Joint Committee on Environment and Climate Action debate -
Tuesday, 31 Jan 2023

Engagement with the Commission for Regulation of Utilities

Chairman

We have a quorum. We have received apologies from Deputy Bruton, who is unable to attend today. The purpose of the meeting is for the Commission for Regulation of Utilities, CRU, to provide a general oversight to our committee. On behalf of the committee, I welcome from the CRU Ms Aoife MacEvilly, chairperson; Mr. Paul McGowan, commissioner; Mr. Jim Gannon, commissioner, Mr. John Melvin, director of security of supply and wholesale; Mr. Phil Hemmingway, director of decarbonisation; Ms Karen Kavanagh, director of networks and economic regulation; and Ms Karen Trant, director of customer policy and protection. They are all familiar faces and are welcome back to the committee.

Witnesses are reminded of the long-standing parliamentary practice to the effect that they should not criticise or make charges against any person or entity by name or in such a way as to make him, her or it identifiable, or otherwise engage in speech that might be regarded as damaging to the good name of the person or entity. If witnesses' statements are potentially defamatory in regard to an identifiable person or entity, I will direct them to discontinue their remarks. It is imperative that they comply with any such direction.

Members of the committee are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official either by name or in such a way as to make him or her identifiable. Members are allowed to participate in the meeting only if they are physically located on the Leinster House complex. I ask members who are joining us online, prior to making their first contribution, to confirm they are in Leinster House.

I invite Ms MacEvilly to make her opening statement.

Ms Aoife MacEvilly

I thank the committee for inviting us today. As members are keenly aware, 2022 was one of the most challenging periods for the energy sector and, indeed, for the CRU since our inception. In addition to our own security of supply risks in electricity, the war in Ukraine created a new gas and electricity security crisis across the EU, along with high and volatile energy prices that are continuing to cause real hardship for customers. The CRU also continued to tackle the climate crisis and we were given new statutory responsibilities under the climate legislation. From the perspective of our safety remit, we continue to work on the safe introduction of compressed natural gas, CNG, and renewable natural gas into the gas system. On 3 January, the safe electric scheme and registered gas installer, RGI, scheme commenced operation under a new safety supervisory body, Safe Energy Ireland, following a major procurement exercise in 2022.

While these challenges are significant and multifaceted, good progress is being made in a number of areas, which I will briefly highlight, along with our priorities for 2023. We remain very concerned at the impact of high energy prices on households and businesses. The CRU has been working with the Department to deliver the actions in the national energy security framework. We consider that the enhanced customer protection measures we have introduced, along with the Government's electricity credit scheme, communication campaigns, including the CRU campaign and the Government's Reduce Your Use campaign, and other measures are helping some of the most vulnerable customers. The data we have provided the committee show, for example, the positive benefit of the electricity credit scheme in reducing customer debt.

The Electricity Association of Ireland has advised that there has been a 30% increase in the number of registered vulnerable customers, engagement with whom we have been promoting. This is very important as vulnerable customers can only receive the necessary support if they register with their energy supply companies. Once the new public service obligation, PSO, levy regulations are signed, we expect to roll out the PSO payment to customers in the coming weeks, which will also help. While gas wholesale prices have eased in recent weeks, they remain, along with electricity wholesale prices, significantly elevated above previous yearly norms. The expectation is that Ireland, along with the UK and EU, will continue to see high retail prices for a further period to come. We will, therefore, continue to keep all consumer protection measures under constant review.

Turning to security of supply, the EU measures to lower electricity and gas demand, fill gas storage and increase liquefied natural gas, LNG, imports have had a positive effect on the outlook for the remainder of this winter and next winter. The situation remains volatile and a prolonged period of adverse weather could reverse some of those gains. In terms of the all-island electricity market, good progress has been made on the security of supply programme of actions, which the CRU is implementing along with the Department of the Environment, Climate and Communications and EirGrid. We have provided the committee with a more detailed update note on progress under that programme. It includes both temporary measures and ongoing work to procure and accelerate the delivery of enduring capacity through the all-island capacity market, demand-side measures, including the Beat the Peak campaign by ESB Networks, enhanced use of battery storage and much more. It should be noted that we saw a new record for peak demand in December 2022 but no system alerts. Some of these measures are short term in nature but others will form part of our enduring low-carbon electricity system.

Turning to the energy transition, the CRU has an important role to play in the delivery of the climate action plan for 2023. Our regulatory frameworks will enable the delivery of major renewable electricity targets such as increasing the proportion of renewable electricity to 80% and development of 9 GW of onshore wind, 8 GW of solar energy and at least 5 GW of offshore wind energy by 2030. Some of the key actions the CRU is responsible for include development of an electricity demand-side strategy and implementation plan, new arrangements for renewable self-generators, publication of system services future arrangements, work on interconnection, storage policy, hybrid technology grid connection, and many more.

More broadly, the actions the CRU will deliver under the climate action plan for 2023 will be a critical enabler for the achievement of multiple sectoral climate targets, including in the electricity, heat, transport and enterprise sectors. Much of this work is already under way. Recently, the CRU has taken decisions on offshore grid connection assessment and connection and charging arrangements for offshore renewable energy projects. The Single Electricity Market Committee, SEMC, has revised the firm access policy to increase clarity and certainty for both existing and potential new generators. We have decided to run another enduring connection policy batch-processing window in late 2023 to run parallel with development of a policy for the longer term. As we increase the level of renewables in our electricity market, system services and storage technologies will play a much bigger role. We will continue and intensify our work on implementing the future arrangements for system services this year, following the publication of the high-level design in 2022.

The SEMC recently published its decision on procurement of low-carbon inertia services, with procurement to commence in July 23 and to be completed by December. The earliest go-live target date for contracts is 1 October 2024. There will be a phased introduction of projects, with the aim of having all of the projects in this first phase in place by 2026. This year, we will also step up our work on demand-side flexibility, leveraging the smart metering infrastructure in homes and businesses across Ireland to lower costs and support low-carbon generation and security of supply. We have also started engagement on large energy users' demand flexibility and a new approach to connecting large-demand users, including data centres. Decarbonising economic growth and our existing demand is crucial to staying within our carbon emissions ceilings and will be core to the new and ambitious demand-side strategy.

As in 2022, the EU will continue to drive new policy and legislation impacting on our work. We continue to work with the Department on implementing the demand reduction targets in electricity and gas and engaging on legislation to implement the revenue cap. We are also working with the Department and our regulatory colleagues across Europe to provide feedback to the European Commission on its consultation on energy market design, which will likely lead to significant follow-on work for both the CRU and our regulatory colleagues.

There is far more information in our detailed work plan for 2023, which we have provided to the committee. A key priority for 2023 will be recruiting new staff to build out our new decarbonisation division and stand up new CRU teams, including the new district heating team that is being put in place shortly to address the new functions we have recently been given in this area. We will also grow and support our existing teams to deliver our ambitious work plan. We are happy to take questions from committee members.

Chairman

I thank Ms MacEvilly for her thorough opening statement. Members will have five minutes each for questions and answers and, if there is time, they may come in for a second round. There is lots of information in Ms MacEvilly's statement, which would take a long time address in full, so I will confine myself to a few points.

It is very significant that there were no system alerts, given we went into last winter and this winter really fearing there would be. It seems such alerts may be becoming a feature of the summer more so than they are of the winter. It is very significant that we have not had any this winter despite, as Ms MacEvilly noted, the record demand. Will she talk us though why it looks like we are in a better situation than we were before? What has changed since last year?

I would like to hear more about the enduring connection policy.

I commend the vision of the Commission for Regulation of Utilities, CRU, on looking forward to Ireland becoming a net energy exporter in time, and as soon as possible, in order that we are not just looking to decarbonise our own system but to also help other countries as well. I would like to hear more about that. I would also like to hear more about demand-side flexibility, and particularly for the larger energy users. Ms MacEvilly mentioned the new approach by the CRU and perhaps she could elaborate on that.

Reference was also made to the challenge of getting new staff. This is something we hear about from every sector. It is to do with the economy and full employment. Every sector will be challenged to find skilled people to come and work in the industry, or to invite them to the country because we might not have the skills here. I am interested to hear what the CRU is doing to get the right people in place to take part in this huge reform agenda that we have.

Ms Aoife MacEvilly

I will make a start on those questions and then bring other colleagues in. With regard to the winter security of supply provision, it is fair to say that we are not resting on our laurels at the moment. It has been our experience over the past years that some of the most challenging periods have come in February and March. We are continuing to sustain the same level of preparedness throughout the winter. It is worth noting that when we had the record demand periods in the run-up to Christmas - the committee will recall that very cold period - it was accompanied by very low wind. There was a similar situation in the UK, which also had very tight margins and low wind. At the time there were also very tight margins in France. Given that we are all interconnected, we were all experiencing tight margins. What stood us in good stead was the level of work done by the system operator, EirGrid, particularly over the summer, to try to schedule planned maintenance of plant so that the plant we have on the system, that is, the dispatchable plant that are available at times of low wind, were in a good position and had good availability throughout that period. Ironically, as the Cathaoirleach has said, the periods when we have been most at risk in previous years were the summer periods. The amber alerts that have come in August have been because we had to schedule maintenance of plant so they will be ready for the peak winter period. That leaves the system tight in the summer. In this particular scenario in December, it left us in a good position to manage through a period of sustained cold and low wind, albeit again with tight margins. We did get interconnector support from Great Britain, GB, but it was managed very carefully because there were also tight margins in GB and in France. We are continuing to work closely. We meet on a two-weekly basis with EirGrid to monitor that situation carefully. There is a range of backup measures that we put in place over the past years that we would implement, if needed, if we had further periods of cold weather. We were really happy to see that in December, we got through that period. The other measures we are taking for ensuring capacity and for temporary emergency generation will help us out next winter.

I will speak briefly on demand-side flexibility. This is absolutely crucial to our transition. It is important at times for security of supply. We have seen, not just in Ireland but also throughout Europe and the UK, that there is a greater emphasis on the impact of reducing demand to support security of supply. It is actually really important when we come into a high-renewables system where we will want to have flexible demand, and perhaps demand that is incentivised to come in when there are higher renewables and lower prices, and to step out when there are lower renewables and higher prices, to make it more cost-effective for customers. There are ways we are doing that through our smart metering programme. This gives prompts for customers to move demand off-peak. In future, there may also be more dynamic tariffs that will really help customers to benefit from lower wind periods. We need to roll this out now to the large-demand users. There is the existing cohort that might have the capability to be flexible, and we can think about how we are bringing new large demand onto the system to ensure that this is built in. In effect, we could have large new-demand customers that are effectively net zero, which would be the aspiration of some of those cohorts when they enter our system, and they can help us to support the system in managing the high-renewables vision.

I will talk briefly about the step-in challenge and then I will hand over to Mr. Gannon on the enduring connection policy. We are all hiring at the moment in the energy space. The scale of work required to manage through the energy transition is only really becoming apparent as we work through successive iterations of the climate action plan and what it will really take to put in place the regulatory frameworks that facilitate the incredible societal change and the incredible technology and innovation shift we need to deliver the low-carbon vision. We are hiring. We have had permission from the Department to bring in new staff. We are competing against industry, which is in the same space. We are probably competing against our own Department, against EirGrid, and other State actors. It will be a challenge. We would certainly look to all options. As a regulator, one of the things we offer is that public interest mandate. We are aware there are a lot of people leaving college who really want to make a difference to their communities and to society and who wish to be able to say after a couple of years of working with the CRU that they have made a positive impact for customers, in the climate space. We can offer that. It will be ongoing. We will be hiring constantly for the next few years. I would say that we will be coming back to the Department again looking at further increases in the scale of the organisation that will be required to deliver on the mandate.

Mr. Jim Gannon

On the enduring connection policy, we have seen some movement at European level, with directives and in the recent publications last year such as the Fit for 55 plan and the REPowerEU plan, where those concerned are looking to fast-track both the processing of renewable electricity projects and the underpinning of infrastructure. This is to see how many of those statutory and other processes can be put in parallel to each other, and which can be shortened or accelerated to get things built faster, while still allowing the important democratic process as set out.

