Joint Committee on Environment and Climate Action debate -
Tuesday, 4 Jul 2023

General Scheme of the Gas (Amendment) Bill 2022: Department of the Environment, Climate and Communications

An Cathaoirleach

I have received apologies from Senator Pauline O’Reilly, and Deputy Farrell indicated that he may be able to arrive later.

The purpose of the meeting today is to carry out the pre-legislative scrutiny of the general scheme of the gas (amendment) Bill. On behalf of the committee, I welcome the following officials from the Department of the Environment, Climate and Communications: Mr. Noel Regan, principal officer, Ms Cristina Hurson, assistant principal, and Mr. Eamonn O’Halloran, administrative officer. They are all very welcome.

Before I begin, as usual, I will read out the note on privilege. I remind witnesses of the long-standing parliamentary practice 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 their statements are potentially defamatory in relation to an identifiable person or entity, I will direct them to discontinue their remarks and it is imperative that they comply with any such direction.

Members 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. I remind members that they are only allowed to participate in the meeting if they are physically located on the Leinster House campus. I ask members joining us online that, prior to making their contributions, they confirm they are on the grounds of the Leinster House campus.

I call Mr. Regan to make his opening statement.

Mr. Noel Regan

I thank members for the invitation to meet the committee on the pre-legislative scrutiny of the general scheme of the gas (amendment) Bill 2023. I am principal officer in the Department of the Environment, Climate and Communications in the area of energy security and, specifically, natural gas. I am joined by Cristina Hurson on my left and Eamonn O’Halloran on my right.

Fundamentally, the purpose this Bill is to facilitate the integration of Ervia into Gas Networks Ireland. As background, the Minister for the Environment, Climate and Communications is the Minister with responsibility for gas policy and all legislation relating to gas and energy policy. The natural gas directive, Directive 2009/73/EC - the European one - regarding the unbundling of ownership of generation, supply and transmissions systems in the energy market prevents the Minister for the Environment, Climate and Communications assuming the role of majority-shareholding Minister in Gas Networks Ireland and its parent, Ervia. As such, the Minister for Housing, Local Government and Heritage is the majority-shareholding Minister for Ervia, which manages the national gas infrastructure through its subsidiary, Gas Networks Ireland. As a consequence, the Department of Housing, Local Government and Heritage leads in respect of the governance of Ervia.

The Government has decided that the establishment of two separate State companies to operate the gas network and develop water services provides the optimal solution to meet the future challenges of decarbonising our energy supply and modernising our water services. The Water Services (Amendment) Act 2022 was signed into law on 7 December 2022 and on the date appointed in the Bill, 1 January 2023, Uisce Éireann, previously Irish Water, was split from the Ervia group and became a stand-alone company. The Government decided that the most appropriate structure of the gas utility following the separation of Uisce Éireann from Ervia was the integration of Ervia into Gas Networks Ireland so as to become the single network entity, Gas Networks Ireland, GNI. The Government's decision to integrate Ervia into Gas Networks Ireland is being progressed by the Minister for the Environment, Climate and Communications, who has responsibility for gas legislation.

Regarding policy considerations, Ervia's business is predominantly - both in terms of activities and revenue - the operation, maintenance and development of the gas networks and interconnectors that are in its ownership. Ervia and Gas Networks Ireland are currently operating as a single entity from a structure, strategy and operational point of view.

Ervia was established as a statutory corporation pursuant to the Gas Act 1976, as amended. Its subsidiary, Gas Networks Ireland, was established as a company under the Companies Act with its own constitution pursuant to the Gas Regulation Act 2013. Ervia is fully State-owned and the sole owner of Gas Networks Ireland.

I refer to the main provisions of the Bill. The general scheme provides for the integration of Ervia into Gas Networks Ireland to become the single entity Gas Networks Ireland. The Bill provides for amendments to the Gas Acts to facilitate the integration - the transfer of functions, assets, rights, liabilities, staff and records from Ervia to GNI. In addition, it provides for the corporate governance arrangements relating to Gas Networks Ireland in respect of shareholder arrangements, board arrangements and its chief executive, annual reporting and accounting provisions. These governance arrangements are being provided in primary legislation rather than in constitutional documents, which will enhance transparency and accountability.

