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Joint Committee on Transport and Communications debate -
Wednesday, 18 Feb 2015

Regulation of Gas Industry: Discussion

The purpose of this meeting is to engage with the Association of Plumbing & Heating Contractors Ireland, APHCI, and the Commission for Energy Regulation, CER, on the regulation of the installation of gas boilers. Following this engagement, we will meet CER representatives separately to discuss the cost of electricity and gas to consumers to establish why prices do not appear to have fallen in line with the decreases in the prices of crude oil and gas.

On behalf of the committee I welcome the delegates from APHCI: Mr. Sean Giffney, chairman, Mr. James Egan, secretary, and Mr. Crozier Deane. I welcome also the commissioners from the CER who will represent the organisation for this part of the meeting: Mr. Garrett Blaney, chairman, Mr. Paul McGowan and Ms Sheenagh Rooney. I also welcome Mr. Paul Tierney and Mr. Paul Byrne from the CER.

I wish draw to witnesses' attention to the fact that by virtue of section 17(2)(l) of the Defamation Act 2009, they are protected by absolute privilege in respect of their evidence to this committee. However, if they are directed by the Chairman to cease giving evidence on a particular matter and continue to so do, they are entitled thereafter to only qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and asked to respect the parliamentary practice to the effect that, where possible, they should not criticise nor make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable. I also wish to advise them that any submissions or opening statements they make to the committee will be published on the committee's website after the meeting. 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 invite Mr. Giffney to make his opening submission.

Mr. Sean Giffney

On behalf of the APHCI, I sincerely thank the committee members for taking the time to meet us today and for understanding the gravity of the situation facing the gas industry. I thank Deputy Michael Moynihan, who has given us great support in our endeavour to achieve results in the gas industry for the past three years. The Deputy has travelled up and down the country to meet our members on so many occasions. I thank Deputy Ellis for his help and contribution.

Today is our last-ditch attempt to seek change within our industry to ensure the safety of thousands of lives that are at risk across the country. Lives of families in each constituency are at risk because of the failure of the regulatory system. We are the people on the ground working in people's homes and businesses each day. Our members witness illegal operations but little or nothing is being done about it. We have tried for over two years to engage with the regulator to find a solution. There is a need for proactive policing and severe penalties for those who break the law. These are not currently in place.

Down the corridor from here, there is a public banking inquiry under way. The one point on which we can all agree is that this inquiry is being held because the regulator was asleep at the wheel. If our industry is not properly regulated, sooner rather than later it will face the same fate as the thousands affected by the collapse of the banks. However, we are facing serious fatalities, with thousands of people's lives at risk. We simply cannot wait until it is too late. Our members are deeply concerned and holding out hope for a positive outcome today and for the help of the committee to prevent a major crisis. I shall now hand over to our secretary, Mr. James Egan, who will explain to the committee a number of the facts, including those on the illegal operations of natural gas systems installers.

Mr. James Egan

This presentation is crazy and I hope it is clear to all the members. Some 100,000 illegal boilers have been installed since the regulatory system was introduced in June 2009. We are deeply concerned about this and believe lives are at risk. Some of the potential accidents could kill. The market is awash with illegal operators and there is a loss of revenue to the State as a consequence. It is driving legitimate operators out of business. These are the main three points we would like to get across.

In 2012, it was suggested to us by the chairman of Register of Gas Installers of Ireland, RGII, and it was discussed with the CER that we should look into the number of boilers sold in Ireland. In 2012, Mr. Dermott Jewell carried out an independent survey and contacted the main six brands. There are probably ten or 15 but, as with every industry, the main ones are fewer in number. When Mr. Jewell contacted the six main boiler brands, he discovered they sold 27,500 boilers in 2011.

Under legislation, the CER has responsibility for putting in place what is supposed to be a comprehensive system of safety. In June 2009, it set up RGII, whose remit is to regulate registered gas installers. With regard to the investigation of complaints made to it, it is not responsible for identifying illegal works or installers. This is a fundamental flaw in the system. We believe no one takes responsibility for proactively identifying illegal works and operators. The system is not like that in Northern Ireland where the inspector actively looks for people who are doing illegal works. If necessary, he will call to their home, mark the cards, camp outside or do whatever must be done.

For over three years, the APHCI has been talking to the CER and RGII about the scale of illegal and black-market operations. In 2014, after years of denying the problem, the CER acknowledged to the APHCI that action was needed. Despite this acknowledgement, we feel nothing has really happened since, and little action has been taken. The CER produced a decision paper recently entitled Regulation of the Gas Installer Industry with respect to Safety from 2016. In 2016 the RGII’s tender will have expired. It may be reappointed then, or some other body might be. That is why 2016 is the year listed. In the document, which was published last November or December, the CER expressed the view that, in general, the scheme has worked effectively to regulate gas installers from a safety perspective. We found, after working with it for a long time, that this was just unacceptable. We invested considerable time in seeking change but saw there would be none and that there would be another seven years of the same conditions.

There are 30,000 gas boilers sold each year. Some 12,000 of these are certified. It is legally required by the legislation that they be certified.

By law, the certificates are supposed to be returned to the RGII within ten days.

By comparison, the number of registered gas installers in Northern Ireland is 2,000. On 13 February, the number of registered gas installers in the Republic of Ireland was 2,775. The market in the Republic is obviously far bigger than that in Northern Ireland. In its 2009 tender document, the CER said there were 4,984 gas installers in the Republic. There are 650,000 gas customers in the Republic and fewer than 6,000 boiler replacement certificates are returned to the RGII each year. This means that a gas boiler is being replaced, on average, once every 108 years.

The CER published a report for the Minister on safety cut-offs and disconnections. According to the report for 2011, two years after the scheme came in, safety disconnections were up 133%. Safety disconnections occur where somebody has a problem in their home. When they telephone Bord Gáis networks, which is now called Gas Networks Ireland, somebody calls out to them within 25 minutes. If they find a problem internally in the house they will safely disconnect.

An independent public inquiry needs to be set up to finally establish the facts. We need proactive policing, not advertising. The CER will say that it advertises about carbon monoxide and about always using a registered gas installer. In theory that is great, but in practice we need inspectors to proactively seek illegal operators and illegal works. A systematic approach is required to tackle the 18,000 uncertified boilers that are sold annually.

We need to have sufficient penalties for those who break the law. Since 2009, there have been about ten or 11 prosecutions. The majority of those prosecutions, as far as I am aware, have been given the Probation Act. Their names have not been published and they have received fines in the region of €250. It is laughable because it encourages people not to register. At the end of the process, that person can still become registered. There is nothing to stop them from becoming registered, even during the prosecution.

Someone needs to take responsibility for the seriousness of what is happening. Legislation is required on the sale of boilers only to registered gas installers. Every boiler that is produced and brought into this country has a unique reference number, which can be traced by the manufacturers. It is possible for that number to be taken by a supplier, when it is sold over the counter, and put into the system. That can then be followed up through the installer to ensure the certificate was issued and where that boiler was installed. From that information, inspections could be carried out in people's homes. The system is there to do it.

As regards random inspections, at the moment registered gas installers are inspected once a year. It is done by appointment and they get to choose where they meet the inspector. No one from RGII is going out to look for illegal workers outside that system. No home should be insured unless it has certification for the gas boiler. This is already the case with alarms and others such items.

We first brought this matter to public attention in 2012, yet three years later nothing has really changed. The current system is not fit for purpose. A recent survey of registered gas installers, which closed six days ago, showed that 98% said they have no confidence in the CER or the regulatory system. Some 95% said they had no confidence in the RGII, and 98% said they would like an independent public inquiry. The system simply allows illegals to go unhindered with little or no chance of being prosecuted.

We issued the survey at 3 p.m. on 5 February and two hours later we had received 31 replies. Each survey comes back with an IP address. It was a requirement of the survey, but was not compulsory in that one could still complete the survey without completing a couple of parts of it. We asked for the RGII number, name and telephone number so that we could identify who voted. The 31 replies had nothing on them. They were in favour of the system. When we looked up the IP address online it turned out to be RECI's IP address. The RGII is a subsidiary of RECI. The following morning a further 81 similar replies were received. For obvious reasons these have been removed from the survey. They were invalid because they did not have a person's name on them, but it illustrates the point.

A level playing field must be achieved with a proactive approach to finding illegals. We want the JLC to provide an independent consultant to investigate the regulatory system.

That concludes my presentation, which I hope was clear.

I thank Mr. Egan and will now hand over to Commissioner Garrett Blaney. Serious allegations were made in the last presentation so he may want to respond.

Mr. Garrett Blaney

I thank the Cathaoirleach and other members of the joint committee. We very much welcome this discussion about safety. Increasing public awareness of safety issues is to be welcomed by us as the safety regulator. I will now hand over to my colleague, Dr. Paul McGowan, who is the lead commissioner in the area of safety. Together with him and the director of safety, Ms Sheenagh Rooney, we will make a presentation. We will also talk through the background to the schemes and some of the issues that have arisen.

Dr. Paul McGowan

I thank members of the joint committee for inviting us here. We are pleased to make a presentation on the important issue of gas safety.

All aspects of the gas supply chain are subject to safety regulations - that is, from the well to the burner tip. I want to reassure the committee that gas is essentially a safe fuel in Ireland. I want to reassure gas customers that they can have assurance on gas safety if they use a registered gas installer to carry out an installation in their home, to service or change a boiler, or to carry out any work on their gas installation.

I wish to make three key points about using registered gas installers. First, those gas installers are on the register because they have been deemed competent to be there. Second, they are insured. Third, they are subject to audit and inspection by the Register of Gas Installers of Ireland. That is the assurance gas users can take from using a registered gas installer. It is a key message that we continue to try to put out, both in our dialogue with the industry and in the advertising we run.

Nevertheless, we operate on the basis of continuous improvement. The scheme we run is subject to continual review in order to determine where improvements can be made. We welcome the opportunity to talk with stakeholders, including the association, and to talk here today with members of the joint committee.

We learn from this dialogue and from the investigations that we carry out, and we also learn from any gas incidents that occur. This feeds into our ongoing development of the registered gas installers' scheme. There are three key facets to the overall RGII scheme.

First, we rely on communication - making the public aware of the general dangers associated with gas and with installation that is not carried out by a competent installer. Second, we carry out prosecutions of unregistered gas installers who install or carry out servicing on a gas installation or who portray themselves as a registered gas installer. Both of these are criminal offences for which we have powers to prosecute. The third aspect of the regulatory scheme is registration, the means by which we ensure people can be portrayed as registered gas installers and, therefore, people can have confidence in using them to carry out gas works.

All functions pertaining to the registered gas installers scheme stem from the Energy (Miscellaneous Provisions) Act 2006. As with everything done by the Commission for Energy Regulation, CER, it is a creature of statute and operates within the legal framework that is in place. The CER is responsible for the overall operation of the scheme. It defines works that can only be carried out by a registered gas installer. We have the power to define gas works which are restricted to registered gas installers. We also undertake prosecutions of people who carry out gasworks when they are not registered gas installers and those who portray themselves as registered gas installers when they are not. We also undertake audits and inspections of the gas safety supervisory body, the Register of Gas Installers of Ireland, RGII. Through public consultation and engagement with various stakeholders, we make decisions on the overall RGII scheme criteria. Recently, we completed a consultation on it.

We also carry out activities to raise public awareness about the dangers associated with carbon monoxide and the need to use a registered and competent installer when getting any fuel-burning appliances serviced or changed. The RGII is under contract to us to provide the day-to-day operation of the scheme. It maintains and publishes the register of gas installers and it is its job to ensure all applicants to join the register have attained the appropriate qualifications and hold insurance. One common reason for an installer to be suspended temporarily is that he or she does not have insurance. RGII also undertakes audit and inspection of installers on at least an annual basis. It will also investigate complaints where members of the public or gas customers make a complaint against a registered gas installer.

