I thank the Chairman and the committee members for inviting us here today to talk about Bord Gáis Networks, BGN, and the work it does in connecting customers from the domestic and business communities to Ireland's gas network. I am joined by my colleagues, Mr. Aidan O'Sullivan, general manager of Gaslink, Mr. Jack O'Connell, head of regulation and commercial affairs, Mr. Sean Casey, head of asset management, and Mr. Ger Cowhig, head of networks finance.
BGN is a regulated network utility, regulated under licence by the Commission for Energy Regulation, CER. The operator of the Bord Gáis Éireann gas network is Gaslink, an independent subsidiary company wholly owned by Bord Gáis Éireann. BGN is a business unit of Bord Gáis Éireann which provides system operation, maintenance and development services to Gaslink. BGN is ring-fenced from Bord Gáis Energy which is a part of the Bord Gáis Éireann group and a licensed supplier of gas and electricity to customers across Ireland. There are a number of energy companies competing in the Irish gas market and Gaslink and BGN provide non-discriminatory access to the gas network to all of these companies, including Bord Gáis Energy, which, in turn, use the network to supply gas to consumers.
At the macroeconomic level, natural gas represents 13% of Ireland's final energy consumption, which is a measure of the energy delivered to energy consumers in the economy. This is well below the European average of 22%. Ireland is probably over-reliant on oil, at 64% of its final energy consumption compared to 43% in Europe. Switching from oil to gas will not only reduce Ireland's oil dependency but will also decrease CO2 emissions since gas produces roughly one third fewer carbon emissions than oil. This CO2 reduction will contribute to Ireland's obligations under the EU strategy to reduce emissions by 20% by 2020. Our strategy reflects the changing nature of the energy mix worldwide. We believe that natural gas will continue to gain in importance as a relatively low-carbon fossil fuel and as an ideal partner to renewable energy sources.
A new European security of supply regulation, which came into force in 2010, deals with measures to safeguard the security of the gas supply within Europe. Ireland imports approximately 95% of its gas via two interconnector pipelines with Scotland. These pipelines are vital to Ireland's security of supply. BGN is keen to undertake capital investment to enhance this interconnector system, thereby securing our link to the highly liquid market in Great Britain. Other sources of indigenous gas such as gas storage, liquefied natural gas, LNG, and Corrib gas, for which commercial arrangements are now complete, will all add to Ireland's security of supply.
BGN has a record of delivering critical infrastructure to develop the network. It is an experienced network owner and operator with network construction, maintenance and operation experience in the Irish, Northern Irish and UK markets. We have a proven track record of delivering major sub-sea interconnector, transmission and distribution projects. Our gas network is one of the most modern in Europe, with over 13,000 km of steel and polyethylene pipeline. From the end of 2001 to the end of 2011, we spent approximately €2 billion on developing the Irish gas network. From 2012 to 2017, we plan to spend a further €460 million on network development. The gas network performed well during the severe winters of 2010 and 2011, with uninterrupted gas supply during two of the coldest winters on record.
At the end of 2011, BGN had almost 650,000 domestic and business customer connections. During the year we handled around 372,000 telephone calls, completed more than 86,000 customer appointments, conducted approximately 26,000 surface reinstatements at customers' premises and attended over 19,500 gas escapes reported by the public with an average response time of 25 minutes. Customer complaints during 2011 amounted to 2,891 or just over 1% of the overall customer base. We also carry out a broad range of activities on behalf of the gas supply companies, including meter installations, meter replacements, meter reads, and other activities at customers' premises.
In 2011, around 120,000 customers changed supplier in the gas market, making it one of the most competitive in the world. BGN manages the various processes underpinning this commercial activity using state-of-the-art IT systems. BGN is a highly customer-focused organisation and has won a number of significant awards, at home in Ireland and in the UK, for delivering excellent service to our customers. We are proud of the achievements of Bord Gáis and its business partners in this regard.
We have successfully completed a major business transformation programme which implemented a high-performance utility model in the organisation that reflects international best practice. This is delivering operational efficiencies across the business and optimises the use of the company's staff, systems, and processes to deliver excellent service levels to our customers. The project involved a complete reorganisation of the networks company, a reconfiguration of our IT systems, the optimisation of our supply chain with best-practice procurement processes and a major overhaul of our outsourcing model for engineering works, moving from a multi-contractor to a single-contractor model.
Safety is a core value for the company and is central to all BGN activities. We are continuously improving our safety systems and approach and have an ongoing safety awareness campaign covering areas such as the gas emergency service, dial-before-you-dig, carbon monoxide awareness and the register of gas installers. Gas safety is regulated by the CER, which has established a natural gas safety regulatory framework, and BGN is subjected to ongoing audit and inspection by the CER under this framework. We report quarterly to the CER on a comprehensive range of safety performance indicators to verify that all operations are in compliance with the safety framework.