As we seek to do this for connection policy - it is not just for conventional generators but also for renewable generators, types of batteries and the types of low carbon system services such as synchronised condensers we have spoken about previously - we felt it also was important that, as this is developing, we would still provide a set of goalposts for those with projects in the pipeline and with projects in the renewable electricity support scheme pipeline. For the coming year, we decided to host another round in October. The enduring connection policy, ECP, round is something that developers are very familiar with now. We have done this for the past number of years on a regular basis to facilitate projects going through the pipeline, as the faster-track process is being developed. The latter is being developed with the Department and with other EPA licensing processes, the planning process, and other statutory processes to try to get that alignment but in the meantime, we will provide that goalpost so the pipeline can continue to move.

On the broader comment, on interconnections and interconnection policy, we have agreed the regulatory framework for the Celtic interconnector. That project is now progressing well and we expect it to come into service in 2026. The Greenlink interconnector is now in construction. We expect this to be commissioned at the end of 2024 and to enter service about that time, which is in advance of the Celtic interconnector.

Chairman

What year for the Celtic interconnector?

Mr. Jim Gannon

The estimated timeframe at the moment will be towards the end of 2026.

On the demand side, I will add to what Ms MacEvilly has said. As an energy regulator we have a certain number of tools at our disposal. It is likely that to decarbonise our existing economy, and to decarbonise economic growth, it will take multi-departmental work and multi-agency work with our enterprise agencies and the environmental and statutory planning agencies to really bring alignment to that. We see ambition cited in a number of the large energy user groups to also decarbonise their own electricity and gas use, and energy use in general.

We must make sure that alignment happens quickly, or more quickly than we would otherwise anticipate. Again, it will take regulatory intervention from ourselves, but also, perhaps, work across agencies and Departments.

Chairman

I thank Mr. Gannon. Our committee has agreed tentatively to try to engage with the enterprise committee at some point this year. On the two issues raised, the one Mr. Gannon just mentioned and that of staffing, our committee will be interested in hearing from the commission so we can relay the challenges to the enterprise committee and get the wheels turning in the Department of Enterprise, Trade and Employment if we can.

Senator Lynn Boylan

I would like a back-and-forth in my five minutes if that is acceptable because I have some specific questions to ask.

On the story about large energy users being subsidised by domestic users and the practice of rebalancing tariffs, which went on for 12 years, I understand the Minister contacted what would have been the Commission for Energy Regulation in 2009 to ask that the rebalancing be made permanent. While the Government memo at the time conceded that this measure would be unpopular, it was stated that domestic users could still shop around or reduce energy use to bring down their costs. What was the reaction of the commission to this, bearing in mind it is an independent body? Did it carry out any analysis of what the impact would be on domestic users if network tariffs were balanced in favour of the large energy users?

Ms Aoife MacEvilly

To put it in context, it was not a measure on its own. There was a package of measures, some of which did benefit domestic customers also. We engaged with the then Department and Minister. It was a time of crisis. We are independent in our decision-making but work within an overarching policy framework. Much as we worked through the national emergency security framework during the crisis, we worked with the Department and Minister. There was some analysis of the impacts at the time. It was probably more based on examining the comparisons of emergency costs for large users in Ireland and other European countries, as well as the average cost-----

Senator Lynn Boylan

Did the commission note that domestic users were also out of kilter with the rest of the EU? We just have high energy costs in this country.

Ms Aoife MacEvilly

There was a package of measures, some of which benefited domestic users also, but there were challenges for all in the period.

Senator Lynn Boylan

I wish to stop Ms MacEvilly but do not mean to be rude. The Government memo from the time states the Government was unwinding the measures for domestic users and that it wanted permanent rebalancing in favour of large energy users, subsidised by the domestic users. The measures that had been put in place for domestic users were being taken away. The memo clearly states this would prove unpopular but that domestic users could just shop around or reduce their energy use. The objective was to design a network tariff that favours large energy users at the cost of domestic users. The CRU's mission statement or remit is to protect the public interest and provide safe, secure, sustainable energy at a reasonable cost. How does the proposal to penalise domestic users to pay for large energy users fit in with this mission statement?

Ms Aoife MacEvilly

I believe the Deputy is referring to a Government memo. We cannot comment on its specifics. That was the Government policy at the time, and we work within a Government policy framework. The challenge at the time, which we could all clearly see, was that large companies or large employers were leaving Ireland, leaving people jobless and unable to pay bills. That was part of the reality of the time. The policy in question was the Government policy. The CRU engaged with the Minister and Department on it. The decision referred to was the one taken at the time. There were other measures in place-----

Senator Lynn Boylan

Did the CRU push back or carry out any impact analysis? We are aware there was a financial crisis at the time and that we were losing jobs. Equally, we know many hard-pressed families were also in a financial crisis. Did the CRU push back or do any analysis as to how fair the measure would be for domestic users?

Ms Aoife MacEvilly

The measure was introduced around the time when there was effective competition coming into the market, so we would have examined the options for customers to shop around and effectively beat the impact by switching and making savings as a consequence. That was the level of engagement we would have had. Would Ms Kavanagh like to comment on that?

Ms Karen Kavanagh

After the Government decision was conveyed to us, we would have done an analysis as it was implemented as part of the PR3 framework. It was the first year of that framework. On the specific analysis and tariff decision-making process for 2010, there would have been an impact analysis for domestic customers to quantify the incremental impact regarding transmission and distribution tariffs. One should bear in mind that transmission and network tariffs were a smaller component of the overall customer bill at that time, in the order of 25%. That would have been spread across all the residential customers at the time. As Ms MacEvilly said, we were in a newly deregulated market at that stage. There was a really active, competitive market in terms of supply offers available. That would have been part of the analysis that would have fed into the decision at the time.

Senator Lynn Boylan

But the measures stay in place for 12 years. Was there a regular engagement with ESB Networks? The Government's version was that there was going to be a €50 million subvention per annum or a rebalancing in favour of large energy users. What ESB Networks seems to have proposed was that a percentage of the network charges would be skewed in favour of large energy users. Did it come forward with a submission to the CRU to state how it proposed to implement the Government's decision, and did the CRU engage with it on that? Later, in the CRU letter of November, the CRU admitted that more than €50 million per annum was likely to be paid. Who decided not to follow the proposal on the €50 million and to opt instead for a percentage model? Second, was there regular engagement every year on whether it was justified to continue for 12 years after the financial crash and when we had more large energy users coming into the market?

Does the CRU have the total amount? We have heard a figure of €600 million and another of €70 million per annum. Do we have an exact final figure for the cost to domestic users in the past 12 years?

Ms Aoife MacEvilly

There is a lot to that. In each annual tariff decision, the permanent measure, as it was at the time, was still in place, and the €50 million was being rebalanced. That was in every annual tariff decision from the date in question until more recently, when we decided to reverse it. Over the past couple of years, we signalled that we were looking into this. We initiated a major review of overall network charges in the context not only of this measure but also more generally, having regard to how we were using networks in Ireland and determining the right basis for charging various types of customers for different uses given the decarbonisation agenda and the different ways in which customers use energy and networks in Ireland. We started that review. What happened was that, in the context of the more recent crisis and the work on the national energy security framework series of actions, we realised we did not have time to wait for the outcome of the review and wanted to bring forward the reversal of the measure. Would Ms Kavanagh like to address some of the other points?

Ms Karen Kavanagh

As Ms MacEvilly said, that would have formed part of the annual revenue and tariff decision. We set a framework on a five-year basis. Annually, we look at what the specific revenue is for the given year and-----

Senator Lynn Boylan

Does Ms Kavanagh have the figures for each year?

Ms Karen Kavanagh

They would have been published annually in respect of each decision.

Senator Lynn Boylan

But the representatives were not able to give us an answer when the committee asked for the overall figure for the 12 years. It was said the final figure would be reconciled when the arrangement was unwound or closed down. Does the commission have an annual figure or is it still calculating how much it was?

Ms Karen Kavanagh

With regard to the decision set out by the commission, the documents at the time set out the commission's implementation plan.

It was that €50 million was to be split between distribution and transmission revenue between EirGrid and ESB Networks. As Ms MacEvilly stated, on foot of the commencement of our overall network tariff structure review, the planning for which started in 2020, in the revenue decisions in 2020 and 2021 we flagged that we would be looking at this and reversing this decision. In March last year, we engaged with ESB Networks and EirGrid to do preliminary analysis around looking at the reversal of that measure. At that time, the commission decided to reverse that decision. In that process, ESB Networks identified to us that it had applied this measure as an annual percentage and not as a fixed amount.

Senator Lynn Boylan

I know I am going over time but that is the key point. Ms Kavanagh is saying that ESB Networks flagged when the CRU stated it was going to unwind it that it actually was not €50 million; it was a percentage. What due diligence had been carried out for the previous 12 years, given that this only came to attention when it was being unwound?

Ms Karen Kavanagh

When we review the allowed revenue annually, will set an overall framework that is profiled over five years. Each year, there are swings and roundabouts in terms of inflation figures, energy forecasts and unaccounted-for costs and we scrutinise all those costs annually to ensure they are efficiently incurred. The inclusion of this money does not impact on that overall revenue because it was about the total amount to be recovered. The way in which it was implemented meant that more was recovered from one pot and less from another but the overall amount of the revenue that we set on an annual basis was adhered to. It was not until we looked to reverse it that ESB Networks identified this. Further to the commission's decision in March, when we said we would reverse the rebalancing piece, we decided to do a further piece of work to look in detail at how it was applied and the individual costs. That reconciliation work will happen this year as part of our annual tariffing exercise.

Deputy Jennifer Whitmore

I was going to raise the issue of disconnections; I hope I will get a chance to do so. I wish to follow up on the issue just raised, however. A decision was made 12 years ago that this tariff would be applied. The commission assumed it was being applied as a €50 million tariff but the ESB was applying it as a percentage. How can that discrepancy happen? That seems to be a large oversight on behalf of the regulator. From where did the direction come? Did it come from the CRU to the ESB that it could apply that tariff and the means of doing it? Is Ms MacEvilly saying the CRU told the ESB it could apply this additional tariff but it was to be done to the amount of €50 million?

Ms Aoife MacEvilly

To be clear, it is not only ESB Networks. There is a portion that is on the transmission side, so EirGrid also applies part of this. In each annual tariff period, we gave them an amount in the millions of euro. In year one, there was no discrepancy because the percentage exactly matched €50 million. In year two, it was probably pretty close as well. It was only over time that their continued application of the percentage created this administrative error.

Deputy Jennifer Whitmore

Did EirGrid also apply it as a percentage?

Ms Aoife MacEvilly

No, it applied it as an amount in the millions of euro in line with the-----

Deputy Jennifer Whitmore

It took the direction as it was meant. It was only the ESB that applied the percentage.

Ms Aoife MacEvilly

It is just on the distribution side.

Deputy Jennifer Whitmore

Okay. In the event that the ESB took the CRU's direction and misapplied it, is there a penalty for that? It is quite a large administrative error.

Ms Aoife MacEvilly

We will look at this. It is important to state that ESB Networks did not benefit from this. It did not retain any of that money. It did not in any way favour ESB Networks. It is clear it was an administrative error.

Deputy Jennifer Whitmore

Ms MacEvilly is saying the ESB did not benefit from this but that money would have been put on domestic bills; is that correct? Theoretically, domestic bill holders from ESB could have been charged a lot more because they were getting charged on a percentage basis rather than to a total of €50 million.

Ms Aoife MacEvilly

It was not just theoretical. Through the application of the percentage, domestic bills were being charged more than we had directed. The benefit of that did not go to ESB Networks; it went to larger energy users. Having identified that, in March last year we decided that money will be paid back to domestic customers. The only question now is the final reconciliation that Ms Kavanagh mentioned and how we will reverse that in addition to-----

Deputy Jennifer Whitmore

To be fair, that is not the only question the CRU should be asking. It should also be asking how a State entity responsible for this misconstrued the direction of the CRU to the point that it was overcharging customers for 12 years. Questions need to be asked in respect of how it took so long for this to be recognised. That is a fundamental issue the CRU needs to consider.

Ms Aoife MacEvilly

In fairness-----

Deputy Jennifer Whitmore

I wish to raise the issue of disconnections. The word "vulnerable" is being used a lot, often interchangeably. Under the current remit of the CRU, vulnerable customers are medically vulnerable people who need for energy supply critical medical purposes, as well as people who are elderly or could have medical reasons for needing security of supply. It does not relate to financial vulnerability; is that correct?

