Dáil Éireann debate -
Tuesday, 22 Jun 2010

Vol. 713 No. 1

Electricity Regulation (Amendment) (Carbon Revenue Levy) Bill 2010: Report and Final Stages

Deputy Liz McManus

I move amendment No. 1:

In page 3, between lines 22 and 23, to insert the following:

"1.—The Minister for Communications, Energy and Natural Resources shall prepare and publish a regulatory impact analysis of this Act prior to the commencement of the Act.".

I tabled this amendment because I am concerned the Government is not complying with its policies. This Bill is called the Electricity Regulation (Amendment) (Carbon Revenue Levy) Bill so regulation is pertinent. The Government very specifically commits itself to better regulation. The Government White Paper and the follow-on statement on the web refers to better regulation contributing to:

improving national competitiveness and better Government by ensuring that new regulations [. . .] are more rigorously assessed in terms of their impacts, more accessible to all and better understood. Existing regulations will be streamlined and revised, where possible, through a process of systematic review. [. . .] The approach [. . .] is both practical, in that it is action-oriented, and pragmatic in that the Government is not "for or against" regulation. Rather, the Government favours Better Regulation. Regulation is an integral part of the process of governing and it will continue to be so. Legislation and subsidiary regulations have a critical role to play in key areas of economic and social life.

It also refers to the continuing drive for competitiveness and people's expectations of high quality public services. After that preamble, the commitment is very specific:

The Government will make better use of evidence-based policy-making. This means making better use of research and analysis in both policy-making and policy implementation. Regulation is an expression of policy and Regulatory Impact Analysis (RIA) is an evidence-based approach that allows for the systematic consideration of the benefits and costs of a regulatory proposal to the economy and society.

That is what the Government says of its approach to regulation but what it does, in this Bill, is to disregard everything in the White Paper. The Minister set about introducing a new regime. Generally speaking, this would receive the support of the Opposition. The Minister then tried a sleight of hand by attempting to introduce these measures in legislation concerning bio-fuels, which have absolutely nothing to do with the imposition of a carbon levy on electricity generation. We managed to stop the Minister on that point and argued trenchantly that separate legislation, which was transparent and open, should be introduced so that the two issues are kept apart. Thankfully, the Minister backed down and produced a separate Bill, which we are now debating.

When it comes to ensuring the impact of regulation is understood by the public, the Minister, the Department and those framing the legislation, there is no way out. According to the policy of the Government, there must be a regulatory impact analysis. However, we have not had that in this case. The Minister referred to holding many meetings. Maybe that is true, maybe it is not. I am sure he has had many meetings and that sometimes this issue arose but I imagine many meetings addressed other issues as well. This focused, analytical, evidence-based approach is different from the Minister having many meetings. The objective of robust legislation that has gone through a forensic approach promoted by the Government has not happened.

Generation companies knew something was coming down the tracks because the CER report of 2009 indicated this was the case. They approached the Department and this was activated by the private sector side. It is unlikely that the ESB or Bord Gáis will oppose this legislation. An ad hoc arrangement pertained.

The Minister will not accept my amendment because it is too late. We are on Report Stage and the Minister wants to rush this Bill through. However, it is important to hold the Minister to account because otherwise we have an example of the Government not living up to its commitments. Again, regulation is introduced without proper safeguards. One can argue that regulation is being introduced into a narrow area and the levy is being imposed but it is symptomatic of a malaise that led this country into the worst economic disaster we have ever seen. The lack of regulation, transparency and ensuring controls and safeguards in the public interest have led us to where we are. In this instance, the Bill is simple and regulatory impact analysis would have provided us with information to ensure this is the best possible legislation. The Government suggests this approach but the Minister is not following it.

Minister for Communications, Energy and Natural Resources (Deputy Eamon Ryan)

I do not propose to accept this amendment, as Deputy McManus predicted. As outlined on Committee Stage, I am committed to the development of evidence-based policy making. Although formal regulatory impact analysis has not been conducted, I am satisfied this Bill stands as an example of good regulatory practice. My officials and I consulted widely with the industry and have held detailed discussions with the Office of the Attorney General and the energy regulator in order to ensure the regulation is robust. I am confident the requisite analysis has been done and that this approach is correct. As such, I want to see this legislation implemented as soon as possible. We will not benefit from delaying further. We are aware of the views of industry on this measure and further public consultation will not unearth further issues that have not already been considered by my Department.

