Energy (Miscellaneous Provisions) Bill 2011: Second Stage

I move: "That the Bill be now read a Second Time."

I am pleased to have an opportunity to present and commend for consideration by the Dáil the Energy (Miscellaneous Provisions) Bill 2011. The Bill has been designed to revise, consolidate and expand energy legislation in areas such as the theft of electricity and gas and the safety of liquefied petroleum gas in order to reflect the structure and needs of the energy sector. It is also proposed to restate energy efficiency and other provisions currently provided for in secondary legislation. The amendments proposed will result in more robust energy legislation. I would like to address energy policy issues before I speak about the proposals made in the Bill in detail.

The economic backdrop requires us to take stock of energy policy directions. Despite the current economic situation, the overriding objectives of energy policy remain security of supply, competitiveness and sustainability. The importance of a secure energy supply has become central as the geopolitical turmoil in the Middle East and north Africa has led to concerns about oil prices and security of supply. In the longer term the policy shift away from nuclear power in Japan and Germany suggests demand for gas will become even more acute. We are heavily dependent on a single source of gas supply. Our electricity interconnection is still limited. We are heavily reliant on gas for the generation of electricity. This reliance is set to remain for some time because gas is the fuel of choice while we build our renewable capacity.

The Government fully endorses the strategic national importance of investing in Ireland's electricity transmission infrastructure. EirGrid's national grid development strategy, Grid 25, is of key importance. The development of the high voltage electricity grid is critical to economic recovery, security of supply, competitiveness and the realisation of our renewable electricity targets. The country's reliable and modern electricity and gas system is the result of extensive strategic investment by State-owned companies, notably the ESB and Bord Gáis Éireann. These investments were not funded by the taxpayer but by well run and highly profitable State companies.

I wish to speak about the sale of a minority stake in the ESB. Given the importance of the electricity sector to the economic and social functioning of the State, I am strongly of the view that the State must continue to have a strong and direct presence in generation, networks and supply. I am confident that the sale can be structured in a way that protects overall economic competitiveness and does not deter private sector involvement in generation and supply.

As Deputies are aware, a group co-chaired by my Department and the Department of Public Expenditure and Reform has been mandated by the Government to report by the end of November on the best approach to the proposed sale of a minority stake. The group in question will engage in appropriate consultation. Subject to a positive decision by the Government after its consideration of the report of the group, I envisage that the specific transaction will be progressed through 2012. The State will continue to have a strong majority shareholding in the ESB. The task of the group will be to assess the level of stake that might be offered, taking account of energy policy parameters, including regulation, and, of course, the objective of maximising yield. The overall objective is a transaction that produces a compatible minority partner for the ESB.

An analysis of EUROSTAT data by the Sustainable Energy Authority of Ireland shows that at the end of 2010, Irish electricity and gas prices were competitive when compared with our European neighbours. In the two years to the end of 2010 the two predominant trends in Irish electricity and gas prices for domestic and business consumers were convergence with the EU average and falling prices. Energy efficiency is an area in which there is increasing investment and innovation in Ireland. Improving energy efficiency will pay dividends for the environment, energy security and competitiveness and contribute towards meeting our European target of 20% energy efficiency savings by 2020. Over 100,000 homes have now been grant-assisted to improve their energy efficiency, resulting in economic activity of over €280 million since the scheme's launch. The scheme is supporting almost 6,000 jobs this year alone.

In the business sector, the most significant cost-cutting and energy saving potential lies in improving the energy performance requirements of new and existing buildings, encouraging more businesses and public bodies to address actively their energy use and to use the most energy efficient plant, machinery and equipment. The accelerated capital allowances scheme allows companies to write off the full capital cost of registered energy efficient equipment in the year of purchase. The scheme has expanded and now includes more than 7,000 products on its register, representing 10% to 15% of the most efficient products in each class. It covers equipment accounting for at least 60% of the energy used by industry in Ireland.

SEAI's business and public sector programme supports energy efficiency retrofit measures to be installed at significantly reduced cost to businesses across the country. The dedicated SME support programme gives free energy management training, advice and support to any business that is willing to show a commitment to becoming more energy efficient. Over 1,600 businesses have already availed of the many support services under this programme, with 10% savings being routine in the first year.

As part of the jobs initiative announced in May by the Minister, Deputy Noonan, I launched Better Energy: the National Upgrade Programme, which is providing an additional €30 million for energy efficiency initiatives this year. This announcement marks an important milestone in the achievement of our national energy efficiency targets. The scheme will generate 2,000 additional jobs in the economy and should bring the total to just under 6,000 jobs in a full year, and a spend of €100 million this year.

The legislative proposals in this Bill are fully consistent with what has been agreed by Government under the better energy programme. The Bill sets out energy efficiency obligations for the energy sector that are already provided for in secondary legislation. It provides a legal framework for setting energy efficiency targets to be met by energy suppliers and distributors. This will be achieved through the provision and promotion to customers of energy services and energy efficiency improvement measures.