When the voluntary registration scheme operated, it had between 500 and 600 installers on its register. Since the scheme became statutory, the number has risen to 3,000 registered gas installers. The majority of certificates sold are servicing certificates. There is a gap between the number of certificates sold and the number returned to RGII. Recent initiatives have been put in place which we hope will address this. We have already seen some improvements in rectifying this gap.

Ms Sheenagh Rooney

A key building block of the scheme is our reliance on the public to act as the police, as it were, on the ground. It is important for the success of the scheme that the general public be aware of why the scheme is in place, its benefits and what people can do to protect their families and their homes. The CER, in conjunction with RGII and other stakeholders, participates in several publicity campaigns on a yearly basis. These are designed to focus on the key message, which we try to get across to the general public in an accessible manner. Essentially, the message is to use a registered gas installer to carry out work at home as it is a legal requirement. They are insured, competent and will do the work in accordance with the standards set down. We also advertise the importance of servicing gas appliances such as boilers, and carbon monoxide awareness, a key risk to the public but one against which it can protect itself. We also advertise through public engagement how people can contact us if they suspect work has been carried out in their home which is substandard or carried out by unregistered workers. Whenever we have a successful prosecution, we advertise that, as it will act as a further deterrent against illegal activity.

Prior to 2009, when the CER took over this legal responsibility, a voluntary scheme was in place with only 800 people participating in it. Now it is a legal requirement. Due to the work done on public engagement, awareness of the RGII and its benefits has increased over time, reaching a level of 69% among natural gas users. Not only do we put our efforts into engaging with the public, as they are key to the scheme, and carrying out the awareness campaigns, we also monitor the effectiveness of these campaigns to see if the message is getting across. Over time, we have adjusted the message to ensure it remains effective.

It is a legal requirement for people who are undertaking gas works in the home to be registered. It is also illegal for a person to claim he or she is a registered gas installer when that is not the case. Penalties have been laid out in legislation for these offences. On indictment, there is a fine of €15,000 and the potential for three years’ imprisonment and, on summary conviction, a €5,000 fine and six months’ imprisonment. We have put much effort over the past two years into strengthening the work we do in the enforcement area.

All complaints notified to the CER are investigated. We do not tolerate illegal activity and, as such, we investigate all complaints. The number of successful prosecutions we have taken has increased. Last year, we had seven successful prosecutions and we have had one so far this year. We have three that are about to go to court. In total, we now have 45 ongoing case files. That compares quite favourably with Northern Ireland, which has no such prosecutions. It also compares very favourably with the UK given the number of gas installers. We have focused on ensuring that when our cases go to court, we follow best practice in respect of how evidence is gathered. We have focused on streamlining our internal processes and we have never yet brought a prosecution that has not been successful. Whenever we are successful with a prosecution, we have strived to attract as much publicity as possible relating to the offences that were committed and we have had quite a deal of success in getting these prosecutions publicised in trade journals and newspapers.

Complaints, all of which we investigate, can be made to us in three ways. People can contact us anonymously, so if anyone suspects anybody of conducting illegal activity, there is a phone number they can call. They can also contact the RGII website and they can also write directly. All complaints are recorded and can be made anonymously.

We must balance the level of resources we put into enforcement and audit and inspection. As was mentioned in the previous presentation, whenever anybody contacts us, including the association, with ideas about how we can focus more on enforcement, we always look into these ideas. In our recent consultation, people suggested that we concentrate more on public awareness. That is something we are committed to doing. Initiatives have been suggested in respect of restricting the sale of gas boilers or appliances to those who are registered. That is not within our legislation but, on a voluntary basis, we have contacted all DIY suppliers in order that they can advertise the scheme and in order that they might consider agreeing to sell boilers and appliance parts only to those who are registered.

We had a recent consultation because the scheme had been operating for up to seven years and we are now about to go to tender for a new gas safety supervisory body to run the scheme. We had a lot of meetings with stakeholders, including the association, in respect of how the scheme was operating. We also had more than 20 responses in respect of the scheme and how it was doing. The CER remains committed not only to the scheme as it is but to improving the scheme constantly, continuing our focus on enforcement, the work we have done on returning the completed certificates, constant engagement with stakeholders about how the scheme can be improved, and monitoring the gas safety supervisory body going forward in respect of key performance indicators such as how quickly it is resolving complaints, etc. We reiterate that we are committed to tackling illegal activity and any deficiencies in the scheme. Anyone who suspects that illegal activity is taking place should address their complaints anonymously or otherwise to the RGII or use the phone number indicated on the slide.

Each spokesperson will have three minutes to ask questions. We will then allow the witnesses to respond. We will run it as efficiently as possible.

I welcome representatives of the Association of Plumbing & Heating Contractors of Ireland and the CER. This is a very serious issue. I have had significant engagement with both groups. I know that the association has been pretty exasperated by the issue. More than 200 plumbers attended a meeting in a Fitzgerald hotel on a Tuesday evening in the middle of January. They are exasperated. They are busy people and have plenty to do but they spoke about what they found and the type of installation that has bee done. I have spoken to the commissioners and outlined very strongly the seriousness of this issue. While there has been engagement with both parties, there is huge frustration among the association. The statistics speak for themselves. There is a pile of unregulated jobs, for want of a better word. If something were to go wrong, there would be a massive outcry about why this was not raised or policed. There seems to be a shortage of tools to move this forward.

We must find out what needs to be done from a regulatory point of view because it is not working. A lot of unauthorised work that is not up to standard is taking place. This is a toned-down version of what I could say. I thank the Chairman for permitting both bodies to be here today in order that we can thrash out exactly what needs to be done. What further powers do we need to give the regulatory regime? Mr. Egan mentioned the new tender in 2016 but many issues have been discussed and highlighted over the past three to four years. The seriousness of the situation does not seem to have been grasped. Perhaps it is because the CER lacks the powers to police and tackle it head-on. At the meeting in the Fitzgerald hotel, I saw the frustration of very busy plumbers who had 101 things to do other than to sit there on a Tuesday evening discussing the issues. They were able to reel them off without any prompting. They were talking about real-life issues. I am not a plumber and do not know much about it but I can tell the witnesses that the information they gave at the meeting was quite startling and frightening. We need to step up to the plate to make sure something is done about this issue.

Dr. Paul McGowan

I will respond to the points made by Deputy Moynihan. The CER takes its statutory function in respect of safety very seriously, from the well head to the burner tip. The RGII scheme is an important part of the overall safety framework that applies in Ireland. We regard the RGII scheme and the overall safety framework that applies in Ireland as world standard in respect of the overall aim of reducing the risk to the public to a level that is as low as is reasonably practical. That is the general gas safety framework.

The RGII scheme is a very important element of that scheme. Our role is threefold. It is to operate a registration scheme in which people can have confidence. Much of that is achieved by ensuring that people are aware of the need to use a registered gas installer when they carry out an installation. We therefore carry out a communications and public awareness campaign each year which is subject to continual review. It is also important that people can have confidence that the person they hire is competent. Again, that is done by ensuring that entry into and continuing membership of the scheme is subject to review and assessment and that the installers are insured. We also acknowledge that this is an evolving scheme that does not stand still.

We have never said we have it perfectly right, and this is why we engage in dialogue with stakeholders, go through public consultation and get a variety of views on the role of public awareness on whether we should do more or less. We must take a balanced approach to the variety of views we hear when we engage in public consultation on any aspect. Nevertheless, we have continued to make changes to the scheme over time regarding the membership of the scheme, the requirement for continual assessment and other aspects on which Ms Rooney might be able to elaborate. It is to reassure members of the committee and the public that gas is a safe fuel in Ireland for people going about their daily lives. To ensure this, however, the need to use a registered gas installer is one of the key messages we want to get out there. It is very important that the message gets out there.

Mr. Sean Giffney

The APHCI has made numerous practical proposals to the CER and RGII but in all cases has been totally ignored. As an organisation which represents 500 members who would employ up to 1,000 installers, we are the people who are working on the ground and going in and out of people's homes. We see what is happening day to day and the condition of installations that are installed not only in family homes but in apartment blocks and apartments. Our members constantly deliver numerous shocking photographs and stories, which I have on file, of various disastrous boiler installations they have come upon. They are astonished that there has not been a major serious accident.

The market is flooded with illegal operators at a major loss of revenue to the State. The industry is not policed. We have serious concerns about the danger, carelessness and increasing and widespread malpractice that poses a high risk of serious accidents and death. Thousands of lives are at risk. Why has nothing been done about it? We do not exaggerate when we say that 18,000 uncertified, unregulated gas boilers are installed every year in family homes and apartments and nobody knows the condition of them. It is all very well for the CER to tell us these practices exist on paper, but nobody - not the CER, RGII nor the Minister - is responsible for gas safety and policing the illegal installers.

We can go to any of the merchants on any morning of the week and see anything up to 20 people buying gas boilers and paying cash. These people are unregistered. It is a crisis and our members are frustrated. They have taken time out of their work to protest outside this morning to try to highlight these issues to the CER, but the CER just will not listen to us.

The witnesses are here because they contacted us and we decided to give them a platform to highlight the issue. This is the role of the committees. We felt it was better to have the CER here on the same occasion. It is not the committee's role to carry out arbitration between both sides. However, it is an opportunity to highlight the issue. Mr. Egan mentioned initially that the APHCI wanted to achieve a level playing field and a proactive approach to finding illegal operators, and it is fair enough. However, Mr. Egan also said the association wanted the joint committee to provide an independent consultant to investigate. That is not the role of committees and we do not have the power. I do not want to promise something we cannot do. We can produce a report in which we make recommendations to be taken on board by those who can make decisions, such as the Minister. I want to be clear on what is happening here today and our role. We are delighted to give the opportunity to highlight this and it will allow Mr. Giffney to articulate the frustration of the APHCI members and the CER to put across the message that this is an issue.

The commissioner's point is accepted. Anybody who is having a gas boiler installed should use a properly regulated and insured contractor. This must be the one flagged message out there. However, much unregulated and uninsured work is taking place. How will we ensure such work is stopped? What is happening in the marketplace is very dangerous and there is great frustration. The plumbers I have met are very frustrated by what is happening. Although there has been engagement over the past two to three years on it, it does not seem to be moving forward. Is it due to a lack of further empowerment to the industry from the Oireachtas or the statutory bodies? What needs to be done? There is considerable evidence. One could nearly say three quarters of the gas installations in the country have not been done by people who are insured and regulated. How are we going to go after this and ensure every gas boiler installation is properly done and insured and that the State can stand over it?

Dr. Paul McGowan

One key message is that anybody who suspects any illegal activity, whether somebody betraying themselves or carrying out work when they are not a registered gas installer, should report it and it will be investigated.

Ms Sheenagh Rooney

We have met the APHCI on many occasions and we listen to its concerns and fully appreciate its commitment to safety. We are equally committed to safety and it is our legislative role. Before the Legislature gave us power to bring in this scheme, anyone could carry out work on a gas supply in somebody's home without having any competency at all. The scheme is definitely bringing benefits. By law, people must be registered, competent and do certain training and assessments. We publicise the requirement and have recently significantly ramped up the number of prosecutions we have taken. This is evidenced by seven successful prosecutions last year and we have a number in the pipeline. This compares favourably with the UK.

The scheme has improved over time because of representations that have been made to us by groups such as the APHCI. I refer to a number of examples of issues we have taken on board. The entry requirements for the scheme have become stricter and there is a requirement for a competency assessment every five years. The association made recommendations regarding the recording of complaints, which have been taken on board, and it made a number of suggestions on how we could tackle illegals more by engaging with boiler suppliers, which we have done. However, we feel from a legal point of view that we are doing everything within our power to tackle the number of illegals. No illegals are acceptable to us and we will remain committed to that. We are also happy at any time to engage with anyone who has further ideas to tackle illegals.

