Dáil Éireann debate -
Wednesday, 18 Jun 2014

Vol. 844 No. 2

Topical Issue Debate

Road Network

Deputy Dan Neville

First, I must apologise. As I was at a meeting for most of the morning, I was not aware of the arrangements and I apologise for being late.

I welcome the opportunity to raise this important issue for my constituency. I also welcome the Minister, Deputy Leo Varadkar, and thank him for his attendance. The Minister is both aware of the position and is supportive of what I am about to say but I acknowledge there are difficulties in arriving at the desired outcome. This issue concerns the road coming into Adare, the N20 from Limerick to Kerry. The road into Adare has been named by AA Roadwatch as one of the country's worst in terms of traffic tailbacks. It appears in the list of seven of the country's slowest roads compiled by the Automobile Association, AA, based on its own experience and information from the Garda Síochána and bus companies. That is no surprise to the people of Adare, because tailbacks have been experienced for a number of years, which has caused delays for traffic coming into and leaving Adare. During bank holidays, two-mile tailbacks build up on the approach into Adare from the Kerry side as a result of people returning from holiday periods after the weekend. It happens both ways, but the problem is very serious at weekends, especially on Friday nights. It is no surprise to the people of Adare that it is on the list of the seven slowest areas compiled by the AA. I believe the Minister has some personal experience in this regard from his journeys to the south west.

I wish to highlight a number of issues. Obviously, commuters going west experience great frustration. Many commuters who travel through Adare morning and evening are from the west of County Limerick but work in Limerick city and its environs. There is also a serious problem on the small country roads because of what are often referred to as rat-runs. Some time ago, a total of 133 people signed a petition calling for a speed limit on those roads but the council is not prepared to concede this because it is not a 24-hour issue. There are serious concerns about the safety of children and at certain periods, people cannot walk those county roads because of the traffic going west avoiding Adare. This has been a problem for more than 30 years. Several routes for a bypass have been identified over that period but we were extremely disappointed that An Bord Pleanála turned down the last route the council proposed, using the excuse that the motorway from Limerick to Cork is being delayed and it was to be part of the programme to establish that motorway.

I make the case for a bypass for Adare because many other towns have been bypassed. Deputy Griffin will know that the bypass of Castleisland was done as a single project. In my opinion the bypass of Adare should be regarded as a stand-alone project and should not be connected with any future motorway to Cork. I was informed recently that the project has cost more than €5 million to date in providing plans and identifying various routes.

Adare is a premier tourist project in the mid west which has been described as one of the prettiest villages in Ireland. There is great potential for the development of the tourism business in Adare and in the mid-west in general if the bypass is constructed.

Minister for Transport, Tourism and Sport (Deputy Leo Varadkar)

I thank the Deputy for the opportunity to address this issue. Members will know that as Minister for Transport, Tourism and Sport, I have responsibility for overall policy and funding in relation to the national roads programme. The planning, design and implementation of individual road projects is a matter for the National Roads Authority under the Roads Acts 1993 to 2007, in conjunction with the local authorities concerned, in this case, Limerick County Council. Within its capital budget, the assessment and prioritisation of individual projects is a matter in the first instance for the NRA in accordance with section 19 of the Roads Act. Due to the national financial position, public funding for Ireland's national roads has fallen radically since reaching a peak of €1.75 billion in 2007. The allocation to the NRA for improvement and maintenance works in 2014 is €371 million, including recent stimulus funding of €23 million, which is comparable to that available for national roads in 1998. This is where we are in terms of funding. The reality is that the available funds no longer match the amount of work required. For this reason it is not possible to progress a range of worthwhile projects, including Adare. The main focus has to be on the maintenance and repair of roads and this will remain the position in the coming years. Only a small number of new public private partnership projects can be taken to the construction stage for now.

Turning to the issue of the Adare bypass in particular, the N21 Adare bypass route was intended to run to the south of Adare. The compulsory purchase order and environmental impact statement documentation was submitted to An Bord Pleanála for approval on 4 March 2010, but on 18 October 2012, An Bord Pleanála made a decision to refuse the proposed road scheme to bypass Adare. Principally, although not exclusively, the An Bord Pleanála decision was based on the fact that the Adare bypass route:

[would] if permitted and constructed, constitute isolated infrastructure, would not represent a coherent approach to the provision of major roads infrastructure and, furthermore, would not have the potential to fulfil the functions envisaged for the scheme. The proposed development would, therefore, be contrary to the proper planning and sustainable development of the area.