Increasing and enhancing the network is also a priority for the business, where economically sensible. BGN, acting on behalf of Gaslink, has been actively focused on extending the gas network to new towns in recent years. In the past decade we have also made major strides in increasing the number of customers connected to the gas network, although over recent years numbers have dropped off in keeping with the economic downturn. From a peak of 39,500 new customer connections in 2006, the business connected an additional 5,500 customers in 2011. The new contractor model allows us to react more flexibly to changing circumstances, not only in terms of changes in new customer levels but also in terms of operational flexibility in the field.
The gas network is extended and developed in line with the Gaslink connections policy. This policy, which is approved by the CER, aims to strike a balance between providing incentives to new customers to connect to the gas network and ensuring that existing gas users are protected from the burden of costs associated with uneconomical connections. The policy details how connection costs are calculated for different types of new gas customer ranging from one-off single houses to large industrial customers such as power stations. The large industrial and commercial customers, such as power stations and pharmaceutical companies, have substantial connection costs. The policy determines the cost of their connection depending on their expected gas usage and whether they require a connection from the high-pressure network. The large customer pays from 30% to 100% of the cost of the connection. The remaining costs of the connection are met through revenues generated by the customers' gas usage for the first seven years.
When designing connections to large customers, BGN will, subject to regulatory approval, ensure the connection is sized to cater for future gas load requirements in the newly served region. For example, when designing the new gas pipeline connection to fuel the new power station in Great Island, County Wexford, we sought and subsequently received approval from the CER to enlarge the pipeline to accommodate potential gas users in the south-east region.
The connection policy also sets out the criteria used to determine whether a connection to a new town or group of towns is feasible. For a connection to be viable, the revenues generated through potential gas usage in the town must exceed the overall cost of connecting the town. Subject to the results of this analysis, we make a submission to the CER to approve the extension of the gas network to the town.
BGN has been effective in connecting new towns to the gas network. In 2008, we commenced a new town connection study reviewing the feasibility of extending the gas network to 70 new towns located all over the country. The study, which was completed in three phases, found that 21 of these towns were viable for connection. BGN subsequently received approval from the CER to connect these towns. To date 16 of them are served with a gas supply at an approximate cost of €78 million. We will keep under review the possibility of connecting the remaining towns in the study if new potential gas loads emerge in these areas. Any approval from the CER to connect a town will include a proviso that BGN receive a certain level of commitment of gas usage from potential customers in the town before progressing with the connection.
There was a 9% reduction in the total amount of gas transported on the network by BGN in 2011. This was caused by a variety of factors including milder weather, reduced demand due to the economic slowdown and the displacement of gas-fired power generation by wind. BGN and Gaslink are, therefore, actively considering ways in which the Irish gas network can be utilised more intensively, as greater gas consumption means increased use of the network, which will lead to lower overall gas transportation tariffs and thus lower prices for customers. To that extent, we are investigating the future development of the gas network to incorporate natural gas vehicles, NGVs, and renewable gas facilities. We note the CER's recent decision to proceed with the next stage of the smart meter roll-out programme and we look forward to working with it on this over the next few years. BGN believes there is a viable opportunity for the natural gas vehicle industry to be developed in Ireland. We see our role as that of a facilitator in bringing cost-effective and clean fuel to the transport sector. The NGV sector has been very successful in other countries. Madrid is an interesting example. The municipal fleet of natural gas vehicles, which was started in the early 1990s, has grown to more than 660 buses and 400 refuse collection vehicles today. The city is benefiting from lower fuel emissions and lower transport costs. We would like to see a similar uptake of compressed natural gas, CNG, across towns and cities in Ireland. There is developing interest in this area. For example, more than 150 transport and energy industry professionals attended a BGN conference on NGV held last year in Croke Park in Dublin.
To briefly address the financial side of our business, the Commission for Energy Regulation determines the revenues to be earned by Bord Gáis Networks and the charges to be paid by suppliers for use of our gas network. The Commission for Energy Regulation is in the process of concluding a price control review process with Bord Gáis Networks which will determine how much money will be invested in developing, maintaining and operating the gas network over the following five years. The business finances itself and has done so successfully, raising funding in the international capital markets since 2003. The transparent, objective and independent role of the Commission for Energy Regulation, as regulator, has been very helpful in supporting this important function. It has enabled Bord Gáis to retain the all-important investment grade credit rating, which underpins our financing activities.
All gas supply companies pay transportation charges to Bord Gáis Networks for use of the gas network. These charges are passed on by the gas supply companies to consumers and, on average, constitute roughly 40% of the overall price to the domestic consumer, with the wholesale gas price and the supplier's costs making up the balance.
I thank the Chairman and joint committee again for giving us the opportunity to explain Bord Gáis Networks' operations and the services it provides to customers in Ireland. A number of challenges face the company over the next five-year period. These include keeping a downward pressure on transportation tariffs, increasing utilisation of the network, continuing to operate the network safely and efficiently, ensuring the gas network is capable of coping with the increasing levels of renewable energy in the energy mix, and continuing to deliver a best-in-class service to our customers. We are happy to take questions.