Ms Aoife MacEvilly

That is correct.

Deputy Jennifer Whitmore

The moratorium for all domestic users, including the financially vulnerable, is up at the end of February.

Ms Aoife MacEvilly

February, yes.

Deputy Jennifer Whitmore

Okay. In its energy poverty strategy the Government stated that it was going to legislate to include "financially vulnerable" within the definition of "vulnerable". That did not happen and-----

Ms Aoife MacEvilly

It has not yet happened.

Deputy Jennifer Whitmore

It has not yet happened. The Government stated it was going to do it for 2022-23. It is Government policy that financially vulnerable people would be included under the CRU's definition of "vulnerable" but, unfortunately, as that has not happened, financially vulnerable people could face disconnection from the end of February. Is that correct?

Ms Aoife MacEvilly

That is correct.

Deputy Jennifer Whitmore

Will the CRU extend that moratorium to ensure financially vulnerable people will not be disconnected in that period? It is clear we are not at the end of this crisis. Many people are still in very difficult positions. It is Government policy to include financially vulnerable people. Will the CRU extend the moratorium?

Ms Aoife MacEvilly

To be clear, the moratorium for the medically vulnerable or that cohort would, in addition, extend to the end of March.

Deputy Jennifer Whitmore

Yes.

Ms Aoife MacEvilly

I will ask Ms Trant to come in. We are engaging on the potential for extending the moratorium for a further month to capture that.

Ms Karen Trant

The Deputy is correct that it is Government policy to consider extending the definition of "vulnerable customer" for those who are in financial circumstances that could lead to energy poverty. It is a complex area and we have communicated with suppliers and the Department that this needs careful consideration. In the context of the definition, people who would be in fuel poverty are those who spend 10% or more on their fuel bill. Many people fall into that category right now. We need to give it time and consideration. We have engaged with suppliers to look at extending the moratorium. Some of the feedback we are getting is that during the Covid crisis customers disengaged when the moratorium took place, which leads, ultimately, to more debt for those who are probably not in the best of circumstances. We want to try to ensure they are engaging with their supplier.

There are a number of measures in place to protect those customers. Even though the moratorium is due to end on 28 February, there is a process that takes nearly six weeks before a person would be disconnected in any event, which would take us into early summer. Customers can engage with their supplier and we have set a 24-month minimum period for them to pay back any debt. We have told suppliers it has to be a customer-led approach. The customers dictate what they can pay; it is not a rough calculation done by the supplier. We are monitoring that. Disconnections are still very low. At the beginning of 2021, there were in the region of 2,000 disconnections. In 2011, there were 17,000 disconnections. I acknowledge that was a particular time. The measures we are putting in place are having an effect, as is the Government credit.

The number of disconnections is low. Debt is also continuing to decrease. Engagement is still taking place with customers. Customers are more engaged in terms of asking questions about the credit, for example, when will they see it.

We will continue to work with suppliers. They will push back and say that they have done a great deal and that they are businesses. The more we push them, the greater the risk of supplier-of-last resort events happening because smaller suppliers will feel the squeeze. They cannot deal with that level of debt on their books in the long term. It is a complex issue. We will continue working with the suppliers and push them as much as we can, but-----

Deputy Jennifer Whitmore

The CRU is considering extending it to the end of-----

Ms Karen Trant

Yes.

Deputy Bríd Smith

My voice is weak. I have something.

Following up on the previous comments, we are still facing a cost-of-living crisis. There is no end in sight. Ordinary people are aware that although the wholesale prices of gas and electricity have dropped significantly, that reduction has not been passed on to them. This committee should tell the Government that it needs to consider extending the moratorium, not cut back on the supports it has been providing, and try to do something about the amount of profit gouging taking place.

The percentage of customers in arrears has decreased slightly where domestic electricity customers are concerned but has rocketed to 20% in respect of domestic gas customers. That is shocking. Attention needs to be paid to this issue, particularly given the level of profits being made by the gas companies when people are struggling.

Ms Trant referred to how the number of disconnections had decreased, but the table does not show that. Rather, it shows 648 non-payment of electricity account disconnections in 2021 and 2,031 in 2022. That was a more than 300% increase despite the moratorium and subsidies in 2022. Is there an explanation for this? There was a more than 100% increase in the number of domestic gas disconnections in the same period. I would like some quick answers to these questions. I have a couple more questions to ask. Maybe I will ask them now and someone can reply to what I have already asked later.

Regarding the information the CRU provided us, I asked in September about the data centres to be connected. The committee later wrote to the CRU asking it to answer my question. It has still not been answered. According to one of the CRU's replies, there were eight data centres at transmission system operator, TSO, level and eight at distribution system operator, DSO, level that had connection agreements but were not yet connected. Are they the same eight or are there 16? If they are due to be connected, how will that impact the estimate of the expected power demand from data centres that EirGrid gave us?

Excuse me, but my voice is weak. My questions are on arrears, the moratorium, the CRU's figures and the data centres.

Ms Aoife MacEvilly

We understand that there are challenges, difficulties and fears in many households over the bills, particularly gas bills, that are coming through their doors after the high-consumption winter months. The electricity credit has helped on the electricity side, as can be seen from the numbers. There is no equivalent on the gas side, which can also be seen from the numbers, which are increasing. For whatever reason, there have traditionally been higher levels of debt carried by domestic customers in gas than in electricity. It can be due to the seasonal nature of bills. For example, people get high bills in the winter, pay some of them off and then catch up over the summer. We are seeing that, but the higher prices are probably having an additional impact. From our point of view, the key is for customers to be aware of their rights, the Government's campaign around reducing use, and the measures that have been put in place to support people who are struggling to pay bills. We understand there are many of them.

Regarding the statistics on disconnections and customers in debt, I will hand over to Ms Trant, after which we will deal with data centres.

Ms Karen Trant

The Deputy asked about extending the protections and the moratorium. We will review that. We are continuing to receive statistics from suppliers. We hope to extend those protections, if needed, over the coming winter.

The 991 domestic electricity disconnections in 2020 form an artificial baseline, given that there was Covid at the time and no one was physically going out to disconnect customers because they were not allowed to access people's properties. The figure of 991 was not necessarily due to the moratorium, but to Covid and operational issues. The closer baseline is probably found in the figures above it - 4,113 and 3,802 in 2019 and 2018, respectively - following which came Covid and then 2022.

We will continue to monitor the situation. No one wants disconnections, not even suppliers. There is a process. In some circumstances, though, it is the only tool that suppliers have. I will give an example. If someone moves into a new property and does not sign up to a supplier, he or she is still getting electricity without being signed up to pay the bill. It is not ideal, but the threat of disconnection can sometimes prompt people in that situation to look for and sign up with a supplier.

Deputy Bríd Smith

These figures are for non-payment, not failure to sign up.

Ms Karen Trant

It depends on how the suppliers calculate them. Using electricity without signing up to a supplier and not paying is the de facto non-payment of an account.

Deputy Bríd Smith

From my experience, my guess is that most of these people are poor, cannot pay their bills and are being cut off. It begs the question of whether anyone follows up with them afterwards. Are they without gas or electricity and lack the money to reconnect? It is wrong that the CRU allows this to happen in the middle of a cost-of-living crisis when profits are soaring.

Ms Karen Trant

We work closely with NGOs, for example, the Money Advice & Budgeting Service, MABS, and the Society of St. Vincent de Paul, to understand those who are at risk. In the main, they are probably struggling financially in other areas. Do they need help beyond the energy piece? We ensure that there are other agencies involved to interact with them.

We will continue to monitor disconnections. We would not want to see an increase in numbers. However, suppliers view disconnection as a tool for prompting people to engage. We will continue to monitor the situation to see exactly who is being disconnected and why.

Chairman

I thank the Deputy. Deputy Farrell is next.

Deputy Bríd Smith

I also had a question on data centres.

Chairman

My apologies.

Mr. Jim Gannon

We made a genuine effort to provide the Deputy with the information she sought. In our letter on 16 September, we noted that there were eight data centres connected at the transmission level and a further eight had connection agreements in place but had not been connected yet. The latter eight has not been connected but were in the pipeline, to put it that way. At distribution level, which would be ESB Networks, there are 31 data centres connected and eight have connection agreements but are not yet connected. As such, there are eight at transmission level plus eight at distribution level, meaning 16 in total.

Deputy Bríd Smith

Does being at transmission level mean they are connected?

Mr. Jim Gannon

It means they are connected at higher voltages with bigger wires. EirGrid deals with larger wires at higher voltages. It is just a different grouping of data centres that use higher levels of energy.

Deputy Bríd Smith

Will the CRU revert to me properly in written format in respect of my questions?

Mr. Jim Gannon

No problem.

Deputy Bríd Smith

The answers may beg more questions. For example, it could be a case of doing one thing while promising another. I also asked whether data centres' connection would change EirGrid's estimate of power demand from data centres.

Mr. Jim Gannon

It would not. EirGrid has the existing data centres connected and has signed agreements with them. It has the contracted ramp, which is what data centres may increase their usage by, in that connection contract. EirGrid would predict how much the data centres might ramp or increase their usage within that.

We will come back in writing. We are also happy to sit down sit down with the Deputy and have a brief session on it to make sure she has the information on it.

Deputy Bríd Smith

I might do that.

Ms Aoife MacEvilly

It might be worth mentioning that we collect retail market monitoring data from suppliers. On an ongoing basis we have regular access to the same data all the time. We are more comfortable with that. We had to collect data on ad hoc basis from the system operators in line with the questions the Deputy asked. We were trying to understand what she was looking for to provide it. It is not information we hold but we would genuinely be happy to sit down with her. We know she is very interested in this. We need to try to understand what we can provide, what we can get from ESB Networks and EirGrid which will help.

Deputy Bríd Smith

My original question was in September. When can I expect the written answer?

Mr. Jim Gannon

Tomorrow we will follow up with an answer which collates the two and which perhaps notes what we mean by transmission connected and distribution connected to highlight that they are two separate baskets of connections if I can put it that way.

Deputy Bríd Smith

I look forward to that. I thank Mr Gannon.

Deputy Alan Farrell

I thank the witnesses for appearing before the committee. I just have three questions as quite a bit has already been covered on the moratorium on disconnections. My primary question relates to the outlook on energy prices. How far ahead we are hedging? What are the consequences and effect of that on energy prices? When will the next set of hedging contracts be undertaken or is it an ongoing thing?

Ms Aoife MacEvilly

We would not have much insight into the individual hedging strategies of suppliers because that is confidential commercial information. That is the basis on which they compete with each other. Those who are hedging typically adopt a laddered strategy over time. The electricity or gas they are selling to a customer at this point might have been bought in combinations of three months ago, six months ago, nine months ago and 12 months ago in different percentages. The benefit of hedging to customers is that it reduces volatility. In the past their customers may feel they have been exposed to a lot of volatility because the retail prices increased by so much.

However, this contrasts with what we saw in wholesale markets where prices were literally doubling overnight at one point. A price of 50 pence per therm was a typical gas price prior to the crisis and we were seeing prices spike to 500 pence or 800 pence, meaning £8 per therm which is many multiples. Customers would not have been exposed to those extremes. They would have been paying a price that would have been hedged during those periods. As we now hopefully come through to a period of downward pressure on wholesale prices, the same applies where suppliers will generally have hedged the gas or electricity they are selling. Therefore, it takes more time for it to unwind. On the question of when, we would not necessarily be able to predict. It also depends on the longevity of the downward pricing cycle that we have seen.

Deputy Alan Farrell

That is the key to the issue. Does the CRU have any mechanism available to it to discuss the length of hedging with energy suppliers? Of course, it might be beneficial to them and ultimately to the consumer in a different set of circumstances, but in this set of circumstances consumers are being exposed to significant levels of bills and of course debt associated with that. I can pivot to the Central Statistics Office's analysis of the supports that have been put in place. It has benefited the vast majority of people. At the same time, does this highlight a potential improvement in the regulation of the sector if the CRU had the authority to intervene and-or use its position to leverage the companies themselves to recognise that they needed to drop their prices?

