Dáil Éireann debate -
Thursday, 24 May 2012

Vol. 766 No. 3

Electricity Regulation (Carbon Revenue Levy) (Amendment) Bill 2012: Second and Subsequent Stages

Minister for Communications, Energy and Natural Resources (Deputy Pat Rabbitte)

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

I am pleased to have this opportunity to present the Electricity Regulation (Carbon Revenue Levy) (Amendment) Bill 2012 for consideration by the House, and I thank the Whips and Deputies for facilitating the Bill being taken today. The legislation seeks to cease the inclusion of the carbon revenue levy in wholesale electricity prices bid into the Single Electricity Market. On its enactment it will end the charging of the levy so that it can no longer be included in prices bid into this market. This in turn will end the associated wholesale electricity price increase thereafter.

The inclusion of the carbon levy in wholesale electricity prices is a result of the Supreme Court decision in the case of Viridian Power Limited and Huntstown Power Company Limited v Commission for Energy Regulation, CER. The decision issued on 23 February quashed the prohibition of the carbon levy being included in wholesale electricity price bids in the Single Electricity Market. The consequence of the Supreme Court decision to quash the prohibition means that the levy is now mandatorily included in all generators’ price bids. As it stands, after the judgement and without any action being taken, electricity generators are not only allowed to include the opportunity cost of the free carbon allowances they have received in their price bids but also the cost of the levy they pay to the regulator, thus increasing the wholesale price of electricity by the amount of the levy. The expected impact of the decision is to increase wholesale electricity prices by a figure estimated at between 3% and 6%. This potentially could increase electricity prices to end consumers. Certain large businesses have already seen increases in their prices because of the inclusion of the levy in the wholesale bids. As time goes on, again assuming no action is taken, increases would also be expected to take effect in due course in the prices paid by medium and small business and those paid by domestic consumers.

As Members are aware, prices in the retail electricity market for all business and domestic customers have been deregulated. There is no ministerial or regulatory role in setting retail electricity prices. It is therefore an entirely commercial matter for electricity suppliers to decide whether, when and by how much to increase or decrease prices depending, for example, on market circumstances, contract terms and hedging practices. I note some electricity generators are also suppliers in the retail market, whether domestic or business or both. The Government is also concerned about the potential impact on Northern Irish electricity consumers and this reinforces the need for urgent resolution of the issue. The levy's inclusion in wholesale prices, again assuming no further action, would also have the effect of increasing wholesale prices in Northern Ireland, as well as in the Republic, because of the existence of the all-island wholesale market for electricity.

The Government recognises that the cost of energy in Ireland is a serious competitiveness issue facing energy consumers during this difficult period for the economy. As I have noted, prices in the retail electricity market for both domestic and business customers are now fully deregulated. Prices charged to electricity customers are wholly a commercial and operational matter for the suppliers. Ireland's electricity markets, both wholesale and retail, are characterised by vigorous competition regulated by the regulator. Ireland's concerns about high oil and gas prices are shared at EU level and fellow member countries of the International Energy Agency, IEA. The EU and IEA agree that high fossil fuel prices underline the need to reduce dependence on fossil fuels by radically enhanced energy efficiency measures and the development of renewable energy. At a national level, competitive markets in electricity help put downward pressure on prices. I am committed to working with enterprise and with the energy sector to ensure the costs of energy are as competitive as possible, including sustained focus on energy efficiency measures.

In view of the importance the Government attaches to electricity costs, for business competitiveness and because of their role in domestic bills, it therefore has agreed to end the charging of the carbon revenue levy. This is to mitigate the increase in wholesale electricity prices resulting from its inclusion in generators' price bids into the single electricity market, SEM. The purpose of the Bill is to end the charging of the levy on enactment, thereby ceasing its inclusion in these bids and thus ending the associated wholesale electricity price increase thereafter. Amending the Act in order to cease the imposition of the levy from the earliest possible date will ensure the wholesale electricity price increase has effect for the shortest period possible. In this way, the inclusion of the levy in wholesale prices will have the least possible impact on retail prices. This is vital for business competitiveness and for domestic consumers' electricity bills. Members accordingly will appreciate, from what I have just said, the protection of the electricity cost competitiveness of Irish enterprise, as well as the impact on domestic consumers' electricity bills, are the key motivators for this legislation. The impact on Northern Irish electricity prices is also a significant concern. I am confident the Deputies opposite will agree, for the reasons I have just outlined, as to the urgency of taking action to ensure such price rises do not happen and to minimise their duration if they do happen. The collective concern of Members is reflected in the urgent priority the Oireachtas is affording to this Bill.

As I have previously outlined, the need for this legislation is to end the inclusion of the levy in price bids into the single electricity market and the associated wholesale price increase. In turn, the levy's inclusion in these price bids is because of the Supreme Court decision quashing the prohibition on the inclusion of the levy. Given this context of the levy and the judgement, as well as the undoubted complexity of these matters, I believe a setting of the wider background would therefore be useful for all concerned. To be helpful, I will now explain how the levy itself came about. This requires me to briefly explain carbon allowances under the emissions trading scheme. I will also briefly describe the wholesale single electricity market. The manner in which carbon was allowed to be bid into electricity prices in this market is also relevant and I will then turn to the nature of the legal challenge itself.