I will now elaborate on the provisions of the Bill. It is a relatively short Bill with 22 heads in total and is largely technical in nature. The general scheme of the Bill is divided into two Parts. Part 1 of the general scheme provides for the Title of the Bill, its commencement and the definitions used in the Bill. Part 2 lists the provisions that provide for the dissolution of Ervia and the integration of its functions, roles, responsibilities, liabilities, etc. into GNI. Part 2 also includes the heads of the Bill that concern the amendment of other enactments in order to facilitate the dissolution of Ervia and the integration of its functions, properties, liabilities, staff and records into GNI.

The Bill’s 22 heads can be summarised as follows. Part 1 contains heads 1 and 2. These are standard heads that provide for the Short Title of the Bill, commencement on enactment or by means of ministerial order, as appropriate, of its various functional provisions, as well as definitions of certain terms referred to in the Bill. Part 2 contains the rest of the heads that provide for the integration of Ervia into GNI.

Head 3 will provide for the restatement of the definition of the majority-shareholder Minister, which currently is for Ervia and will be for GNI the Minister of Housing, Local Government and Heritage. Head 4 establishes a transfer date that will be set by the Minister by way of an order. Head 5 provides for the cancellation of Ervia’s shareholding in GNI and issuance of new shares to the relevant Ministers.

Heads 6 to 10, inclusive, cover the transfer of the existing functions, responsibilities, liabilities, assets, etc. from Ervia to GNI. This includes the transfer of all functions in relation to gas that are statutorily vested in Ervia to GNI; the transfer of land and any other property of Ervia to GNI; and the transfer of rights and liabilities of Ervia resulting from any contract or commitment Ervia has entered into to GNI, including all contracts or commitments involving Ervia. Furthermore, it provides for liability for loss occurring before the transfer date and ensures that GNI will assume any liability outstanding from Ervia.

Heads 11 and 12 provide for the transfer of staff from Ervia to GNI and any records held by Ervia to GNI. Head 13 provides that the final accounts and the final report of Ervia can be prepared and progressed by GNI on Ervia’s behalf. Further provision is included to enable GNI to carry out, after the transfer date, administrative tasks associated with the dissolution of Ervia. Heads 14 and 15 and heads 18 to 22, inclusive, amend a range of legislation to change references to Ervia to GNI and, where appropriate, the Minister.

Heads 16 and 17 provide for amendments relating to the board and constitution of GNI and the preparation of annual reports and financial statements. Head 16 provides for amendments relating to the board and constitution of Ervia. The proposed amendments involve the repeal of Schedule 1 of the Gas Act 1976, substitution of sections 6 and 7 of the Gas Regulation Act 2013 and a number of other minor amendments to the 2013 Act. These deal with directors of the network company. They are being substituted to reflect the revised board structures that will be in place following the integration of Ervia.

Schedule 1 of the Gas Act 1976 is being repealed. Schedule 1 was originally drafted for the Irish Gas Board, or Bord Gáis Éireann, as it was called, which did not have a constitution, unlike GNI, which is registered as a designated activity company under the Companies Act.

The Schedule to the 1976 Act is being repealed in order to eliminate duplication of those matters that are dealt with by either the GNI constitution or the Companies Act 2014. The revised section 6 reflects that GNI has a constitution under the Companies Acts.

Head 17 substitutes sections 14 and 15 of the Gas Act 1976, which provides for the preparation of GNI’s annual report and accounts. Heads 18, 19 and 20 provide for amendments to the Gas Act 1976, to update terminology to reflect the integration of Ervia into GNI and head 21 provides for a variety of miscellaneous amendments to the Gas Act 1976.

Head 22 provides for the repeal of section 21B(1)(c) of the Gas (Interim) (Regulation) Act 2002, which is deemed redundant as GNI cannot take over the function of being a “shipper of last resort” from Bord Gáis Éireann.

The Minister for the Environment, Climate and Communications is keen to progress this Bill and secure the integration of Ervia into Gas Networks Ireland. We have commenced work on the Bill and the drafting of it with the Office of the Attorney General. We would very much welcome the views of this committee in order to finalise the draft Bill with a view to its publication and progression through the Houses of the Oireachtas.