Ms Aoife MacEvilly

There are two aspects to what the Deputy is discussing. Interestingly, the European Commission is currently consulting on proposals as to whether suppliers should be obliged to undertake a minimum level or a certain level of hedging which is considered to protect customers. The first question being asked more broadly is whether either nationally or at EU level we should oblige suppliers to hedge to protect customers. On the mechanism by which we then engage with suppliers, we generally meet them quarterly. They will sometimes give an indication of where they are at, for example at a very high level in a crisis cycle. So much happened over the past year that it can be difficult to-----

Deputy Alan Farrell

I fully accept that these are very exceptional circumstances. However, I ask Ms MacEvilly to consider the matter. She might provide to the clerk of the committee a briefing note with an overview of her views on the matter. My time is very limited, but I very much appreciate the answer.

My other question relates to the potential for direct clients or private clients as they are sometimes referred to. I can go back to the prior conversation about large energy users, some of which, I understand, are looking for large energy suppliers and are unable to get a connection. I understand it is very common elsewhere in Europe. Does the CRU have comments on it?

Mr. Jim Gannon

I believe the Department is reviewing the policy on that at the moment.

Deputy Alan Farrell

Does Mr. Gannon have a view on it?

Mr. Jim Gannon

I think it is something that could be facilitated and could be of benefit. One would need to consider whether any limits should be put on it. When it comes to the extent where it could be a private network, then different charging considerations-----

Deputy Alan Farrell

Absolutely. Obviously, it requires the Government to make a decision and the Department to issue a directive. Would the CRU, as the regulator, feel obliged to frame a policy on it?

Mr. Jim Gannon

As Ms MacEvilly noted earlier, we follow national policy. As the Government and the Department set the policy, we would certainly follow that.

Ms Aoife MacEvilly

It might require legislation rather than just a policy decision.

Deputy Alan Farrell

A specific section of the Act would need to be changed. I am aware of that.

I ask the CRU to provide the committee secretariat with an overview of the system services across the board. It is very helpful to get today's opening statement and for representatives of the CRU to provide answers here on the floor, but sometimes the devil is in the detail. I ask that we be provided with as comprehensive a note as possible for the benefit of the committee's work.

Mr. Jim Gannon

It could take one or two bites in that there is a lot of detail that the devil could be in. It is very complex. Let us definitely start that and we will provide as comprehensive-----

Deputy Alan Farrell

It would be very helpful because at times we are a little bit too much on the overview side and we need to get into some of the minutiae of the grid.

Deputy Darren O'Rourke

I thank the witnesses for appearing today. I wish to make a point about the large energy user subsidy. We need much more detail on that. We are in an incredible situation. I welcome the discussion on the extension of the moratorium. There is always a loaded argument on moral hazard and how certain types of people will act in a certain way if they are given the comfort of a moratorium in the middle of a crisis. I do not believe that is borne out in the evidence before us here. When people have money to pay their bills, they pay their bills.

I want to focus on security of supply and our capacity going into winter 2023.

There are some points in the additional information relating to temporary emergency generation and the progress made in that regard. Under point 5, there is a reference to capacity market auctions for later this year and the years ahead. What is the generational capacity picture for this year? What is new and coming on stream and when will it be delivered? Various media reports have indicated there is a question mark over some of those projects regarding the financial viability committed to some years ago. Will our guests set out where those projects are and how confident they are as to whether they will be delivered?

Mr. John Melvin

I will do my best to answer that. This winter, there was peak demand twice in December and Ms MacEvilly outlined that situation. As it happened at the time, there was low to no wind. The situation in France is important to us this year. One of the operational steps EirGrid has taken for this winter is that there is significant co-operation between EirGrid, the TSO here, National Grid, the TSO in Great Britain, and RTE, the TSO in France. We have helped Great Britain at times when it has been in difficulties and vice versa. The situation in France has improved. Nevertheless, the beast from the east in 2018 hit at the end of February, so there is still more of this winter to go.

For winter 2023-24, the first tranche of the temporary emergency generation EirGrid is procuring, of approximately 250 MW, is expected before that winter starts and that all relates to the Dublin region. EirGrid is procuring a second tranche, relating to the EirGrid, Electricity and Turf (Amendment) Act 2022, namely, the 258 MW in Shannonbridge and 150 MW in Tarbert. The expectation is that the majority of that will be delivered in quarter 4 of this year, which will mean we will be in winter 2023-24 when parts of that come. In July of this year, we will hold what is called a T-1 capacity auction, which will be for equipment that can come in in time for 1 October 2023. A number of plants, comprising both gas turbine fire plants and battery facilities, will have the opportunity to compete in that, gain capacity revenues and, therefore, be available to the system for 1 October 2023. Those plants are in construction and a decision will be made as to whether they compete in this auction in July for delivery this winter from 1 October 2023.

We are going to have an auction in March but I will skip past that for a moment and point out we recently had a number of interactions with people who won in the auctions we held in early 2022. There was a request that if there were a delay to their delivery caused by a judicial review of a planning decision, we would allow the start of the contract to be delayed by the same period from opening of the case to judgment, whereby we would add that to the start of the contract and to the duration of the contract. That decision was made by the SEM committee in early January and published. A second factor is that entities that competed in the auctions early in 2022 have expressed concerns, as has industry, about inflation since then, and we have all seen inflation since then. In October of last year, the SEM committee had a call for evidence on that to examine the degree of unexpected inflation and the evidence that entities could give us as to how this has affected them. In the next few weeks, the SEM committee will publish a follow-up consultation on that to seek further details from industry, with a view to progressing that matter significantly. It is clear there has been significant unexpected inflation since last year. That further consultation will be published shortly. We have listened to industry and will engage with it in that regard.

Beyond that, in March of this year there will be the T-4 auction for 2027-28, and we, industry and EirGrid have been examining important factors in that auction. We are making a series of changes to the capacity auction following on from the EY report, which in turn followed on from our understanding of what has happened in the capacity market in the past. Some of the things we are looking at in that auction include the de-ratings we apply to plants to ensure we value and pay them properly, that is, not overpaying them but not undervaluing them, and other elements such as the payments that must be paid once an auction has been won, the pre-qualification that has to be met to get into an auction and, importantly, the appropriate sums that can be bid to allow participation in the auction. The SEM committee expects to publish information on that final piece of that work in the next few days.

Deputy Darren O'Rourke

This calendar year, what capacity does CRU hope to deliver in that T-1 auction for July to be delivered in October? Is Mr. Melvin satisfied it will be delivered and that there will be capacity in the system for winter 2023-24?

Mr. John Melvin

Plants currently on the system are expected to exit over the period of winter 2023-24 and that will have to be adjusted for or made up. I will not give an expectation of who might win because the people building it have to decide they will be here on time and will come in, and it is their choice as to whether to bid. More than 150 MW of plant is in construction and the indications we have been given are that it will be in on time. We are engaging with the electricity TSO and the gas TSO to ensure what needs to be in place for next winter will be in place.

As for the temporary emergency generation EirGrid is procuring, it has advised it is confident that the 250 MW in Dublin will be in on time for next winter and also that the 450 MW will come in during the forthcoming winter. Perhaps between 150 MW and 180 MW is scheduled to leave, so we have to add that to our expectations or requirements. Moreover, there may be some demand growth over this year. We hope to influence that demand growth through some of the work Mr. Gannon mentioned, such as by engaging with, in particular, large energy users. Some of the tariff changes we made this year can be seen to have had some impact on the peaks in various sectors, and we will continue to engage with that. We have made a decision to facilitate the demand-side industry to better participate. The SEM committee made that decision late in 2022 and EirGrid will implement that decision. The expectation is that that will result in greater participation by demand side. A number of factors are at play.

Senator Alice-Mary Higgins

I might follow up on the questions about the subsidies. It is striking that households and families have been subsidising 1,500 of the largest energy users for 12 years. Some clear questions have been asked, so I will try to add something different on top of them, to look at how this happened not just over 12 years but in particular over the past three or four years. Over the past three years, we have had multiple sessions and discussions about the cost-of-living crisis and the pressure on households.

Over the last three years we have had multiple sessions and discussions about the cost-of-living crisis and the pressure on households. We have had new Government schemes in respect of support for energy bills and there was no mention of the fact that those bills were artificially inflated by this scheme. I am quite shocked that during that period of time this was not considered. Again, this is not about last year's spike; this is going back to 2020. Why was this not raised or identified very early on as an area of concern? Whatever about the arguments that were made in 2009, and I do not necessarily believe they stack up, in the last five years we have seen a massive increase in large energy users in the State. We saw a 285% increase in electricity usage by large energy users which was being subsidised. What was the thinking over the last five-year period, when clearly we had an expansion in large energy users and over the last three-year period, when we had huge pressure on households? Why has it taken until 2022 for action to be taken in relation to shifting that policy? It is not simply that there was a subsidisation of large energy users in that period of time; there was also a failure to put the brakes on the expansion of large energy usage.

I note that there are discussions now and a review is ongoing around demand-side measures and I ask our guests to expand on that. Actually, I will ask that as a separate follow-up question, if that is okay. For now, I ask the witnesses to explain what was happening during the five years of massive expansion in demand and the three years of extreme pressure on households. Why has it taken until 2022 to address this issue?

Ms Aoife MacEvilly

Over the past two or three years we had flagged that this was a measure we would be looking at in the context of the annual network charges. In 2020 we initiated a review of network charges as a whole, with a view to looking at this specific question. It was flagged by us, perhaps not at this committee but in our public-facing published documentation, that this was going to be reviewed. I am trying to think back to 2020 but I do not think it was at the level of crisis that we have experienced in terms of energy costs over the last year. We did not have a national energy security framework of actions targeted at this. It really is in the context of a crisis that we took immediate action, or at least action that was not on foot of a major review but targeted at taking measures that would impact-----

Senator Alice-Mary Higgins

One of the things that was happening during that period of time was the consultation that CRU had in relation to data centres. In that consultation, CRU was discussing whether there should be a continued expansion of data centres in the context of the electricity demands that come with that. Again, obviously one of the factors that would have been relevant in such a consultation was the fact that the public would be paying for those data centres and subsidising their energy use. This was not simply about taking the risk in terms of energy security but also about actively subsidising those data centres. This would seem to be something that was relevant at that time in CRU's 2021 consultation. Also in that consultation there was full awareness of the climate issues.

We raised an issue in previous sessions with CRU, and I also raised it in my own submission to the 2021 consultation, around diesel and gas backup generators used by data centres. The circular issued last year by the CRU, or perhaps the year before that, said that data centres did not choose to attach a fuel type, in terms of dispatchable generation. Why, in the context of the climate crisis, was the decision made just two years ago to tell data centres that they could have backup generators of diesel or gas, that if it was dispatchable it did not have to be renewable? I feel like we are coming with solutions a year or two after each problem. Now we are seeing something around gas connections but two years ago we had a decision to allow diesel or gas backup generators which, of course, come with serious climate implications. Can Ms MacEvilly explain that?

Ms Aoife MacEvilly

First, it must be acknowledged that we do still need fossil fuel generators on our system. As Mr. Melvin just explained, we are procuring additional gas-fired generation which is needed to ensure security of supply-----

Senator Alice-Mary Higgins

I am speaking specifically about data centres.

Ms Aoife MacEvilly

To put it in context, we are not in a position at this time to completely eradicate fossil fuels from our mix. At the same time, I fully acknowledge the point the Senator is making in respect of how we might impose new criteria in terms of large energy user connections. In the context of the Climate Action and Low Carbon Development Act, and the climate action plan for 2023 with the obligation that puts on us, we are happy to look at introducing a demand-side strategy to ensure that 30% of large demand is flexible demand. This really opens up a whole new opportunity. Perhaps it is one that we should have grasped in 2021 also but that was a different context. This is absolutely something that we are looking at now and we are engaging with the system operators.

Senator Alice-Mary Higgins

With respect, the context was not that different in that we still had the climate goals and were in a climate crisis. In the public consultation, it was one of the issues that was raised strongly. Again, in 2021 two decisions were made. First, there was an option to have a moratorium on new connections until we had full safety but the decision was made to continue with new connections but with criteria attached. Two decisions were made on that. One was to not make renewable energy a criteria and the other was to not make it an obligation to reduce demand. There was a reference to the ability to step down energy demand rather than an obligation to do so. We have lost two years from the very narrow period of time we have to achieve our climate targets. Are both of those issues going to be addressed very promptly now? How many connections have we lost in the meantime? How much lock-in have we got in terms of gas in the meantime?