I note the Act has no specific commencement provisions. Rather, it comes into force on enactment. Since Report and Final Stages are being taken today, requiring a regulatory impact analysis to be conducted before enactment would not be practical in the time available. The legislation represents the only viable option expected to meet with the reasonable degree of success in recovering the majority of the carbon windfall gains. It has been approved by the Government and the Attorney General, who is satisfied the legislation is robust. Since carbon windfall gains are a temporary windfall, I intend to enact the legislation without further delay. I cannot accept this amendment.

Deputy Liz McManus

What a surprise.

Amendment put and declared lost.

An Ceann Comhairle

Amendment No. 2 is in the name of the Minister. Amendments Nos. 3, 7, 9, 14 and 15 are related. Amendment No. 8 is related and an alternative to amendment No. 7. Therefore, amendments Nos. 2, 3, 7 to 9, inclusive, 14 and 15 may be discussed together by agreement.

Deputy Eamon Ryan

I move amendment No. 2:

In page 4, between lines 5 and 6, to insert the following:

"‘CADA' has the same meaning as in the Electricity Regulation Act 1999 (Public Service Obligations) Order 2002 (S.I. No. 217 of 2002) (as amended by the Electricity Regulation Act 1999 (Public Service Obligations) (Amendment) (No. 2) Order 2007 (S.I. No. 583 of 2007));".

I stated on Committee Stage that I had asked my officials to conduct a detailed review of all ongoing public service obligation contracts to confirm that no generator is benefiting from the commission decision on carbon costs. Following this investigation, it has become clear that two electricity generators which are covered by the public service obligation have the opportunity to benefit to a small degree from the SEM committee decision requiring generators to pass through the opportunity cost of carbon.

These two generators are Aughinish Alumina and Tynagh. These two generators will benefit if they sell a small proportion of their output outside the PSO scheme. They are thus earning carbon windfall gains on this small portion of their output as it is sold directly into the wholesale market and the generators receive the market price for it, which includes the opportunity cost of carbon.

To deal with this position I propose limiting the exemption for PSO plant. Any output which is sold by companies into the market and is outside the scope of the capacity and differences agreements, or CADA,with the ESB will now be subject to the levy.

The amendments I propose require these generators to report to the CER any emissions which are attributable to that portion of their electricity on which they are earning windfall gains. They will be liable to the carbon levy on that basis. The CER also retains its powers to request any supporting information it requires from generators to verify these figures, and it remains a criminal offence to provide false information to the CER. In practice, the two companies' levies liabilities are likely to be very small since the vast majority of their output in both cases is subject to the CADA contract.

I stated at the outset of the legislative process that my goal was a fully transparent levy that recovers carbon windfall gains while treating generators equitably. These amendments ensure that no emissions producing generators benefiting from the same committee decision requiring them to pass through their opportunity cost of carbon to the wholesale electricity market are exempt. As such, I propose that amendments Nos. 2, 3, 7, 9, 14 and 15 be agreed. The acceptance of this amendment will have the effect of nullifying Deputy Coveney's amendment No. 8.

Deputy Simon Coveney

I think I understand what the Minister is trying to do but it may require some further clarification. First, my amendment No. 8 essentially states that generating plant subject to PSO, whether it be for peat or for anything else, should also have the windfall tax or the carbon levy, as the Minister has decided to christen it, applied to it in terms of power that is generated and sold on to the grid. That would provide more transparency for consumers as to the portion in terms of who is paying what as regards the PSO and the price of that electricity for consumers but I want to be clear on what the Minister is saying. Is he saying that when Tynagh and Aughinish Alumina are selling electricity on to the market they will be charged for that portion of electricity that they sell? In other words, when they are selling into the common pool, so to speak, they will be charged for that portion but the energy they use themselves, in the case of Aughinish Alumina, will not be subject to any carbon levy. Is that what the Minister is saying?