Better Energy is a major step forward as it brings all energy companies in as partners. Energy suppliers are being asked to participate through voluntary energy savings agreements. All sellers of energy over a minimum size will be involved, from energy suppliers to oil companies and solid fuel suppliers. These companies have been given targets to deliver energy efficiency upgrades, the size of their target being linked to their share of the market. The priority is to ensure energy saving agreements with energy suppliers are finalised quickly. However, we need to be more ambitious to drive the market growth and energy savings that our economy needs today. The proposed EU energy efficiency directive signals a target for energy suppliers of 1.5% savings per annum, and Better Energy is a necessary first step towards achieving the kind of savings we need in the long term.

The Bill proposes to provide for the establishment of an energy efficiency fund, which may be funded through contributions from energy suppliers, subject to an energy saving obligation. The fund's objectives will be to support the delivery of energy efficiency programmes and measures and to promote the development of a robust market for energy services. This will be an important element of future funding mechanisms as we make the transition from State supports to a pay-as-you-save framework, which is currently under development. I took the opportunity at Question Time today to expand on that.

A number of provisions of the Bill propose to further expand the functions of the Commission for Energy Regulation. Since its establishment in 1999 with responsibility for electricity regulation, the remit of the regulator has expanded considerably, which is partly a consequence of EU Internal Market legislation. We now have a strong, independent energy regulator. Most recently, the Petroleum (Exploration and Extraction) Safety Act 2010 gave the regulator responsibility for upstream gas safety. The enactment of the Energy (Miscellaneous Provisions) Act 2006 gave the regulator responsibility for downstream gas safety, for LPG safety and for electrical safety. The electrical and gas safety regime is now fully operational. However, it was found necessary to amend the 2006 Act to ensure that LPG provisions adequately addressed the safety regulation of LPG and did not result in duplication of Health and Safety Authority and regulatory functions.

A two-phase approach was undertaken. Amending legislation was enacted last year through the Energy (Biofuel Obligation and Miscellaneous Provisions) Act 2010, which provided for the extension of the natural gas safety framework to LPG installers. As of June 2011, it is an offence for anyone to carry out LPG works unless they are a registered installer. The LPG provisions in the Bill represent the second phase of LPG safety legislation. In summary, it is proposed to extend the regulator's safety function to the safety regulation of LPG undertakings and LPG pipelines, and to include provisions for the reporting of LPG incidents. The enforcement regime will include a safety licensing regime applicable to LPG importers and suppliers of LPG. The regulator will also have responsibility for promoting LPG safety. The overall objective is the achievement of first-rate safety standards for the LPG sector.

I now propose to outline the provisions of the Bill. For the convenience of the House, a detailed explanatory memorandum has been published and this provides a synopsis of the provisions of the Bill, which consists of 20 sections. Section 1 of the Bill contains standard provisions concerning Short Title and commencement. Section 2 provides for a number of definitions for ease of reference.

Sections 3 and 4 propose, following legal advice from the Attorney General, to restate in primary legislation superannuation provisions relating to certain employees of ESB and Bord Gáis Éireann who transferred to EirGrid, ESB Networks Limited and Gaslink Limited. The proposals do not go beyond provisions set out in four sets of ministerial regulations made since 2000. Section 3 proposes that an employee of the ESB whose employment was transferred to EirGrid plc, and who was immediately before the transfer a member of a superannuation scheme, can continue to have his or her superannuation benefits, and the contributions payable in respect of his or her superannuation scheme membership, paid out of, or into, the ESB fund into which that person was, before the transfer, paying superannuation contributions. An employee of ESB who transferred to ESB Networks Limited, and who was immediately before the transfer a member of an ESB superannuation scheme, may continue to be a member of that scheme. Section 4 proposes that former employees of Bord Gáis Éireann, who were members of a Bord Gáis Éireann superannuation scheme and who transferred to Gaslink Limited, may remain in the Bord Gáis Éireann superannuation scheme.

Section 5 proposes to amend sections 15 and 16 of the Energy (Miscellaneous Provisions) Act 1995 by extending existing theft of electricity and gas provisions to independent suppliers and to the customers of those suppliers. Possibly the most familiar example of theft is interference with electricity and gas meters. This provision is required to reflect the current structure of the marketplace in which a number of independent suppliers are now operating in a competitive market. The section also includes a new provision in respect of deemed contracts of supply, subject to safeguards. The aim is to provide, subject to strict criteria, for the recovery of debts by energy suppliers from the owner or occupier of a premise that has been consuming gas in the absence of a contract to supply energy being in place.