An Cathaoirleach

I thank Mr. Regan for his opening statement. I invite members to indicate to ask questions. I will go first. Mr. Regan mentioned that it is largely a technical Bill. Is it solely a technical Bill or is there anything in there looking at the functions, mandate and remit of Gas Networks Ireland? We need to look at that in the context of the climate challenge we have. Is the view being taken that "we just get this technical Bill out of the way" and we merge Ervia and Gas Networks Ireland and get that done? Are we looking to come back at some future point to look at the remit and mandate in regard to the climate challenge?

Mr. Noel Regan

Essentially, it is a technical Bill, in that Ervia once was the owner of Irish Water and GNI. Irish Water, now Uisce Éireann, is gone, so Ervia is left with GNI. This legislation will dissolve Ervia. Ervia will disappear and GNI will have the functions and roles that it has today. They will be transferred over in law. We are tidying up the corporate governance, which is led by the Department of Housing, Local Government and Heritage. However, there are no policy matters in regard to the future role of gas. There is a brief update on a few relevant matters to the committee. The Minister, in his letter to the committee, wrote that the EU is currently in trilogue on the gas package, which includes a range of matters relating to natural gas, specifically changing how we integrate renewable gases into the natural gas market. Hopefully, that trilogue will finish in the coming months. This means the next block of work for us to work on will be the issues raised by the Chair. This is more about the role of GNI in a future hydrogen and decarbonised gas market and there is also a regulation on methane. There are issues to come. In short, the answer is "Yes", this is a corporate governance clean up of the move of Ervia into GNI. It is not-----

An Cathaoirleach

Is it fair to say that the mandate of GNI will be looked at again? Is that the discussion that is ongoing in the Department?

Mr. Noel Regan

Yes, and as I mentioned, through the European matters that are under way, we have also a current range of policy matters within the Department. We have the security of supply review, the biomethane strategy and the hydrogen strategy and the regulator is looking at large energy users, so there is a range of policy measures within the Department and in the EU that we will have to return to and look at.

Deputy Jennifer Whitmore

I thank Mr. Regan for the presentation. There is something I am confused about. I am probably reading it wrong. In his background section, he said that the natural gas directive prevents the Minister from assuming the role of majority shareholder in GNI and Ervia. However, it appears that this Bill will result in that outcome. Is that right? I may be reading it incorrectly.

Mr. Noel Regan

The Minister, Deputy Eamon Ryan, cannot have any controlling influence on GNI as a shareholder. He will be a 5% shareholder. However, there is a specific carve-out, whereby he has no role whatsoever, nor does the Minister for Public Expenditure, National Development Plan Delivery and Reform, in the board appointments. That is solely for the Minister for Housing, Local Government and Heritage, who exerts control. The controlling 90% rests with the Minister for Housing, Local Government and Heritage. There are provisions to safeguard that. Our Minister has no power.

Deputy Jennifer Whitmore

Okay, so the Minister, Deputy Ryan, is a 5% shareholder and the remainder is with the Minister for Housing, Local Government and Heritage, Deputy Darragh O'Brien?

Mr. Noel Regan

There is 5% with the Minister for Public Expenditure, National Development Plan Delivery and Reform and 90% rests with the Minister for Housing, Local Government and Heritage.

Deputy Jennifer Whitmore

Perfect. The other question is in regard to staffing. If the two companies come together will there be any impact on staff? Will there be duplication of roles or other such issues that might need to be addressed?

Mr. Noel Regan

There should not be. The Irish Water staff have now gone under the water services, so Ervia is essentially GNI. The approximately 700 staff will switch from Ervia to GNI under the same terms and conditions. There is a provision to make sure that their rights and everything they have are protected. That issue was dealt with in the previous legislation when the Irish Water staff left. All that now remain are GNI staff.

Deputy Jennifer Whitmore

Can I assume the staff are aware that this is happening and that the unions have been involved?

Mr. Noel Regan

Yes, we engaged closely with GNI in the development of this legislation, and with the Department of Housing, Local Government and Heritage also.

An Cathaoirleach

I thank Deputy Whitmore and call Deputy O'Rourke.

Deputy Darren O'Rourke

In regard to the line Ministers and the European directive, what is the rationale that it cannot be the Minister for the Environment, Climate and Communications? I would have thought he would be involved with energy. What is the rationale for that? Why that 5%:5%:90% carve-up? Is there a rationale for that as opposed to any other configuration?