Free carbon allowances originate from the EU emissions trading scheme, ETS, under which electricity generators have received these allowances. The EU emissions trading directive, Directive 2003/87/EC, was implemented to assist member states in achieving reductions in emissions of greenhouse gases by establishing a carbon trading regime whereby large emitters of greenhouse gases were required to possess allowances for their emissions. These measures were implemented following signature of the Kyoto Protocol. The directive was transposed into Irish law by the European Communities (Greenhouse Gas Emissions Trading) Regulations 2004, SI 437 of 2004. These regulations led to the creation of national allocation plans, which determined how the allowances were to be allocated sector by sector. Under the Irish national allocation plan covering phase 2 of the emissions trading scheme, which runs from 2008 to 2012, electricity generators receive the vast bulk of their required carbon allowances for free, with only a small amount of the allowances auctioned.

The single electricity market created a single market for electricity on the island of Ireland. On 1 November 2007, the market went live, commencing the trading of wholesale electricity in Ireland and Northern Ireland on an all-island basis. In its review of Irish energy policy last year, the ESRI stated that one of the key successes of Irish energy policy in recent years was the implementation of the single electricity market on the island of Ireland. It concluded that the SEM had ensured a secure supply of electricity at a competitive price since 2007. The single electricity market committee, comprising the energy regulators North and South and two independent members, is statutorily responsible for the regulation and oversight of the single electricity market. This committee governs the operation of the all-island wholesale electricity market. Although generators receive the majority of their allowances for free under the ETS, they are able to receive revenue for them from the SEM through a decision taken by the SEM committee. In March 2008, the SEM committee decided that regardless of how they receive the carbon allowances, all electricity generators must include the full opportunity cost of carbon allowances in the bids they submit to the single electricity market. Therefore, generators participating in the SEM were allowed to bid in the opportunity cost of the free carbon allowances to the price they charge for electricity generation by this decision. As a result of this decision, electricity generators receive additional revenues from the market due to the inclusion of the opportunity cost of carbon allowances in their allowable costs for the purposes of price determination in the SEM. This is despite the fact that all or some of the allowances have been granted for free. The Electricity Regulation (Carbon Revenue Levy) (Amendment) Act 2010 enacted on 30 June 2010 amended the Electricity Regulation Act 1999. Its provisions allowed for the charging and collection by the Commission for Energy Regulation of a levy from the electricity generators. This ensures that a portion of these additional revenues, namely, the "opportunity cost" of the free carbon allowances, are recovered for the use by the Exchequer. The legislation provided that the carbon revenue levy would end on 31 December 2012 in line with the ending of free allowances and the requirement to purchase them after 1 January 2013.

The Electricity Regulation (Carbon Revenue Levy) (Amendment) Act 2010 provided for the introduction of a carbon revenue levy payable by fossil fuel generators of electricity. It provided that proceeds from the levy be disbursed into or for the benefit of the Exchequer and that the Minister for Communications, Energy and Natural Resources, with the consent of the Minister for Finance, would direct the regulator as to how the levy proceeds should be disbursed in line with Government policy. The proceeds of the levy have in this manner been utilised for rebates to large energy users, LEUs, to mitigate the effect their electricity costs in accordance with the provisions of the Act. The LEU's who have benefited are significant employers with an indigenous and multinational base. This rebate scheme is temporary and there are funds in place for payment of it in accordance with the existing annual direction to the regulator. There are no implications for the Exchequer.

After charging and collection of the levy had commenced, two companies subsequently sought to bid-in the carbon revenue levy as an allowable cost for price purposes in the single electricity market, SEM. The single electricity market committee in response issued a determination effectively confirming that the levy could not be included in electricity generators' costs in determining the wholesale price of electricity. Two private electricity generators, Viridian and Endesa brought a High Court case against the regulator on the decision that prohibited the inclusion of the levy in price bids. This was decided in the regulator's favour in late 2010. Viridian then brought an appeal to the Supreme Court stating that the High Court judge erred in his judgment. The Supreme Court issued its judgment in February 2012, stating that the prohibition on the inclusion of the levy in electricity generators' price bids was incorrect. The legislation was not challenged in the case and the Supreme Court judgment was not directed at it. This judgment had the result that the levy then had to be included in wholesale electricity price bids in the single electricity market, with the knock-on impacts on the wholesale price which I referred to earlier. This required action to be taken to minimise the duration of this price increase.

I now propose to outline the main provisions of this short Bill. For the convenience of the House an explanatory memorandum has been published and this provides a synopsis of the provisions of the Bill. Part 1 is the substance of the Bill. The single substantive provision of the Bill is to bring forward the end date of the final carbon revenue levy period as provided for in the original provisions of the 2010 legislation. I highlighted earlier that the end date was 31 December 2012, in line with carbon allowances having to be purchased after that point. The legislation being discussed here today advances the end date from 31 December 2012 to the date of enactment of the Electricity Regulation (Carbon Revenue Levy)(Amendment) Act 2012.

Part 2 is a standard provision providing for the Short Title of the Bill.

I commend the Electricity Regulation (Carbon Revenue Levy) (Amendment) Bill 2012 to the House.

