I am pleased to be before the committee. With your agreement I will share this presentation with Mr. Tutty. We will try to be as brief and as concise as possible.
The Commission for Energy Regulation, CER, has been around since mid-1999. Our functions are set out in the second slide. Primarily, we have five functions: to regulate the networks to try to drive the development of competition in both electricity and gas; to regulate the price of electricity and gas in some parts of the retail market; responsibility for safety of gas and electricity; to monitor and promote security of supply in both gas and electricity; and to advise the Minister and the Government as the case may be. In order to do that, we have devised a mission statement which we have tried to keep as simple as possible. Our duty is to make sure the lights stay on and the gas keeps flowing, that prices are fair and reasonable, and that it is done in an environmentally sensible and safe way.
The primary legislation which set up the Commission for Energy Regulation comes to about four Acts. However, there was also secondary legislation. The original main Act was in 1999. We were given responsibility for gas in 2002. Our powers were further extended in 2006 when we were given power to start developing the all-island electricity market and also to deal with safety in electricity and gas. When the new market was almost ready, further functions to regulate and govern this market were given to us by the Oireachtas last year. Further legislation is in train to extend our remit to cover safety for offshore and upstream oil and gas exploration.
At present, the organisation has two commissioners. However, ideally there should be three commissioners. There has been a vacancy for some time. The process being undertaken by the Minister to appoint a third commissioner is practically finished and we expect a new commissioner to be appointed in the near future. Terms of office are usually for five years but commissioners can serve for up to ten years, that is, for two terms.
We have organised our affairs in four functional divisions as follows: the electricity market which deals with the wholesale and retail markets, the networks and the retail end; the gas division; the safety, environmental and customer affairs division; and an operations division which deals with human resources, finance, IT, etc.
Our organisation has about 56 full-time equivalents. There are four directors of the functional divisions, managers, analysts, customer care officers who deal with any customer complaints which we receive and some administrative support. Most of our staff have post-graduate qualifications, some have PhDs. They come from diverse backgrounds in the energy industry but are also qualified in economics, business law, accounting, etc. We have a wide range of highly-qualified people. We would wish to retain these people and have a good environment in which people can work. We expect our staff numbers will have to increase when our responsibilities are extended to include further safety functions.
Our income is determined by ourselves and is levied on both the electricity and gas industries. We are not financed in any way by the Exchequer. We raise our money by way of two statutory instruments — one for the electricity industry and one for the gas industry. Effectively, it is based on the size of the companies involved and the amount of business they do in the sector. Our expenditure is on the wages and salaries of staff, professional and consultancy fees, accommodation and the usual office consumables. In 2006 expenditure was of the order of €12.8 million. Last year it was approximately €14.9 million — the financial statements have not yet been published — and our estimate for this year is approximately €15.7 million. If we have any surplus income in any one year, we offset it against the requirements for the subsequent year. That is the way we raise our money.
We are accountable in many ways. The annual report and work plans must be submitted to the Oireachtas through the Minister. We publish newsletters and information papers and engage in full public consultation on all our proposals and decisions. To put it in context, in 2007 the Commission for Energy Regulation published something in the order of 230 consultation, decision and other papers. As part of the development of the all-Ireland market, we published twice as many as that figure — well over 550 — of papers of all types. Therefore, there is an enormous amount of information available for people on which to comment and work.
We had an innovative idea this year. We had an open day when we presented our work programme to all interested parties. There was a large attendance at the meeting. Also, we regularly meet the Minister to discuss matters with him. We answer to four committees of the Oireachtas — this committee, the Joint Committee on Communications, Energy and Natural Resources, the new Committee on Climate Change and Energy Security and the Committee of Public Accounts.
For some time now we have been engaged in a consultation process on how we can further improve our public awareness and public consultation process. That process is almost complete and we will bring measures into effect in the near future.
I will give members a flavour of the work we do. As part of our work programme, we have identified what we regard as the ten key work items of the year, which are listed. Members will see that the all-Ireland gas project is listed No. 1. It is called CAG — common arrangements in gas. Renewable energy is on everybody's lips, as is smart metering. We must continue to develop the all-Ireland market. The east-west interconnector is a major matter, as is security of supply. Restructuring of tariffs is also high on our agenda, as is safety of delivery of electricity and gas supplies. We have recently taken over responsibility for consumer care activity from the ESB where it was known as ELCOM. We want to run our affairs properly and ensure our records and files are correct. I will touch on some of these issues briefly and then hand over to Mr. Tutty.
The single electricity market was our biggest undertaking last year and was launched last November. It has now been five months in operation and is working very well. It has been a major undertaking North and South. We have a regulatory body called the SEM committee which comprises the Northern Ireland regulator, our good selves, an independent member and a deputy independent member. That structure now regulates the all-Ireland market and appears to be working well.
As members will be aware, the price of fuels — oil, gas and coal — has been rising dramatically on the world markets recently. This will have a significant impact on the price of electricity in the next year. The cost of natural gas has increased by well over 150% in the past year, while the price of coal has almost doubled. The price of oil, as we all are aware, has increased significantly. The price of carbon is also in the mix, all of which conspire to drive up prices.
Another major activity in which we have been engaged with the ESB is the disposal of some of its power stations. By the end of this year we expect the ESB will have disposed of approximately 1,500 MW. That process is well in train. A short list will be organised by the ESB and the due diligence process is under way. Bids are expected by mid-summer and a decision later in the year. We have a formal legal agreement with the ESB to do this and see it as a major part of improving competition in the market, which everybody welcomes.
The last paragraph about which I will talk relates to smart metering or electronic meters. As members will note from the presentation, they can store data, measure inputs and outputs by time of day and they can be controlled remotely and upgraded. This will eliminate the need for such dreadful practices as estimated readings. It will allow us to have far more sophisticated tariff structures. This system can also accommodate micro-generations. People with micro generators in their houses can export the power and their exports will be measured. We are working on that basis and a steering group is working on this system. Progress on it is well under way. I will hand over to Mr. Michael Tutty.