While I do not think anyone would argue that traffic is not an issue for the residents and businesses in Adare, given the rejection by An Bord Pleanála of the preferred route, the NRA and the local authority must now assess options on the basis of that decision. The scheme will have to revert to route selection stage and I understand that Limerick County Council has removed any planning restrictions on the southern route. Limerick County Council has recently appointed engineers to examine the various options for better connecting Foynes Port to the wider road network. This route selection report is expected to be completed before the end of the year and its impact on Adare can then be assessed.

As the Deputy knows, I am concerned about the situation in Adare. I have visited the town many times and I have met the Deputy and Deputies Patrick O'Donovan and Niall Collins, the National Roads Authority and Limerick County Council to see if a way forward can be charted, bearing in mind the decision of An Bord Pleanála.

One issue raised at that meeting was the need for preplanning application consultation with An Bord Pleanála for major road projects so that major issues can be flagged before plans are submitted. At present, there is no provision in either the Roads Acts or the Planning Acts for the NRA or roads authorities to enter into preplanning application consultations with An Bord Pleanála in relation to proposed road developments. However, the Planning Acts make provision for preplanning consultation with An Bord Pleanála for various other strategic infrastructure developments, including transport related projects such as railways, prior to the submission of a planning application.

I am considering the inclusion of a Committee Stage amendment to the Roads Bill 2014 which will enable the NRA and road authorities to engage in preplanning consultations with An Bord Pleanála in respect of proposed road developments. This will provide the NRA or the road authority, as the case may be, with a formal mechanism to obtain the preliminary views and attitude of An Bord Pleanála with regard to a proposed road development before submitting an application to the board for approval under section 51 of the Roads Act 1993, as amended.

Deputy Dan Neville

I thank the Minister for his reply. The Minister has informed us of the difficulties associated with the preplanning discussions with An Bord Pleanála, and I welcome his decision to amend the Roads Bill 2014 as he promised. I wish to underline the urgent need for the project to be carried out independently of any other project, just as has been the case for many other projects. There is a serious situation with regard to commuter traffic in the village. I know that many Members on their way to Kerry, including Deputy Griffin, have experienced serious delays in Adare. It is very frustrating for those who want to develop the tourist projects in Adare and for the people who live in Adare because the enjoyment of their village is inhibited by the presence of the level of traffic passing through Adare. It is very difficult to understand that one of the most serious bottlenecks in planning is one of the prettiest villages in Ireland and that the tourist product and the businesses of Adare are inhibited from developing because of a situation that has continued for 30 years. We look forward to the Bill being amended and to engaging in preplanning discussions. As the Minister stated previously, we met the various authorities and my constituency colleagues to find a solution to what is a serious traffic management problem in my constituency.

Deputy Leo Varadkar

I neglected to reply to the Deputy's question in his introductory remarks. I do not know the exact cost of the project to date but I will ask my office to contact the Deputy with the information.

I share Deputy Neville's sense of urgency with regard to this project. Adare is a beautiful tourist village. It is a lovely place to stay and to stop and it would be even nicer if not for all the traffic going through it. I agree with the sentiments expressed by the Deputy. It would also be of significant benefit to people travelling to and from County Kerry if this bottleneck could be addressed. However, in my opinion it is right to carry out the study rather than looking at Adare in isolation because one of the reasons given by An Bord Pleanála for its refusal was that the bypass was considered as an isolated development. Therefore, to satisfy An Bord Pleanála we should not consider it in isolation but rather consider it in the context of other road projects in the area, including Foynes. Once that work is completed by the end of the year, we should be able to come up with a solution for Adare and at that point I will strongly encourage the NRA to proceed with planning so that if and when the money becomes available for construction, we will be ready to commence. That is my plan of action in that regard.

Public Service Obligation Services

Deputy Brendan Griffin

I thank the Ceann Comhairle for selecting this important issue for discussion and the Minister for attending in person. I apologise on behalf of Deputy Joe McHugh for his absence; he has been unavoidably detained elsewhere. It would be remiss of me not to commend Deputy Dan Neville on raising a matter that is related to the issue I am raising to the extent that access to County Kerry is hampered by shortcomings in the road network. Bottlenecks in Adare, Newcastle West and Abbeyfeale, for example, make road access to the county difficult and increase journey times. It is vital, therefore, that County Kerry retains its air link with Dublin, the main hub connecting us with the rest of the world. Similarly, Donegal does not have a great road network and needs to retain flights to the capital.