Deputy Niall Collins

Fianna Fáil will be supporting the Bill. This is a technical Bill which brings forward the end date of the carbon revenue levy period from 31 December 2012 to the date of enactment of this Bill. As the Minister stated, the need for this legislation arose out of a recent Supreme Court judgment which found against the regulator's prohibition in respect of the bidding in by generators of the carbon revenue levy to the wholesale price of electricity in the single electricity market. As a consequence of that judgment, generators will henceforth bid-in the cost of the levy, with potential impact on prices for the duration of the levy, which, under the 2010 Act, was due to cease at the end of 2012 but which the Minister is proposing in this legislation to bring forward.

I agree with the Minister's statement that we must take every measure possible to address our competitiveness. We know only too well to our detriment that we have suffered a severe loss in our competitiveness over a number of years, culminating in a large number of company withdrawals and resultant job losses in our economy. Much of this was driven by the increases which we have experienced in energy costs. Unfortunately, many of the companies that withdrew provided manufacturing-type jobs. For example, the withdrawal of Dell from Limerick, which cited as its reason for withdrawing that the region had become uncompetitive for its business model. There are signs that we are regaining our competitiveness. However, we must do all we can to ensure a return to competitiveness at a quicker pace.

On energy prices in general, the Government has failed to deal with rising energy prices. The provision of secure, sustainable and competitive energy supplies is critical for the economy, business and families. While the Government will point to global gas and oil prices rising sharply since the start of 2011 driven by events in North Africa and Japan and high demand from China, India and other emerging economies, its inaction on rising energy prices has been disappointing. The Government should sit down with energy companies to explore every possible alternative method of managing costs to hitting customers with substantial price hikes. Increases in energy prices will be a cause of great concern to the tens of thousands of families who are already in arrears and who simply cannot afford them. As public representatives, we are all aware that rising energy costs, in particular in respect of family homes, is a cause of serious concern. A recent survey by the Irish League of Credit Unions indicates that one in four people cannot cope with rising energy costs, 15% of people have had to dip into their savings to deal with them and 8% are unable to cover household bills. These figures show just how hard the ordinary people of Ireland are being hit by increasing household expenses. Impending increases to energy bills will hit families hard, with households concerned they will not be able to adequately heat their homes over the winter.

Despite the Government's rhetoric about energy efficiency and renewables to reduce our dependence and vulnerability to global price increases in such fuels, energy price hikes are hitting the most vulnerable the hardest.

From November 2010 to November 2011, the following price increases were noted by the SEAI: natural gas was up in the order of 12% to 20%; gas oil was up 21%; bulk propane was up 16%; kerosene, up by 28%; coal down by 3%; and briquettes up by 1%.

Returning to the subject of the Bill, I refer to carbon and the climate change crisis. The world's soaring carbon dioxide emissions remain the elephant in the atmosphere. They are the single biggest contributor to rising temperatures, will remain in the atmosphere for 100 years and, unless drastic action is taken to mitigate them, costly and dangerous climate change will not be averted. I am, and always have been, an avid believer in the need for radical action to address the climate change crisis. We need to be more broad-based in our approach to the problem. In this regard, it is disappointing that the Government has abandoned the Climate Change Bill. More specifically, I was disappointed that the Government reversed a policy which promoted cleaner cars. The decision to increase certain motor taxation rates was an act of regression which flies in the face of measures being taken globally to tackle fuel emissions.

To reduce carbon emissions, enhance the environment, help produce a cleaner environment, tackle climate change and promote energy efficiency, the previous Government introduced various incentives. This policy worked. Those who bought fuel-efficient cars did so on the basis that there would be certainty and consistency in the motor taxation regime. We have now seen this policy reversed, which is disappointing. The correct pricing of carbon is important as part of tackling the climate change crisis.

I urge the Minister and his colleagues in Government to take every measure available to them, in particular sitting down as often as they can with the energy providers, to try to effect a real knock-on in savings to the end user, especially hard-pressed families and households.

Deputy Martin Ferris

Sinn Féin will not oppose the Bill nor will it table any amendments to it. We welcome the opportunity to have it passed speedily, in the interests of everybody concerned. Given that the purpose of the Bill is to forestall a situation in which electricity suppliers can include the "opportunity" cost of the carbon allowances and the CER levy in the prices they charge to customers, there is no reason to oppose it. Electricity consumers, both domestic and commercial, are often already under considerable pressure to meet energy bills and such an increase would constitute an intolerable extra burden for some. It is vital that struggling households and businesses are not landed with such an extra cost at this juncture.

I recall that in 2010, when the original Bill to impose the levy was debated in this House, some of the subsequent difficulties were anticipated. The then Minister for Communications, Energy and Natural Resources, Eamon Ryan, referred to the difficulties of determining the extent of the windfall profits that were the target of the levy. Other speakers referred to the possibility of legal action and named the two companies, Viridian and Endesa, which actually took successful cases. Mr. Ryan also estimated that the levy would bring in €75 million in its first 12 months of operation. I am not certain what the exact figure has been; perhaps the Minister, Deputy Rabbitte, might enlighten us. There was also some discussion as to how the moneys taken in from the levy would be distributed. If the Minister has time today or at some later date it would be interesting if he were to provide us with information on that, too.

