Vol. 588 No. 7
I move amendment No. 1:
In page 3, line 15, to delete "€6,000,000,000" and substitute "€4,000,000,000".
I appreciate that ordinarily we try to consider amendments as quickly as possible. Given that there is just one amendment, however, I hope to get a chance to ask the Minister a couple of questions in this regard.
That is acceptable as long as we confine ourselves expressly to the amendment.
I will speak purely about the amendment.
We do not want to open up a whole debate or to go outside the Standing Order that relates to Report Stage.
By all means not.
We would not want to create a dangerous precedent.
The purpose of the amendment is to limit the funds we are lending to the ESB to €4 billion, rather than €6 billion. There are a number of arguments in favour of such a change. During our consideration of the Bill on Committee Stage and the joint committee's examination of the electricity and energy sectors, it became clear that €4 billion will give the company a sufficient capital base to allow it to engage in all the activities it might want to engage in up to 2008. The acceptance of the amendment will not restrict the company in any way in the medium term.
I would like to hear the Minister's response to my main point. The allocation to the ESB of a larger capital lending facility is not a good corporate strategy at a time when the Government does not have a clear idea of how it sees the company developing. It is not a purely academic exercise. The managing director of ESB National Grid, Mr. Kieran O'Brien, made a presentation at a recent meeting of the Joint Committee on Communications, Marine and Natural Resources. He argued that we are facing a difficult and unwelcome situation in the electricity generation market. He used the term "inefficient oligopoly" to describe the dominant position in the market of the ESB, which sets the price 99.9% of the time. If we achieve a reduction to 60% of the company's share of the electricity generation market, which will be difficult, the ESB will still be in a dominant position. Mr. O'Brien argued that the ESB's position is characterised by a series of inefficiencies and that the Irish consumer loses out as a consequence of high prices.
It will not be acceptable if the strategy for the development of the ESB helps to maintain the status quo. It would be inappropriate for us to give the ESB a larger lending facility that goes beyond its obvious investment needs in terms of the maintenance of the grid. Nobody would object to providing for such investment. If our provision is too great, however, we may allow for the strategic development of the company in a direction that the Minister might not require. When Mr. Padraig McManus of the ESB recently addressed a meeting of the joint committee, he set out a strategy for the company under which it maintains a dominant position in the Irish market. We know from Mr. O’Brien’s evidence that such continued dominance would have serious consequences for the market.
Mr. McManus told the joint committee that the ESB hopes to invest approximately €150 billion overseas each year. Perhaps the Minister agrees with the strategy and the Government is satisfied with it. The joint committee was recently told that there is a risk that we will not have sufficient power in the winter of 2006. It may be that the Minister is willing to accept that higher prices may result from such a strategy. I do not believe that the maintenance of the status quo is appropriate. It is not right that the House should offer the proposed lending facilities in the absence of a clear Government strategy for the ESB. I do not believe any board of directors in the private sector would operate on such a basis. Similarly, as shareholders in this important company, we should not do so.
We have various choices. The ideal solution may be to return to the centralised arrangements which worked well for so many years, which may be appropriate given the small size of our market. That seems to be out of the question because of European legislation, unfortunately. Like Mr. O'Brien, the Commissioner for Energy Regulation, Mr. Tom Reeves, seemed to indicate when he made a presentation to the joint committee that a possible way forward would be to put in place some sort of process whereby the ESB generating stations would act as independent operations.
I offer that as a possibility to the Minister. Has he given any thought to the way such a development might work? Perhaps he is considering other alternatives and, if so, I would be interested to hear those.
It is inappropriate for this House to allocate a €6 billion lending facility — not a small amount of money — when we do not have a clear strategy from the Minister on how he sees the company developing. In Mr. McManus's presentation to the committee he made the point that both the ESB and the Department were currently in talks on an evaluation of the strategy set out by the company. Given that, a €4 billion lending facility is far preferable to the €6 billion and it would make the point to the company and to the public that we are in an interim phase and not just staying with the current status quo, which Mr. O’Brien described as an inefficient oligopoly.
This amendment is fundamental to the whole Bill. The Bill proposes to increase the borrowing from €1.6 billion to €6 billion. It is 22 years since the last change took place. The question in regard to this amendment is whether what Deputy Ryan says is true, that the €4 billion he proposes is sufficient to meet the needs of the ESB for the foreseeable future, and whether there is a particular reason for the €6 billion figure.