The Minister was the first member of Cabinet I met following my election to the Dáil in 2011. At that meeting, we discussed the need to continue flights between Kerry and Dublin beyond 2011 and the Minister, to his great credit, subsequently decided to maintain the air link between counties Kerry and Donegal and the capital. These services provide an economic lifeline for both counties. I welcome the Minister's recent decision to place the service provided on both routes out to tender once the current public service obligation contracts expire in November.

The purpose of raising this topic is to ascertain the current position, including the plans for the routes and the timeline anticipated for realising them. People are concerned that, with the current contract set to expire in November, there may be a hiatus during which flights between Dublin and counties Kerry and Donegal will cease. Will the Minister assure the House that every effort is being made prevent such a scenario?

Kerry Airport has a significant impact on the county and I am sure if Deputy McHugh were present, he would make a similar point with regard to Donegal Airport. Kerry Airport employs 50 people directly and a further 53 people indirectly. The staff payroll amounts to more than €500,000, which goes into the local economy. The air link between County Kerry and Dublin should not be viewed in isolation as it makes the airport viable. It is this viability that has attracted flights from London, Luton and Frankfurt Hahn and a service, primarily outbound, to Faro in Portugal. These international flight connections have a significant impact on the local economy. I have met large numbers of visitors from the United Kingdom and Germany, primarily in summer, many of whom told me that the availability of the air link was the reason for their visit to County Kerry. Most of them would not otherwise visit the county and they spend substantial sums locally.

Kerry Airport is a vital lifeline for the county, which must be maintained and developed. Last week, I contacted Ryanair to ask whether it had plans to establish new routes from the airport, particularly to the north of the United Kingdom with which we do not have a link. If possible, I would also like a transatlantic route established at the airport at some point.

I ask the Minister to provide an update on the current position and commend him again on the support he has shown for Kerry Airport. I know he wants what is best for the airport. Any support or information he can provide will be appreciated.

Deputy Leo Varadkar

Under the Regional Airports Programme 2011-2014, Exchequer support for regional airports is provided under a number of schemes, including a public service obligation, PSO, air services subvention. This programme reflects the outcome of the 2010 value for money review of Exchequer expenditure on the regional airports programme. Following the review, a decision was taken to reduce to two the number of routes covered by the PSO air services scheme.

The Exchequer provides supports under the scheme to Aer Arann-Stobart Air for the Kerry to Dublin route and Loganair for the Donegal to Dublin route. The review took account of a number of factors, including the performance of the services, the requirement to make best use of scarce Exchequer resources, improvements to the road network and changes in European Union legislation covering PSO air services. The decision to maintain the PSO air services to counties Kerry and Donegal had regard to the fact that the former is not yet connected to the major interurban motorway network as the Ballyvourney-Macroom road is not complete and the latter is not connected to either the motorway or rail network.

Exchequer funding for PSO air services schemes provides financial support to airlines, based on a competitive tender, to operate essential services serving peripheral or development regions. These services are considered vital for the economic development of the regions in question and would not be provided on a commercial basis. Under the current contract, which ends in November, a total of almost €12 million will have been paid to Aer Arann-Stobart Air in respect of the Dublin to Kerry route and more than €10 million will have been paid to Loganair in respect of the Dublin to Donegal route over the lifetime of the respective contracts.

Regional airports were developed in the 1980s to provide for improved connectivity both nationally and internationally. However, the development of the major interurban roads programme and improvements to the rail network in the intervening period have reduced the importance of regional airports for connectivity within Ireland. Today, regional airports are largely viewed as being important because of a level of international connectivity that they bring to a region for tourism and business.

Arising from the Ireland West Airport Knock study, the Government decided to continue the funding for regional airports under a new post-2014 programme, which is being developed in my Department. This is in line with the draft national aviation policy which will be finalised in the coming months. The new programme will have to comply with the revised European Union guidelines on state aid which came into effect in April this year. While the 2014 EU guidelines on state aid to airports and airlines have application to other Union guidelines on state aid, the current PSO air services scheme and any future air services schemes must comply in particular with Regulation (EC) No. 1008/2008. These regulations require that a notice of invitation to tender must be published in the Official Journal of the European Union, with a deadline of two months for submission of tenders from the date of publication of the notice.