Mr. Jim Gannon

I will start on some of that and might defer to my colleagues then. In terms of the question on the November 2021 decision regarding the difference between an ability to reduce demand versus an obligation to do so, through the security of supply programme of work we have demonstrated the ability to implement an obligation to reduce demand through the mandatory curtailment exercise. What we were ensuring was that the technical ability would be designed into these facilities to satisfy an obligation, or to increase the accessibility of that obligation, should we need to mandatorily reduce or curtail use. This winter, while we did see peak demand in that significantly cold period we did not have an amber alert and although we had an ability to call on mandatory demand curtailment, we did not do so nor would we unless we were in peril.

In terms of the first piece, the answer is "Yes". The November 2021 decision was followed quickly by an updated Government policy statement on the role of data centres in enterprise policy, which outlined some principles for data centre development. Subsequently and significantly, we now have the sectoral carbon ceilings for 2025 and 2030. Again, subsequent to that, we have capped 2023. We have already engaged with the system operators around an update to our connections policy. That review will take place this year. We have spoken in that dialogue about the decarbonisation of economic growth, about the fact that we now have sectoral carbon ceilings and how they should be taken into consideration in connections policy. It may be the case that this requires changes to legislation and again, we are working through that with the system operators and the Department. Separately, Ms MacEvilly has noted the capped 2023 demand-side strategy, which I will not repeat again.

Senator Alice-Mary Higgins

The programme for Government already existed at that point. Our guests have talked about demand growth.

We are hearing demand reduction mentioned. The witnesses mentioned legislation. Do they have any further written notes on legislation anticipated in one of the areas of the commission's work plan for 2023? There has also been a lot of talk about demand growth and how that growth will drive renewables. I am very concerned that we may be ending up with a contradictory narrative in which the renewables element is being linked to expansion in demand, which means it will have less of an impact on lowering our overall usage and usage of non-renewable energy. If renewable energy is being linked to demand growth, then it is expansionist. The overall sum is still changing. I would like some reassurance on the question of demand reduction and demand growth.

Chairman

We will just put the question.

Senator Alice-Mary Higgins

I have a final question.

Chairman

I will come back to the Senator. She has had about 15 minutes now so I am going to stop her there.

Senator Alice-Mary Higgins

My very final one is about-----

Chairman

No. We will let the commissioner answer the Senator's questions.

Senator Alice-Mary Higgins

----moving away from gas. We have been behind on two areas. I would like a note on gas. Why are we still having new private and domestic gas connections?

Chairman

They are good questions. There will probably be time for a second round but I want to be fair to other members.

Mr. Jim Gannon

On that latter point regarding economic growth, there is a very real risk that we could bring on intermittent renewable energy without matching it to demand. We need to ensure that we decarbonise economic growth in the country at both residential and large energy user scale. The demand-side strategy needs to include consideration of how to get demand to be more flexible so as to align with when we have solar and wind energy coming through our wires, how to quantify, track and monitor that and how to make sure that the value is attributed to the right areas as we do that. That is a key risk and it needs to be considered in the demand-side strategy. As the Senator has outlined, it is, in fact, at the core of it.

Senator Alice-Mary Higgins

We are putting that on top of all of those gas-powered facilities we have agreed to in the past two years, however.

Mr. Jim Gannon

Yes. As I have said, we must make sure that we decarbonise the existing demand as we also look to the future. It will take work on our part to encourage that change to more renewable systems and more efficiency in these facilities but it is also likely to involve multiple Departments and agencies. I agree with the Senator that this is a key risk we need to tackle.

Chairman

I will just come in on that. It is a very good question. Has the CRU done any analysis on the interplay between the sectoral emissions ceilings, the carbon budgets, the need for some amount of fossil fuel-powered generation, the risk of lock-in and so on? Has any analysis been done that would give us confidence that we are on the right path to decarbonisation?

Ms Aoife MacEvilly

We rely on the analysis done by others with regard to the carbon budgets. I refer to the likes of MaREI at University College Cork and others who are experts in this field. What we can see is that, in order to meet our sectoral carbon emissions ceilings in addition to achieving the renewables targets set out in the Climate Action Plan 2023, we need to also ensure that demand growth remains at the lower end of the EirGrid projections to 2030 set out in the latest generation capacity statement, GCS. That is key. We also need to build in what Mr. Gannon just mentioned with regard to demand flexibility so that we are optimising the use of renewable energy when it is available and minimising the times at which we have to bring on higher-emitting fossil fuel generation to bridge gaps. It is the coming together of both of those strategies that will enable us to meet our carbon sectoral budgets. This is new for all of us. It is a complete change in how we plan the system. It is a complete change for the system operators with regard to how they engage with new and existing customers. It will require a lot of thinking and work to ensure we are putting in place the right incentives and technological solutions to achieve that.

Chairman

Does Ms MacEvilly envisage a revised market mechanism which would lead to fossil fuel infrastructure being used less, perhaps only at times of absolute need?

Ms Aoife MacEvilly

Mr. Melvin may come in on some of the work we have already done. Within the capacity market, we do not just buy gas-fired power stations, although the focus is very much on such stations at the moment from a security of supply point of view. We also buy batteries and demand-side units. While getting this new capacity, this new infrastructure and these new services into the market, we are also working on how to optimise their use to avoid using gas-fired generation.

Mr. John Melvin

I believe it was Deputy Alan Farrell who asked whether we could give an overview of systems services in some depth. Once we can reach 99% of instantaneous electricity being delivered by renewables, we can avoid running fossil-fuel generation. Once we can rely on low-carbon inertia services, we can avoid running fossil-fuel generation at night for inertia reasons. Once we can rely on reserves that are low-carbon, we can make the maximum use of the renewables we have and spill as little as we can. However, there comes a point at which flexibility from the demand side becomes absolutely essential. From a technical point of view, much of the focus in the coming years will be on using as much of the renewable energy that is available to us as much of the time as possible. That will deliver a great deal. Flexibility on the demand side is essential. This includes the piece around people at home considering whether they should wait to put on the tumble dryer when it will be windier later that members may see on their televisions and the question of whether small and large businesses can change how they consume electricity so as to consume more when low-carbon electricity is available and less when the electricity mix has higher carbon emissions. We engaged with EirGrid, academics and the Department in the run-up to COP 23. Senator Higgins is right; high levels of growth in demand make it very difficult to meet the sectoral emissions ceilings given that they run from 2020 to 2025 and then from 2025 to 2030. It is difficult to manage. It does not mean we cannot have demand growth but we must have decarbonised growth and we must continue to decarbonise existing demand. Those systems services are the way in which the market can help us to use as much renewable energy as we can as often as we can but there will have to be changes. Demand can grow but it must be met with zero-carbon or low-carbon generation as it does. There is also a very great piece of work to do in getting flexibility in existing demand to help us to reduce the carbon intensity associated with that demand. I hope that is an okay summary.

Ms Aoife MacEvilly

We also changed the rules on the demand side to reward users.

Mr. John Melvin

Yes, I mentioned that earlier.

Deputy Jennifer Whitmore

On the issue of the ESB's non-compliance with the CRU's direction, I am just reading the commission's compliance and enforcement policy statement. It is very clear that the commission expects a culture of compliance among its regulated entities and that enforcement actions should "deliver a credible deterrence against non-compliance and ensure meaningful consequences". That is very much based on the impact of any non-compliance. The criteria for determining the impact of non-compliance consider the number of people affected, which is essentially every ESB customer over 12 years in this instance. There is also mention of those at risk and whether they include vulnerable customers. You would assume that many vulnerable customers were impacted by this overcharging and non-compliance. The monetary value is also a factor and I again imagine that this was considerable. There is also the issue of repetition. This non-compliance occurred annually over 12 years. There is also the question of intent and whether there was deliberate non-compliance or just a mishap. I assume the CRU is currently looking into that. Another is the perceived culture of compliance. If you do a Google search of "ESB" and "overcharging", you get quite a lot of hits from different news articles of overcharging by the ESB in certain circumstances over recent years.

My question for the commission is what steps will it take to ensure accountability in respect of this non-compliance.

What measures will be taken and when will they be taken? I presume there is an investigation under way. What lessons need to be learned from this because the CRU missed it on an annual basis for 12 years? As a self-reflection, the CRU needs to ask how it was missed and what changes are going to be put in place.

Ms Aoife MacEvilly

To answer the latter question, there are things we can learn. This was a unique measure in terms of the rebalancing. The way we look at the annual charges and assess the information was based on looking at it in the round. As we did not catch this, we will be looking at how we analyse the information that is provided to us to ensure that if there was a similar measure in the future, we would catch them more quickly.

Regarding ESB Networks, at the moment we are looking at further reconciliation and a deep dive into how that operated in the context of this year's network tariff review. We will take any decisions as to whether it was a non-compliance or administrative error and we would address that with it separately.

Ms Karen Kavanagh

The various criteria we cite in our compliance policy have been pointed out. The first priority is to understand what the exact details of the issue are. We have flagged that there was an error regarding how that was applied. We need to understand the specifics around it, why it happened, how it happened and how, as the Deputy mentioned, how it passed unnoticed over that number of years. That is our immediate priority. As for the next steps in doing that, we receive on an annual basis the revenue return submissions from the systems operators, SOs in April. As part of that process, we will scrutinise those to understand what the error is and will decide on the mechanism for how that money gets returned to customers. That is the immediate priority. Part of that is looking at what happened, how it happened and what do we do about it.

Regarding the overall revenue control and price review five, PR5, framework within which system operators operate, part of the newer measures that were put through within PR5 was a measure around reporting and accountability. There is an audit of looking at how ESB Networks would make a submission to us in terms of the accuracy and transparency. We will be looking at how they make those submissions. It is also noted within our annual work plan for this year that we are establishing a separate team within my division which will look specifically at utility performance. That will allow us a bit more capacity to focus on the application of the regulatory framework related to delivery, performance and the application of incentives. This is separating that function from the annual revenue and tariffing decisions. It will give more focus to those decisions. There will be quite significant changes coming down the line.

Deputy Jennifer Whitmore

Will the additional costs be repaid? I mean the extra charges.

Ms Karen Kavanagh

Yes, the money will go back to customers. That decision was made by the commission last March.

Deputy Jennifer Whitmore

That decision has been made but do we know how much it will be yet?

Ms Aoife MacEvilly

We made the decision in principle. We discovered there was this administrative error or correction that needs to be made but yes, the money gets paid back. To do that, we need the deep dive into exactly how much and then determine in what way and over what time period

Deputy Jennifer Whitmore

When does the CRU expect that information to be available?

Ms Karen Kavanagh

As the annual revenue submissions are made to us in April, we will be engaging with them over the coming weeks and months in order that the submission we receive in April will reflect the mechanism for next year's tariffs.

Deputy Jennifer Whitmore

But there is already 12 years. So this one in April will review retrospectively all of that?

Ms Karen Kavanagh

To correct for the entirety, absolutely.

Deputy Jennifer Whitmore

Not to pre-empt the outcome of any examination but in the event where there is non-compliance that would meet a number of the CRU's criteria, what sanctions are available?

Ms Karen Trant

That would come to my division. At the moment we have powers of direction, which would be publicised if we found there was non-compliance. We would look at whether it is systemic, the amount involved, the number of customers affected and was it deliberate or an administrative error. At the moment we have those powers of direction so it is a "name and shame" approach. In the longer term, we will have administrative sanctions, which means that we can fine the network companies and the suppliers for non-compliance of standards of performance. This links back to their licence obligations. Work is ongoing in this regard. We have found from dealing with the network companies and suppliers that they do not like the brand piece.

Deputy Jennifer Whitmore

At the moment the CRU is not in a position to fine them?

Ms Karen Trant

We are not in a position to do so at the moment.

Deputy Jennifer Whitmore

Obviously work is happening but that will not deal with any retrospective so really, no matter what the findings are, even if it was deliberate - I am not saying it is - and no matter what is determined, the only sanction available at present is the "name and shame" option. Is that correct?

Ms Aoife MacEvilly

The focus of the original legislation was more on correcting issues. We are focused on ensuring that harm does not continue. If there is harm, it is about mitigating or correcting that harm. This is what we will be doing and can do.