The points raised on Second Stage should also be borne in mind because we do not know the Government's future intentions regarding the ESB other than it would appear that through the actions of the regulator, ESB costs and prices are being slowly engineered upwards to make it more attractive to other investors to become involved in the area of energy generation and supply. As a result, it would appear to many consumers that far from making matters better for the consumer, be they domestic or industrial, they will face a worse situation than they did heretofore.
We also have to consider this in the context of the future power requirements of the ESB and the extent to which it will be possible to avoid blackouts. Incidentally, on a number of occasions I tabled parliamentary questions on that subject only to find they were refused. Nobody wants to answer them any more. If there is one permanent change I would like to see implemented relative to the business of this House it is the reluctance on the part of all Ministers, whichever party is in government, to accept responsibility for areas over which they directly or indirectly have control. We should be able to get those answers on a more regular basis than is currently the case.
The Minister should tell the House why the €6 billion lend facility is necessary as opposed to the €4 billion proposed in the amendment and the net benefits to the consumer, be they industrial or domestic, between one and the other. Is there much of a difference between the two? Would it have been sufficient, for instance, to have an increased borrowing limit of €2 billion or €3 billion? On what basis was the €6 billion figure arrived at? If we knew that we might have some indication as to what the Government proposes to do regarding the ESB and the generation of energy over the long term.
On Second Stage we talked about alternative sources of energy, the fact that such sources were expensive and that to produce energy in this way and tap into those alternative sources was to perhaps create a situation whereby electricity prices were slowly increased to make it more attractive. Will the Minister clarify those points in his reply with a view to identifying the reason we should proceed with the Government's proposals?
I do not agree with the amendment or the arguments made in favour of it, nor do I agree with the Minister's basic proposal. The ESB does not determine the price of electricity, nor does the Minister; that is determined by the regulator, Mr. Tom Reeves. I know the regulator very well because I worked directly with him when he was in the Department. He is a man who is passionately in favour of competition and in the interest of competition he has made some extraordinary decisions without achieving a result. One of his extraordinary decisions was to increase the price of the product to make it attractive to others to enter into the market. The consumer is now paying more for electricity than is required by economic forces and in spite of that, we did not get the competition because it was not sufficiently attractive. We attracted minor competition. That is not the issue and the argument that the ESB, because it is a monopoly, can determine the price of electricity is no longer true.
In preparation for the possibility of competition, the ESB shed over 2,000 jobs and in spite of the loss of those jobs and an increase in the price of electricity, there is no gain for the consumer in this situation. The argument about what would happen to the ESB if it had a higher borrowing possibility simply does not stand up. We have other examples of alleged competition in the telecommunications area and in the housing market, and it is not producing a very good result for the consumer. I do not want to stray from the Bill, which is a straightforward measure, other than to say that I do not agree with the amendment.
It is interesting to hear the views expressed by the main Opposition spokespersons. This is yet another reason the alternative Government which is being postulated would end in tears——
There are all sorts of people——
There is enough postulating on that side of the House. There is no need for the Minister to look to the Opposition for that. If the Minister could convert it into energy and sell it, he would have a premium.
——because it is obvious they could not agree on a fundamental issue, namely, the future of the ESB, in that we have heard divergent views from Deputies Eamon Ryan and Stagg.
The Minister should welcome a bit of support.
I have considered the content and the portent of Deputy Ryan's amendment but I cannot accept it and I will outline my reasons in that respect.
The borrowing limit, as previous speakers have said, was set 22 years ago at an equivalent figure of €2 billion. We propose to increase it to €6 billion to take into account the dramatic ESB current and forecast financial position.
I do not accept Deputy Stagg's point that there has been no gain for the Irish consumer. For years, Governments of every hue and cry prevented, for political reasons, increases in electricity prices. That was very popular but the reality is that over those decades there was no investment in the infrastructure and, ultimately, the people would be at a significant loss if that was the case. To be fair to Deputy Stagg, he acknowledges that neither the Minister nor the ESB has power in regard to pricing. We passed legislation which gave that power to an independent regulator who is obliged, under law, to give a rate of return to companies investing in this infrastructure.
We hear a good deal about Government stealth taxes but the reality is that this was established by the Oireachtas to allow a fair return for investment in telecommunications or in the energy area. By 2007, the ESB expects that its peak net debt levels will be approximately €4 billion. This is a one-section Bill, taken from the more substantial Electricity Bill to be introduced later in the year. The reason for it is that this is a period in the Oireachtas in which parliamentary time for legislation is much sought after and time is of the essence regarding the ESB's current financial position.