It is planned to hold shortly a new PSO air services competition, that is, a public tender process, for the Donegal to Dublin and Kerry to Dublin routes post-2014. As part of this process, it is planned to extend the current contracts to next February to ensure continuity of service pending the outcome of the tender process. It is expected that a limited budget of some €12 million per annum will be available for current and capital expenditure under the regional airports programme from 2015 onwards. With an average cost per annum for the two PSO routes from Kerry and Donegal of more than €7.5 million per annum based on existing figures, a final decision on whether to maintain both routes post-2014 will be taken when the cost of subvention becomes clear from the tenders submitted.

Deputy Brendan Griffin

I thank the Minister for his response and welcome the extension by three months of the current contracts. As I stated, I was fearful that, with the clocks ticking, time could run out before a new arrangement was put in place. The extension is, therefore, a welcome development. While I welcome the commitment to further examine the issue, the Government's approach must take account of factors other than the immediate cost of the subsidy for services on the Kerry to Dublin and Donegal to Dublin routes, including the wider benefits to the economy. I referred to tourism but I note also that a large number of international companies, including FEXCO, the Kerry Group and Liebherr, are based in the county. Their executives and clients use the PSO route frequently to connect with Dublin and the rest of the world. If we wish to attract foreign direct investment to County Kerry, particularly now that it will be on the regional aid map again from 1 July onwards, it is crucial that air connectivity is maintained.

I thank the Minister for providing for an extension to the services to ensure flights do not cease on 1 November. I ask him to do everything in his power and to be as flexible as possible to secure new operators for the Dublin to Kerry and Dublin to Donegal air routes. As I indicated, the Government must consider the matter in the context of the overall economic impact of the routes, as opposed to their immediate costs to the State.

Of that subsidy, €600,000 goes back into the Dublin Airport Authority, a State body, through airport charges alone. It is not all one gross expenditure figure. There is a lot of that coming back in to the State directly as well.

Deputy Leo Varadkar

I want to confirm for Deputy Griffin that the existing contracts will be extended to February to ensure continuity and no loss of service over the winter period.

The Deputy makes some valid points. Government decisions should take account of not only the simple narrow balance sheet but also the wider economic benefits that derive from air connections, whether they be tourism, investment or business. He is, of course, correct to say that there are benefits for Dublin Airport as well as Kerry and Donegal in that landing fees are charged and the routes from Donegal and Kerry help to feed routes from Dublin to Britain, Europe and other parts of the world and make them more sustainable. That is true.

Notwithstanding all of that, the budget for regional airports is €12 million a year and, unfortunately, I do not expect that to increase. Of that, approximately €7.5 million goes on those two PSO routes and I do not expect that to increase either. I am not in a position to write any blank cheques to anyone at this stage. We need to see what tenders come in. If I can give any signal from here, it is that we expect the airlines to put forward good value propositions so we can continue these routes well into 2015 and beyond.

Acting Chairman (Deputy Alan Farrell)

The next topical issue, in the name of Deputy Penrose, on the need for immediate review of the public service obligation levy is to the Minister for Communications, Energy and Natural Resources. As we await the Minister, we will move on to Topical Issue No. 4 in the name of Deputy Ó Cuív.

Social Inclusion and Community Activation Programme

Deputy Éamon Ó Cuív

First, I apologise for not anticipating the absence of the Minister, Deputy Rabbitte. When I saw Deputy Penrose in the House, I was sure that Topical Issue No. 3 would be taken in its proper sequence. I apologise to the Minister, Deputy Hogan.

I understand that it is the Minister's intention not to fund directly any national networks under the new Social Inclusion and Community Activation Programme, SICAP, which is the successor of the Local and Community Development Programme. We, in the previous Government, decided that there were certain issues that needed to be dealt with on a national basis - Travellers, women's issues, island issues - and we recognised that in some cases the local approach only did not fit the bill. I was surprised to hear that it is intended not to make the €1.3 million, and the programme, available to the National Collective of Community Based Women's Networks. Given there are 17 projects, this €1.3 million is quite a modest amount. It would amount to €76,000 on average per group, including the national office. The collective funds essential networks for women in the most disadvantaged of the communities.