Mr. Noel Regan

The rationale goes back quite a way to when the European gas markets were unbundling. Historically there would have been the national company, in our case, Bord Gáis Éireann, that did the supply and the transmission of gas. To create competition in the supply, the European Union introduced the gas package where we had to split the company that operates the pipelines, which has to charge a service fee to competitors that supply. In Ireland, for example, Flogas, SSE Airtricity and ESB compete and buy gas and pay the public service obligation, PSO, contribution. The reason for this unbundling is that, if for instance Bord Gáis Éireann energy was not sold and it was part of the same company, the fear was that the company that owns the grid would give it preferential treatment. They might be in the same building. It would give it access if there was a constraint. The fear was there would not have been equal access. They have to have separation of that. The instance that arises in Ireland is that several of the companies that use the gas network are also under our Minister's control such as, for example, the ESB and Bord na Móna. Therefore, our Minister cannot have control on both sides because other parties might complain that is unfair. In regard to the 90:5:5 ratio, it is common among the semi-States to do that. Typically what happens is, the Department of Department of Housing, Local Government and Heritage in this instance takes over the governance and consults. The 5% means it has to consult on big decisions with our Minister and the Minister for Public Expenditure, National Development Plan Delivery and Reform. It provides for that too. This is a typical approach across the board.

Deputy Darren O'Rourke

In regard to the timeline, when might we see the draft legislation? When will it be introduced? When might we see these before us and enacted and these changes implemented?

Mr. Noel Regan

Ideally, if we work back, it would be great to have this legislation done by the end of the year. That is really just from an accounting perspective. It is much easier to do the accounts up to the end of the year. If it is the end of January for example it is a bit messier but we will facilitate it. We would like to have the legislation through the Houses after the summer recess, clearly, if the committee has time, as it needs to do pre-legislative scrutiny. However, ideally, we would like to have this wrapped up by the end of the year.

Deputy Darren O'Rourke

To go back to the Cathaoirleach, Deputy Leddin's point, it is an issue that has been raised in the committee before.

Is Mr. Regan saying that matters like the mandate of GNI at this stage; the expansion of the gas network; increasing islanded data centres; gas boilers being installed, including by the State; and the expansion of the gas network are being considered in the Department in different forms? Are they being considered in terms of the European directive, the trilogues that are going on, or the range of strategies and policies being prepared by the Department? Would Mr. Regan have an indicative timeframe or sequencing for when we might be able to get our teeth into some of those matters within these Houses?

Mr. Noel Regan

I will respond on behalf of my colleagues while recognising that some of those matters are outside our division's work.

We are finalising the security of supply review. That looks at several issues, including the report by Mr. Dermot McCarthy, the public consultation and the technical analysis. It is looking at oil. We are finalising that, and it should be coming quite soon.

On the EU gas package, we will have to prepare legislation. We hope it will be done in July. It is hoped that the EU can agree it, which will mean we can begin that work after the summer. The hydrogen strategy is due shortly, as I understand it, and that involves another range of issues. The biomethane strategy is being prepared by our Department and the Department of Agriculture, Food and the Marine, so that involves another range of issues. The Commission for Regulation of Utilities, CRU, is doing a call for evidence right now on large energy users, so there is a whole host of work under way. I would say, in a broad sense, that after the summer there should be some very relevant discussions to be had on these matters.

Deputy Richard Bruton

I thank the witnesses for the presentation. I wonder what changed compared to the original conception of having Ervia. Was there a rationale to it? What changed?

I am interested in the methodology that now exists generally for public bodies squaring up to climate obligations and seeking to be innovative in the climate space. How is this being rolled out? Is it by letters, or regulatory obligations? Is it just best endeavour and monitoring? I would be interested to know, in general terms, how the rubber hits the road with regard to climate obligations for public service bodies of all sorts.

Am I to understand from what Mr. Regan is saying that all the industrial relations issues are, in effect, ironed out at this stage? I know in the case of Irish Water, there is considerable friction between those who have traditionally worked in the local authorities and those who are now designated as Uisce Éireann workers. Are there any issues of that nature?

Mr. Noel Regan

I thank Deputy Bruton. Historically, Ervia was set up with Irish Water and GNI on the basis, as I understand it, that savings would accrue from a network company doing water and gas. It would have been before our time. It was decided not to take that approach. The previous Government decided to split Ervia and GNI, and to put them very much focused on their individual roles. This is an implementation of that decision.