Consumers will be the main beneficiaries of investment in the supply infrastructure. Ireland will not have the same problems of significant black-outs as experienced recently in Italy, the US and the UK. The ESB is investing €5 billion in the supply grid over five years, from 2002 to 2007. Ultimately, the consumer will pay for such investment but will gain the benefit of an electricity infrastructure which will ensure no black-outs and sustain current economic growth. Even though it is accepted that the ESB will be at its peak of net debt levels of €4 billion by 2007, the Government believes it is prudent that extra facilities be given to it. The additional €2 billion will be divided into €1 billion to ensure liquidity and €1 billion for headroom factors. The proposed limit of €6 billion is considered sufficient to cover the ESB for at least ten years, which is the financial forecasting horizon period for the company. Inclusion of the €2 billion on top of the anticipated borrowing level of €4 billion is considered reasonable and prudent. Though the ESB's net debt stands at €1.9 billion, it is rising rapidly and will soon probably go over the existing limit of €2 billion if this legislation is not passed. While the company employs tight management of its cash outflows, the remaining cash balance is nearing exhaustion.
The fundamentals of the Government's energy policy are set out in my Department's strategy statement. This is further informed by the Programme for Prosperity and Fairness, other related Government policy papers and relevant EU developments. It is important to understand the dynamic nature of the energy sector. My Department is involved in ongoing work in developing, updating and refining the detailed elements of its policy regarding the wide-ranging issues that impact on the energy sector.
The Minister of State at the Department of Communications, Marine and Natural Resources, Deputy Browne, explained that the ESB strategic plan takes full account of Government energy policy. The company is revising its five-year corporate plan with my Department to ensure it is in line with Government policy. There is a consultation process in the renewable energy area which will inform the Government when introducing a new policy for that sector. It will be submitted to the Government for approval later this year. I am working alongside my Northern Ireland counterpart, Mr. Barry Gardiner, MP, on the development framework for an all-Ireland energy market. The future of Moneypoint generating station also needs to be speedily resolved.
The ESB has a five-year corporate plan covering 2003 to 2007. The ESB has stated that it is committed to reducing its generation market share to 60% by 2005 to resolve the issue of its market dominance. The privatisation of the ESB is not on the Government agenda. I am opposed to the privatisation of the networks. I have already said that in the event of any future change in the structure of the ESB, selling of the wire would not be on the agenda. The Government believes the ESB is a critical national asset and must remain in State ownership. One thing worse than a public monopoly is a private one. The Government's policy is to ensure the ESB's company structure remains as it is.
While the finances of the company are its own matter, it is required to get annual approval from me as the Minister responsible for its annual capital expenditure budget. Any of the capital expenditure associated with projects abroad, such as in Bilbao in northern Spain and Coolkeeragh in Northern Ireland, require my prior consent and that of the Minister for Finance. The introduction of a borrowing limit of €6 billion for the ESB is prudent and reasonable, particularly when the last time it was amended by the Oireachtas was 22 years ago. Introducing a borrowing limit sufficient for an anticipated ten years is the correct course of action. I cannot accept Deputy Eamon Ryan's amendment.
I was informed that borrowing would rise to €4 billion by 2008 and not 2007 by the Minister of State at the Department of Communications, Marine and Natural Resources, Deputy Browne, on Committee Stage. This figure was also given to me by Mr. McManus of the ESB, who also stated that there was plenty of fat in that figure. The €4 billion proposed in my amendment allows the company plenty of room.
The Minister claims that electricity prices have not risen in a long time. He implied that the recent 23% increase was a catch-up exercise. To a certain extent that is correct, but now prices for industrial and domestic consumers are significantly above the European average. Deputy Stagg is correct in stating that the regulator gives sanctions to price increases. However, according to Mr. O'Brien of EirGrid, the ESB sets the market price by continuing to control the mid-merit stations. These are stations that cannot easily be turned on and off. The company that controls those stations sets the market price.
Another reason behind the price increases is that Ireland has been unsuccessful in attracting new entrants to the market. To overcome this, electricity prices have been significantly increased, yet the price is set by the ESB, according to Mr. O'Brien of EirGrid.
The Minister said that the investment in the grid is necessary to ensure we will not have blackouts such as occurred in America and Italy. I agree. We need to invest that money in the grid, but I criticise the manner in which it is being invested. The Minister needs to provide a policy direction that we should invest in that grid network on a future production basis, looking towards the new renewable energies which will come on stream in the next ten to 15 years, rather than on a demand-led basis, which is how the substantial sum of money of €600 million or €700 million is being spent annually. We are not spending it cleverly. If we are to have the interconnector, we need to start giving directions that the grid must be built up on land to join with the connector. We need to start ensuring the investment is not made solely on a demand-led basis.