Deputy Réada Cronin

In a previous meeting with the CRU, we talked about standing charges. Since then, Deputy O'Rourke and I have brought in a Bill that would prevent energy companies using standing charges to grow their profits. I am sure everyone would agree that there is something inherently unjust and unacceptable that this is happening. It is particularly galling for people who are trying to save money and use less energy to see that the standing charge has no effect on their usage. I had one constituent write to me and ask my why their daily standing charge had gone up from 0.9563 and it had trebled in his last few bills. This meant that he was paying €56.42 before even one unit of electricity was used. The legislation we are proposing would give the CRU the power to regulate standing charges. It would require energy companies to justify the unjustifiable, as it were, and show how these charges relate to their fixed costs. It would ensure that they are not using standing charges to inflate their profits if people are using less energy. The witnesses have stated that their job is to implement Government policy but I seek their opinion on the standing charges and how suppliers are using them to inflate their profits.

Ms Aoife MacEvilly

We are aware of the legislation and obviously we work within the legislative framework. In supplying customers, suppliers face charges. Some of those are fixed and some are variable, which one usually sees through the unit charge. At present, our legislation does not allow us to regulate any part of those charges. We do, however, monitor the market and we look for trends which we can convey to customers. The whole thrust of the legislation is that competition is the main means by which we can avoid any one supplier trying to inflate costs. If they do so, they become uncompetitive versus the other suppliers in the market and customers will vote with their feet. We promote competition and switching and we encourage customers to be aware of and to understand their bills so they know if there was an unfair or higher charge and can take action. Those are the main areas we are focused on at present.

Ms Trant might comment on standing charge costs.

Ms Karen Trant

All I have is information on annual costs. Anecdotally, we would have heard that standing charges had gone up to €750, and we check that. We get information on standing charges from the suppliers on the domestic front. We do not get it for the SMEs and the commercial entities because they are bespoke and they agree those individually with the customer. On average, it is probably in and around €300 once-----

Deputy Réada Cronin

Some people are paying up to €800. We had a case where-----

Ms Karen Trant

We have not seen that on the domestic. From the data that we have, that is not happening on the domestic front, and we get that information. If there is something specific, I am happy to take that away and investigate it because that should not be the case.

Ms Aoife MacEvilly

It would be anomalous to have a standing charge at that scale. The other thing is we look at is what we call the estimated annual bill. If a typical consumer is using the typical annual consumption, how much would that consumer use? It applies that same basis of comparison across all the suppliers. In the stats at the moment, we are seeing that the suppliers, even though there have been changes and some of them went for price increases at different times, movements and large differences could be seen at times between the standard charges for customers. They are actually converging. If there is somebody that is charging a high standing charge, they may be charging a very low unit rate. It may be that could present a better value for customers. However, we have not seen a standing charge of the scale the Deputy is talking about. We would be interested if she could give us the example. Perhaps there is something that we are missing.

The main thing for customers is to do something like go onto one of the accredited price comparison websites. You can either programme in typical consumption or put in your own consumption and they will tell you what the best value out there for the kind of consumption in your household. That is the main means by which customers can ensure they are getting the right value in the market.

Deputy Réada Cronin

The last time the CRU was in with us, we talked about letting vulnerable customers know about disconnection and that sort of thing. Did the CRU do any kind of an audit as to what kind of communication energy companies were using? I noticed there were more ads on the television. To be honest, I do not whether that is like how it is said that when you buy a red car that you notice all the red cars. However, I noticed there were more ads on television advising vulnerable customers on charges. Did the CRU carry out an audit? Most vulnerable customers would tend to be in the elderly cohort and it is not sufficient to point them to a website.

Ms Aoife MacEvilly

We did an audit of the suppliers’ compliance with the code of practice on vulnerable customers in order to ensure that they were giving the proper information to customers. In addition, in the context of the measures that we introduced over the summer, we asked suppliers to engage further. I am glad the Deputy saw more in that space. The CRU had a campaign to promote this as well. The initial feedback we had from the Electricity Association of Ireland, which we mentioned in our opening statement, is that it had seen a 30% increase in the number of vulnerable customers. That is a positive because it means awareness is increasing and the right people are hearing and finding the channels to register with their supplier. In fact, one of the suppliers anecdotally told us their particular number of vulnerable customers had increased by 50%. Some suppliers are seeing a large, positive response to that.

Deputy Réada Cronin

That is good to hear. Did any of those electricity suppliers write to customers or was it all just through the advertising campaign?

Ms Karen Trant

My understanding is that it was by means of the method customers had chosen in respect of their accounts. For example, if they chose text, email or post, that was the method that was used.

Senator Lynn Boylan

I do not want to labour the point. There are a couple of things I want to pick up again about that large energy subsidy. When the memo went to the CRU at the time asking for this permanent rebalancing of the networks, I understand it was €25.05 million for the transmission and €24.95 million for the distribution. How did the CRU notify the TSO and the DSO that it would implement this? Was it, for example, by email or a meeting? How did it instruct that the network tariffs were going to be changed? What was the process in place?

Ms Karen Kavanagh

I was not directly involved at the time, but my understanding is that there was a communication conveying the Government policy. I think it said that it would be for the CRU to implement that and we published notification at the time setting it out in detail. It was to commence from 1 October 2010, so that would have been the first year of that revenue control. The details relating to implementation would have been part of that decision. There was a reference possibly in the note we submitted to the committee in November. If that is not there, I will find that and come back to the committee with the specifics. The details of the implementation, as in the split of the €50 million and how that was to be implemented between the two net operators, would have been set out in the decision paper.

Senator Lynn Boylan

What I am trying to get at is how is it that one operator decided to implement it as a flat rate and another, ESB Networks, decided to implement it as a percentage if a very detailed note was sent to them regarding implementation and the subsidy in respect of the rebalancing of the network tariffs? How did one it differ so much from the other one?

Ms Karen Kavanagh

Without pre-empting the more detailed review that we have to do, my understanding is that in calculating what €25 million was and how they applied it within the detail of the tariff, they identified the percentage that equated to the €25 million. It should have stayed at that fix amount, but the percentage was replicated throughout the years. Therefore, as the total revenue for the distribution network increased over the period, that would have meant that the subsidy element was increasing over time. That is precisely the detail we need to get the bottom of and understand.

Senator Lynn Boylan

Is that detail included in the annual revenue decisions that are submitted by the DSO and the TSO to the CRU? Do they not go into that level of detail?

Ms Karen Kavanagh

In the context of an annual review, we will have set within the context of a five-year framework the total revenue for that period and we profile it over the years. Annually, we will look at the allowed revenue for that year and consider all of the other impacts that would adjust that particular year. We will not have perfect foresight about inflation figures and demand forecasts. There is a correction factor for if we made an estimate in the previous two years that was above or below what it was. In that case, there is a correction that comes through. We will look in detail at the revenues and make a decision on the total allowed revenue for that year. We will then instruct the network operator to calculate a suite of tariffs in line with the approved methodology to recoup that amount of revenue. We would not, as a matter of course, do a detailed audit of their internal tariff model.

Senator Lynn Boylan

The Department of Enterprise, Trade and Employment contact the CRU regarding its decision to unwind this rebalancing. In its submission to the CRU, the Department outlined its concerned around the fact that the CRU decided to unwind this. It criticised the lack of consultation and the consultation period. However, it estimated the figure of the subsidy to large energy users that the CRU was taking a decision to unwind was around €70 million. Was the figure of a subsidy from domestic households to large energy users in the ballpark of €70 million per annum and not the €50 million?

Ms Karen Kavanagh

The policy was €50 million and, as discussed, on the distribution side, there has been an error in the calculation, and we need to quantify exactly what that increment was. The Department responded to the consultation paper that we did on the tariff review. I cannot remember the total number of responses, but I think there were three respondents that raised a concern about that. It is also important to bear in mind that the national energy security framework specifically tasked us in respect of one of the actions to look at the levers within our control in order to try to mitigate the impact on customers.

That was also part of those measures. Notwithstanding the Department's comments, the commission decided to proceed with the correction on the rebalance.

Senator Lynn Boylan

Is it around €70 million?

Ms Karen Kavanagh

The policy decision was €50 million. On the transmission side, I believe it was correct at €25 million. However, there was an error on the distribution side. I do not have a specific answer for what that increment was. We will be able to come back with fuller information on that.

Senator Lynn Boylan

Where did the Department of Enterprise, Trade and Employment get the figure of €70 million contained in its submission?

Ms Aoife MacEvilly

We will need to go back and look at its response again. I do not recall that number offhand. There was a lot in that consultation. It is not just the €50 million rebalancing. I think they were probably unhappy with many of the measures we proposed. We will need to go back and look at what that €70 million referred to. The large energy user rebalancing figure in the public domain for the entire period of this has been €50 million.

Senator Alice-Mary Higgins

I have just three questions and maybe one short comment which was a kind of a question I had asked the last time. A huge subsidisation has been made from 2010, a permanent rebalancing. During the 2021 consultation on a potential moratorium for large energy users when the public had their chance to give their views on large energy users, why was the relevant information not given to the public that they were subsidising these large energy users and their electricity bills every year? This came to €40 or possibly quite a bit more per household. That should have been relevant information in the discussion and in a public consultation on public policy towards the expansion of large energy users.

I have two other questions. We have heard about the CRU being behind the curve in addressing this issue despite lots of notice. It let it slide for 12 years. For the last five years of expansion, it let it slide further. We heard about being behind the curve and missed opportunities, including the one I just mentioned in the 2021 direction to data centres.

I wish to flag two other matters in respect of which there is a risk of CRU being behind the curve again. I do not see anything in its strategy for 2023 about exiting gas. There is stuff about renewables and so on. It is about gas security of supply. We know that the issue of gas is volatile in economic and political terms. Why do we not have a policy of having more domestic connections to gas? Why is there a focus on continuing to adapt or expand the gas network rather than looking to an exit strategy?

Earlier, the witnesses were asked about the very high bills and the extremely high level of arrears among gas customers. None of the solutions seems to be focused on offering incentives to support an exit from gas. I would like to know about the actual exiting from gas. I do not need information on what the CRU is doing about renewables. I want to know about the winding down of the expansion of gas networks and new connections or new lock-in on gas looks like.

Regarding smart meters, there is almost a fantasy version of how the market will work. I am concerned that there may be an ideological rather than an actual evidence-based version of how competitive markets work. We know that in competitive markets involving shareholders there is a lot of price gouging. Smaller customers do not have the same influence as big customers and large energy users. That is all over the policies here. Back in 2008 when they were being landed with these extra costs from large energy users, we saw this kind of cavalier attitude that customers should shop around. I worry that there is a bit of that cavalier attitude now with the smart meters, which is that customers can think carefully about their energy use and can shop around. That is still the response that is being given.

While there are standing charges, if customers shop around and reduce their energy usage, standing charges may still increase. If anything, standing charges are often increased in an arbitrary way to make up for the reduction in energy usage. How important is the standing charge issue from our climate goal perspectives if we are to reward people for changing their energy usage? Some people who have smart meters want to move away from having a smart meter because they realise they are giving considerable detailed marketing information in some cases to an electricity provider. They may have other ways that they want to manage their energy usage which may be environmentally appropriate. What are the options for exiting? One of the reasons people may be reluctant to take up smart meters is because it feels like a one-way street where they will not be able to change if they want to move away from a smart meter in the future.

Ms Aoife MacEvilly

I might start with the decarbonisation of gas. We have a strategy or vision to reduce our reliance on natural gas by decarbonising the gas network, introducing renewable gas and ultimately moving to green hydrogen. That strategy is outlined in our strategic plans. While it may not be called out in our detailed 2023 work plan, I am sure there is work that we will be engaged on in that strategy. That is the vision. An overarching Government policy sets the framework here. We have the climate action plan and we are also engaging with the Department on the green hydrogen strategy. There is real potential here.

Senator Alice-Mary Higgins

We have heard a lot about the decarbonisation and the potential for green hydrogen down the line. We may look at certain limited uses for green hydrogen in particular targeted areas. Decarbonisation is one part, but we should be reducing reliance on gas and exiting from it. The gas sector as a whole should be shrinking. Even if green hydrogen comes on stream the general advice internationally is that it should be used for targeted and specific uses in areas where other energies are not suitable. We hear a lot about the plans for shifts within the gas system. Are there plans for the downsizing of the role that gas, as a whole, plays in our energy system?