Mr. Sean Giffney

The truth is the system is not working and what we are hoping to achieve here is that we can highlight that to all the Members here today. The system is in crisis. There are 100,000 illegal, faulty gas boilers installed in people's homes and we are deeply concerned about it. Contractors regularly inform us of illegal operators working in people's homes. This information was immediately passed on to the RGII but it was never investigated. It was not acted on or taken on board.

It was reported and not acted on.

Mr. Sean Giffney

Yes. We feel the system is a sham and it is dangerous but nobody is doing anything. If it takes legislation or whatever to change it, we need something done.

Dr. Paul McGowan

On the point about the number of boilers, I have to make it clear that no verifiable statistics are available in respect of boiler sales. Informal surveys have been carried out. I reassure the committee that just because somebody bought a boiler and had it installed does not automatically mean it is faulty or a risk to him or her. It is not a situation that we want to happen but I want members of the public to be aware that gas is generally a safe product, provided a registered gas installer is used.

Mr. Giffney said the APHCI reported people who were installing boilers illegally and it was not acted on. Will the CER respond to that?

Ms Sheelagh Rooney

We have had a number of engagements with the association and we are satisfied that any complaint addressed to us or the RGII has been investigated fully.

I thank both delegations for attending and for their presentations. It is important to make sure people are safe in their homes and to protect businesses and those who are registered and working legally. If 30,000 boilers have been installed and 12,000 certificates are returned, that means the other 18,000 are installed by unregistered gas installers. If there were only ten or 11 prosecutions over recent years, that is worrying. While this does not involve 18,000 individual installers, there is a crossover. What is the CER's policing system? If it is able to undertake audits and inspections of registered installers, how does it address the issue of those who are unregistered? I assume its staff cannot knock on someone's door and ask him or her whether they can see the boiler and ask them to produce the certificate.

When people are prosecuted, is there a follow-up to ensure they are either registered or not trading? What information is needed for conviction? Is it a lack of information that is preventing the CER from securing convictions? Does the policing system rely solely on communication given the CER cannot audit people who are not registered?

A division has been called in the Dáil. I will allow a reply to the Deputy's questions and then we will suspend.

Ms Sheelagh Rooney

The scheme audits and inspects the installers who are registered. They are subject to yearly audits and inspections of their work.

On the policing system, to tackle people who are either carrying out work when they are not registered or portraying themselves as registered when they are not, we rely on the public or anybody in the industry to alert us to this fact, and that is why the publicity awareness part of the scheme is important. It is essential that the public and the industry know what are the requirements. People alert us to allegations of illegal work undertaken in their homes by someone who is not registered or someone who is portraying himself as registered when he is not. A number of our personnel are dedicated gas safety officers and they will open up a case based on the allegation and go through a full and rigorous process, taking witness statements, etc., in line with best practice procedures. It is important for us to ensure we have a solid case before going to court. We are satisfied with the process we have in place because every prosecution we have brought has been successful. In summary, we rely on people reporting to us and then we act on those reports but anyone can make those reports either anonymously or otherwise.

If somebody is registered and has carried out work that the public is dissatisfied with, the RGII is contacted and that will be investigated and potentially lead to disciplinary action against the registered gas installer who could then be suspended from the scheme.

If the CER has no ability to police this without communication from the public and is not the one making the first move, does it need more power to carry this out or is it an impossible task?

Ms Sheelagh Rooney

References have been made to us being more proactive regarding illegals, for example, through surveillance activities, etc. The difficulty is that when one undertakes such activity and one does not have surveillance power - we are not the Garda - we would have difficulty in court potentially in undertaking a successful prosecution in that regard because there could be accusations of entrapment, for example, with us allowing someone who was not registered to carry out work, which would be illegal. We follow best practice procedures to secure prosecutions and, therefore, we do not undertake surveillance to do our job.

Does Ms Rooney agree that the CER needs more assistance to carry out that duty effectively?

Ms Sheelagh Rooney

We are satisfied that by continuing to increase our enforcement resources, we will continue to have success, but we are reliant on the public to know the requirements and to alert us if they feel they are not being met.

Sitting suspended at 11 a.m. and resumed at 11.15 a.m.

I thank the APHCI and the CER for coming here today. Deputy Dessie Ellis has a number of specific questions he wishes to ask so I will brief.

There have been 100,000 illegal boilers installed since June 2009. There may be some disagreement over the figures, but that figure is frightening. Mr Giffney describes it as the gravity of the situation facing the gas industry. I am concerned about that but I am more concerned about the gravity of the situation facing the public. If there have been 100,000 illegal boilers installed since 2009, this means that there are hundreds, if not thousands, of people illegally installing boilers.

I recently met Paul Duffy, who I believe is a member of the APHCI, and he took me around one housing estate. I am not an installer or a plumber, but it was obvious, even to the layman's eye, that some work had been carried out externally.

The dynamics that are at play here are, first of all, legislation. There have been roughly 100,000 illegal installations, yet only 45 cases have been taken. This indicates that there is something wrong, either with the legislation or the implementation of the legislation. As legislators, we need to determine why this is.

Obviously the costs of it will be an issue as well because if there are more inspectors needed, this will cost the public more. I am conscious that all I saw was the external work that had been done. I did not see, nor would I be qualified to comment on, the hidden work that had been done, for example, the pipes that would be in concrete and rubber coating. I am not aware if those kinds of things are being inspected.

What is of biggest concern to me is that the focus appears to be on registered installers while the legislation may not be strong enough in relation to unregistered installers. There is much work going on in looking at the work of the registered installers but there does not seem to be much work going on in relation to the unregistered installers. That, in my view, is the gap that exists. Does the CER agree with that analysis?

The APHCI has suggested that there should be an independent review of our system in Ireland. Can its representatives present give international examples of best practice in terms of regulation of the gas industry? Can it suggest a country that might provide a good model for regulation?

Dr. Paul McGowan

I will address the point made about legislation for non-registered gas installers, and Ms Rooney may add to my response. The legislation is quite clear. To carry out gasworks if one is not a registered gas installer is a criminal offence. I believe the legislation is very clear in relation to that. The CER has made it absolutely clear in terms of both the publicity that we carry out and in our discussions with the APHCI and other industry stakeholders that any case of suspected illegal activity, if reported to us, will be investigated. The law in relation to non-RGIs is very clear. As I said, the CER sees the key issue here as being a three-pronged approach of communication, registration, and ensuring that registered installers are insured, audited and inspected.

Would the CER regard as proportionate a situation where there have been approximately 100,000 illegal installations yet only 45 legal cases?

Dr. Paul McGowan

Ms Rooney may be in a position to provide more information but as we understand it, the CER's prosecution rate is comparable to that in other jurisdictions.

Ms Sheenagh Rooney

The CER does dispute the figures.

I would like to think there are verifiable statistics for the numbers of boilers sold, but the truth is there are not. We have tried to replicate the survey conducted in 2011, but have been unable to do so. On a more positive note, we have been engaging with the CSO to find a way to gather these numbers. It is not straightforward, but we are determined to keep going to try to come up with a verifiable number of boilers sold.

It is important to remember that gas is a safe fuel and that boilers are constructed in accordance with international standards. We are also tackling the issue that the number of boilers installed does not necessarily match the number of certificates returned. It could be the case that a boiler has been serviced by a registered gas installer and that he or she has not returned the certificate. This is an issue we have identified with the scheme and we have put much effort into addressing it. Processes are now followed, whereby if a registered gas installer continues not to return certificates, he or she will be suspended from the scheme. This initiative has led to the return of an increased number of certificates. For us, it is about concentrating our efforts on the elements of the scheme which are completely workable but require constant effort such as the work undertaken to improve elements of the scheme and enforcement.

A point was raised about best practice elsewhere. We are confident the key pillars of our system - requiring people to be legally registered, publicising the requirements to be met among the public, and enforcing, where necessary - stack up against any scheme we have come across elsewhere, including Britain and Northern Ireland. We do not tolerate illegal activity and, as we have stated, if anybody contacts us about illegal activity, we will follow up on it and have done so.

Mr. James Egan

The CER is responsible for putting in place a comprehensive system of safety. The law states a certificate must be returned for each job done. Resources are not the issue. The people paying for this - this is a big issue for us and an insult in many ways - are the installers. Not only have we paid for it, but we have also paid for a sinking fund. The number of inspectors in Northern Ireland for 2,000 installers is one. He looks after all 2,000 people by himself. He also tackles the illegal market and has relationships with suppliers. If he gets an inkling that somebody is operating in the black market, he calls to his or her house, knocks on the door, marks his or her card, states he has heard that he or she has carried out illegal work and that he is watching. He will get somebody to sit outside overnight if he thinks it is necessary and the person to register. There is no willingness to do anything like that here. In the Republic there are eight inspectors for 2,775 installers. The inspectors concentrate on registered gas installers. They visit each installer once a year and the average number of inspections is 1.6 per day. The average cost of an inspection is €480 to the installer and inspections take approximately 30 minutes.

The commissioner spoke about confidence in the system. We have conducted a survey and there is no confidence in the system. If the intent is to have confidence in the system, there is none. How can 100,000 boilers be installed without certificates if the system is working satisfactorily? It is nonsense.

Ms Sheenagh Rooney

It is important to clarify two points. With regard to the comparison of our scheme with that in Northern Ireland, we feel very strongly that ours stacks up really well. Mr. Egan referred to the inspector in Northern Ireland marking an installer's card. We do not tolerate marking anyone's card if there is an allegation of illegal activity. We will proceed immediately to open a case file, gather evidence and take the person concerned to court. We do not mark anybody's card and do not give second chances.

In Northern Ireland those who are registered are inspected only every three to four years. Under our scheme every registered person is inspected once a year; those who are new to the scheme are inspected more often than this. We are always looking at our scheme to see how it could be improved and always looking to see how it compares with others. We are confident that it stacks up very well compared to other schemes identified. There are resources in the CER for our gas safety officers who investigate any complaint of illegal activity and in the Registered Gas Installers of Ireland to oversee those who are registered.

We can quibble about the figure of 100,000 for the number of illegal installations since 2009. Even if the number is half of this figure and there have been 45 cases, there is something wrong with the picture. A magnifying glass is being placed on compliant registered installers and there is a dependence on members of the public knowing enough to ring the number to state the chap installing their boiler is not a registered contractor. Even if one takes the figure for illegal installations to be 50,000, although it has been suggested here credibly that the number is closer to 100,000, something is not working if there have only been 45 cases. The intention is good and the legislation is strong with regard to registered installers, but there is something wrong with the picture if we have tens of thousands of illegal installations and only 45 cases have been taken.

I apologise for missing the start of the meeting. I had a question to ask in the Dáil Chamber, but I followed proceedings on the monitor. When I was listening to some of the contributions, I did a quick search of classified advertisements on Google. I do not know whether the CER relies solely on the public, but through Google I have a list of five or six people who are advertising as gas installers and I doubt if any of them is registered. All of their telephone numbers are available. It is remarkable that one has to rely on the public to detect this activity. One advertisement has been placed by a person who will undertake a gas installation, wire a house and do painting and timber work. This is very serious and no laughing matter. I am stunned that the CER is relying on people to telephone to complain and that only 45 cases have been taken.