The Minister correctly said that the investment in the grid will ensure we do not suffer blackouts. However, according to the ESB network company, the likelihood of blackouts in the winter of 2006 is now becoming significant partly because of our inability to attract new entrants to the market.
The Deputy's second contribution is limited to two minutes. He will have another opportunity to reply.
As only one amendment is involved, I asked the Ceann Comhairle if I could ask the Minister some questions. He agreed I could if I stuck to the content of the amendment.
Yes, but a Deputy's second contribution on Report Stage is limited to two minutes. A Member who moves the motion, as the Deputy has done, is entitled to speak again.
I will put a short question to the Minister. Is he concerned that we appear to be failing to attract new generation capacity and that in the winter of 2006 or next winter we may not have sufficient capacity to meet supply? The regulator said that the new power plant in Tynagh Mines may not be on stream as expected in 2005 and the Kish Bank offshore wind farm in which the ESB is a partner is unlikely to be brought on line within the timescale planned. Since we are failing to deliver new capacity, how can the Minister assure us we will not have blackouts next winter or the following winter?
The Minister has pointed to the wisdom of the Department's proposal and I note that. However, given the changes that are taking place and the increased requirements in terms of investment and energy over the next ten years, the period for which the Minister said the €6 billion would suffice, we should perhaps consider the reverse of the amendment, so to speak. The investment of €6 billion is possibly not enough and if so, this is the time to act.
I am not sure that there will be a significant increase in investment and restructuring within the ESB to avert possible power shortages. The more industrial development that takes place, the greater the electricity requirement and, as a result, the greater the investment requirement for the electricity or energy supplier. The Minister might elucidate matters. We are aware of the alternative sources of energy and when they might kick in but, as other speakers have noted, they will kick in only at a level that makes it economically viable for them. That may well have the knock-on impact of making life more difficult for industry in general and for the domestic consumer.
It would be wise at this stage for the Minister to summarise for us the implications as he sees them and as the ESB sees them. We must examine the situation not as it has developed up to now but as it is likely to be from here on in, with hugely increased energy demands. It may not be possible in the short term to provide that extra energy by way of alternative energy sources.
Deputy Durkan suggested that we should perhaps increase the investment. I repeat that I am quite sure that the €6 billion will be sufficient for the ESB grid investment requirements over the next ten years. The current dispatchable capacity is 5,549 MW. The peak expected demand last winter was 4,480 MW. Due to higher than expected temperatures during the winter period, the peak was lower than expected, at 4,320 MW. From that point of view we had reasonable headroom. With the implementation by the ESB national grid of what it calls the demand side management programme, and it was able to secure a reduction of approximately 120 MW, increased imports of 167 MW of electricity from Northern Ireland, which is contracted until June 2005 with a possible extension to autumn 2006. The ESB purchased an additional peaking plant which may not have been necessary. Measures have been taken and will be taken. There are two new additional generation stations at Tynagh and Aughinish bringing in an extra 550 MW which we expect to come on stream in 2007. It is also possible that there will be additional generating capacity coming on stream.
In an island nation on the edge of Europe it is difficult to get competition into an energy market where huge investment is required in generation plant and infrastructure and there is a relatively small population. That is one of the reasons the Government took a strategic decision to proceed as quickly as possible, as a priority, with a double interconnector of 500 MW each, which we expect will be in operation in the not too distant future. That will ensure not only security of supply but more competition, which will ultimately reduce prices.
The figures given by Deputy Eamon Ryan regarding the cost of electricity vis-à-vis the rest of Europe with regard to residential users are at the EU average, or close to it. The costs for large industrial operators are higher than the EU average, but that is the only significant area of demand where there is a completely open market. Such operators are not obliged to deal with the ESB and may deal with competitors.
Regarding the amendment, it is prudent and reasonable to put in a facility of €6 billion to cover the next ten years, particularly given the difficulty of returning to the Oireachtas to seek additional time in which to get legislation passed.
Does the Minister agree that while it is an open market, the electricity price is set at a certain level by those mid-merit stations, so that no matter how open the market is, the price will be set by the ESB in terms of what it cost it to turn on its most inefficient plant? While the Minister's figures are no doubt correct, is he concerned that the grid operator, who would have as close an eye on this matter as anyone, is raising serious concerns? While the figures may look good on paper, when one has 75% or 76% availability coming from that generation capacity, the figures look rather different in reality.
How does this address the concerns of the grid operator that we will not have enough power?