It was generally suggested and understood at the time that the levy would be used to offset the costs of large-scale users of the network in order to increase competitiveness in industry. Has that been the case and, if so, has it been successful? At the time, it was the Minister, Deputy Coveney, then the Fine Gael Party spokesperson on this area, who presciently raised the prospect of legal action being taken by the two main private operators in the sector. He referred at the time to the considerable investment which Endesa had made in acquiring two power stations and carbon allowances up to the end of this year from the ESB.

My party's view on the ownership and distribution of the energy network is, of course, radically different from that of Fine Gael but Deputy Coveney, now Minister for Agriculture, Food and the Marine, raised the issue at the time and the court agreed with the case brought by the company. One wonders, therefore, how tight the initial legislation was and whether all of these issues were fully explored prior to the bringing forward of the 2010 Bill. Perhaps the Endesa case might have been addressed as a separate issue. It could also be argued, of course, that all these problems arise from the short-sighted and ultimately negative policy of selling off the public interest in energy and other utilities. Perhaps that is another lesson that ought to be borne in mind as the current Government applies its mind to a large-scale selling off of State assets, in both energy and other sectors.

I will comment on part of Deputy Collins's contribution, on higher energy costs and the effect they are having on ordinary citizens, particularly low income families, and on industry and in consequent job losses. Every time one goes to a filling station, one sees the price of diesel and petrol rising on a regular basis even though world markets might indicate a reduction in the price of a barrel of oil. It does not transfer to the customers. The cost of transport also has another effect in that it leads to higher costs for foodstuffs, and so forth, because most such transportation is done now by motor transport. We have been lucky this year in that fuel costs for energy and for heating homes were reduced because of the mildness of the winter but it must be borne in mind that people are suffering. Elderly people who depend on oil heating are suffering greatly as a consequence of rising prices.

I raise a final issue, that of LNG in Tarbert, County Kerry, a project that has been limping along for some considerable time. I respect that the Minister has given us several briefings on the matter in both the Topical Issues debate and on Priority Questions when I raised it in the recent past. The Minister attended the House and gave a very detailed answer. If possible, will he give us an update as to where the situation now stands Is it the case, as we have been led to believe in recent months, that we are coming to decision time at the end of this month or the beginning of June? Perhaps the Minister might refer to this in his replies.

Acting Chairman (Deputy Peter Mathews)

I understand Deputy Murphy wishes to share time with Deputy Boyd Barrett. Is that agreed? Agreed.

Deputy Catherine Murphy

I support this Bill because it is my view we have been boxed into a corner and I suspect we all believe the same. I am really disappointed by the decision of the Supreme Court. It was a good levy, designed in the public interest. The money was not specifically ring-fenced but was to form part of a wider State package on retrofit. If anybody believes the Supreme Court was acting in the public good on this issue, even a superficial look at the case will highlight that it was not doing so. I am incredibly disappointed. One must ask in whose interest it acted because it certainly was not in the public interest. Perhaps I am wrong but I would have expected the Supreme Court to have come down on that side.

The more complex the issue is the more difficult it is for the public to understand it. It took me some digging to understand exactly what was happening. It would be useful for the background document the Minister used in his contribution. I suspect the average person on the street will not get their head around the exact dynamics of this easily. I want to make the point that this is a reasonable use of the guillotine. It is clear that something has to be done quickly. I regret it is not the case that the guillotine is used in this kind of case only. This Bill has been introduced on foot of a legal challenge that was brought against the Government by two energy suppliers. Under the EU emissions trading scheme, electricity companies receive free carbon allowances. If their emissions in a given year are above the limit, they must purchase additional allowances. In most cases, they do not need to do so. If their emissions are below the cap, they can sell their spare allowances on the market to other companies. The companies in this sector were dealt with fairly. Most Irish electricity companies form part of the all-Ireland single electricity market. The companies in the Republic are regulated by the Commission for Energy Regulation, which sets the prices.

The 2010 windfall legislation was introduced by the former Minister, Eamon Ryan, to make sure that the State could recover profits that were generated unfairly and that the market was not distorted by an unfair advantage. The levy was based on a formula whereby the rate was set at a figure which was 65% of E multiplied by P, with E representing total emissions in a given year and P representing the average daily price over that period. The levy, which was expected to raise €75 million, was due to expire at the end of this year but this Bill will change that. All electricity generators in Ireland that receive carbon allowances and participate in the single energy market were taxed in this way, whereas electricity generators that are subject to the public service obligation levy were excluded. The ESB is in the latter category. That is my understanding. The court action was taken by Viridian, which is based in Northern Ireland, and Endesa, which is owned by interests in Spain and Italy. The Minister has explained the outline of the case they took.

I have many questions I would like to ask. I am not sure whether the previous status quo, whereby companies could generate profits unfairly, will be allowed to resume. What decision-making power does the Minister have in the context of the all-Ireland regulator, as distinct from the Commission for Energy Regulation? I do not understand the dynamics between those involved. It would be helpful if they could be explained, particularly in the context of the Minister’s own role. I will not ask about the aspects of this matter that were addressed by the Minister in his contribution. It was expected that the revenue from the levy would be €75 million in 2010. How much was actually raised in that year and since then? Is that figure known? Does that figure represent the amount the consumer can reasonably be expected to pay? I am trying to find out what dynamic this measure will have in terms of energy prices.