The reason I am annoyed about this - I ask the Chairman for his indulgence - is a young woman in my constituency, Miriam Reidy, who went with her family to enjoy a hen party in west Cork. With her sister and members of her extended family, she stayed in a hotel in which she died from carbon monoxide poisoning. During the inquest it was mentioned in evidence that the amount of carbon monoxide in the room had been beyond detectable limits, in other words, it had exceeded the maximum limit. The room had been flooded with carbon monoxide, such that it is amazing that only one person died in the hotel that night. Ms Reidy's family in Ballyhahill, west Limerick deserve to know that this issue is being taken seriously. Their daughter went away for a weekend and never came home. The reason she never come home was that the boiler in the hotel had not been installed correctly. We do not have to wait for another incident; this girl is dead as a direct result of something that should never have happened. It was a failure of the system.

The Dáil is discussing a law that has been introduced to reduce speed limits in housing estates because a young child was killed. It took that child's death to reach consensus in the Houses that something needed to be done. For the life of me, I do not see how the status quo can be defended or why the commission, the Department and the regulatory authorities cannot admit that the current system is not working. This girl's memory deserves more than defending the indefensible. She is not coming home and never will. Her family have been left with question marks over how someone installed a boiler in good faith but incorrectly and no one inspected it. There was a lack of regulation and a total collapse of the system in protecting an unsuspecting person. The boiler was not in a home but a hotel. It could have been in a nursing home, a private hospital, a public hospital, etc. We should drop the defence because the system is not working. If it had been working, this girl would have been back at her job in AIB the following Monday. Instead, her family had to accept her remains. That is the reality. As the system does not work, I would like people to stop defending it.

Mr. Sean Giffney

I will revert to the figures. I would hate it if any committee member believed we had distorted the figure of 100,000 illegal boilers. According to the 2014 figures we have obtained, 34,100 gas boilers were sold. Last year we exceeded the figure of 20,000 illegal gas boilers being installed. One does not need to be Sherlock Holmes to discover how many gas boilers are sold. One only needs to contact the appropriate merchants selling them. We have a great relationship with them. We have tried unsuccessfully to educate the Commission for Energy Regulation, CER, on how to obtain this information. It has been trying to obtain accurate figures for the past three years, but it has failed to do so. We have also asked it about getting the merchants that are selling products to the illegal operators on a daily basis to put up signs pointing out that it is illegal to install gas equipment unless one is a registered gas installer. Our request has been refused. The CER has failed to accept any proposal we have put to it to date. For example, it has refused to contact the Irish Insurance Federation, IIF, to require insurance companies to request declarations of conformance for gas works. It has failed to take action, allowing registered gas installers to work after a ten-day training course. Registered Gas Installers Ireland has 2,700 members. We asked how many of these had entered our organisation as registered gas installers having only completed a ten-day training course. Our evidence suggests carpenters, machinists, labourers, JCB drivers, taxi drivers and so on have entered the registered gas installer scheme. I have evidence that a man from a foreign country approached me approximately three months ago with GI1 and GI2 pass certificates stating he was a qualified gas engineer, yet he did not have a clue what a gas boiler even looked like. He wanted to know whether I would take him on for a six-month trial period and let him work with my installers in order that he could learn to service gas boilers because he had been told that there was a good income to be earned from it and that there was very little work involved. That is what we are up against.

I thank Mr. Giffney.

Ms Sheenagh Rooney

It is important to acknowledge the Deputy's contribution on the sad case of Ms Miriam Reidy. We are aware of it and, unfortunately, other cases of deaths due to carbon monoxide. We take our responsibilities in that regard seriously. That is why we are involved in the carbon monoxide campaign, in which we try to emphasise the need for people to know the causes, to maintain their boilers and, if necessary, to have carbon monoxide alarms installed. If we can get that message across today, it will have been worthwhile.

As to what we are doing about the problem, it has been acknowledged that the incident occurred on a commercial premises. While the scheme we have put in place tackles the issue of the competence of those installing on domestic premises, it does not tackle the requirement for someone to be registered in the case of commercial premises. Last year we published a consultation paper on our website, with the specific purpose of bringing the requirements that applied in the domestic sphere into the commercial one. We will shortly publish a draft decision paper proposing a scheme to require those conducting such gas works on commercial premises, including hotels, to be qualified, trained, audited and inspected. This is something concrete we can do to extend the scheme and protect people's safety.

Every gas incident like the one mentioned is reported to us. We co-ordinate a gas safety committee comprising various representatives, including of the Department and people involved in the industry. We examine every incident to determine whether anything can be done to make the standards or elements of the scheme more rigorous.

Deputy Helen McEntee has rightly brought a point to my attention. While what Ms Rooney has stated is laudable, it does not mean that the people in the hotel or other commercial premises will necessarily co-operate. With the Chairman's indulgence, I will revert to my original point:

Hi, i am qualified Carpenter, Handyman, furniture assembler, furniture fitter, cabinet maker. Also i have background experience with plastering work, flooring, tilling, shop fitting and appliences water, gas, electricity installations.

This advertisement is on the Internet. In the current climate where people are hard-pressed for money for one reason or another, if someone wants a good deal on an installation - the delegates can shake their heads if they want - and, as I did, googles "cheap gas installer" and comes across this advertisement, is it any wonder people are being smothered to death because of carbon monoxide poisoning? Unsuspecting people who have difficulty in running their households will naturally opt for the cheapest option they can find. They have never heard of the CER, RGII or the like, but they know the value of the euro in their pocket. In many cases, they do not know about carbon monoxide because it does not affect them until it is too late. If one googles "cheap gas installer Limerick", "cheap gas installer Cork" and so on, one will find a person who can do everything in a house, from digging the foundations to hanging gates. Is it any wonder that we are having this discussion? That is why I am annoyed. Last night I spoke to the family members of the girl mentioned. They want to ensure no one else will have to go through what they have gone through.

Consultations and consultation documents are great, but what the public want is an assurance that those advertising as gas installers are competent. One should be able to receive that assurance by way of a Google search, rather than having to hire someone from Special Branch.

The Deputy's point is well made.

Mr. James Egan

Another example of the problem highlighted by the Deputy is provided by the taxis that were displaying advertisements on the back of them in relation to RGII. I do not know the exact specifics of the case mentioned, although I have heard something about it. My understanding of the regulation - I may be incorrect - is that while industrial and commercial boilers are not covered, a domestic boiler fitted in an industrial or commercial premises is covered. My understanding is that in the case in question a domestic boiler was fitted in a commercial premises. Again, I cannot be sure about this.

I would like to make an important point. People who have problems in their homes are not being told to contact RGII to make a complaint; rather, they are being told to contact Bord Gáis Networks or Gas Networks Ireland. Each year approximately 19,000 calls are made to Bord Gáis Networks and 4,000 plus safety clamps are installed in people's homes. Bord Gáis does not investigate the cause of the problem in the house. Up until recently, it had not been telling people that they must contact RGII about such problems. It is reasonable to assume that if a domestic customer with a problem in his or her home contacts Bord Gáis, the problem will be dealt with. When the CEO of Bord Gáis Networks appeared before the committee, he said that in such cases a Bord Gáis representative would call to the house and clamp the meter. He said that was the sole responsibility of Bord Gáis Networks, but I do not understand how that can be allowed.

Following on from that, we asked that people whose supply had been safely disconnected be given the AHPCI leaflet, but that is not being done. The leaflet informs people who have had work done in their homes, in respect of which a problem has arisen and as a result of which their meters have been clamped, that they should report the matter to RGII, which will then send a representative to the house to investigate the matter.

Who has been asked to do this?

Mr. James Egan

We have asked the CER to do it. There has been some discussion about it. A person whose heating has been cut off in the middle of winter needs to have the problem fixed immediately. People do not necessarily have the time to contact RGII online, fill in forms and then wait some days for a reply. They need to have their problems addressed immediately. By the time RGII contacts them - if it does - the evidence is gone.

We need to move on. There are two other members waiting to ask questions.

Ms Sheenagh Rooney

I should have pointed out that in addition to looking for assistance from members of the public and people involved in the industry to alert us to illegal activity, we also monitor advertisements. Last year, for the first time ever, we were successful in taking prosecutions against individuals who had been portraying themselves as being registered when they were not. It is important to point this out.

The CER now has another advertisement to investigate.

How many prosecutions arose from advertisements?

Ms Sheenagh Rooney

I do not recall exactly, but I would say approximately two or three.

I have a list of many such advertisements.

Ms Sheenagh Rooney

We will look into any advertisement which relates to persons or companies that people suspect are not registered. It is easy to check whether somebody is registered.

It appears they are all unregistered.

Ms Sheenagh Rooney

If people are portraying themselves as being registered and they are not, that is a criminal offence and we will look into it.

On the role of Gas Networks Ireland and safety disconnections, the first priority when an issue about safety at a house arises is to make safe and address the hazard. The second is to provide information for the customer on how he or she can act to protect his or her safety. It could be the case that a registered gas installer carried out work which led to the problem, but it could also be the case that the problem arose for other reasons, including that the boiler had not been serviced or there were signs of carbon monoxide. The advantage of the leaflet which is given on the day is that it contains all of the relevant safety information. That is the reason we went with that leaflet, as opposed to the one shown here today.

I will allow questions on this issue from two more members, following which we will have to move on to deal with the gas and electricity prices issue. We will take questions from Deputy Dessie Ellis and Senator Paschal Mooney together.

I thank the CER and AHPCI for their presentations. There appears to be a dispute between the two groups about the scale of the problem. It has been stated approximately 30,000 boilers are being sold on a yearly basis, of which only approximately 12,000 are being certified, and that up to 100,000 have been been fitted illegally. If there are 600,000 gas customers, this means that one in six boilers has been fitted illegally. This needs to be verified. I note the statement that the CER is struggling to verify it. In 2011 Mr. Dermott Jewell of the Consumer Association of Ireland carried out a survey of main dealers. The figure he came up with was 27,500. Has he been consulted on the basis of that survey? He should be because it would give us some idea of the scale of the problem. If the scale of the problem is anywhere near that figure, there is a big problem in terms of regulation. We certainly need further investigation of the issue by RGII, which needs to be given additional powers in this regard.

I note that RGII has stated it is not responsible for weeding out illegal installers. While it may not have responsibility, it should have a role to play in verifying the scale of the problem. I have had many experiences of gas boilers and plumbing in general. Huge issues in this regard arose in the Ballymun regeneration project. Throughout the Celtic tiger era many contractors subcontracted out work, the standards of which was, in many cases, very poor. We now have a huge number of housing estates, the work in which was signed off on, but it was substandard. According to Bord Gáis Networks, there has been a 33% increase in the number of gas escapes. Has consideration been given to engagement with it on the putting in place by it of a mechanism through which it would engage with every customer in time? I accept that it would be a big ask, but if the scale of the problem is as great as stated, it is important that Bord Gáis Networks engage with each customer. I acknowledge that it will take some time to ascertain whether all boilers, etc. meet the required standard, but we may need to establish an inquiry to examine this issue. I am not aware of the penalties applied in this area. Perhaps the delegates might address that issue. The suggestion that identification numbers be printed on boilers is a good one.

The Minister, Deputy Alex White, in his letter to the AHPCI states, "neither I, as Minister, nor my Department has any role in gas safety." What is the view of the AHPCI? Is gas safety solely its responsibility? Surely, the Minister has some responsibility in this regard. It is not sufficient for him to say he has appointed a regulator and that he has no role in the matter. I would welcome hearing the delegates' opinion.

How many inspectors are attached to the CER? When replying to that question, the CER representative might also respond to two specific points raised by the AHPCI.

One relates to the insurance dimension; it is similar to the issue of the inclusion of alarms in the household insurance process. What communications have there been with the insurance industry? There is a proposal that legislation needs to be introduced to force merchants to sell boilers only to registered contractors. We should take that on board and fully support it if it is a legislative issue. Does the Commission for Energy Regulation, CER, have a view on this or support such a process?