Will the Minister outline why he thinks it is difficult to introduce competition? Is this because outside investors look at a market where there is a dominant player which effectively sets the price and decide that it is not a business environment they want to enter? Does the Minister accept the point made by Mr. McManus, the head of the ESB generation company, that even if it is down to 60% power generation capacity, it would still have a dominant position?
I was about to leave the Chamber when Deputies Eamon Ryan and Stagg were arguing about the future structure of ESB.
The Minister should be brief. He is not entitled to further contributions.
I will consider closely the promises that this alternative arrangement is postulating in the energy area. I suspect this will be one of the key fault lines between the Green Party view which is, in effect, to break up ESB, and the Labour Party view which is to retain it as it is. This will be an interesting debate in the years leading up to the next general election.
As far as Deputy Ryan is concerned, the Green Party position is that the status quo cannot remain. I am not sure what the Fine Gael view is.
We are not too sure of the Minister's views either. He told the public many things before the last general election but unfortunately was silent afterwards.
It is an interesting debate. The Opposition is telling the public it will run as an alternative. However, here is a major issue on which the Opposition cannot agree before the alternative even gets off the ground.
The operators of the grid have rightly expressed concerns in this regard and we must take those into account. The biggest concern is——
I asked the Minister to be brief. This is not Committee Stage.
The Deputy on the other side got plenty of time.
He moved the amendment and is entitled to reply. He replied and we should now put the question.
I will be very brief. The Deputy instanced the concern of the operator of the national grid. The biggest concern of the operator is in regard to a significant amount of wind energy coming onto the grid and the technical instability associated with this. This is one of the reasons we had to hasten slowly in regard to new contracts, on the advice of the same person.
They have 20 years of that technology behind them.
Can I raise a point of order?
The Deputy may, because we are in total disorder at present.
The Deputy always wants to come back in.
Unfortunately, the Minister was not available on Second or Committee Stages to discuss these points. This is a single amendment to a very important Bill and I would like to make a concluding remark, if I may.
It was open to the Deputy before commencement to move a recommittal. That would have solved the problem but it was not done. The Deputy should be brief.
The Minister is correct that there may be differences on this side of the House. It will take an amount of political courage because it is a very sensitive and important issue for four parties to come out and state that the status quo is not working and needs to be changed, which I am happy to do. The point of the amendment is to discover what the Minister thinks. My criticism has always been that the Minister has not clearly stated his position. I regret that at this stage of the debate we have heard the same arguments presented on Committee Stage by the Minister of State with some political mud slinging tacked on.
There is a serious issue which we cannot ignore and must address. If we wait until my party is in Government in three years' time, the damage will be done. The decision cannot be put off until that time. If we are not able to debate the matter in the House, given that the Minister will be attending the Joint Committee on Communications, Marine and Natural Resources for a final summing up on our energy module, we will have to debate it there. However, we will have to debate it somewhere because politicians have an obligation not just to score cheap political points and trade in soundbites but to seriously address this important issue for the development of our country and to take tough decisions. I do not get any sense from the debate that the Minister is willing or able to engage in that debate or, it would seem, make decisions on the matter, which I regret.
I will press the amendment. In a situation where the future development of the market is so uncertain and the progress of the company may change radically, it is not appropriate to send a signal that the status quo is working or to allow the company this top-up of €2 billion above what the company states it needs. This is bad planning and bad direction. While the debate on policy will have to happen somewhere else, I propose the amendment to restrict the lending facility to €4 billion. This is prudent and correct and I hope the Minister, at this late stage, could accept it as a signal that he will have to do something on this issue. We cannot just paddle on as if everything is going swimmingly, because it is not.
This debate has been very illustrative of the serious fault line now evident between the Green Party——
The Minister should move on from politics occasionally. Could he rise above it for once?
It is significant that the public should know the Opposition parties' attitudes in this respect.
We do not know much about the Minister's attitudes.
Deputy Eamon Ryan states that I have not articulated the view of Government. I have said clearly in regard to the network——
The Chair wants to intervene at this stage because the procedure is totally out of order. I suggest that the Bill be recommitted in respect of amendment No. 1.
I have made it clear that the networks are a national asset and must remain. The issue of ESB dominance is being tackled by the Commission for Energy Regulation under the legislation passed by the House. However, I accept that there is a need to rigorously assess this issue in the near future. The figure of €6 billion is more than adequate. While Deputy Durkan suggests we should go even further, we should stick with that figure.
My apologies, a Leas-Cheann Comhairle. I did not realise a recommittal allowed for continued debate or I would have facilitated you earlier.