Ms Aoife MacEvilly

We are a while away from reducing reliance on gas because we need dispatchable power generation, for example. Through hydrogen or other renewable alternatives we are working to the extent that we can to ensure that this is a decarbonised dispatchable fleet over time. That is at the core of what we are trying to achieve here.

Senator Alice-Mary Higgins

With absolute respect, I would suggest this is an area where CRU is very much behind the curve again. In two years' time we will probably hear that we should have done more about reducing reliance on gas, which is what we have had on each of these issues. They have all been well flagged. We are losing two to three years and we do not have many years. We have about ten years to get to our 2030 targets. While saying that reducing reliance on gas is far down the line, there is no need for households to still be connected to gas.

Dr. Paul McGowan

We are reducing our reliance on gas through the target for renewables. Achieving 80% renewables by 2030 will reduce the reliance on gas. The second point is that the sectoral emissions ceiling will reduce the reliance on gas. I do not want to put words in the Senator's mouth. She may be referring, for example, to the use of natural gas as a home heating fuel.

The majority of households are heated through the use of fossil fuels. The CRU does not have the power to require them suddenly to switch from gas to decarbonised electricity, but that is the direction of travel with new house builds and home retrofits. As Ms MacEvilly pointed out, there will be a reliance on gas to 2030 and beyond to meet those periods when intermittent generation is not available and while the system's services are being developed. This means there will be a continuing reliance on the gas grid. As such, there must be a balanced transformation of the energy system to ensure that the lights stay on.

Chairman

Does the CRU project an increased or decreased use of gas over the coming years? Has that been mapped out?

Dr. Paul McGowan

I do not have the gas demand projections. That information would come from Gas Networks Ireland in its forecast statement. The fact that 80% of electricity will be produced from renewables means that the prevalence of fossil fuels in our energy mix will fall. Coupled with the fact that we have sectoral emission ceilings that we must comply with, this means that the overall level of fossil fuels in our electricity mix will have to reduce.

Chairman

I thank Dr. McGowan.

Senator Alice-Mary Higgins

I asked two other questions on standing charges and smart meters.

Mr. Jim Gannon

I will answer the Senator's first two questions or comments as distinct from those two, if that is okay.

The consultation on connections policy relating to data centres in the context of security of supply was just that - a consultation limited to the security of supply challenge. It did not have direct regard to the decarbonisation policy that would flow from that. I will take this matter somewhat separately.

The annual tariff process was not brought into the consultation because it was not part of the annual tariff process. In previous iterations of our consultation papers, we noted the large energy user balancing and the fact that we were considering rebalancing in our reviews. Following the consultation on connections, there was the invasion of Ukraine by Russia, which resulted in the development of the national energy security framework in March under the energy security emergency group, ESEG. This placed urgency on rebalancing and the way in which we treated the matter. It resulted in a more urgent response than the one we were working on, which was to review all of the network tariffs over the course of a multi-annual programme. They were two separate subject matters, in that the large energy user balancing and rebalancing would have been considered in publications in previous tariff years whereas the specific piece around data centres would just have been considered in the context of security of supply at the time.

Since November 2021, we have seen the Government policy statement on security of supply as well as the Government policy statement on data centres in national economic policy. We have seen the publication of the sectoral carbon ceilings. We have also seen efforts relating to, and an action for the CRU regarding, a demand-side strategy.

In terms of contending with demand growth and ensuring that we mitigate same as regards security of supply and carbon, and notwithstanding the fact that we could have acted sooner, we are acting responsibly and early. It is important that a demand-side strategy that looks at economic growth and the decarbonisation of same be taken across Departments and agencies and that all involved ensure the implementation of the principles set out in the Government statement on data centres in national economic policy. This is how we can bring success to the decarbonisation of domestic economic growth from SME level up to large industry level, not just data centres.

Deputy Christopher O'Sullivan took the Chair.

Ms Aoife MacEvilly

To test whether I understood the Senator's question on smart meters correctly, did she ask whether customers could benefit from lower off-peak times when standard charges increased?

Senator Alice-Mary Higgins

Yes. Is it not essential that the standard charges be addressed? Otherwise, the benefits from schemes will be reduced significantly.

We have heard a great deal about the advertising of smart meters and my other question related to people who wanted to remove a smart meter. What are their options? That standing charges can increase in an unregulated way is undermining the uptake of smart meters and reducing their benefit.

Ms Aoife MacEvilly

I will start with the first question. Ms Trant has indicated that the average standing charge for a domestic customer is in the order of €350 and the average bill is in the order of more than €2,000. The vast majority of a customer's bill is not fixed or made up of the standing charge. There remains a compelling case to say that many customers will save by switching to a time-of-use bill. In our work plan this year, we will address further the question of how we can give customers better information to help them understand this matter and make such decisions. We will monitor the types of offer and try to ensure there is not the perverse incentive that the Senator outlined whereby some of the benefits would be reduced. Unfortunately, bills are so high at the moment that the standing charge is not a major part of it. It is down to the unit charge, but this increases the incentive.

Regarding the roll-out of smart meters, all meters are installed with advanced warning to the customers. Some customers say that they would rather not receive meters and their wishes are respected. There have been a small number of cases in which customers asked to return to the old mechanical meters. That is a challenge, as many of those meters are effectively obsolete. In some cases, they are no longer safe. The use of the older metering stock, which was overdue for replacement by the time we rolled out the smart meters, is being addressed in part by the smart meters. Does Ms Trant wish to discuss the few instances to which I alluded?

Ms Karen Trant

Yes. I will make a distinction between the meter and smart tariffs. If someone takes up a smart meter, there is no obligation right now to transfer his or her data or to allow those data to go to other suppliers. The smart meter is doing what the previous meter did, except it is recording data at a half-hourly rate. This can only be good for the customer, as he or she is not getting the meter read physically. The data are going to the customer's supplier.

If the customer decides to go onto a time-of-use tariff, it is a challenge to move him or her back to what suppliers call a 24-hour standard tariff. It is a supplier issue, and suppliers are now developing that kind of product because there will be people who want to revert. It is still early days but, from what we can see, the smart time-of-use tariffs are slightly lower than the standard tariffs that suppliers are offering. There is value out there.

As Ms MacEvilly pointed out, the old type of meter will become obsolete, so it will be difficult for someone with a smart meter to, for whatever reason, revert to an old meter. That presents a challenge. However, I believe the Senator's question was more about the information flowing from the meter rather than the meter itself.

Senator Alice-Mary Higgins

Yes. I am not being reassured that people can choose to move away from having their information transmitted. People may sign up and later decide that they do not want to continue with that system. Under GDPR, it does not seem proportionate to require half-hourly information to be transmitted.

I hope people engage and believe people are engaging in energy-efficiency practices but there is a worrying dynamic. This was reflected in a cavalier statement by the Government in 2009 implying that households under considerable pressure could shop around. There is a fear that households do not seem to be at the top of the priority list when it comes to energy and electricity policy. We do not want people to be told that whatever is being done on the energy policy is acceptable because they can shop around or wash in the middle of the night. This is why I am saying there is concern. We want to encourage people to take energy-efficient steps. However, if standing charges are not addressed, with the consequence that it feels like information is flowing out, it is another matter. Is it possible to exit if one wishes?

The energy poverty action plan states vulnerable customers will be moved automatically to the most economical tariff and allowed to access bill pay regardless of their credit record. That is important because we know there are cash surcharges for those who are happy to pay by cash. Will the representatives confirm whether the policies on access to bill pay for vulnerable customers, regardless of their credit records, and the prohibition of surcharges for those who pay in cash have been addressed?

Ms Aoife MacEvilly

In general, there is no prohibition on customers moving to bill pay. The default assumption is that everybody has the right to bill pay. In fact, because of concerns raised about prepaying customers who were finding it expensive to move back to bill pay, we eliminated costs and ensured there were no barriers to doing so. I am not even aware of-----

Senator Alice-Mary Higgins

So, having no credit record is not a barrier?

Ms Aoife MacEvilly

It is not. That has never come up with us as a barrier.

Ms Karen Trant

Maybe the Senator was referring to the switcher aspect and potential debt flags on customer accounts. There is something in the supplier handbook to the effect that if a person is more than €700 in debt, it must be flagged. In reality, we have seen that suppliers ignore it. They take on new customers. There is no barrier. We have seen that the switching level has increased over time, so the evidence suggests customers can still switch.

There is no fee. We have waived the fee. We have made the network companies waive it. On the gas side, there was a charge of €350 if you wanted to go from a payment meter back to bill pay. That has been waived. On any of the pay-as-you-go meters, the same charge has been waived. Therefore, there is no financial barrier for customers who wish to move back.

I want to answer the question on smart metering. We are working on what is called a data access code. It will mean the GDPR issues that customers and the Senator have raised will be dealt with so customers can be absolutely confident that data they give to the network operator will be carefully managed, and it will also mean customers must consent to who can see that information. That is the key. We will, of course, ensure that whatever GDPR laws are in place are adhered to by the network companies and suppliers. They would be very mindful of them in any event. The data access code will deal with all that. There is a paper due out in the next two months.

Deputy Darren O'Rourke

I have a couple of questions. On the negative PSO levy, when will people see the benefit? Are they already doing so? What is the position on the measures relating to windfall taxes and the two versions of those? Has there been an assessment of the impact they will have on domestic bills? When will domestic customers see the impact?

Ms Aoife MacEvilly: The first benefit of the PSO levy came when we reduced it to zero in October, but we did have to put in place several operational and logistical measures to provide a PSO payment. In addition, both primary and secondary legislation were needed to enable it. At this point, our expectation is that the final piece of legislation will be signed this week. The commission will make a decision this week on implementing it. The target will then be to have a payment back to customers instead of a rate of zero or a charge, starting with bills commencing on 1 March and continuing for the remaining seven months of the year. The full 12 months of costs will be concentrated in that period.

The question on windfall taxes relates to the inframarginal rent cap. We had some information on it this morning. Mr. Melvin might comment on it.

Mr. John Melvin

I am not familiar with the Stages of legislation but we understand the heads of the Bill will be visible in February with a view to having the legislation in place in March. We are engaging with the Department and industry on progressing that. The idea is that the inframarginal rent cap will take effect for the period in question. The figures in circulation are €180 for certain coal- and oil-fired plants, €120 for renewables and €180 for other non-specified units. The amount recovered will depend on the market prices in the various periods. From December, the average market price was around €270 per megawatt hour. It has been €160 per megawatt hour, which was the case in January. That is lower than the higher number. It depends on outturns over the rest of the period, with the collection of the moneys over quarter 2 and the distribution of moneys being a matter for the Government.

Deputy Darren O'Rourke

The last time the representatives were in, they had a rough estimate.

Mr. John Melvin

I am not sure I did give a rough estimate. If I did, I would not do it again. It really depends on the price in the market and where the final numbers I called out are set. It is very difficult to give a number.

Deputy Darren O'Rourke

That is fine. The representatives have touched on some aspects of the last subject I wanted to touch on, namely, batteries and the availability to the system of backup capacity from large energy users and others. On one of the previous occasions on which representatives of EirGrid were before us with representatives of the CRU, they pointed to what I would regard as some challenges within the system. They stated that, in terms of demand-side management, we have approximately 500 MW but that the challenge is ensuring the closure of the gap between what is signed up to and what is delivered. The committee received a letter from the sector in this regard. I subsequently heard from stakeholders that they see insufficient capacity, pointing to relatively low availability and reliability of capacity. They say there should be penalties for poor availability and that measures should be taken within the market rules. They also refer to the grid code that could improve the availability of capacity. Does the commission agree and is it working on it? Does it believe there is potential in this regard? Battery capacity will be a key pillar in the time ahead, particularly as we move towards-----

Mr. John Melvin

There are several aspects to that question and I will try to address them all. At present, it is difficult to dispatch batteries. Senator Boylan asked me about this on the previous occasion I was here. The TSO now has in its programme the next round of IT upgrades to facilitate the easier dispatch of batteries, which should facilitate both the battery industry itself and the delivery of low-carbon electricity using batteries.