How many merchants are there? The contractors have indicated they have a good relationship with merchants, so why have they not initiated a type of publicity campaign in association with merchants, such as putting up signs in shops? I appreciate that they may argue it is a matter for somebody else, but as they are directly affected, have they gone down that road and would the merchants respond to that?

In the context of an answer to the question about the number of merchants, inspectors and resources, is it feasible for the CER to give a tap on a shoulder at the point of sale, asking whether somebody is registered? Mr. Giffney mentioned a figure of 20 boilers sold every day. My colleague, Deputy Moynihan, wished to ask about the statistic that emerged in the last exchange with Bord Gáis that there are 4,000 households that have had appliances clamped, presumably because of health or safety issues. Could the CER use that as a starting point and liaise with Bord Gáis to identify the problem with those 4,000 households? At least that would result in progress in specific areas identified as allegedly suffering safety issues as a result of improper installation by allegedly illegal boiler installers.

There was one question that was not answered, relating to those who are prosecuted. Is there follow-up to ensure they either register afterwards or leave the trade?

I have a question that just requires a "Yes" or "No" answer. If I live in the north west and have a natural gas supply, how could I find registered gas installers in the area? Could I search on the Internet for gas installers in County Leitrim?

Ms Sheenagh Rooney

Yes.

Will the witnesses begin by taking the questions from Deputy Ellis and Senator Mooney?

Ms Sheenagh Rooney

The RGII website has a list of registered gas installers. It can also be contacted by phone, and we have provided the number. CER gas safety officers investigate illegal activity, and there are currently two full-time and two part-time gas safety officers. That number has increased over the past year. We are satisfied with the resources we have for the legislative framework. The RGII regulates registered installers and it has five full-time gas inspectors. It also has a person overseeing those gas inspectors. The CER also inspects the inspectors from the RGII, auditing them and their processes on a yearly basis. Every inspector has one inspection per year.

The issue of following up prosecutions was raised by Deputy McEntee. If there is a successful prosecution against somebody for being unregistered, with a fine levied, it is open to the person to enter the scheme again and become registered. Such an installer would become registered only by meeting all the criteria, including qualifications and work for inspection, with an audit and inspections undertaken in that respect. Our objective is to get as many people as possible registered.

We have endeavoured at all times to follow up on any ideas that anybody has on how the insurance scheme could be improved. One idea is a requirement under home insurance that a person must show that a boiler is being serviced by a registered gas installer. We have written to the Irish Insurance Federation about that but as of yet we have not received a reply. We have engaged with merchants to see if they would be willing on a voluntary basis to sell boilers and appliance parts only to people who are registered, as we do not have legislative power to make it mandatory. Some merchants have taken this on board but others have not. We have also asked merchants to display publicity material at sales counters to reinforce the message to the public of the benefits of using a registered gas installer.

There was a query about the penalties that apply. These were indicated in our presentation. There is a difference between charges on indictment and summary charges; all our prosecutions to date have been for summary offences, so people are subject to a fine or term of imprisonment. All we do is investigate illegal operators; we bring a case to court but ultimately, it is a matter for the court as to what punishment is levied, particularly the amount of a fine. There have been fines in the region of €1,000 for illegally operating or portraying one's self as a registered installer.

One would hope a person would register after being prosecuted and fined, but is there a list that can be checked to see if the installers are continuing to work while unregistered?

Ms Sheenagh Rooney

We follow up and concentrate on people who have had convictions. We check to see if they are working and registered. If people are facing court cases for work that may not be up to standard, we can identify other work done by them and inspect them more than we would other parties.

Dr. Paul McGowan

Legislation pertaining to sale of boilers is clearly a matter for the Oireachtas and not within our remit. Anything to ensure boilers are installed by registered gas installers would be welcomed. The term "tap on the shoulder" was used. I can compare that to the publicity we would gain from a successful prosecution. Such publicity has a better return, so to speak, in terms of getting the message out that an installer must be registered and a person must use a registered gas installer when an appliance is being serviced or installed.

We are in continuous discussion with Gas Networks Ireland about safety, as we also regulate it from a safety perspective. The scale of safety disconnections is an indication that the entire process of ensuring gas safety is working. When identified, these appliances are being disconnected, with steps taken to advise the person affected of what steps can be taken to rectify the position. A safety disconnection may not necessarily come about as a result of faulty installation or a particular issue. It could come down to age or damage.

Have all the more than 4,000 safety disconnections been followed up comprehensively?

Ms Sheenagh Rooney

Primarily, the entity we regulate in that regard is Gas Networks Ireland. As I said, it is important that, first, it is made safe and, second, the public are aware that if there is a safety issue they should contact a registered gas installer. Those are the key messages we are trying to convey. In addition, if there is an incident where, for example, there is a fatality, injury or damage to property, there is a legal requirement to notify us. We investigate all incidents that are notified to us. We also investigate all incidents involving carbon monoxide. We follow up on all incidents that come to our attention.

I am anxious to bring this to a conclusion, as we have another session.

There are still a few questions that were not answered.

Be brief, please.

I asked about the survey that was carried out by the Consumer Association of Ireland in 2011 about gas boiler sales. There were 27,500 sales among the main brands in 2011. Did the CER engage with Dermott Jewell to find out how he came to that conclusion? The witnesses said the CER had no evidence of the number of boilers.

The other issue is that the RGII said it was not responsible for weeding out illegal installers. The CER should be responsible for finding out the number of illegal installers.

Ms Sheenagh Rooney

RGII is not responsible for the illegal element. That is a responsibility for the CER. RGII is responsible for running the scheme of the registered gas installers and disciplining those installers, if necessary, as well as keeping a register, training, and audits and inspections of the registered part.

Regarding the survey conducted by Dermott Jewell, we followed up on that and we tried to replicate the methodology he used by contacting all the merchants ourselves and trying to see how we could verify his figure. However, we were unable to arrive at a figure that was close to his figure. In saying that, however, we must acknowledge that there is illegal activity. We are committed to addressing that illegal activity. It is a shortcoming that we do not know the extent of it, but we will continue to do whatever we can, with both the association and others, to arrive at a true picture of the amount of illegal activity taking place.

Mr. James Egan

I will be as brief as possible. For the first three and a half years of the scheme, Bord Gáis Networks visited more than 19,000 homes per year, and we have already discussed clamping. There is a memorandum of understanding between Bord Gáis Networks and RGII, supposedly, that if RGII finds something it will send it over. In the first three and a half years no complaints were sent over. In the first three and a half years there were three prosecutions. Two of them were never publicised. It took us ages even to find out the details. We could not get them. That was the situation in the first three and a half years. It picked up last year, when seven were caught. Bord Gáis Networks is obviously getting a little more proactive, but in the overall scale of things this is really tiny.

The overall problem is that the system is not fit for purpose. There is a huge hole in the system. It is all geared towards regulating registered gas installers. There is nothing about proactively looking for illegals, and it is the responsibility of the CER to put in place a comprehensive safety system.

Regarding the merchants, it was we who approached them and got three of the main merchants to sign up to a voluntary scheme for parts. We approached the CER about it and it said it could not impose it on merchants. We asked the CER to ask them to participate. The CER did that and got one or two more. However, it is mainly on parts. They are not doing it on the boilers and the main reason is that they would simply go out of business if they did it at present.

There is a final point. Could this be solved with the stroke of a pen, with boilers only being sold to registered gas installers or consumers - such as any of us - who provide evidence of who is to install it and hand over a certificate to show that the installer is registered? Would that require legislation and would that resolve it?

Mr. James Egan

It would certainly solve the main part of our problem. It would go a long way.

I presume that would require legislation.

Dr. Paul McGowan

It is certainly worth exploring. We would be happy to discuss that further, but it would require legislation.

That is fine. As I said at the start, the objective of today's meeting was to highlight this, inform people and see what the committee could and could not do. We cannot investigate, but we can issue a report. That is the reason I asked the last question.

Mr. Sean Giffney

I apologise to you, Chairman. In my opening address I thanked Deputies Moynihan and Ellis. In my excitement to proceed with my address I did not thank you, Chairman, for all the hard work you have done for our members in both Mayo and Dublin.

Not at all. You have all sides covered now.

Chairman, Mr. Deane, who has not contributed, raised his hand to speak.

My apologies.

Mr. Crozier Deane

We have heard a brilliant defence from the CER, and every question asked was not answered directly. For example, with regard to Dermott Jewell, the committee got the answer that the CER had followed it up, but there was no follow-up with Dermott Jewell except a letter which was, in Mr. Jewell's view, absolutely unacceptable. That is the approach it takes. It will not be proactive. I have come from another industry and I believe the regulation in this industry is absolutely appalling. If it happened in the industry I was in previously, there would be a Dáil inquiry about it. Unfortunately, I believe in the near future we will face an inquiry into deaths. It will not be about the person who has not got the boiler in their own house serviced but the person in the house next door who has not got their boiler serviced and it blows up. How somebody can say that gas is safe when 60% of boilers are installed illegally is just incredible.

In the interest of fairness, I will let the CER reply.

Mr. Garrett Blaney

I thank the committee. I realise it is very busy, but this is an important issue. There are people who are not registered and we need anybody who can to help us to try to find them and prosecute them. We appreciate the time. This has been a very helpful debate and we will consider further the information from it.

On behalf of the committee I thank Mr. Sean Giffney, Mr. James Egan and Mr. Crozier Deane of the APHCI, and the commissioners from the CER, Mr. Garrett Blaney, Dr. Paul McGowan and Ms Sheenagh Rooney, for appearing before it today for this issue to be aired in public. We all agree that it is a very important issue.

We will suspend the sitting to allow the APHCI representatives to leave, after which we will resume our engagement with the CER regarding consumer prices for electricity and gas.

Sitting suspended at 12.09 p.m. and resumed at 12.20 p.m.

On behalf of the committee, I again welcome Commissioner Garrett Blaney, chairperson of the Commission for Energy Regulation, who is now joined by Commissioner Aoife MacEvilly, Ms Laura Brien and Ms Adrienne Costello of the commission for this part of the meeting. We have stated the house rules already; the witnesses heard them earlier.

Mr. Garrett Blaney

Commissioner Aoife MacEvilly is our lead commissioner in retail, so she will talk through the presentation. She will be supported by our director of markets, Laura Brien.

Ms Aoife MacEvilly

We will take the committee through a brief presentation in this area. I will begin by explaining the key cost components of an electricity and gas bill and then I will hand over to Ms Brien, who will talk the committee through recent developments in wholesale markets and how they affect retail prices.

Our first slide shows some of the components in electricity and gas bills. The first element is the network charge. In electricity, that relates to the costs of operating, maintaining and developing the transmission and distribution lines that bring the electricity from generators to our homes and places of business. This amounts to around 30% of the final bill. The CER has a role in regulating those costs, because there are monopoly providers of those services. Our focus is on ensuring the least-cost investment in necessary infrastructure and driving efficiency and innovation for ESB Networks and EirGrid in that area.

We then move to the market component of the bill. For electricity, there are two elements. There is the wholesale element, namely, our generators. There, the CER has a role, along with our Northern Ireland counterparts, as part of the single electricity market committee in setting the rules for this all-island competitive single electricity market. Those rules are, again, about ensuring that we get the least-cost generation portfolio to meet demand at any given time. That element of our bill, the wholesale cost, constitutes about 50% of the final bill. We also have a competitive retail market. The activities of the suppliers around billing, customer service and buying the electricity for the customers constitute 12% of the final bill. The CER has a role in regulating the activities of suppliers, particularly to ensure that competition is working for the benefit of consumers and to ensure a significant level of consumer protection in that area.