The Minister is correct in that the energy regulator sought the introduction of some sort of competition in the market by asking ESB generating stations to act independently. It would seem that the potential for this option is being rapidly diminished by the recent abandonment of the local nodal pricing mechanism that the CER had proposed. Such circumstances lend further urgency to the matter.
I will outline some of the options I would consider. One that would not be allowed due to European regulations would be to re-centralise everything, buy back outside independent capacity and put it into one central company, which was the position for many years. This might be the best policy but now seems impossible and must be ruled out. A further option for consideration would be to split the generating companies into three or four groups, and possibly sell them and allow them to compete against each other on the open market.
The other option which deserves consideration, and I will probably make further proposals on this, is some type of flexible mechanism to make the management and operation of the stations genuinely independent. It could be through awarding a contract to individual workers and management in those stations to operate independently, sell their output independently and make a profit from it. That might have a role in solving some of the industrial relations difficulties we are facing at present, where the unions are demanding a 20% share of the overall company.
It is a method whereby the stations could operate independently while the asset could be maintained in State ownership. Some of the generating stations are actually an extension of the network. In Moneypoint, for example, we have built two massive 400 kV lines connecting it and the location of the station means it is, in essence, almost a State asset. It could be kept in State ownership but the operation could be private. It is similar, in a way, to what the Minister for Transport, Deputy Brennan, is suggesting in the bus market. I am not sure if it would work there but it might work in the electricity market. It is clever, flexible solutions such as this which the Minister should discuss. It might not be the right option and the analysis might show it would not work but it is preferable to the status quo. Perhaps the Minister is considering such options.
The Minister might not be aware that there has been a sea change in recent months with regard to the technical difficulties for wind power on the grid network. The technical changes the grid operator is now seeing in turbines and their ability to ride through any fault in the grid and to assist the grid operator in frequency and voltage stability are such that the arguments about wind power being a problem in the grid are yesterday's arguments. I believe there will be a massive development of wind energy, which will be one of the possible solutions for the future.
However, the market support mechanisms in place, the AER VI system, will be seen to fail because people will have bid too low to win the contract. The lack of proper support mechanisms from the Minister is what will delay the arrival of wind power to save the day. The AER structure will not be enough to get us through the crisis we will face in 2006. The Minister might see this as division on this side of the House but what we should be about is proper political discourse and putting forward suggestions. They need not be on an ideological or rigid basis but we should certainly ask the relevant questions. It is the Minister's responsibility to make certain decisions in this area. If he is happy with the way things are, he can decide to do nothing. However, what we are hearing from the industry, the grid operator and from the regulator is that this half way house, where we have half liberated the market but left it dominated by one player, will not benefit the public or the operators in the market in the long run.
With regard to renewable energy, I agree that there has been a sea change. That is the result of proper contact and discourse between all the interested parties, including the grid operators, so that everybody understands where we are going in this respect. I agree that as a result of technical and technological changes in the delivery of wind power, there are greater possibilities. That is one of the reasons I knocked heads together in the case of all the operators and it is the reason we have a renewable energy group that is currently looking at the way forward in this area.
I do not agree with the Deputy about AER VI. It has been very successful. To a certain extent we have been the victim of our own success in that respect. The Deputy says there are no proper supports. That is saying, in effect, the Government should allow higher prices for renewable energy. I accept the Deputy has an argument about what is included in the cost per unit of renewable energy but everybody accepts, even in Denmark where there is a plethora of wind energy, that electricity from renewable sources is more expensive than from fossil fuels. It is important to tell people this because they tend to have an old-fashioned or aspirational view that everything should be renewable. Everybody would like to use renewable sources as much as possible but we also must be aware of the consequences not only from a price point of view but from the point of view of stability on the grid. That is what the group is working on.
With regard to the Deputy's musings on the future structure of the ESB and his comment that we should not get hooked on ideology, he need not direct his comment to this side of the House but to his Labour Party colleagues.
The Green Party's future bride.
The Minister should say it to some of his backbenchers as well.
The pertinent question is how the Green Party and the Labour Party will be able to commit themselves to any future in this area if they are postulating themselves to the public as an alternative to this Government.
I have made it clear, and perhaps no other Minister has been as clear in this regard in recent years, that as far as this Government is concerned privatisation is not on the agenda. We regard the ESB as a national asset. In the event of any change in the structure of the ESB, we will not countenance selling the network of the wires and the pipes. They should stay in State ownership so they will be available for all operators. That will allow proper competition to continue.