It is fair to say that we are not doing enough to tackle disadvantage. When I was Minister, it always amazed me that I could get plenty of notice for rural issues and island issues, but when one talked about urban disadvantage it was difficult to generate any interest from the media for the plight of those living in disadvantaged communities. If I might say so, women, in particular, in disadvantaged communities, face considerable challenges and are often the subject of significant disadvantages.

I ask the Minister to revisit his decision and recognise that some things are done better with a dedicated national programme, that the idea of incorporating the collective into the new SICAP will not work because in each of the areas in which there is one of these women's networks he is depending on the local bidder to put an equivalent programme in place with equivalent funding. I do not think that will happen. A important service serving a huge range of people will lose out. I ask the Minister to reconsider this decision and continue to provide the service to the 36,589 women who have been benefiting from this service and who, in my view, will not get the same service in the new arrangement.

When a good suggestion is made, it is good to listen. I compliment the Minister's colleague, Deputy Rabbitte. When this Dáil came together, there was a debate for an hour and a half on the oil and gas exploration sector and I suggested that we put the matter to good analysis in an Oireachtas committee. The committee put forward a comprehensive report, including new oil and gas terms. In fairness to the Minister, Deputy Rabbitte, he announced today that he will implement substantially the recommendations of that all-party committee, including Fianna Fáil, Fine Gael, Labour, Sinn Féin and Independents, and change gas exploration. We must learn in this Dáil that if a suggestion is good, no matter from where its comes, as Deputy Rabbitte certainly accepted, it should be taken on board.

Minister for the Environment, Community and Local Government (Deputy Phil Hogan)

I always have taken on board good suggestions from all sides of the House whenever I deemed them to be good suggestions. Sometimes the problem is who is to be the arbiter of the good suggestion. As Deputy Ó Cuív will be aware, I have an open mind on matters.

The proposals outlined in the Putting People First - Action Programme for Effective Local Government seek to position local government as the primary vehicle of governance and public service at local level. I thought Deputy Ó Cuív would welcome that development concerning a democratic input at local level. The proposals are leading in terms of economic, social and community development, delivering efficient and good value services, and representing citizens and local communities effectively and accountably.

As part of the programme of reform of local government, local community development committees or LCDCs are being established in all local authority areas. These committees, comprising public-private socio-economic interests, will have responsibility for local and community development programmes on an area basis, including the new social inclusion and community activation programme, SICAP. They will develop, co-ordinate and implement a coherent and integrated approach to local and community development than heretofore. I know that Deputy Ó Cuív will welcome that because he started the process himself.

In accordance with the public spending code, best practice internationally, legal advice and in order to ensure the optimum delivery of services to clients, the SICAP is subject to a public procurement process. The process is a competitive one that is open to local development companies, other not-for-profit community groups, commercial firms and national organisations, such as the National Collective of Community Based Women's Network, NCCWN, that can provide the services to be tendered for to deliver the new programme. On the contrary, therefore, I am not withdrawing funding. I am giving an opportunity for all the groups I have just mentioned to tender for the SICAP programme.

The process comprises two stages. Stage 1 is currently underway. At stage 2 the LCDCs will procure the programme locally. Applicants at stage 1 must demonstrate that they meet the criteria for the delivery of services in the lot or lots applied for. Joint applications are encouraged and organisations of varying sizes - for example, smaller organisations working in consortia with larger organisations - are invited to submit joint applications.

Partner candidates have a role in the delivery and implementation of the programme. All such partner candidates must be identified in the qualification questionnaire and a contracting arrangement may be required between the lead candidate and any partner candidates. Candidates may rely on the resources of other entities in order to establish the suitability requirements on condition that they can prove to the satisfaction of Pobal that they will have these resources at their disposal when necessary.

All proposals received will be assessed in accordance with the assessment criteria notified within the application documentation and any contract or contracts will be awarded on the basis of bids received from qualifying applicants from stage one. Pobal is assisting my Department and the LCDCs in the preparation of tender documentation and the assessment criteria which will form part of stage 2. The closing date for receipt of expressions of interest under stage one of the process is 12 noon on 11 July 2014. I am not withdrawing any funding, therefore, but am putting the programme out to tender.