On public bodies and their role in climate delivery, that is a very live question. I will not say I have a definitive answer on that yet. I think we are a year into the climate Act, after which there is a legal requirement on them to take the carbon budgets and ceilings into account. There are learnings there now. I think the Minister for the Environment, Climate and Communications, Deputy Eamon Ryan, has written to them saying they must adhere to this. We are learning on that, and more needs to be done on how we align them. We see-----

Deputy Richard Bruton

Is the expectation that it will be one omnibus sort of obligation, covering everything from health to education bodies, or will we see this legislation coming back with specific obligations on a model for an individual company or body?

Mr. Noel Regan

It is possibly not for me to say specifically on that, but one can see that there are certainly areas where there are issues and different sorts of State bodies are interacting a lot. Maybe a catch-all for all of them might not work because they work in such a diverse area. A common approach to dealing with them will probably have to evolve. It can be seen that they all have different interests. The agencies under the Department of Enterprise, Trade and Employment have very much economic interests. The Environmental Protection Agency, EPA, has an interest in emissions. More work will be needed on how to channel them all. It would also be part of some of the reviews I mentioned. With regard to a hydrogen policy, there would be different State actors with a role there. With regard to biomethane, that is being done by the Department of Agriculture, Food and the Marine, so that will already naturally bring in some of the State bodies, including GNI.

I am not aware of any specific industrial relations issues.

On the point that the Deputy raised about local authorities, it is more straightforward in a sense. That is not the case with GNI. It has direct employees. They have contracts for some services, but it is not reliant on local authorities, which I know was always a complication with Irish Water. I do not think that issue applies in this case.

Deputy Richard Bruton

Going back to the original point about climate obligations, I recall that the Department used to publish annually the energy-efficiency performance of bodies. They ranged from the excellent to the deplorable, and it created some sort of momentum for people to get themselves out of the fourth division. The Department has a similar model with regard to emissions impact measured either in terms of Paris emissions or, as we have discussed here, embodied emissions in purchases, which are equally interesting. Is there anything like a league table of public bodies based on their baseline emissions and where ambition ought to be bringing them?

Mr. Noel Regan

Yes is the short answer. The Sustainable Energy Authority of Ireland was designing the methodology so that each public sector body would have its own carbon emissions target for the direct emissions that it effects. In the same way that we have energy insufficiency published reports, as the Deputy said, we have the equivalent for emissions. It is not in our area of responsibility but that is being designed, as I understand it. They also have a public sector mandate. It is broader than just their emissions; it is how they work and behave. It includes small things like making sure there are cycling facilities, etc. They have that too, and they are very much focused on their direct emissions.

Deputy Richard Bruton

I know it is not really relevant, but should they not also be looking at embodied emissions in their purchasing of vehicles and their construction of buildings? With the sort of thing that comes up in the circular economy, one starts to look at the wider impact, which gives a somewhat more rounded view of what we are trying to achieve, compared to the narrow inventory of direct emissions.

Mr. Noel Regan

I must confess to the Deputy that I am straying very much away from my area of responsibility, so I would have to get a briefing from my climate colleagues on that.

An Cathaoirleach

I thank Deputy Bruton. I want to return to Deputy Whitmore's question on the 90% shareholding. Who would be with the Minister for Housing, Local Government and Heritage in the new formation? Is that correct?

Mr. Noel Regan

Yes. The legislation gives the Minister for Housing, Local Government and Heritage 90%, and he will be called the majority-shareholding Minister. It gives the Government power to change it if it so wishes in the future, for reasons that we may not know today.

An Cathaoirleach

I presume the relevant Oireachtas committee would be the Joint Committee on Housing, Local Government and Heritage. Would it switch over from this committee?

Mr. Noel Regan

Yes. The governance of GNI will fall to the Joint Committee on Housing, Local Government and Heritage. Energy policy, obviously, remains with this committee.

An Cathaoirleach

Okay.

No other members are indicating to come in so I think we are at the end. I thank the witnesses for their time this morning. This has been very helpful. We will seek to complete the pre-legislative scrutiny report as quickly as possible to allow the Bill to progress. As has been said, all going well, it will be ready for the end of the year.

The joint committee adjourned at 11.40 a.m. until 11 a.m. on Tuesday, 11 July 2023.