Deputy Eamon Ryan

Or where it is in a PSO based system, yes.

Deputy Simon Coveney

Regarding the capacity in an agreement that a generator would have with the ESB to sell power to it, when there is a CADA involved is it or is it not the case that a carbon levy will be applied? I want some clarification on that.

Is the Minister saying there are only two generating stations in the country to which this may have relevance? In other words, for the peat power stations the Minister is sticking to what he had stated previously would be his approach. I would like some clarity in a language we can all understand in terms of who is paying what and the rationale behind the reason that if a company uses its own power but has received free carbon allowances from the Government for doing that, it should not have to make a contribution in terms of the cost of carbon of the emissions it is emitting.

Deputy Eamon Ryan

I will give further detail on Deputy Coveney's amendment, although we have discussed this issue on Committee Stage also.

Tynagh and Aughinish Alumina are the only plants that would have such CADA agreements. Deputy Coveney was an Opposition spokesperson when Tynagh and Aughinish Alumina got those agreements. There was a shortage of electricity at the time. We were very close to being unable to meet some of our power demand and in those circumstances the regulator issued them with those contract arrangements to ensure they would have guaranteed sales. Even with those contract arrangements, there is a percentage of their output which in certain instances they may be selling into the electricity market outside that contract arrangement or PSO system, and that is the element on which we would look to make sure that the carbon windfall which accrues to them is recovered. As I said, that is likely to be a small percentage of their output but one we did not want to omit.

I will give details on the peat one because while in our initial discussions on this Bill I was of a like mind that we should apply it to all generators, even in the peat plants where there is a PSO in place, I asked my officials to examine that in some detail and having given it due consideration they came back with the view that removing the exemption for PSO plant from those peat generators would not be irrational because they do not earn the carbon windfall gains in the PSO application they get. That is because PSO plant do not bid into the market in the same way as other generators. Rather they receive a guaranteed fixed return, and that fixed return is generally above the prevailing system marginal price. Hence, when fossil fuel prices are high and the market price is high, there is little or no premium paid to those PSO plant. However, when market prices are low that premium can be large. The effect of the incorporation of carbon into electricity prices was to raise the wholesale cost of electricity similarly to if there had been an increase in fossil fuel prices.

That directly reduced the cost of the PSO levy to consumers. While overall compensation to PSO plant was unchanged, therefore, the cost of the PSO to consumers declined by that portion of the rise in electricity prices attributable to carbon, that is, we, the electricity consumers, benefited from the incorporation of carbon, not the PSO plant. The PSO difference from the market price reduced when we passed through carbon and it was from that point that the consumers did not have to pay for it. The PSO would otherwise have been higher.

Imposing the carbon levy on the PSO plant would be essentially a zero sum game. The amounts we would collect from the PSO plant by applying the carbon levy to them would be passed directly on to consumers through an increase in the PSO levy. I understand it may seem incongruous to some that we are excluding the most carbon intensive plants from the levy but even if we were to include the peat plants in the carbon levy that would have no effect on the emissions of those peat plants.

The peat plants have priority dispatch. That means they always produce electricity when they are available, regardless of the cost. The consumer then picks up the bill for that through the PSO levy. Imposing the levy upon them, therefore, would not reduce their emissions one iota.

I have sympathy with the Deputy's argument that the PSO levy should reflect the true economic cost of running such plant and that the cost should be transparent to consumers. However, as I am sure the Deputy is aware, the CER has recently published its draft decision on the PSO levy that will apply from this October onwards. That decision proposes a PSO levy of almost €200 million, with over €90 million of that total attributable to the peat plant. The decision makes the cost of operating the peat plant clear and real to consumers. The PSO levy applies to all consumers. I have already stated that I will be using the funds raised by this levy to offset electricity prices for large energy users. Therefore, imposing this levy on a PSO plant would raise prices for domestic users while reducing electricity prices for large energy users. This would be an additional burden on consumers. Given that removal of the exemption would have no impact upon the operation of a peat plant and the steps I have taken to address the small amount in windfall gains to be earned by other PSO generators where it is possible, I cannot on that basis accept amendment No. 8.