Finally we have the levies, which are shown on electricity bills as the PSO levy. This is effectively a Government policy instrument to support particular types of electricity generation, including renewables and peat. That amounts to 8% of the final bill. There is no PSO levy on gas but there is a similar breakdown of networks, namely, the pipeline and interconnector conveying gas to our economy, primarily from Scotland. That is about 40% of the bill. There is also the cost of purchasing the gas in the UK market and bringing it across, which makes up the remainder of the bill.

About 50% of the gas bill will be impacted by falling fuel prices on wholesale markets. The single electricity market generation aspect of the electricity bill is not all about fuel but gas will drive 30% of the final electricity bill at the moment.

I hope that helps explain how the wholesale price fits into the bills. I will now hand over to Ms Laura Brien, who will take the committee through recent developments and recent price changes.

Ms Laura Brien

While there has been a great deal of information in the press recently about the 50% drop in oil prices, oil prices do not impact on the retail prices for either electricity or gas. Oil-fired generation accounts for less than 1% of the generation in Ireland, so the 50% drop in oil price will not feed through into a drop in the retail electricity or gas prices. Natural gas prices are what matters in this context. They have the big impact. About 95% of the gas consumed in Ireland comes from Great Britain, which is one of the most liquid and transparent wholesale markets in Europe. In that context, the gas cost is out of Ireland's control. We are a price taker in that we accept the wholesale price from Great Britain. In the context of fuel price declines, gas prices have declined by about 18% over the last 12 months in euro terms. They have declined a bit more in sterling terms, but since the euro has weakened against sterling, we get a correspondingly lower reduction in gas costs in Ireland. While that 18% is significant, it is not the 50% we have seen on the oil prices. The British price counts for about 50% or more of the cost of gas delivered in Ireland, the rest of which is the cost of delivery, that is, the cost of the network of pipes.

We have not seen a similar reduction in retail prices because of the decline in gas prices but this is partly because suppliers buy ahead at fixed-price contracts, a practice often referred to as "hedging", on both the electricity and gas sides. That is to provide greater retail price stability. It works both ways. It tends to take about six months for a change in fixed-price contracts to feed through into retail prices, so when the spot price is declining, the fact that there are fixed-price contracts means that there is a slower rate of decline that feeds through into retail prices. Similarly, if spot gas prices were rising, we would see a slower response to a price increase. The graph on slide 5 of the presentation, in which the red line reflects the euro value and the blue line reflects the sterling value, shows that while we have seen a decline in wholesale gas prices, headline sterling gas prices have dropped closer to 25%, while there has been just a 16% to 18% drop in euro prices.

How do Irish electricity and gas prices stack up compared to the rest of Europe? The graphs here come from the most recent EUROSTAT report, which was published in December 2014. We have highlighted Ireland in the graph on slide 6 so it is easy to see where we are with respect to the rest of Europe. Domestic electricity prices, shown in the graph on the left, are marginally lower than the euro area average and business electricity prices are approximately the same as the euro area average. We are in there with other European countries. The difference compared to some of the lowest-cost countries is primarily explained by our generation mix. The majority is gas, while those countries with coal-fired generation or hydro-generation have lower generation costs. We also have a relatively low density population, which is dispersed, meaning that we have relatively higher network costs because we need more kilometres of wires to service a similar population.

Slide 7 shows recent trends in gas prices. This is the same report that was published in December 2014 by EUROSTAT. We are about 6% lower than the euro area average for domestic gas prices and around the average for business customers.

Our location on the periphery of Europe has an impact because, while we have the opportunity to buy at the British wholesale market price, we have additional transportation costs and the cost of networks to ship it primarily from Scotland to Ireland.

Members may also be aware of recent domestic price changes. We have seen the reduction in gas prices feed through into wholesale electricity prices and they have, in turn, led to reductions in the prices charged to domestic customers. The prices listed apply to both the standard charges of each supplier and the discounted charges. The reductions range from 2% to 4% on electricity and 3.5% to 4% on gas. The CER welcomes the reductions and we think it important that they have applied to both standard and discounted charges such that all customers will benefit from lower prices.

The overview provided by Ms MacEvilly indicated that the CER does not regulate end-use retail prices for customers. However, significant benefits come to customers from retail competition. We regulate and oversee the terms and conditions offered by suppliers but we do not fix the prices for end users. Strong competition and price deregulation have helped to deliver competitive prices and innovative products as well as more choice to customers. We have also seen this by the entry of new competitors into the market over the past years. Standard rates have declined and we have seen increased availability of discounted offers for customers who switch suppliers. We think retail competition is working in Ireland, as evidenced by the switching rates. This is the rate at which customers choose an alternative supplier in response to the offers available. Switching rates in the Irish gas and electricity retail markets are high. In the 12 months to the end of 2014, just over 16% of electricity customers switched suppliers and just under 16% switched in gas. These are significantly higher rates than in other European countries. They are also higher than those of our nearest neighbour, Britain, where the most recent data show 12% of electricity customers and 11% of gas customers switched.

Switching supplier is simple, fast and free and has no impact on the cost of supply. All that is needed is the meter number and payment details. It is easy to do it over the telephone or online. For customers to get the best deal, we recommend shopping around. The CER credits two price comparison websites that provide lists of all available price offers. People can also contact the suppliers to see if a lower tariff is available. If they are happy with the existing supplier, there may be better offers than the standard tariffs.

The CER actively overseas customer protection through the licensing of suppliers and monitoring of their activities. We do so on an ongoing basis and audit the operations of suppliers to make sure they are complying with terms and conditions of codes of practice. We also actively monitor the operation of the market through examining market share and switching rates. We also monitor the level of disconnections and report regularly on price plans. We have a role with regard to customer complaints and overseeing how suppliers deal with customer complaints and follow-up where it is not appropriate.

This came about because of the fall in fuel prices and gas prices. Ms Brien has clearly identified that gas is at issue. Some of the providers have reduced their prices in the past number of weeks but this is not coming into play until late March or April. The public is saying that it goes up quickly but does not come down as quickly. Ms Brien referred to the fact that wholesale gas prices had dropped by 8% but I understood that it was 30% or 27%.

Ms Laura Brien

No, 18% in euro terms.

Ms Brien mentioned the weak euro but my understanding is that the euro has weakened in the past week. That should not be a factor. Ms Brien also referred to hedging and I presume that means there will be a continuous reduction in price in the future. Fuel and gas are being purchased at lower prices.

On switching, Ms Brien mentioned that she advised people to switch. There seem to be good incentives to switch but elderly people, who are loyal to a particular brand or provider, do not switch as much. The message today is that people do not switch as much as they should. While it is easy, sometimes people do not take advantage of it. Is it not better that there is a reduction in the base price rather than all of the funding available for switching? My understanding is that when people switch they must enter a contract for 18 months. The price automatically goes up after a while.

Ms Aoife MacEvilly

Yes, there is a perception that the price goes up quickly and takes a while to go down. We regulated prices for a while for a few years before stepping out of the role. While the perception was there, the reality was that we had a single price change every year for Electric Ireland and Bord Gáis and it looked at prices over a 12-month period. While it may have been in people's consciousness that there were price increases, it was a single yearly price increase. Things have changed in the market and we have stepped out of price regulation. For domestic customers, suppliers tend to offer a price that is good for approximately one year. However, they are more free now. It works better in this case because instead of having to wait until September, which is running normally when they reprice for the year ahead, we have seen mid-term price reductions. Electric Ireland reduced prices for electricity in November and other companies are looking at it in March and April. Prices are moving down and it is correct that hedging and a deferral of price decreases means we have not seen them fall as quickly as they fell on the wholesale market. We should continue to see the impact over the next few months. We have been quite clear in signalling that we expect it to be the case, assuming all other things remain equal in the market.

If there are no other dramatic price changes, we will look to see further consideration of price reductions if possible by suppliers, having regard to market conditions in the coming months. We are giving them that message. When taking into account the euro component, the fall in gas price is 18%. The graph displayed earlier by Ms Brien showed the difference between sterling and euro. It showed the changing impact of the exchange rate between the two currencies over time.

The euro-sterling exchange rate has been moving against us over that period and that is having the impact we saw.

In terms of switching, we very much welcome the opportunity to speak to members, all of whom I know have taken a strong interest in this area. The more we get the message out to customers that they should be active and should be looking for best value in what is an increasingly competitive market, the better. I thank members for the opportunity to get that message across today. We accept that sometimes customers may have concerns or may be loyal to their existing supplier but we would still say to them to call their existing supplier to see what better value that supplier may be able to offer them. There are customers who do not switch around but who get the benefits of discounts through direct debit or online billing. There may be other value their supplier can offer. It is a feature of all competitive markets that it is the active customer who is willing to look around who is likely to get the best value. That is the same in the electricity and gas markets.

In terms of the contracts, typically, it is an annual contract of 12 months. We have seen other contracts come in. I think Bord Gáis Energy is offering a fixed contract over two years which is a new offering on the Irish market and which would help customers have certainty over their price for a two-year period. That is an innovation competition has brought. We want to get the balance right between ensuring customers are not caught with long-term contracts which they cannot get out of or the terms of which they are not fully familiar with and allowing competition to drive innovation and better offers for consumers.

We have a role and can look at the type of contracts suppliers offer and the type of communication they have with customers when selling those contracts, which is very important, and ensuring customers are not disadvantaged in any way. That is certainly a role we take very seriously.

I welcome the Commission for Energy Regulation, CER, to the committee to discuss this issue. There is huge frustration with the system given the reduction in oil and gas prices. The CER is right that gas is the major component in terms of Irish energy prices. People are asking why they are not seeing a reduction in the price of electricity, when they have seen a reduction in price at the petrol pumps. They are asking what is wrong with the system and if the companies are creaming off the profits. I have discussed this with some of the energy providers in recent weeks and they went through the hedge funding, how the purchases are made and so on.

In 2012, if I am not mistaken, the energy providers went to the CER looking for an increase in electricity prices of somewhere in the region of 6% but ended up getting 8%. We accept they have hedged their bets and bought in at a particular price. Obviously, the energy suppliers will buy now that gas prices are low and they will hedge now. Will we see the 18% reduction reflected in the bills of ordinary customers and business people?

Another point I raised with the CER previously is that when one looks at the annual accounts of the energy providers, one sees that they are making massive profits. Some of them end up with profits of €500 million. The perception is that it is being made on the back of the energy prices they charge for their product. Perhaps Ms MacEvilly might gives us her thoughts on that.

If we accept hedging, we expect that if energy prices increase at some point in the future, there will be a six to 12-month period in which energy prices for consumers will not rise accordingly. If the companies are telling us the truth, they will have six months to 12 months of energy bought at a lower price. The price increase on the wholesale market is nearly always reflected within a very short period of time.

We are very dependent on prices in the UK. When will the Corrib gas come on stream? Will it have an impact on energy prices?

Ms Aoife MacEvilly

I will take the last question first. The Corrib gas is certainly very welcome from a security-of-supply perspective. It is hugely beneficial to our economy to have an additional indigenous source of supply. However, that source of supply will compete against that very liquid competitive wholesale price in the UK, which Ms Brien mentioned. We would not expect to see it having a material price impact. The benefit is really around the security of supply.

We absolutely agree with the Deputy that the swings and roundabouts of hedging should ensure that customers get the benefits when the price is falling, even if it is over time, and are protected if prices start to rise rapidly or if they are volatile. Hedging should protect them from that over a period. That is something we will monitor as part of our market monitoring regime to ensure customers are protected, to the extent that hedging should protect customers. Ms Brien can take some of the more detailed questions.