Sections 6 to 8 of the Bill propose a number of amendments to the Electricity Regulation Act 1999. The objective is to strengthen the enforcement powers of the Commission for Energy Regulation in regard to electrical and gas safety. Section 6 proposes to give powers to the regulator to appoint electrical investigation officers who will have powers to investigate unregistered electrical contractors and to investigate designated electrical works from a safety perspective. Section 7 proposes to give powers to the regulator to require electricity undertakings to provide information on electrical safety to their customers and to the public. Section 8 proposes, for the avoidance of doubt, to clarify the investigative powers of gas safety officers in regard to the investigation of gas works carried out by gas installers.

Section 9 is a minor technical amendment relating to sections 9L, 9M and 9N of the 1999 Act. It restates sections 9L and 9M of the Act, which provide powers to the regulator to require energy undertakings to ensure that tariffs are energy efficient. The provision also obliges energy suppliers to provide clear, easily understandable and informative details in consumer bills. These obligations are currently set out in the European Communities (Energy End-use Efficiency and Energy Services) Regulations 2009. The provision does not go beyond the 2009 regulations. The section also includes a second minor technical amendment relating to section 9N and Part IIA of the same Act.

Sections 10 to 16 provide for the restatement in primary legislation of provisions also set out in the European Communities (Energy End-use Efficiency and Energy Services) Regulations 2009. The proposals concern Part 5 of the regulations, which relates to an energy efficiency obligation scheme for energy suppliers and distributors. As I stated earlier, the proposals provide a legal framework for setting energy efficiency targets to be met by energy suppliers and distributors. This will be achieved through the provision and promotion to customers of energy services and energy efficiency improvement measures. I have already referred to the proposed establishment of an energy efficiency fund, which will be managed by my Department or an agent of the Department.

Sections 17 to 19 of the Bill propose a number of amendments to the Electricity Regulation Act 1999 relating to liquefied petroleum gas, LPG, and natural gas safety. The proposals in this Bill aim to address remaining safety gaps in the LPG chain that are not already regulated by the Health and Safety Authority or any other agency. The LPG phase 2 proposals of the Bill extend the regulator's safety function to the safety regulation of LPG undertakings and LPG pipelines. As part of the enforcement regime, it is proposed to provide for a safety licensing regime, to be administered by the regulator, which will be applicable to LPG importers and suppliers. The regulator will have responsibility for promoting LPG safety. Gas emergency officers, appointed by LPG undertakings, will be provided with powers to investigate LPG leaks and defects to fittings.

Section 18 sets out enforcement provisions where a natural gas or an LPG undertaking is not operating in accordance with the safety framework or has contravened or failed to comply with safety requirements. The approach is based on the model applying to upstream gas safety, as provided for in the Petroleum (Exploration and Extraction) Safety Act 2010. Where a natural gas or LPG undertaking is not operating in accordance with the regulator's safety framework, the regulator may issue directions to an LPG undertaking requiring it to submit improvement plans. Where more serious safety issues arise, the regulator may serve improvement notices and prohibition notices. Where the regulator deems the activities of an undertaking to be so serious as to involve risk to safety of life, of gas or LPG infrastructure or of property, the regulator may make an application to the High Court for an order prohibiting activities by the LPG or gas undertaking. It is also proposed that the regulator will be given powers to make regulations relating to the reporting and investigation of LPG incidents involving death or injury to persons or loss or damage to property resulting from the use, misuse, abuse, leakage, combustion or explosion of LPG. Section 19 proposes that the regulator may impose an annual levy on LPG undertakings for the purpose of meeting expenses incurred by it.

Finally, section 20 of the Bill provides for the correction of minor typographical errors in energy legislation. It also provides for the repeal of section 11 of the Electricity (Supply) Act 1927 and of section 17(2) of the Gas Act 1976. The latter repeals are proposed on the grounds that they are obsolete provisions that have been superseded by up-to-date provisions. I look forward to working constructively with Deputies and to an informed and meaningful debate. The input from Members from all sides of the House will help in advancing the measures provided for in the Bill.

I also ask Members to note that I intend to table a number of amendments on Committee Stage, primarily to clarify certain matters. Subject to final legal drafting, I hope to introduce amendments to make provision for the winding up of a number of non-trading statutory Bord Gáis Éireann subsidiaries and to facilitate co-operation and provision of information by oil companies in respect of oil contingency planning. I also propose to introduce amendments to the National Oil Reserves Agency Act 2007 in regard to the time limits set out in that Act in order to allow the agency to more effectively perform its functions with respect to bio-fuel certificates.

In conclusion, this Bill is an important measure in delivering on the Government's targets for energy efficiency. Furthermore, the safety provisions of the Bill will deliver benefits to consumers and to the public in general. I look forward to working closely with the regulator on ensuring the speedy implementation of the Bill's provisions following enactment and commend the Bill to the House.

Debate adjourned.