I have told the Minister previously that I am concerned about the fact that the carbon levy is not a ring-fenced levy. I do not think this can be seen solely as a form of excise as we change from non-renewables to renewables. The Minister has said previously that it is not possible to ring-fence the levy and that there is no experience of that being done. I remind him that some years ago, the motor tax fund was ring-fenced for the purpose of funding local government. If my memory serves me right, that happened under the rainbow government. I think it might have been the Minister, Deputy Howlin, who was responsible for the matter at the time.

I do not believe we can separate the issue of energy security from the issue of climate change. If the economic crash had not happened, the price of energy would probably be the dominant issue to be debated. It is a strong focal point for people at the moment. The cost of heating one's home and travelling to work is an issue of key concern to people at the moment. In the last week, I published a Bill on this matter because I am disappointed that this issue is constantly being deferred into the future. We urgently need to deal with the issues of energy security and climate change. I hope we will see some movement in that respect sooner rather than later. I am disappointed we are dealing with this Bill today. We have been let down by the Supreme Court decision on this matter, which was not in the public interest.

Deputy Richard Boyd Barrett

We find ourselves in a very difficult position here. I am not happy with the circumstances which led to the need for this Bill to be introduced. We probably have no choice other than to support this legislation. This debate gives us an opportunity to highlight some serious issues. I would like to make a few points and ask a few questions to help me to understand fully what is going on. It seems that this Bill will have to be passed to avoid increases in the electricity prices paid by industry and, possibly, consumers. The legislation stems from the Supreme Court judgment in a case taken by certain private companies that want to include the carbon levy in their costs and pass it on to industry and, possibly, consumers. As a result of the judgment, the Minister has felt obliged to introduce legislation to remove the levy from them. While he is right to do that in the interests of protecting consumers and industry in this country from further electricity price rises, the private electricity companies who will no longer have the levy imposed on them will be the real winners.

I have serious questions about the Minister's statement that this measure will not really affect the Exchequer. He has told us that the moneys which came in from the carbon revenue levy were dispersed to multinational companies, presumably to subsidise their electricity prices. I would like to hear a little more about that. Can the Minister name the companies whose electricity costs we were subsidising? How were they chosen? Do the companies in question make very big profits? Are we essentially boosting those profits? Are particularly favoured companies getting windfall profits as a result of the disbursement of the revenues from this levy? Those questions need to be answered. The Minister referred in general terms to "significant employers" with a "multinational base". Could he be more specific? Who was benefitting from the carbon revenue levy and by how much? What moneys are we talking about here? How much was the carbon revenue levy generating? How much will be lost between now - we will drop this levy as soon as this Bill goes through - and the end of the year? The Minister suggested that the moneys in question will not be lost to the Exchequer. The beneficiaries will be these companies.

In that regard, the Supreme Court decision is extremely disappointing. The Supreme Court clearly has not acted in the public interest and I would like to hear a little more about the arguments that were used by the Supreme Court to justify its decision and to what extent this was contested by those representing the State interest and the public interest.

It seems bizarre that private electricity companies were essentially getting free windfall profits as a result of their allocation of carbon credits and that this can somehow be construed as a cost for them. It is just free profits. Serious questions need to be asked about how much windfall profit was being made. Did the carbon revenue levy take all the windfall profits back when it was in operation? Can this be clarified? If that is not the case, to what extent were these companies actually getting a significant free boost in profits because of the carbon credit allocation scheme? These are serious questions which I would like answered.

Whatever the answer is to those questions, it highlights a number of issues which the public need to consider and the Government should consider. First, it shows what a disaster the privatisation of power or electricity generation and supply is. The whole logic we got from Europe about deregulation and privatisation of electricity markets was that it would benefit the consumer and prices would go down. However, what we discover is the opposite, namely, private companies go to court and go to extreme lengths to ensure their profits are maintained and they make it clear that if they cannot do that, they will pass on the cost to the consumer - greed, in other words.

This crowd, whatever they are called - Viridian - are just a crowd of----- well, I cannot use the language in the Dáil. In any case, it is pure greed that motivated the legal case it took. The approach was: "We are not going to take a hit here. We are getting free profits. We like getting free profits and we are going to go court to make sure we can keep our free profits. If we do not get to keep them, we will unload the price on the consumer or industry." That is outrageous and it is the result of the privatisation of the electricity market, which flies completely in the face of the so-called of competition in the market, which is supposed to benefit the consumer. It means we will get more of this.

It also raises very serious questions about the carbon emissions and carbon trading scheme itself. I do not know all the answers so perhaps the Minister can enlighten me. In the context of the Irish Cement industrial dispute, it was brought to my attention by the Irish Cement workers that the cement industry in this country had made €226 million in windfall profits over recent years because of the allocation of carbon credits to those companies, mostly to big companies like CRH. Will the Minister tell us whether there is a carbon levy on those profits? He might just nod to tell if there is or is not. Are they getting windfall profits as well? Will they continue to get free allocations, as it appears they have, in coming years or will the free allocations end for that sector? Is it only electricity we are talking about or does it apply to other sectors as well? Are they getting these free windfall profits and will these continue at the end of this year? If I understand what the Minister is saying, in the electricity sector they will at least have to purchase the credits from the end of this year. Is this also true for companies like CRH or will they continue to get free windfall profits? If they do, it is a scandal.