All parties, including the ESB, would accept that the dominance of the ESB in this market has to be examined. It is currently being tackled by the CER under the current legislation. One of the reasons I am changing the legislation is to give the Minister the ability to give policy directions with regard to this and other issues so there will be a political tie between the independent regulator and the representatives of the people in the Oireachtas. That exists in the telecommunications area and it has worked successfully. From that point of view, there is work to be done. There must be a rigorous assessment of the options for the future in this respect and these issues will be examined in the not too distant future.
I am deeply moved and touched by the Minister's concern about the ideological musings on this side of the House. However, he does not express any concern about the ideological musings on his side of the House, some of which are fundamental and could have a huge bearing on the future of not only the ESB but other State and semi-State bodies.
There is a general concern among the public as to what might happen to the ESB and a number of other agencies, having regard to what happened to Eircom or Telecom Éireann, as it was known at the time. A national asset was sold to the people for a huge amount of money and then was subject to another flotation at a later stage. That experience will not have gone amiss so people are ready to expect anything on this occasion. It is important that the Minister repeatedly reassure the House about the likely future of the ESB, notwithstanding the need to comply with EU regulations on competition.
One issue that can always be mentioned is the unfortunate experience I have just referred to whereby, in an effort to achieve the type of competition that was desirable under EU law, a massive overkill was achieved. Everybody was accommodated except the unfortunate consumers who bought a national asset that they already owned. They paid a huge price for it but a short time later they received not a cheque in the post but a note pointing out that they could only get 60% or 45% or whatever percentage applied of the sum they paid for that asset. The people have a long memory. It might be longer than the Minister would like, as he will find out in due course and as he discovered in the most recent election. The Minister may cease his musings on the ideological differences on this side and concentrate on the difficulties that exist on that side of the House. Perhaps the Minister has heard that from his backbenchers in the past couple of weeks.
The Minister spoke about wind energy. I am in favour of alternative sources of energy. The sight of wind farms is appalling, but we cannot put propellers underground. They must be placed over ground and they are not the most edifying sight on the horizon. The issue of tidal wave power arose during the debate on Second Stage.
The Deputy should concentrate on the amendment.
I am concentrating on the amendment, which applies to the entire Bill. Will the Minister reconsider the notion that wave technology is not sufficiently advanced? I cannot believe that. Hydrology is as old as the hills — it existed at the time of the Romans. If we had the Shannon scheme many years ago, I cannot understand why we cannot develop wave energy to any extent now. For as long as I have been a Member of this House we have been told again and again that the technology is not yet far enough advanced. It is similar to the answer we received in this House many years ago on the question of air conditioning. I will not revisit that issue.
The Minister stated that he is in favour of retaining the ESB as a State entity while at the same time enforcing the changes recommended by the regulator. Although the Minister might not like to admit it, he has influence over the regulator, the appointment of the regulator, the terms of appointment of the regulator and so on. If the regulator impacts sufficiently on the ESB to the extent that costs to consumers are increased across the board to attract further investors into the marketplace to break the monopoly, that could have a negative impact on Irish industry right across the board.
The Minister's dismissal of the €4 billion or €6 billion proposed by my colleague as not being enough creates the basis for a very wide-ranging debate. The Minister will have to examine the whole structure of the provision of electricity within the country, the number of companies and alternative companies that will have the option of providing for the industrial sector as well as for the domestic sector. There is ample evidence in the United States, the UK and Canada that one trigger in the context of overload can have major and far-reaching effects. Such an event would involve colossal expense for industries here that are greatly dependent on electricity.
I reject the Minister's political gymnastics. I congratulate him on the colourful nature of it and the fact that he seized every opportunity to deflect attention from what should be the focus of our attention and energy. I reassure him that when the time comes for the people to make that grand decision, they will have ample opportunity to balance the rights and wrongs of what they are about to do. I have no doubt what their decision will be.
Neither have I.
I refer to the Minister's points. It is interesting to hear his political slagging. I thought the Minister and certain Fianna Fáil backbenchers were urgently attempting at present to go to the left of the various other parties on the left. It is interesting that he is flicking back to the right again for a brief period to have a go at the Labour Party.
Let me return to the main point of this amendment. The ESB recently made a presentation to a committee of this House. It effectively set out its strategy as being to maintain a dominant position in the Irish market and to enter into the European market. That seems correct as the current structures in Europe are leading to a larger, wider market. It will continue to invest approximately €150 million a year in projects such as the 750 mw plant it built in Bilbao. If we had another 750 mw plant here our problems would be over and I would not be moving this amendment.