Ms Laura Brien

Many of the larger industrial customers are on wholesale pass through tariffs which means they get the immediate benefit of any drop in the wholesale electricity price. They are already enjoying that. The wholesale electricity price is approximately 12% lower than where it was over the previous year. Those large industrial customers are already seeing a direct reduction in their bills as a result of that. Small and medium-sized enterprises and domestic customers tend to be covered through the supplier hedging because they expect to get a fixed price for the year so that they know their prices will not change during the year. That is why they enjoy but also suffer from the benefits of hedging.

In regard to the reduction in the gas price and how that would feed through into end retail prices, as we explained, the international price of gas probably covers approximately 30% of the cost of electricity so 30% of that 18% is 6%. Ultimately over time, we would be looking at a reduction in the retail price of 6% or so. We have seen a 2% to 3% reduction already. However, once the impact of that hedging continues to feed through and assuming there is no change in the market conditions, there is potential for a corresponding or approximately the same level of reduction in the future to account for the impact of hedging.

Some 18% of the 30% is 6%. Currently, there is a 2% to 2.5% reduction. However, there should be a full 6% reduction at some stage.

Ms Laura Brien

Assuming the current trend in gas prices continues, it would not be unreasonable to conclude that the total we would expect to see would be 6%. We will talk to the suppliers and monitor the prices they are offering. If subsequent reductions are not seen at the start of the next heating season, we would look into their pricing strategies in much more detail.

Mr. Garrett Blaney

The Deputy also mentioned profitability, which is a very important metric. While we do not want to see excess profitability, we also do not want to see unprofitable companies in the market. We want to try to achieve reasonable levels of profit. Unreasonable levels of profit would clearly be an indicator that the pricing is not right. A lot of the companies are vertically integrated in that they do not just have a retail arm but also have a wholesale arm. When we look at profitability, therefore, we look at both the retail and wholesale elements of the organisations. That is something that we are continually monitoring but there is no indication at the moment of a big jump in profitability. Overall, profitability has probably been coming down in recent years. That said, we must be continually vigilant on this.

I welcome the witnesses. I must say that I met officials from the commission recently to discuss this very matter and I found that meeting very helpful. I went in with a fairly simplistic view of the commission's world. I thought that the commission could tell companies the price they can charge per unit. However, the commission described to me during that meeting, and again today, quite a complex algorithm used by the companies. The commission's responsibility is to ensure that the algorithm is being applied correctly in order that, in comparison with other markets, customers are not being ripped off. I would much prefer it to be as simple as my view of the world because we could probably protect customers' interests a lot better then. However, it appears that this is not being done anywhere else either so there must be some reason for that.

I have raised the issue of the PSO levy previously, which contributes 8% to electricity costs. I believe it is entirely unethical to apply VAT to that levy. I understand that this is not the responsibility or fault of the commissioners and the Department of Finance argues that it is an EU requirement. I do not care whether it is a European or national decision; it is entirely unethical. It represents a tax on a tax and we should be seeking ways to change that.

I am glad we have clarification on the price taker issue. It would be lovely if we, as a nation, were price makers. That would be lovely. Some people are suggesting that we should allow hydraulic fracturing in this country and argue that if we get gas in Ireland, the price of energy generally will drop dramatically. Those arguments are generally made by people who have some vested interest in hydraulic fracturing. The truth needs to be out there that, no more than with Corrib, even if we did have hydraulic fracturing in Ireland, we would continue to be price takers. We need to understand the truth in that regard.

In terms of price comparisons, I look at different tables and see different things. There are variations in terms of the European average price, median price and so on, which I have not got to the bottom of yet. I will keep going at it until I understand it fully. There does not appear to be one set of standard figures which indicates the costs to the customer - highest, lowest, average - throughout the EU. I will need to do more research in that regard.

As the commissioners have said, customers should be encouraged to switch providers. Indeed, after my recent meeting with the commissioners, I appeared on the local radio station, Ocean FM and gave that advice to people again. I believe that the rate of switching in the north west is very low, partly due to the availability of fewer options and partly because of the age profile of the population. In many instances, people have been dealing with the same companies for many years and have a loyalty towards them. There are discounts available to people who switch providers which means that the people who are loyal to companies are paying more. That is the bottom line there and it is wrong. As I pointed out at the aforementioned meeting, if 50% or more of customers switched every 12 or 18 months, as they would be entitled to do in line with contractual agreements, we would have price inertia and the model would not work. The increase in one company would be offset by a reduction in another company and that would begin to balance out. We would then have price inertia. I believe it is an unsound model on which to move forward. I spoke about the algorithm that the commission examines and its component parts and I believe we should be looking at those component parts to see if there is anything more we can do to question the companies about, for example, their levels of profit. Is that part of the algorithm? Do we care? Is there scope within the companies to reduce the price to their customers? We need to look at that algorithm and its various components to determine if there are areas over which we have no control or into which we have no input and to decide whether we should have.

Ms Aoife MacEvilly

First of all, I agree with the Deputy about the complexity of energy markets. Every time one thinks one has a handle on it, one finds that there is another layer of complexity waiting for one. Within that, however, the Deputy is absolutely correct to say that we must focus on the controllable costs within the overall calculation and on what we can do to drive down those costs. That can be done through enhancing competition. We are currently engaged in a redesign of our wholesale market, the I-SEM, by making the market more competitive and integrating it with the European market in order to drive down costs in the Irish market. The aim is to ensure that the generators we are rewarding are delivering better services to the customers at lower cost. That is one element of our work. On the networks, we are currently involved in a price review to try to drive down costs and drive efficiencies within the network area. That is something that we, as regulators, must continue to focus on because there is always more that we can extract in terms of efficiency, innovation and other cost savings in the market. We must keep a strong focus on that and it is absolutely core to what we do.

In terms of the switching model, a scenario where 50% of customers were actively switching would be really welcome. If that were to happen, it would force many of the suppliers to look at the issue of customer retention, which some are already doing. The cost of retaining customers in an environment where many people are switching may be lower than the cost of attracting new customers. Therefore, suppliers might start focusing their attention on retaining a loyal customer base. That would help to even out the situation where the biggest benefits are only available to actively switching customers. That said, there are loyalty programmes in place at the moment and some suppliers are trying to retain their loyal customers. The reductions that Ms O'Brien referred to, for example, will be passed on to all customers on standard tariffs.

The Deputy is also correct in his comments about the kinds of information we can give to customers to help them make informed decisions. Ms O'Brien and Ms Costello are doing a lot of work in that area so I will ask them to speak about some of their work programmes.

Ms Laura Brien

We constantly refer to the supplier handbook or the codes of practice that suppliers must adhere to when dealing with customers. One of the items covered in the handbook relates to the best way of presenting information when trying to attract new customers. Is it better to tell customers that they will get a 20% discount on their standard tariff or that their average bill for the year will be €950 if they switch provider? These are some of the things we are examining.

We do an annual audit of suppliers. This year we looked at their marketing and customer sign-up practices, and the findings from the audit will drive some of the actions we take this year on revising some of the codes of practice. We are looking at a range of options, particularly options related to transparency of information. We are also considering whether we should require suppliers to inform all customers when they are getting to the end of a 12-month discount period so that they know they will move on to the standard tariff, as a jog to them, to consider switching again or look for better offers. That is part of our overall programme.

We actively monitor the market. We publish a quarterly report with a range of indicators relating to everything from market share to switching rates. We publish information on customer complaints, the level of disconnections and so on. This is designed to empower the customer so that they know what options are out there and how their current supplier stacks up against the alternatives.

Does the Commission for Energy Regulation investigate micro-generation projects in other jurisdictions and the impact they would have on price, be it an increase or a reduction, particularly in respect of renewable energy? Is it responsible for micro-generation projects?

Mr. Garrett Blaney

We are quite active in looking at renewable energy projects and their impact on the network. I chair a group at European level that is looking at the future of networks and what micro-generation is doing to those networks. Let us take an example of the networks in Italy. The old Italian network was designed on the basis of the generator, and, as my colleague commissioner Aoife MacEvilly described, energy goes through the transmission system and the distribution system to the home. Micro-generation turned that on its head. On a sunny Sunday afternoon, nobody is consuming much energy in Italy, as everybody is out enjoying themselves, but they have massive production because of all the solar panels on the roofs. The distribution system is feeding energy back into the transmission system. Micro-generation has a significant impact on the way the system is run and governed. From our point of view, there is a cost element. Our renewable policy in Ireland has been relatively cheap for what has been delivered to date. We need to ensure that continues. Obviously it is a matter for the Government to decide on renewable energy policy, but our advice is to keep a very close eye on the cost of it all. Micro-generation should be in the mix, just like any other option.

Has the Commission for Energy Regulation published a paper for the Government on what is happening in Europe and what we might learn from the experience in European countries?

Mr. Garrett Blaney

We made a formal submission to the Government Green Paper. We have participated in European studies looking at the costs of renewables and how that is benchmarked across various countries. Our costs are some of the lowest in Europe, and we have shared that with the Government so that it can learn from our good experience as well as the challenges.

The graph shows that domestic electricity prices are lower in Ireland than the European average and that business prices are the same as the European average. I understand that was not the case a few years ago. The graphs set out the breakdown of the electricity prices. Is the fact that the cost of domestic electricity is lower in Ireland related to the wholesale price of electricity, or is it because of competition in the domestic market? How do we remain cost-competitive? The cost of energy is crucial in attracting inward investment, which leads to job creation.

There is a great deal of debate on whether our renewable energy strategy adds to the cost to the consumer. The debate on wind energy is topical and centres on carbon emissions, REFIT tariffs and PSO. Some groups are against wind farms and think it is not the best solution in terms of renewable energy. They see wind energy as a flawed system, but in lots of cases they would not want nuclear power. I was very interested to learn that the cost of using renewable energy in Ireland is less than in Europe. I presume that is because we have the resource of wind. Is the use of wind energy ramping up across Europe? Can the witnesses address the physical structure of the national grid? We have set a target of 40% for the use of renewable energy; is that reasonable, or we will we exceed our target? I would like to hear some objective comments on wind energy, including its impact on carbon emissions and whether other renewable options such as biomass compare favourably. People cite the work that goes into building a wind farm, although obviously the resource is free after that, depending on how much the wind blows.

Can we discuss smart grid technology, not just in respect of new transmission and distribution lines but in terms of expanding the capacity of the existing transmission lines? I understand that EirGrid has a few pilot projects, but it would seem that we encounter difficulties in building out the grid. I know that in County Mayo a number of projects have been given planning permission, but there is a problem with the grid connection. I am aware that Mayo Power Ltd. has a biomass plant in Killala and it is having problems with its connection to the grid. All the ground work has been done in getting the statutory permission.

I know that we need to build out the national grid. I wish to raise the contentious issue of Grid West. The driver for building out that grid is to capture the wind. Will the delegates comment on whether we will achieve our 2020 targets? A point made in the debate is that we are generating energy for export when we are not hitting our domestic targets and that the rate of installed capacity for wind energy is not the rate we would like to see. There is a debate on the use of DC or AC technology and whether we need to take out the wind as opposed to using it to meet the requirement of a business case that would need to connect into AC technology. The issue that members face is that pylons have been erected in environmentally sensitive areas, and in County Mayo the most windy areas are the areas that are picturesque and environmentally sensitive. I have attended a great many public meetings, and I know the Chairman, who lives in an environmentally sensitive area, has engaged with people as well, but at meetings I find the information has been lifted from the Internet. I would like to see the Commission for Energy Regulation address the issues so that we are discussing the facts. I believe all the facts have to be on the table to have a real debate. I believe that EirGrid gave information only on overhead power lines and we had no data. People came up with data on the logistics of underground power lines. An expert panel was established and I hope it will address all the issues so that we can see all the facts.