I read an article by Ms Kathleen Barrington which stated that those who are concerned about these issues estimate that the free carbon credits allocation will continue to the cement industry, which will make €625 million in further profits in future years on top of the €226 million. Surely, a levy should be put on that money so it comes back to the Exchequer. It should come back to the Exchequer. Why is it being disbursed to multinationals? Should it not come back into the revenues of the State?

What all of this indicates is the absolute urgency of us developing our own energy resources. We are very well placed to do that. While we have a very good balance of trade, the one area where we must import and where we are very susceptible to the ups and downs of the markets is that of fossil fuels. I do not understand why the hell we do not develop our wind, wave and current resources in a way that could reduce that dependency. It seems we cannot because we are tied into a troika austerity programme that essentially prohibits the public investment that would be necessary to develop those resources.

Deputy Finian McGrath

I thank the Chair for the opportunity to speak on the Bill. Its purpose is to end the charging of the carbon revenue levy on enactment to cease the inclusion of the carbon revenue levy in wholesale electricity prices bid into the single electricity market, thus ending the associated wholesale electricity price increase thereafter. I welcome the Bill and I commend the Whips of the different parties who moved on this issue.

It is an important Bill. Every day of delay in enacting the legislation increases the electricity cost burden on large industries which sought price increases shortly after the March implementation of the judgment. Delay increases the possibility that the electricity prices faced by small and medium-sized businesses and domestic consumers may also rise. This is at the core of the legislation. It is up to all Members of the Oireachtas to support small businesses, particularly at their time of need in the current economic climate. This Bill deals with this aspect and I will develop my points later in this regard.

This is why the Minister wants to give this area urgent priority. If we are serious about supporting these matters, we need to put all parts of the jigsaw in place in order to retain and develop jobs and economic growth. Electricity charges are an issue which can help in this debate if we want to fill that part of the jigsaw and deal with the reality of the situation on the ground.

We need to be creative, radical and progressive. We need strong elements to deal with energy costs in this country. This is why I support the Bill, which is linked to all the talk we have heard in recent weeks about growth and jobs. We need strategies that exist to bring our people back to work or keep them working, which is a major concern of mine at present. Almost every other EU state has different protection schemes in place and unemployment is already beginning to fall in some countries because such schemes are in place and they have dealt with energy costs as part of that strategy.

When we consider the banking situation, the bill for Anglo Irish Bank alone could rise to €35 billion or more. Even conservative forces such as the Financial Times or Barclays Bank are suggesting our banking plan is lunacy because it places the entire burden on the taxpayer. This is also linked to the debate on the Bill because we must deal with the two issues of the energy costs but also the burden that is around the country’s neck. Therefore, in addition to discussing the energy costs issue, we must also link that to constructive proposals to try to solve the problem.

As I said, we need to prioritise jobs and growth. We cannot cut our way out of crisis. That is not working and has not been working for the past 12 months. We also need to end the uncertainty which currently exists in this country. Many of us have come up with different policies in our own constituencies. For several years, I have proposed the idea of a jobs strategy to assist the unemployed in my own constituency of Dublin North-Central. I proposed a plan, supported by all the local small businesses, that all those who are working and those over the age of 50 who have a few extra bob to spend would spend €20 extra per week in local businesses. We have targeted this campaign at people who have savings, such as the over-50s who have a few extra bob. There is approximately €75 billion in savings currently sitting in our banks. If people spend an extra €20 a week in local shops and small businesses in their own communities, I believe we can create an extra 20,000 jobs.

That is one thing we can do. What the Minister is doing in this Bill is trying to assist those small businesses with regard to energy costs. When I talk about businesses, I mean stores, printing companies, small shops, pubs, restaurants and all similar small projects that make a huge contribution and need a lift. We should not forget that many of these small businesses that employ five, ten or 15 people are significant employers.

To return to the Bill, we must deal with the issue of energy costs and this detailed legislation is part of the solution. However, there are other issues, such as rates and rent. There are thousands of people employed in these small businesses and the Government needs to move swiftly on these matters as well as on the issue of energy costs. I was talking to a small businessman last night who told me he got a reduction of only €29 on his rates in the Dublin City Council area. We need to assist these business people so that they can employ more people and use their resources.

The substantive provision of this Bill is to bring forward the end date of the final carbon revenue levy period in the Electricity Regulation Act 1999 from 31 December 2012 to the date of the enactment of this Bill. Section 1 provides for the amendment of section 40D, the carbon revenue levy, of the Electricity Regulation (Amendment) (Carbon Revenue Levy) Act 2010 in subsection (4) by substituting the date of the passing of the Electricity Regulation (Carbon Revenue Levy) (Amendment) Bill for 31 December 2012.

I agree with my colleague, Deputy Boyd Barrett, on the issue of privatisation with regard to energy. This is a dangerous road to take. We need to retain energy companies in public ownership because that will assist us not alone in the area of energy, but in the area of job creation. The energy sector has been a huge employer in this country since the foundation of the State. There is currently approximately 14% unemployment here, but approximately 30% of our young people are unemployed. We will not hear this story told in the debate on the treaty and jobs and growth. Despite emigration, we still have this high unemployment rate among our young people. We must be conscious that we are losing this generation. Many young people have new ideas, particularly in the context of energy issues. Many young people have ideas for creating small businesses and they should be encouraged to help develop these. These young people are aware that energy has a significant role in that regard.