Deputy Éamon Ó Cuív

The Minister is putting the total programme out to tender, but the reality is that under the rules it is not permitted for national organisations to do so. Tenders must be submitted, and can only be considered, on a county-by-county basis and only for the delivery of the programme in its entirety. It is not possible for the National Collective of Community Based Women's Networks, NCCWN, to tender for this programme either nationally or to deliver women-specific programmes. It is disingenuous to say that the new system is the same as the old one, except that the Minister is putting it out to tender.

There is also a question over whether it was necessary to put this out to tender. The Minister will say that he received legal advice but I understand that subsequent to that advice the EU introduced a new regulation whereby social programmes do not have to go out to tender. The legal advice might be out of date, so that issue should be revisited.

The Minister could have had a national tender for certain programmes that are better delivered nationally. He makes great play of the fact that he is localising everything, yet he is the Minister with responsibility for Uisce Éireann. I am not arguing with him on this basis because one must take it case by case. The Minister argued cogently - as I would argue concerning Travellers', women's and islanders' programmes - that rather than doing them on an area basis and making the component parts so weak as to have no say, it would be much better to do certain things nationally.

I am asking the Minister once again to re-tender some national programmes for women, islanders and Travellers, which are specific cohorts that require a national programme.

Deputy Phil Hogan

I am surprised that the person who started the cohesion process, and ensured that we had an efficient area-based service with integrated delivery, is actually against what I am doing now. Deputy Ó Cuív will have to make up his mind what he is for and what he is against.

Deputy Éamon Ó Cuív

I am for what I did.

Deputy Phil Hogan

His Topical Issues matter states that I am withdrawing funding.

Deputy Éamon Ó Cuív

You are.

Deputy Phil Hogan

I am not withdrawing funding, so the Deputy is wrong. I am putting it out to tender on the basis of competition law.

Deputy Éamon Ó Cuív

He is not putting that one out.

Deputy Phil Hogan

Hold on.

Acting Chairman (Deputy Alan Farrell)

The Minister, without interruption.

Deputy Phil Hogan

I am putting the SICAP process out for tender on the basis of legal advice, which the Deputy often had to agree with when he was a Minister. When the Attorney General gave him legal advice, he did not ignore it. There was no prospect of achieving anything unless one proceeded on the basis of law. We must adhere to competition law.

The National Collective of Community Based Women's Network, NCCWN, is the umbrella organisation of the 17 community development projects which focus on disadvantaged women. It is possible, if they partner with others, to be able to tender for this process. We are not withdrawing funding. It receives funding under my Department's LCDC programme, as the Deputy knows.

I do not know where the Deputy is getting this misinformation. I wish to clarify that my Department has not notified any of the 17 projects, including the NCCWN, of any intention to withdraw LCDC funding from their organisations. Deputy Ó Cuív should advise the people who are in touch with him to ensure that they tender for the project and enter into partnerships, if they must in order to do so.

The public procurement process for the new programme is competitive and legally sound. I am obliged to do it and it is open to the local development companies to get on with the job.

PSO Levy Review

Deputy Willie Penrose

I thank the Ceann Comhairle for selecting this important issue which is a vital topic for debate on the floor of Dáil Éireann. The PSO levy has had a serious impact on a series of end users of electricity. The levy was introduced by the government in 2000 to ensure that Ireland had a percentage of indigenous electricity generation, peat resources principally from Bord na Móna, and also to encourage development of green energy in the form of wind and biomass. It was also introduced to have security of supply from the Aughinish and Tynagh power stations, which became relevant in the context of the reduction of the ESB monopoly. It was to guarantee new operators an income in the new markets.

The PSO levy is reviewed by the Commission for Energy Regulation each year and the levy is set according to the various formulae laid down in the original directive from government. In this context the proposed decision paper for the PSO levy for 2014-15 was published on 6 June.

The crux of the problem is that despite everybody's involvement in growing the competitiveness of domestic industry, and the clearly uncompetitive nature of the Irish electricity market, it appears all consumers - domestic, industrial and business ones - are again facing into significant and savage price increases. It is noted that large energy users are bearing a disproportionate percentage of the price increase sought: 47% for domestic users as against 80.5% for large energy users.