Deputy Liz McManus

I thank the Minister for his comprehensive reply. The figure for the PSO stands at €200 million. I appreciate and understand why the Minister is trying to reduce costs for large energy users. However, this will have an impact on domestic users that I would have imagined was worth mentioning. Prices have eased somewhat and it is clear the PSO will cost more. By October 2010, what will be the increase in domestic electricity users' bills?

Deputy Eamon Ryan

That will largely depend on the price of gas. With 60% of electricity generated by gas, its price very much determines electricity prices. The regulator and the generators will be looking at the price of gas.

The PSO has two effects. The PSO on peat-fuelled plants was based on security supplies and an unemployment argument for the midlands concerning the operation of Bord na Móna plants there. The wind PSO levy, on the other hand, was introduced more recently. The two of them come down 50:50 as to how the PSO is applied.

The peat levies have two timelines, one for five years while the other is longer. It might be difficult to get a PSO approval for peat plants given the high carbon emissions from such plants. I am seeking an extension from Brussels on the wind levy because it works in giving a stable investment environment in wind power generation which is the best hedge against volatile gas prices. Much analysis has been done to show that even though there may be an upfront cost in the PSO level, its overall impact will be to bring down market prices because of a greater diversity of supply.

The PSO standing at €200 million will mean a 4% to 5% rise in overall electricity prices. That is not taking into account the portfolio effect that one gets from having diverse supplies. Further modelling would be required to see the exact effect.

We have brought down electricity prices significantly in the past two years, largely because of competition but also because of falling gas prices. Projections from the International Energy Agency see gas prices remaining relatively low and stable for the next five years. That gives us an opportunity to build a wind alternative supply which will give us, in the long run, more stable and lower electricity prices.

Deputy Liz McManus

I do not want to embarrass the Minister because I appreciate the difficulty with peat-fuelled electricity generation. However, I am concerned that he just said electricity prices will go up by 4% to 5%.

Deputy Eamon Ryan

No. I said the component——

An Ceann Comhairle

We are on Report Stage and there are certain restrictions on speaking time. Deputy McManus is in order but I must ask the Minister to allow her and Deputy Coveney to make their points and then he can reply to them.

Deputy Liz McManus

Recently the energy regulator stated electricity prices would rise by 4%. Will the Minister clarify if this will be the case? If so, people need to be forewarned as this is a matter of anxiety to many.

Deputy Simon Coveney

The challenge for the Minister is that he will need to find other ways of bringing electricity prices down to balance the inflationary impact of PSO payments. The way to do so is to examine other elements of electricity bills such as network charges.

Amendment No. 8 is slightly different from one I tabled on Committee Stage which was ruled out of order. It proposes to allow the Minister to determine by ministerial order any rate of levy that may be payable by a peat-powered plant or others subject to PSO payments. I saw it as a reasonable compromise between our two approaches.

All generators, including peat-powered stations, have been given free carbon allowances until the end of 2012, after which they will have to purchase carbon credits for their emissions. The whole purpose of this legislation is to ensure generators do not charge consumers for something they are already getting for free while preparing the marketplace for a real carbon trading market. That is why it is preferable for the next two years to have visible evidence that consumers are paying for carbon emissions even if the moneys are taken back again through the PSO. I accept in the case of a peat-powered plant more would have to be paid in the PSO for carbon costs that could be taken back as a levy and redistributed responsibly.

The argument that introducing a cost for carbon reduces the gap between what is subsidised by a PSO and the normal market price is false economics, particularly if we start pretending the PSO is less because we are not applying a carbon levy. We are pretending we are getting a bit more value for money than we actually are.

I understand the social and regional economic arguments, as well as the security of supply arguments, around peat as a power source in Ireland. It is a sensitive issue that needs to be dealt with appropriately. My amendment seeks to introduce transparency so that everyone will know how much they are paying and for what rather than pretending there is not a cost for carbon in PSO plants.