That strategy is akin to the strategy Cement Roadstone Holdings or AIB have very successfully followed in the past 20 years. It enabled these companies to make very significant profits as a result of maintaining a dominant position in the domestic market, reinvest those profits overseas in acquisitions and build themselves up as global players. It could be argued that that strategy is the correct one. The difficulty of such a strategy, as we have seen in the area of bank charges and in the price of cement, is that domestic consumers would pay a very high price for electricity.
Is the Minister pleased with that strategy? Does he believe it is an appropriate strategy to maintain a dominant position here and expand overseas? If he does, my amendment is incorrect because that strategy would be appropriate. Investing a significant amount of money — the additional €2 billion provided for in this Bill — would allow it to be a player in the European market. The Government's decision regarding the proposed investment in Poland indicates either that the Government does not believe that is the correct strategy or that the Polish bid was too large for the company to take on. If that is the Government's position, the €4 billion spending limit I suggest would more accurately reflect what it is trying to do. I need an answer to that question before I as a Deputy on this side of the House allow a company, of which we as representatives of the people are shareholders, to have significant borrowing above its immediate requirements on the basis of that policy. That is the real question to which I have not yet received an answer.
Perhaps today is not the time to answer it. We need to carry out a rigorous assessment of the dominant position of the ESB. I have not met anyone in this country who suggests that we should sell a single ESB line. To keep parroting that line is a distraction because no one is talking about privatising the ESB. It would make no sense whatsoever. It would be repeating the mistake we made with Eircom. That is out of the question. Let us not spend our time discussing it.
The Deputy should say that three or four times. The Minister might not hear it.
I fully accept the Minister's credentials and conviction in that regard. I do not believe anyone is advocating such a position. Not even the Minister's colleagues in the Progressive Democrats would argue for such a position. Let us not, therefore, talk about that, but I would like to hear from the Minister whether the strategy set out recently to the committee and, I am sure, the Department, is the appropriate one. Perhaps it is. However, it would be at a price to the Irish customer. Does the Minister believe Irish customers are willing to accept that? Perhaps an alternative is possible where we would handle the dominant position here and still allow ESB International to act as a player on the international market. Given that it is a publicly owned company, I would like to see our best engineers playing on that market, winning contracts and bringing profits back to the State. I would be happy enough with that, but not if it is done on the back of Irish customers. The fundamental intent of my amendment is to thrash out what we are talking about here and what we want to do, and I still have not got an answer to that question.
The recent CER decision on marketing arrangements was made in the context of further investigating what are the most appropriate arrangements for the Irish market. He did that as a result of significant contact between regulators and industry interests, North and South, as well as between Mr. Gardiner and myself, and because significant issues were raised not only by the ESB but more particularly by other operators in the Irish market who felt it should be given more consideration. I welcomed his decision to take into account the significant issues coming to the fore in that respect.
So did I.
One of the key issues the regulator must bear in mind is the cost to consumers of any decision that he makes regarding pricing. We could hammer this issue out all day regarding the limit on the ESB and what it requires, as well as the question of investing abroad. I very much welcome investment abroad, provided it does not affect the ESB's core business and the company does not take its eye off the ball regarding investment in infrastructure in Ireland.
It is an indisputable fact that it is currently carrying out very significant investment, spending €2.25 billion on the network, the partial construction of two new peat stations in the midlands at a cost of €300 million, and a 400 mw combined cycle gas turbine at Ringsend. It is also going ahead with a €3.6 billion investment in upgrading the transmission and distribution networks, completion of a 400 mw gas turbine generation plant at Coolkeeragh in Northern Ireland in 2005, a 250 mw peat plant at Loughrea in 2004, a west Offaly plant in 2005, a 380 mw repowering project for an existing ESB site, a 755 mw combined cycle gas turbine in Spain and additional IT developments in that respect.
As Members can see, the ESB is not taking its eye off the ball regarding any of the investments. I understand that the ESB systematically invites Oireachtas Members and indicates to them the types of investments taking place in the various areas. We believe that the €4 billion figure is reasonable and prudent, and I strongly recommend it to the House.
I fear that the current political climate does not allow Ministers to make tough decisions or enter into real, engaged debate. Perhaps we will look forward to that at a later date.
Vótáil.
Will the Deputies who are claiming a division please rise?
Deputies Boyle, Cuffe, Eamon Ryan and Finian McGrath rose.
As fewer than ten Members have risen I declare the question carried. In accordance with Standing Order 68 the names of the Deputies dissenting will be recorded in the Journal of the Proceedings of the Dáil.