While the policy was introduced and designed to support laudable national objectives at the time, it has now become a millstone around the neck of Irish industry. It is threatening the sustainability of many jobs across the economy and is becoming a barrier to the entry of new industries, data centres and the knowledge economy which are highly reliant on competitive electricity prices.

This flies in the face of the continuous focus by Forfás on competitiveness and the fact that it disadvantages us economically as a country in this vital component of international competition. Large energy users are bearing the brunt of the cost of this levy. In 2014-15, if left unchanged, the contribution to the fund by large energy users will rise to no less than 80.52%. On a four-year look back when the country was in the grip of its greatest ever recession, the contribution to the fund by large energy users rose by no less than 242%.

In 2010-11, the fund stood at €156 million but is now a staggering €327 million. In just four short years, the fund has risen by 209%, which is an astronomical rise by any standards. We are aware of where the funds are used, so perhaps it is time to take a closer look at the PSO since the market is radically different from the one that existed when the levy was originally introduced.

The Minister knows my view that wind energy turbines are the most monstrous blot on our landscape, being neither efficient nor effective. They are driven by corporate greed and a dismissive approach by those involved. This industry has had its subsidy, via the levy, increased from €9.73 million to €87.8 million in just four years. It is no wonder that armed with this levy, which is provided by consumers at all levels who have no choice in the matter, wind energy promoters think they can do what they like without any care for people's concerns. This proportion of the levy increased by 295%.

However, we still appear to be hell bent on increasing the number of wind farms across our landscape, for which we will no doubt have to pay a further increase in the PSO levy. Are these great wind farms cost competitive and does this policy offer value for money? I say it does not.

A large user of energy in my constituency will have to pay an increase in the PSO contribution of 80.52%. For this company, which employs more than 250 people directly and indirectly, the increase could be the straw that breaks the camel's back. It operates in the export market, competing with Spain, Germany, England and the Benelux countries, all of which enjoy significantly lower energy costs and, in some cases, provide specific reliefs against high energy costs to their own companies. As a high level energy user, the PSO levy means that the company's overall electrical bill will rise by 4%, which will increase its energy bills by an estimated €250,000. As it competes in the markets to which I referred, it is not in a position to pass on the proposed price increases to their customers. How is the company going to survive and what impact will the increase have on workers and their families in this real life scenario?

If this economy is to survive and grow, businesses must be competitive. If we continue with the PSO levy in its current format, the inefficient generators may survive but energy users clearly will not and we will not be able to attract the data centres needed for the knowledge economy or persuade other high level operators to remain here. The outlook could be bleak in this challenging and competitive environment unless we change tack and remodel the PSO levy from its current structure. Competitiveness is the key to our survival.

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

I apologise to Deputy Penrose and the House for missing my slot. I thank the Deputy for raising this important issue.

The PSO is charged to all domestic and business customers and is designed to compensate suppliers for the additional costs they incur by meeting obligations to purchase electricity from indigenous, sustainable and renewable sources, and to ensure security of supply. Its legal basis and method of calculation are set out in the Electricity Regulation Act 1999 and its operation is outlined in SI 217 of 2002. The cost of the PSO levy tends to be lower during periods when fossil fuel prices are higher. In these circumstances the market sufficiently rewards renewable and indigenous peat producers.

Deputy Penrose will be familiar with the most enduring function of the PSO, namely, to support employment in the peat sector in the midlands. The retention of hundreds of jobs in the midlands would not be viable without the PSO mechanism. Successive Governments have supported the PSO for that reason. A further legacy issue is the contract entered into in 2005 to ensure security of supply with Tynagh and Aughinish, at a time when the country was on a knife edge in terms of energy security. This is something we must guard against in the future. The existence of the PSO is vital to the delivery of our renewable energy targets. The PSO has supported the connection of around 2,000 MW of renewable energy to the electricity grid and it will continue to support the development of renewable energy so that we can meet our target of boosting renewable penetration to 40% by 2020.