However, I understand where the Minister is coming from. I am sure there are plenty of people in my party who would be uncomfortable with me unnecessarily pushing this issue as it may give the impression we are looking to push up the PSO levy on peat-powered plants. I believe, nonetheless, we are pretending an issue does not exist when it does.

Deputy Eamon Ryan

I agree with the point about transparency. I recall from my recent electricity bill that the PSO element was clearly shown. We are upfront with the public that this cost is in place, particularly concerning peat-fired power stations. In recent years, the wind public service obligation was nil. It subsidised the peat-fired stations such that it is only now triggering since prices have come down significantly. That is its purpose; it is a floor in times of lower electricity prices such that the overall return to the wind industry remains stable. This, in turn, helps investment. All the analysis we have carried out shows that, in the long run, such a level will bring down prices, especially with our high level of wind resources. It will give lower prices subject to what happens to gas prices. If gas stays very low in the coming ten or 20 years, then there will be low electricity prices. However, it is a protection against a rise in gas prices, which is likely to occur in the latter part of this decade according to the views of international experts. I do not know what the prices will be in October nor, I believe, does the CER. It must go through the process to establish that. However, we are doing what we can to get the carbon levy and to use it to bring down prices, especially for large energy users. We are concerned that jobs could be lost if we did not do this. This is one measure we have available and I am keen to see it in place. It will help to protect us against any increase in electricity prices in the autumn.

Amendment agreed to.

Deputy Eamon Ryan

I move amendment No. 3:

In page 4, between lines 19 and 20, to insert the following:

"‘qualifying generating station' has the meaning given to it by section 40D;".

Amendment agreed to.

Deputy Liz McManus

I move amendment No. 4:

In page 4, line 44, to delete "Each" and substitute the following:

"Save to the extent that the imposition of the levy would breach EU law, each".

This is to ensure there is no question of a breach of EU law. The Minister assures us there is no such question but one cannot always be certain this will be the case. Let us consider the matter logically. There is an arrangement of carbon allowances fixed by EU directive which must be free. In a sense, this measure subverts that by imposing a carbon levy. I hold concerns not so much about the emissions trading scheme, because the Minister has explained the situation and I have no reason to argue with him in this regard, but I cannot believe there is no grey area of doubt when it comes to the all island market. Certain generators on the island are not subject to the carbon levy because they happen to be on the other side of the Border. Meanwhile, on this side of the Border, certain generators are subject to the levy. I am not an expert in the law by any means but to have such a line as this in the legislation makes good common sense and I call on the Minister to consider it.

Deputy Eamon Ryan

Having considered the matter, I do not propose to accept the amendment. The levy has been constructed with a need to confirm with existing legislation constrains foremost in mind. My Department has received legal advice on the legislation from the Office of the Attorney General. We are confident that the levy in its current form is compatible with European law on emissions trading generally.

As I have already stated on Committee Stage, to the extent that the imposition of the levy could breach EU law, it does not make that levy immune to any legal issues that may arise vis-à-vis its interaction with EU law. Since it does not serve a useful purpose in this regard, I do not propose to accept the amendment.

I refer to the second point made by Deputy McManus with regard to the interaction of the North and the South and the single electricity market. This is something we must take into account in many decisions we make. Different conditions exist in the North and South in a variety of different ways, including different tax rates, support mechanisms and regulatory differences. The single electricity market operates while recognising the two different regimes which often operate different commercial, contracting tax or regulatory arrangements. The market operates effectively and I believe this legislation will not impede that.

Amendment, by leave, withdrawn.

Acting Chairman (Deputy Darragh O’Brien)

Amendment No. 5 is out of order.

Amendment No. 5 not moved.

Deputy Eamon Ryan

I move amendment No. 6:

In page 5, lines 20 and 21, to delete "Schedule 4 of the Regulations of 2004" and substitute "Schedule 4 to the Regulations of 2004".

I propose to take amendments Nos. 6 and 13 together by agreement. These are technical amendments, simply changing the "schedule of" the regulations of 2004 to the "schedule to" the regulations of 2004.

Amendment agreed to.