The Minister mentioned earlier that he was concerned about the high prices connected with oil and gas. I agree. However, he must open his eyes on the international stage and use Ireland's clout as an independent foreign nation to work closely with the oil producing countries. He must build relationships, not close them down. I was very disappointed when we closed down our embassy in Iran. I am also very disappointed with the shenanigans going on between the European Union, the US and Iran and the row about nuclear weapons. I met the Iranian ambassador a number of weeks ago and he told me straight that there are absolutely no nuclear weapons in Iran. He said that not only does he know that, but the US knows it also. What is going on and why is there a scrap going on about this? Iran has massive energy resources but this scrap could put energy prices through the roof over the next couple of months. I urge the Minister to go back and tell his Cabinet colleagues to wise up and look at the situation. He should tell them that we must deal with these international issues also because they all relate to energy costs.

The issue of renewable energy must be put at the top of the political and energy agenda. Not only is there huge potential to deal with energy costs and future potential crises, but this issue is also linked to job creation and support for the 30% of our young people who are unemployed. This agenda should be developed further in this debate. This legislation gives us the opportunity to tackle that head on. This Bill, with its single provision to amend the date of the ending of the levy, will have the effect of terminating the charging of the carbon revenue levy from the date of enactment. Once levy charging is terminated, the electricity generators will not have this charge as an allowable cost in the price of electricity, thus ending the associated wholesale electricity price increases.

I welcome this debate and encourage the Minister to take on board some of the views of the Technical Group, which has lots of ideas on energy costs. I will support the legislation.

Minister for Communications, Energy and Natural Resources (Deputy Pat Rabbitte)

I thank Deputies who have contributed to this debate and express my appreciation to them for facilitating the quick passage of the legislation. Even Deputies who have searingly forensic questions to which they want answers do not oppose the legislation per se and acknowledge that we do not have much choice but to enact this legislation in the public interest.

Deputy Catherine Murphy pointed out that she is very disappointed with the decision of the Supreme Court and Deputy Boyd Barrett reiterated that. It is not customary for somebody in my position to offer an opinion on that. Once the Supreme Court hands down a judgment, it is my job to respond. However, I will say I was surprised by the judgment. It is worth remarking that the issues here in respect of the regulator were tested in the High Court. That said, we have the decision of the Supreme Court and in the public interest it is important that it is responded to. The response is in this legislation.

Deputies raised a number of issues, some of which were pertinent to the Bill and others which are outside its remit. That is reasonable on Second Stage. In response to Deputy Collins in respect of the matters he raised with regard to fuel prices, we are effectively price takers. Fuel prices are essentially due to the rising price of gas. He set out the figures and he knows that we are significant importers of gas and that it is the rise in the gas price which is pushing up prices across Europe that is the cause of the rising prices. We seek to address this through the affordable energy strategy I published some months ago and through trying to encourage the public and everyone concerned to reduce consumption of energy and ensure better energy efficiency throughout the economy and social life. We waste an inordinate amount of energy in this country and it would contribute if we could reduce this waste. I accept the point Deputy Collins raised on fuel prices and competitiveness but we are not an oasis on our own with an indigenous supply of oil and gas. We still have to import fossil fuels and that is the reason prices have risen in recent times.

A number of Deputies, including Deputies Ferris, Boyd Barrett and McGrath raised the issue of fuel poverty. There is no doubt there is a problem of fuel poverty here. We are very fortunate to have had an exceptionally mild winter. The affordable energy strategy, which I recommend again to my colleagues, is a cross-departmental attempt by the Government to address the issue of fuel poverty.

According to EUROSTAT data, after a period of three years in which prices decreased and converged on the EU average, the figures are now going in the opposite direction across the European Union. It is not something that is under my control but it adds a premium to efficiency improvements and renewable energy.

Deputy Boyd Barrett raised a number of important questions. Whatever austerity is responsible for, it cannot be blamed for dampening down the Government's approach to the development of renewables. I do not know how he drew that conclusion.

Deputy Richard Boyd Barrett

We need investment funds.

Deputy Pat Rabbitte

The Deputy may not be up to speed on the progress that has been made on renewables. We approach the issue in the context of our European targets for 2020. In a small market there is a limit to the extent to which we can switch to renewable energy. What happens on a day like today when the wind is not blowing?

Deputy Richard Boyd Barrett

The current.

Deputy Pat Rabbitte

The 2020 target for electricity, at 40%, sets a high threshold but we believe we will meet it. I will send the Deputy a copy of a paper on renewables which I will publish next Monday. I do not know if it will give him a stick with which to beat me.

Deputy Finian McGrath

I will send a Jedward CD.

Deputy Pat Rabbitte

I will be interested in hearing the Deputy's opinions. He is correct that it is an important area and that we have uniquely propitious wind resources. We intend to utilise that indigenous resource to the best of our abilities, consistent with the constraints imposed by the transmission system. We have engaged in discussions with the Government on the neighbouring island regarding our capacity to develop an export sector in this area. It is not an area in which we are especially hampered by the austere climate in which we must operate.