Any call for a review of the public service obligation should consider the importance of delivering our policy objectives of increased renewables and ensuring security of supply. It is also important to have due regard for regulatory stability in the context of overall energy policy, as I point out in the Green Paper. The biggest driver for the proposed levy rise for 2014-15 is the lower predicted wholesale market electricity price, which is currently estimated to be around 10% lower than last year. This results in lower predicted market income for the PSO plants and, therefore, a higher levy is required to cover the allowed costs. The lower wholesale electricity price is currently being driven by the lower international gas prices in evidence since spring 2014. This drives up the proposed PSO levy but if these lower gas and wholesale prices are sustained for the coming months, it will help to reduce the wholesale cost of electricity that suppliers pay. This should enable suppliers to reduce their retail prices and potentially offset the PSO levy increase. Electricity prices are de-regulated and the Commission for Energy Regulation will continue to actively monitor suppliers and the retail market generally. While remuneration of renewable electricity generation adds to the PSO levy and customer bills, it should be noted that wind also tends to reduce the wholesale price of electricity because the operating cost of wind power is close to zero. Renewable generation therefore displaces fossil fuel generation. This is especially the case when fossil prices are high and associated thermal generation is expensive to run.

I am no less concerned than the Deputy about rising costs to industry and households alike. In the context of the increase in the PSO levy I have written to the Commissioners for Energy Regulation. As the main reason for the increase in the levy is a decrease in wholesale electricity prices, I have asked the regulator to be vigilant in its market monitoring function and to ensure that the reduction in the wholesale price of electricity is passed on to consumers. Otherwise I would expect the independent regulator to take further investigative action to discover why the deregulated market is not working competitively.

Finally, it is worth noting that the current decision is a proposed decision by the regulator. The regulator may use a revised figure for the wholesale electricity price in the final decision paper if forecast fuel prices change for 2014-15. The final decision on the PSO levy for 2014-15 will be published before 1 August. Changes in the forecast wholesale price will affect the amount of the PSO levy, increasing it if the forecast wholesale price falls and reducing it if the wholesale price rises. I urge anyone concerned to make a submission to the regulator on this draft decision by the deadline of 4 July 2014.

Deputy Willie Penrose

I thank the Minister for his comprehensive reply. I am acutely aware of the reason for the levy but we cannot continue to foist charges on industrial and domestic consumers. If the estimated wholesale price of electricity in the all-island market falls by 9% or 10%, the savings should be passed on to the consumer and end user but there is a peculiar anomaly in that, as the Minister pointed out, lower wholesale prices result in plants needing additional PSO subsidies to cover their costs and offset the smaller amounts they will receive on the market. This applies across the board both for renewables and peak energy security and supply. That is the biggest single driver of the increase in the proposed levy. The estimated wholesale price for the next year may be reflected in monthly trends of lower spot and forward prices in the single energy market but in a normal market when a company's revenue declines it seeks to offset the losses by lowering input costs and engaging in cost reduction strategies. Has the Commission for Energy Regulation carried out an investigation to ensure this occurs and, if so, can it provide proof that it has carried out such an exercise and who is overseeing value for money?

The Minister made a strong argument but it can be countered by the fact that many large energy users purchase energy in advance rather than on a day-to-day basis. If a company has contracted forward until the end of 2015 or 2016, short-term energy decreases will not be of benefit. We are in a new environment and we have to review how it operates. Electricity costs are a major factor in competitiveness, as the Minister is aware. A Forfás report focused on this issue. It is not sustainable to increase a levy by 250% over four years.

Deputy Pat Rabbitte

I share the Deputy's concerns, and I expressed them at a meeting with the regulator and subsequently put them in writing. When one considers the three elements of the PSO, the largest element of cost is attributable to the peat stations in the midlands. It would not be viable to maintain employment in the midlands, such as among Bord na Móna workers, without the PSO.

Deputy Penrose will be interested to know that the Edenderry power station will cease to receive compensation from the levy from the end of 2015. Given that it is due to receive €20.6 million, it is a significant factor, although it is not as significant as the contract running out next year with Tynagh and Aughinish. For 2014 and 2015, Tynagh and Aughinish account for €77.6 million of the levy. That was a ten-year contract entered into by the then Government in 2005, and as I noted in my formal remarks, the country was then on a knife edge at the height of the boom with regard to energy security. We are now heading into the last year of that contract, and that is a large element.

Deputy Penrose is correct about forward purchase contracts. The public service obligation, PSO, increases when the wholesale price comes down and in those circumstances large energy users should be able to arrange forward purchase contracts to take advantage of the fact that wholesale prices have decreased. In any event, the PSO as we have known it is in the final straight. Edenderry will be affected from the end of 2015 and the legacy contracts with Tynagh and Aughinish have one year left to run.