Deputy Eamon Ryan

I move amendment No. 7:

In page 5, to delete lines 44 to 47 and substitute the following:

"(5) Save in accordance with subsection (6), no carbon revenue levy is payable by an electricity generator in respect of a generating station which is the subject of an order under section 39.".

Amendment agreed to.

Amendment No. 8 not moved.

Deputy Eamon Ryan

I move amendment No. 9:

In page 5, between lines 47 and 48, to insert the following:

"(6) (a) This subsection applies to a generating station in respect of which the following conditions are complied with (in this Part referred to as a ‘qualifying generating station’)—

(i) the generating station is the subject of an order under section 39, and

(ii) the electricity generator who is the operator of the generating station concerned is a counterparty to a CADA.

(b) For the purposes of the construction of ‘E’ in the formula in subsection (1), the total of the emissions, during the levy period concerned, calculated in accordance with the formula for the calculation of emissions set out in Schedule 4 to the Regulations of 2004, shall, in the case of a qualifying generating station, include only such portion of the emissions as is attributable to the quantity of electricity produced by the qualifying generating station—

(i) in respect of which revenues are received during that levy period by the electricity generator concerned through participation in the Single Electricity Market, and

(ii) in respect of which the electricity generator does not receive payments from the Board in accordance with the CADA.".

Amendment agreed to.

Acting Chairman (Deputy Darragh O’Brien)

Amendments Nos. 10 and 11 are related and may be discussed together.

Deputy Liz McManus

I move amendment No. 10:

In page 5, between lines 47 and 48, to insert the following:

"(6) No carbon revenue levy is payable by an electricity generator that has purchased the full value of their carbon allowances available to them until the end of 2012 in a commercial arrangement.".

We discussed this issue on Committee Stage. At that stage, I tabled a different amendment which I have now rephrased in line with Deputy Coveney's amendment, since his wording is a good deal better than mine. It relates to a particular company which is in the unfortunate position that it has already paid for its carbon allowances but it will be penalised by this carbon levy. Generally, there is a certain degree of sympathy.

On Committee Stage, the Minister stated it would not have much impact anyway but he has been very careful to ensure even the small percentage to which he referred in respect of Aughinish Alumina and Tynagh Energy would come into the net. I would have thought that same attention to detail would apply in respect of this company.

Deputy Simon Coveney

The Minister is aware of our approach in this area. He has also met representatives from Endesa, the company to which we are referring. I am aware that it has written to his Department to seek understanding for its situation.

My amendment, which is similar to Deputy McManus's, is linked to the previous amendment, which was ruled out of order and to which I cannot speak directly. However, I can refer to it now because it is related to the amendment which was accepted.

There is something fundamentally wrong when a company is selling carbon allowances it received for free from the Government. We are not asking for any windfall levy on the profit made on the back of that. However, we are charging the company that had to pay for these credits as if it were getting them for free. We are putting it in the same category, which is wrong and should be dealt with in this legislation.

I tried to raise the issue of what to do with companies that have been given free carbon allowances which allow them emit carbon into the atmosphere. What is the position if they do not use the allowances and sell them to another firm which may need them? What should we do with the windfall profit made in such cases? The State is giving away an asset for free. Someone has made a profit on the back of that and we are not taking it back as a carbon levy. I refer to the principle that when generators make money on the back of selling electricity and charge for carbon for which they have been given free allowances, we take back a portion of that money. This principle is in the legislation, it is agreed and I welcome it strongly. Surely the same principle applies when we give the allowance for free but it remains unused and then sold on for a profit?

For example, there may be unused carbon allowances in Moneypoint because the station has not been used to its potential output for whatever reason. There is a very significant carbon allowance attached to Moneypoint because it is a large coal-powered plant. This means the ESB would have excess carbon allowances from there which are valuable. We must question whether we are serious about trying to get the cost of electricity down. Here is another windfall profit being made that the Stage should recoup and spend responsibly to try to bring down electricity prices. In this case, a company is being hit on the double. It also paid when carbon was at its maximum value in the past three years. I believe it paid €24 per tonne but the price is now down to €14 or €15 per tonne, although the Minister will correct me if I am wrong as he is an expert in these matters.