Regarding the demand-side industry, we appeared before the committee alongside EirGrid in August, after which we had engagement from the demand-side industry. Following that committee meeting, we hosted the demand representatives, the Demand Response Association of Ireland, DRAI, in our offices with EirGrid. We have had good engagement with them since then. The SEMC made the decision to allow them energy payments, which should increase the incentive for those industries to respond. I believe that was a key criticism of that industry at the time. On demand response, we made a decision which now must be implemented by EirGrid. We have hosted the industry to understand its concerns better. On the battery side, it is in the work plan. It will be 2024 before that download of the IT infrastructure is available to facilitate greater access and use for batteries from the system. When I spoke earlier, I said 150 MW of existing generation might go and is scheduled to close in 2023. I think it is closer to 210 MW but the broad thrust of my earlier answer stands.

Vice Chairman

I will take this opportunity to ask a few questions. The witnesses said it was not possible to place a figure on the windfall tax for low-carbon energy providers. Regarding the PSO payment, is there a figure per customer or what can be expected?

Ms Aoife MacEvilly

Over the year, we estimated it would be €89 for an individual household. Normally, that would be divided by 12. I think this time it was divided by seven, if my memory serves me correctly. It would be something like a €12 per month payment going back to customers. Some customers get bimonthly bills so it would be €24. We are at the point where everything helps.

Vice Chairman

On the avoidance of system alerts so far this winter, and while I hope we are over peak demand, although I accept there is still a bit of winter left and potentially more cold snaps, it is good news that, despite all the concerns, we have managed to avoid risk alerts so far. What level of gratitude do we owe the public and customers who listened to the Reduce Your Use campaign and decided to use certain appliances at certain times and reduce the use of other appliances? What level of gratitude do we owe the public for putting in place their own measures and taking responsibility?

Ms Aoife MacEvilly

We do not have a specific number but we have seen, and EirGrid has indicated, that between large users and domestics, there is reduced consumption at peak hours. This is fantastic, not just because it helps us through difficult periods for security of supply but also because it sets out the vision for how we can leverage demand flexibility in a low-carbon system in the future. The ESB Networks, ESBN, Beat the Peak campaign was referred to. The ESBN is now looking at flexibility events in addition to tight-margin events. It wants to be able to say to people that it is not that it is a tight margin today but that there is very low wind so it is all really high carbon and asking people if they can move to another day. It is about encouraging that awareness among customers, getting them to ask themselves if it is a good time and informing them that, if they use appliances at different times, it will have a better impact for them and their pocket and the carbon emissions our energy system is emitting. All of that is in its infancy and we are seeing the first evidence coming through this winter, which is positive.

Vice Chairman

Without that buy-in from the public, the public changing some habits and making their own decisions to adapt their use of appliances etc., would there have been a red alert or risk alerts?

Mr. John Melvin

These are all new data. They are all fresh and must be considered and understood. In the run-up to Christmas, EirGrid reported that domestics were visibly using less. Every single piece helps. In some of the larger users, there was a visible dip on particular days between 5 p.m. to 7 p.m. Both of those signals helped. It is important to understand that, for carbon reasons, this will be a bigger part of our lives as time goes on. For example, during the summer in California, the TSO issued an alert that things were very tight because air conditioning was on. There was such a significant response that the TSO moved from a risk of not just alert but emergency back to just alert, but it is reported that it saved the system in California this summer. Similarly, on the French system, customers get alerts to tell them today is tight, to defer what they can until later or avoid using what they can. That type of mass public participation is vital and visible in other jurisdictions. It is part of the piece the ESBN will be working on.

Vice Chairman

Is it important that there is a follow-up public awareness campaign to acknowledge the public's efforts and buy-in? We need to get over the winter first, but their efforts have enabled Ireland to get through a winter without blackouts or system alerts.

Mr. John Melvin

There is a different emphasis in the campaign for the forthcoming summer which, as Ms MacEvilly said, will be about carbon rather than alerts. Whether the ads have been procured for that yet, I do not know but we can take that much away.

Vice Chairman

It is great news and there is a large level of gratitude owed to the public. Is it possible to establish to what degree the reduction in demand from domestic users was down to a simple case of economics and not being able to afford to use the same amount of energy they would have before because it was essentially cost prohibitive?

Ms Aoife MacEvilly

That is the subtle piece that is difficult to capture. We have asked the ESRI to do an in-depth analysis of what happened with demand over the winter. We will be able to track numbers and inform the committee of trends but it will be difficult to capture whether it was because of cost, prompts or incentives. That will always be difficult to pinpoint. There is increased awareness and willingness among customers. We do not want people to avoid using important electrical appliances because they cannot afford to. The focus over the winter was to stay warm and well and, where possible, use less. Even awareness among some customers of what appliances use a lot of electricity was important. People have been very aware of the immersion and careful with lights when lights are mostly LED and would not have been thinking about the power shower being such a drain.

Vice Chairman

Every Irish house is aware of the immersion.

Ms Aoife MacEvilly

Even just better information to customers and better awareness has helped.

Vice Chairman

That is important. We can celebrate the buy-in from the public and the fact there was a real response, but we must also be conscious that families may have struggled through this winter in terms of heating, which could also have led to a reduction in demand. That must be acknowledged.

On a similar note and as briefly as possible, to what degree did the weather conditions contribute to avoidance of that system alert? November was fairly windy. We had a cold snap at the start of December. To what degree was an abundance of wind a factor in this regard?

Mr. John Melvin

There was a lot of wind over the Christmas period and right into the New Year. The two peaks were hit on 12 and 14 December. On 12 December, there was 500 MW of wind, which is much less than the installed capacity. It was, therefore, a combination of cold which increased demand, and wind which allowed that demand to be met. The weather does then play a role in this regard. Concerns arise where one might have high demand, low renewables supply, a forced outage at a plant that would normally be expected to be online and low imports of energy. A combination of events cause these alerts to come and we did not have that combination of events over the peak period.

Vice Chairman

Okay. I call Deputy Devlin. I thank him for waiting patiently.

Deputy Cormac Devlin

I apologise for my delay in engaging with the witnesses. I welcome them back. It is good to engage again. I will focus on one specific area, namely, the inputting of one's own data on the various portals supplied by the utility companies. Has the CRU had any complaints about the effectiveness of some of the portals? Some of them appear to be down. I have got information into my office here regarding the experience of some people who have gone to submit meter readings, especially around a deadline before Christmas when people were asked to submit their readings before a certain date to avail of lower tariffs. When they did go to do that a day or two before the deadline, some websites were down. Is this something that has come to the attention of the CRU? If so, what has and can be done about this? I have received quite a number of queries regarding this matter since our last engagement and I thought I would raise it here.

Ms Aoife MacEvilly

We do have a customer care team and a dispute resolution function. The process, if a customer has a complaint, is that he or she addresses it to the supplier first and then it comes through to us. We do, though, also get some early insight into some of these issues from calls to our call centre initially. I will hand over to Ms Trant who may have more detailed information.

Ms Karen Trant

For my own understanding, are these the data being submitted to the ESB Network data hub?

Deputy Cormac Devlin

Yes.

Ms Karen Trant

It is very early stages in this regard. That data hub was set up in October.

Mr. John Melvin

It is more an issue with the submission of meter readings.

Ms Karen Trant

Okay, my apologies.

Ms Aoife MacEvilly

I think we did hear a few people mention that they had tried to get in the meter readings in advance of the price changes-----

Deputy Cormac Devlin

Yes.

Ms Aoife MacEvilly

-----and had failed to. We will have to come back to the Deputy on this issue in terms of whether we are seeing a particular trend or pattern.

Ms Karen Trant

Yes. There may be a number of cases, but no particular trend as such. I can certainly engage with the customer care team in this regard. It will be investigating these cases in any event.

Deputy Cormac Devlin

This was a particular pinch point for obvious reasons in respect of the tariffs changing. I have since had queries, however, about these portals being down. There is the ESB Networks' portal as well, but regarding the suppliers themselves it is important these services are maintained. This is why I am asking the regulator about this. It is something the CRU seems to be aware of. What can be done about it? A note might be sent to the committee with a response in terms of the extent to which the organisation is aware of this issue. Obviously, it would not be aware of the minute issues that the customer care service teams of the various utility companies would be aware of, but for those cases the CRU is aware of, I would like a note to be prepared for the committee and circulated after this engagement. That would be appreciated.

Ms Aoife MacEvilly

I think it is fair to say we are not aware of a systemic issue. We have instead seen periodic issues come to our attention. This matter has not come to us, however, as the kind of systemic issue the Deputy is asking about. We will go back, though, and check. The other aspect of this is that one of the benefits of the smart meter roll-out is to eliminate this challenge of customers having to submit manual readings and of having long periods where people do not have actual readings. The benefit of this change is that people can see daily updates and their bills are always up to date. Sometimes we see people querying, if the tariff changed in the middle of their two monthly bill, how a certain part of the cost was apportioned to the cheaper tariff and another part to the more expensive tariff. All of that will be eliminated by the better provision of data from smart meters. More than half of households now have smart meters in place and we will see the continued roll-out of these meters throughout 2024. This will then no longer be an issue. It is, frankly, one of the worst things we come across. Issues concerning billing are important to customers. There is also the perennial situation of customers who have not had a meter reading, sometimes for years, and then suddenly being faced with a horrendous catch-up bill that imposes real hardship and challenges. All these issues, whether large, like the one I just mentioned, or small, are included as one of the targets to be addressed by the smart metering programme.

Deputy Cormac Devlin

Yes. It is good to hear about the progress being made with the smart meters. It seems there has been quite a bit of progress made since our last engagement. It was projected that we would be around this point at this time, but it is good to hear concrete evidence that half, or more than half, of customers have availed of these smart meters. This is very good. I thank the witnesses again for their engagement today and for their opening statement.

Vice Chairman

I thank Deputy Devlin. Before we wrap up, I have more of a statement than a question. The last time the witnesses from the CRU were in, and I think representatives from EirGrid were with us then as well, we had a discussion on batteries. I mentioned I had been in touch with quite a few public hospitals that are large energy users, like Cork University Hospital, CUH, in Cork city. During the peak demand hours, from 4 p.m. to 6 p.m., these institutions are large energy users. They identified and examined creative ways of reducing that demand during those peak hours, including the installation of battery storage to allow these hospitals to switch to power source. Has any progress been made in respect of incentivising rolling out this type of mechanism for State-owned public buildings that are high energy users, like hospitals? These are more restricted in terms of when they can choose to switch on and switch off their power, for want of a better term to describe it. Are there any incentives for institutions like this to switch to battery technology?

Mr. John Melvin

There is a demand response industry that was referred to earlier. In this regard, a large hospital might even be regarded as small in the context of the electricity system. In this regard, these demand response entities are often called aggregators, because they can bring together entities that have an interest in doing this but would find the system too complex for them to engage indirectly. These aggregators are out there, involved in the industry, and they can offer these services. We have done a lot to try to stimulate that demand-side aggregator industry. In the context of actively looking to see if State entities participate in that industry, this may be part of the remit of the energy security emergency group, ESEG. I cannot say for certain.

Mr. Jim Gannon

I will make a couple of points on this aspect. We mentioned earlier potential legislative change to facilitate direct lines, which would allow large demand users to access proximate renewable energy generation and perhaps storage. On site right now, we do have the aggregators Mr. Melvin mentioned and the clean energy package. Again, we have a new team set up to implement this endeavour at greater speed. This is for individuals and communities, and small-scale industries in particular, including non-conventional industry. Reference was made to large energy users that might have been here before. If we look at the demand-side strategy being articulated in the climate action plan, and the regard being given to self-generation in particular, these are the sorts of questions that need to be asked and where policy could be put in place.

I reinforce what I said earlier regarding a demand-side strategy. There are certain levers that a regulator has and certain levers in respect of incentives we do not have. We can facilitate connection and engagement with the market through aggregators. That is already facilitated but we can seek to improve it. Capital grants and other bonus incentives for industry, and funding from the central Exchequer, are matters for other Departments to provide for public infrastructure and public services. The responsibility might fall to enterprise agencies to provide funding and incentives in the private sector. The demand-side strategy and self-generation in the climate action plan will look at this area. It needs to be driven along. Real success and acceleration of businesses, public and private, to allow them bring what they can to decarbonisation, security of supply and a reduction of cost for all, and the benefits of that, will require a multi-agency approach. Multiple Departments are going to have to get involved and drive it along.

Vice Chairman

I thank our guests for their attendance. The meeting has lasted almost three hours. It has been a lengthy and educational session. I also thank committee members for their questions.

The joint committee adjourned at 1.51 p.m. until 11 a.m. on Tuesday, 14 February 2023.