Deputy Catherine Murphy asked how the operation of the single electricity market committee governs the all-island wholesale market in accordance with the legislation introduced in 2007. This is a complex and difficult area and I would be happy to arrange a briefing for any Deputy who is interested in learning more about it. A Ladybird guide is certainly not sufficient. The challenge has been raised against the bidding rules into the market not the legislation itself and, therefore, it is not the case that the carbon levy has been wiped out.

In regard to Deputy Boyd Barrett's questions, the operation of the rebate for this purpose and from this fund only started in mid-2010. The accounts are being audited and will be published and made available to every Member of the House. I do not know the figure but I can explain the background to Deputy Boyd Barrett's question on the rebate to what he described as multinationals. The serious competitiveness issues that had arisen for the economy were particularly affecting large energy users, whether indigenous or multinational, and the Government of the day decided to provide for a temporary rebate. The regulator decided on a definition of "large energy user" based on the amount of energy used by an enterprise. The question of whether it was a transnational or indigenous company did not arise. The definition was provided by the regulator rather than through political intervention or arbitrary decision. The rebate will continue to apply until the end of September 2012. I must bear in mind that litigation is still in train in respect of the issue and the case is to be argued before the High Court. I do not think it is necessary for me to spell out why I must bear this in mind.

Deputy Ferris asked me to reply on the record to his question about LNG facilities in north County Kerry, a project which he and other Kerry Deputies have been pursuing for some time. This issue has taken up a great deal of my time. I have been immensely supportive of the project for a variety of reasons, not least to do with energy security. The Government as a whole has been supportive but it is not within the purview of any Minister to make a decision on the operation of such a facility. That decision falls to the regulator, as has been discussed in detail in meetings with stakeholders in north County Kerry and elsewhere. Unfortunately, I do not have the pleasure of listening to Radio Kerry except during a short period in August but I understand that a local councillor who has been very voluble on this issue, Mr. Finucane, was interviewed at some length yesterday on Kerry Radio and blamed me as Minister for the delay in the decision. I was surprised by his argument, which he embellished with considerable rhetoric.

Councillor Finucane was a member of a delegation that met me, the Taoiseach, and the Minister for Arts, Heritage and the Gaeltacht, Deputy Deenihan a few weeks ago. Over the course of a two hour meeting, Councillor Finucane heard why the regulator has this power by statute, why I do not have the power by statute and why I may not intervene to hinder or assist a particular project. Councillor Finucane accepted this at the meeting so I have no idea what happened to him when he got back to the kingdom, forgot everything he had learned and said the exact opposite on Radio Kerry. If it was my decision, I would have made a decision many months ago. I cannot encroach upon the responsibility of the regulator. Councillor Finucane knows this well, accepted it in the Taoiseach's office and has clearly suffered forgetfulness since then.

In answer to Deputy Martin Ferris, unfortunately the promoters of the project have lodged complaints in Brussels. The Directorate General for Competition, in particular, has sought information from the regulator. That will take time and, unfortunately, the only effect is to delay a decision by the regulator. I hope it will not delay for long because it is important we get a decision on this. It is immensely important for the region in terms of unemployment and in terms of the national interest and security of supply. I hope the regulator will not be unduly impeded by the additional imposition arising from the company's referral of this issue to Europe. I hope we can make progress.

As soon as Deputy Boyd Barrett got into his stride and got off the runway, he tore into privatisation. I am not exactly sure what that has to do with the issue that confronts us today. A number of energy companies operate in today's market and that is how the system works. After the regulator was vindicated in the High Court, one company exercised its right to appeal to the Supreme Court. As a result of the decision, this Bill is necessary.

Deputy Richard Boyd Barrett

A State enterprise would not have done that.

Deputy Pat Rabbitte

It is a fact that State enterprises did not do that. I have noted that.

Deputy Catherine Murphy raised the issue of a ring-fenced levy. The original statue provided that the proceeds of the levy were for the benefit of the Exchequer. Therefore, it is not possible to earmark the proceeds in the fashion that Deputy Catherine Murphy would like.

Deputy Catherine Murphy

In that case, it is just excise duty and not a carbon levy.

Deputy Pat Rabbitte

Deputy Catherine Murphy made a point about motor taxation but I suspect that was specified at the time. I had this experience when I established the national drugs strategy and task forces. At the time, Members pressed that the moneys retrieved by the Criminal Assets Bureau from drug crime should be earmarked for beneficial purposes in the communities worst ravaged by the drug situation. The advice from the Attorney General was that we could not have earmarked taxes because taxes go to the Exchequer and the Government decides how they are disbursed. I imagine that is also the issue here, that it is not possible to ring-fence the tax. I note the Deputy's point about climate change and I will be happy to examine it again. I see a certain logic behind it.

Deputy Richard Boyd Barrett

What about the free carbon credit allowance ending at the end of the year? Does that end only for the electricity sector and will other sectors receive free credit?

Deputy Pat Rabbitte

I understand it is ending.

Deputy Richard Boyd Barrett

I refer to free carbon allowances, not the refund.

Deputy Pat Rabbitte

I cannot answer for areas outside of my Department. I do not know what the Minister for the Environment, Community and Local Government would say if he was here. It is ending for electricity and I will communicate with the Deputy privately when I am clear on the answer to the wider question.

Question put and agreed to.

Bill reported without amendment, received for final consideration and passed.

Sitting suspended at 3 p.m. and resumed at 3.42 p.m.