It is a new entrant into the Irish market. We are trying to attract new entrants, yet we are legislating to hit them on the double. This company paid over the odds, although I do not blame the ESB for this since its job was to maximise the value of its assets and it sure as hell did that. However, this new entrant into the market spent much money purchasing two plants and, in a separate transaction, spent a considerable amount of money purchasing carbon allowances which all its competitors got for free. We are now putting it in the same category as every other company which got carbon allowances for free.

We will charge the ESB nothing. It sold it the carbon allowances and made a big windfall on the back of it because it got the carbon allowances for nothing from the State. That seems to be warped logic if the essence of this legislation is about fairness and ensuring that companies do not make money on the back of free allowances.

Will the Minister consider what we have said? It is not in our interests to speak up for one company over another or any generator over another but the by-product of this legislation is to treat one company, which is in a separate category to every other one because it entered the Irish energy market so recently, very harshly indeed.

Deputy Eamon Ryan

I propose to deal with amendments Nos. 10 and 11, which I do not propose to accept. I made it clear on Committee Stage that while I had some sympathy in regard to the arguments being put forward on behalf of Endesa, the carbon revenue levy is being applied to all electricity generators earning windfall gains equally. We are doing this by levying all windfall gains earned through participation in SEM arising from the SEM committee decision requiring generators to pass through the opportunity costs to carbon.

Endesa purchased its generating stations in a private commercial transaction. This was a commercial decision made by a private sector firm. It has been stated that it entered the market on the basis of the existing market structures between now and 2012. However, when Endesa made that decision and purchased the generating stations, there could be no certainty as to the likely future price of carbon or, indeed, a range of other assumptions such as electricity demand.

Additionally, there was no certainty that generators would continue to be able to benefit from the SEM committee decision allowing them to pass on the opportunity cost of carbon to electricity consumers. Indeed, the SEM committee specifically stated that governments should take action to recover these windfall gains, hence the situation was clear when Endesa made its commercial decision.

It has been said that our treatment of the PSO plant provides a precedent for treating Endesa differently. However, I do not believe this is the case. The PSO plants are only treated differently because they operate differently from any other plant in the market. The bulk of their output is excluded because these generators do not benefit from the SEM decision requiring generators to pass through the cost of carbon. For the small proportion of their output which earns carbon windfall gains, the amendments we discussed earlier will levy that output.

Every generator benefiting from the SEM committee decision will now be subject to the levy according to its carbon emissions. Any preferential treatment to exempt one firm from the carbon levy would raise concerns about the equality of treatment for all generators in this levy. In this regard the impact of the levy on Endesa is likely to be very minor since its generation stations are rarely dispatched and hence rarely earn carbon windfall gains. Any levy liabilities borne by Endesa pale into significance when viewed against the sums already invested by Endesa and its stated future investment plans.

It should also be noted that investments in new power generation tend to have a projected lifespan of approximately 30 to 40 years. This levy is simply recovering a temporary windfall gain from generators over the next two and a half years so any effect it could have on investments with such a long projected payback is minimal.

Deputy Simon Coveney

There are no windfall gains for Endesa.

Acting Chairman (Deputy Darragh O’Brien)

The Minister, without interruption. The Deputy has the right to respond.

Deputy Eamon Ryan

I remember talking to the investors at that time and I committed to maintaining a proper regulated market which would not treat one operator differently from another. In the long run, that is a much better investment environment. While certain decisions of the regulatory authority may be difficult, it is better to apply them across the board in order that there is not fear or favour in regard to one company over another. While I have sympathy for the case made, the consequences of starting to treat operators differently would be far more significant and, therefore, I cannot accept the amendments.

Deputy Simon Coveney

Will the Minister outline where the windfall gain is for Endesa in charging for its carbon? He said repeatedly that this is about recouping carbon windfall gains evenly across all generators. Clearly, we are not doing that in regard to the PSO but that is a different issue. There is no windfall gain for Endesa. There is a considerable loss. It paid €24 per tonne for its emissions and carbon is now two thirds of that in terms of value, so there is a loss. If this is about carbon windfall gains, which it should be, there is no carbon windfall gain in regard to the electricity Endesa will sell.

I accept we are talking about relatively small amounts of money in comparison to windfall gains or the amounts of money being made by other companies. It is still an important principle. There is no windfall gain here and perhaps the Minister will at least acknowledge that.

Deputy Eamon Ryan

I tried to make the point on several occasions on Committee Stage that we are not looking at a windfall levy on the allowances but rather on what passes through via the SEM decisions. It is market-related in regard to SEM transactions which, as the Deputy said, are very low in this instance because of where the stations are in the order of merit means they are not in action on a regular basis. It is not applied on the allowances but rather on the SEM pass through.

Amendment, by leave, withdrawn.

Deputy Simon Coveney

I move amendment No. 11:

In page 5, between lines 47 and 48, to insert the following:

"(6) No carbon revenue levy is payable by an electricity generator that has purchased the full value of their carbon allowances available to them until the end of 2012 in a commercial transaction.".

Amendment put and declared lost.

Amendment No. 12 not moved.

Deputy Eamon Ryan

I move amendment No. 13:

In page 7, line 18, to delete "Schedule 4 of the Regulations of 2004" and substitute "Schedule 4 to the Regulations of 2004".

Amendment agreed to.

Deputy Eamon Ryan

I move amendment No. 14:

In page 7, lines 20 to 26, to delete all words from and including "and" in line 20 down to and including "paragraph (a).” in line 26 and substitute the following:

"(b) in the case of a qualifying generating station, information relating to such portion of the total of the emissions referred to in paragraph (a) as is attributable to the quantity of electricity produced by the qualifying generating station—

(i) in respect of which revenues are received during the levy period concerned by the electricity generator through participation in the Single Electricity Market, and

(ii) in respect of which the electricity generator does not receive payments from the Board in accordance with the CADA,

and

(c) such other information as may be prescribed by the Commission for the purposes of this section relating to the verification of—

(i) the calculation of the total of the emissions referred to in paragraph (a), and

(ii) in the case of a qualifying generating station, the portion of the total of the emissions as referred to in paragraph (b).”.

Amendment agreed to.

Deputy Eamon Ryan

I move amendment No. 15:

In page 7, to delete lines 35 to 38 and substitute the following:

"(c) the information to be contained in returns relating to the verification of—

(i) the calculation of the total of the emissions referred to in subsection (1) (a), and

(ii) in the case of a qualifying generating station, the portion of the total of the emissions as referred to in subsection (1)(b);”.

Amendment agreed to.

Bill reported with amendment and received for final consideration.

Question proposed: "That the Bill do now pass."

Minister for Communications, Energy and Natural Resources (Deputy Eamon Ryan)

I will be brief because we have gone through much of the detail of the Bill on Report Stage. I thank the Deputies for its swift passage through this House. I will bring it to the Seanad for consideration as quickly as possible because we want it implemented to help in the important task of keeping our energy price competitive.

I very much thank my officials because this is detailed and complex legislation, which was not easy to draft, but their work will stand us in good stead when it is implemented later in the summer and as we benefit from its provisions over the next two and a half years. I very much appreciate their work and the work of Members in helping its passage through the House.

Deputy Liz McManus

I would like to acknowledge, in particular, the role of the civil servants who took a great deal of time to explain the intricacies of arcane provisions. Such expertise is helpful to Oppositions Members. I thank the Minister and wish him well with the legislation.

It is 6 p.m. and the imposition of a guillotine was unnecessary. It shows how wrong the Government can be.

Deputy Simon Coveney

I recognise the work of the Minister and the Department. A number of EU member states have tried to introduce a similar windfall levy but it has proven to be tricky legally to do so. Even though I have been banging this drum for ages, I acknowledge this has not been a simple process legally. It is a shame this could not have been done a few years ago because significant sums could have been ploughed back into driving energy prices down or implementing other measures but we are close to having the levy in place, which is welcome. The briefings we had were useful and the work on the legislation has been solid. I am sure it will be tested legally. The Opposition has followed through on its commitment that it would not unnecessarily hold up the Bill.

Question put and agreed to.