I would like to make a final point about the Corrib gas project. I know a question has been asked about security of supply in this context. I know the gas price that is set is not just an Irish price. It is a Europe-wide or international price. When we are giving out exploration licences, could we stipulate that a certain amount of the gas taken off a field where there has been a find would be supplied to the Irish nation at a price that is more favourable than the market price? Perhaps that is beyond what the market would allow. Could the Government do such a deal, or would that be prevented by regulation issues? Would the commission say "No, we cannot interfere with the market in that way"? This relates to the question of whether we are getting value for money in respect of our own natural resources.

If the witnesses do not have answers to the questions the Deputy has asked about gas and electricity prices, they can revert back to the committee at some future stage.

I am very hopeful, a Chathaoirligh.

They should feel free to give an answer now if they wish.

Mr. Garrett Blaney

We will try our best. Many of the questions that were asked are inter-related. This is where the complexity alluded to by Deputy Colreavy comes into play. All of these things interact with one another. The first question asked by Deputy Mulherin goes to the heart of the issue. Why are our prices now cheaper than they were a couple of years ago? A number of major changes have taken place across the energy sector globally and particularly in Europe. The move to renewables has been a key factor in that. We need to look at current prices in the context of the sort of revolution that has gone on across Europe. Germany is probably the country that stands out the most. Considerable costs have been put into renewable delivery across Europe. Ireland's wind resource means that the onshore wind technology available in Ireland is probably one of the cheapest technologies available anywhere in Europe. That has started to drive our prices relative to the other prices. If one looks at the graph of the countries, one will see that countries like Germany, Spain and Italy, which spent a great deal of money on expensive technologies at an early stage, are at a slightly higher level of renewable penetration than Ireland, which has been able to deliver it at a much cheaper price by focusing on least-cost delivery of renewables in the form of onshore wind. This is one of the reasons our prices have come down. We are not the most expensive country in the way that we were.

A feature of the market is that high gas prices tend to be much more profitable for the generators. There is a built-in extra cost to consumers when gas prices are high rather than low. We are benefitting from lower gas prices. As Ms MacEvilly was saying, we are trying to look at changing the way we have designed the wholesale market. This is a European requirement. Currently, the market does not comply fully with EU energy union requirements. As part of that, we will seek to put a more flexible system in place as more renewables come in. Wind has been least-cost in the past, but that does not necessarily mean it will be least-cost in the future. More and more wind on the system adds extra costs. It is a question of the law of diminishing returns. To bring in more and more wind, we have extra network costs. We need more flexibility from the generators. The wind does not always blow. When the wind is not blowing, we need to have extra capacity there to keep the lights on. The cost of that increases with the levels of wind. Some of the microgeneration technologies, such as solar technology, start to become more competitive in such circumstances. They also have falling capital costs. We constantly need to look at this in a cost framework. While we have security of supply requirements and we need to consider the environment, cost is a major feature of our overall duty.

What is the optimum amount of wind in the system? Is it 40% or 50%?

Mr. Garrett Blaney

I will answer the Deputy's question about the 40%. From what we can see, it is certainly the case that there are enough connections in the system. We have connections to connect much more than 40% of wind at the moment. There is a question about each of those connections. Each individual generator has been quite slow in terms of delivering the grid. I think that has been a feature. We are very aware of the sort of resistance, particularly locally, to many grid build-outs. It is probably reasonable to presume that 100% of the connections in the system will not be delivered, but we should be on target to meet the 40% level. There are risks. I think the grid is one area of risk. We need to make sure we consider the issue of curtailment. We are finding that we are turning wind generators down, even at times when the wind is blowing, because of a lack of flexibility in the system. We have a programme in place with EirGrid to try to address that. This is one of the major wholesale market elements we are working on. A number of different programmes are in place to try to address these issues, but the crucible of cost is a key factor in all of that.

When we were going through this issue previously, I think we identified that our network costs are more expensive than those of the rest of Europe. Extra costs are added when projects are put underground. The DC options are generally more expensive than the AC options. The AC options are very limited because if very long AC lines are put in, technical problems will arise and the system will not work properly. Throughout this process, as people look at this question and local community issues arise, we are very keen to ensure the cost element is not lost. We do not want to end up with all the lines going underground, with a massive extra cost being incurred by the general consumer, or with people failing to think through the cost elements of these difficult policy issues.

What about undergrounding on DC technology, which does not involve much more than taking the wind out?

Mr. Garrett Blaney

A major jump in cost is associated with going from AC technology to DC technology. I am not sure there is that much of a differential between going underground and overground when DC technology is used. The main issue is going from AC to DC. Two very large converter stations are needed to convert a line from AC to DC. There are very few manufacturers in the world of the special cables that have to be used. The line then has to be reconverted back into AC. There are losses associated with that.

What about the cost of the delays? I refer to the North-South interconnector, for example. All of these costs add up and have to be met by the consumer.

Does Mr. Blaney wish to reply to that? It is really not the-----

Mr. Garrett Blaney

I am happy to reply as much as I can. We are conscious that there are specific areas. The failure to implement the North-South line, which was mentioned by the Deputy, is costing consumers right across the island. It is quite important. We are pressing EirGrid to-----

Could Mr. Blaney put a figure on that? Would it be €30 million a year?

Mr. Garrett Blaney

That is a good figure.

How is that arrived at?

Mr. Garrett Blaney

When there is no congestion in the system, the cheapest cost generators on the system can be run. When there is congestion in the electricity network, generators that are more expensive than those that would otherwise have been run have to be used. The €30 million is, in effect, the extra cost of those more expensive generators, by comparison with what was necessary.

I would like Mr. Blaney to comment on a few other things. I mentioned the smart grid technology and the Corrib gas project.

Mr. Garrett Blaney

My colleague, Ms MacEvilly, will answer the question that was asked about the Corrib gas project. We have allocated separate research and development funds to the network companies to look at research and development generally and to try to see whether they can implement smart grid technology. We are in the middle of a price control with them at the moment. I think the Deputy was suggesting that this is a way to try to reduce costs. We would be very keen for the network companies to explore that as much as they can. They are using smart technologies to avoid building lines where they are not necessary, to get better value for the lines they are building and to reduce the overall cost. We are keen to push them to use smart technologies. I suppose we have to be a little careful that they are not using unproven technologies. We will want them to be able to show they are value for money from whatever technologies they implement.

On the Corrib gas-----

Can Mr. Blaney clarify something about which I asked him at the outset? He said it looks like we are on track to achieve the target of having 40% generated from wind. Can he confirm that this figure relates to our own domestic market? It does not relate to the export market. I know there is an interconnector between the two countries. I ask Mr. Blaney to clarify that. It has been said on a number of occasions that we are taking wind out just to send it. I know there was a different proposition in the midlands. That was not necessarily going to go into the grid. That is on the shelf, so to speak. Can Mr. Blaney talk about the Gate 3 offers? How can he define what was actually intended for the domestic market? Every offer is basically intended for the domestic market. Is that correct?

Mr. Garrett Blaney

I can confirm that. The Deputy is correct that the Gate 3 process of connection of new generators is all based on our domestic requirements.

Everything in Mayo under Gate 3 is intended for the domestic market.

Mr. Garrett Blaney

All of the Gate 3 projects right across the country are designed to meet our requirements - our national targets - and none of it is for export.

The point has been made as part of this debate that giving priority to wind is not a desirable renewable policy from a carbon emissions perspective. Is the commission solely looking at the cost, or is it also saying it stacks up from another point of view?

Is the witness also saying it stacks up and makes sense, as we try to achieve our carbon emission targets and reduce carbon emissions, that wind is the electricity solution, so to speak?

Mr. Garrett Blaney

In terms of the dispatch of the system, there is a priority for renewables which is built into European Union legislation and we have implemented it across the island in terms of the way the system operates. There is a hierarchy within that to try to ensure there is as much stability for the system as possible. In terms of the carbon allowance, a wind renewable generator, be it biomass, wind or whatever, all are deemed to be renewable and therefore they have zero carbon emissions generally, certainly at the point of generation. It gets quite complicated if one tries to look at the life-cycle of carbon and the building of the turbine and how much carbon was needed for that or the amount of carbon-----

It has been established Europe-wide that as we try to achieve these targets, wind is key.

Mr. Garrett Blaney

Whether one takes a unit of electricity from a wind plant or a solar plant, they are all carbon neutral and are deemed to be not creating any further carbon at the point of generation. This is all defined in European legislation.

I understand that but I am trying to make the distinction that solar may not be the solution for us that wind is. I am trying to make the distinction as to which is the best renewable resource to develop and into which to put our funds.

Mr. Garrett Blaney

Our suggestion is to go for lowest cost. It may not necessarily be that wind is indefinitely. There may be room for solar. Right now the price of solar has reduced significantly. Certainly our advice to Government would be to look for the lowest cost renewable sources regardless of where they are from so long as they meet European definitions of renewable.

Ms Aoife MacEvilly

On the gas side, the terms and conditions around attracting exploration and development in the offshore would be a policy matter and the Minister for Communications, Energy and Natural Resources has recently set out a new policy framework around that. While it is a matter for the Minister, I believe there would be challenges to trying to impose special conditions around pricing in respect of competition or state aid law for what is a commodity that is traded on an international market. However, from our perspective as regulators, we can try to ensure that if there are additional finds, they will come ashore in Ireland to give us the security of supply benefit. We are working on a new entry regime that would be designed to facilitate or give some incentive to future offshore developers to bring gas onshore to Ireland. Where that could ultimately benefit the market in terms of price would be if we had a sufficiently significant offshore industry or production industry such that Ireland became a net exporter. Corrib gas is welcome. It brings circa 60% of our gas needs for the next ten years but certainly Ireland will not be an exporter. If there were significant additional finds and we did become an exporter, that is where we might begin to see the price impact in our market. Our job as a regulator, in terms of the conditions for which those potential developers might enter our market, is to ensure we facilitate such entry.

Ms MacEvilly made the point at the outset that we could face a challenge if the Government tried to pursue that type of policy. Would that be from the European Commission?

Ms Aoife MacEvilly

I was merely commenting in terms of trying to impose price conditions.

Ms Aoife MacEvilly

It is a policy matter. Imposing such price conditions on a commodity that is internationally traded, certainly in the EU context but also globally, is challenging and from an EU perspective, state aid or competition law implications would no doubt arise.

Ms MacEvilly noted that some of the providers have reduced their prices in recent weeks and some have not. The providers are appearing before the committee next week. Has that issue been monitored or is there a reason some have not reduced their prices? Is it that their prices were lower already? A response would help us in our deliberations next week.

Ms Aoife MacEvilly

It is welcome that the committee will be talking to the suppliers. There are one or two suppliers. For example, Flogas does not sell electricity. Therefore, it would not have introduced an electricity price reduction. Energia was a new entrant to the market in January 2014. It is probable that 99% of its customers are on discounted tariffs rather than standard tariffs so it has a very different mix of customers. Probably the average prices for its customers are already relatively low. While we have been talking about the general price drivers, every supplier faces a different cost implication and a different range of consumers and a range of offers or tariffs that its consumers are on. They may have different decision-making processes or drivers around pricing. We certainly have been talking to the suppliers and have called on all of them to consider where and when they can to reduce prices as much as possible.

Ms Laura Brien

With respect, Energia entered the domestic market only last year so everybody it has is on a discounted tariff as opposed to a standard tariff but Flogas has the cheapest offering right now. Irrespective of other suppliers' price reductions, Flogas currently has the lowest prices. I am not sure what the prices will be after the reductions because obviously they will not kick in for another couple of weeks. Clearly, every supplier has a slightly different pricing strategy.

We would like to see them battling with each other to quote the lowest prices.

Ms Laura Brien

Absolutely.

On behalf of the committee I thank the representatives for appearing before the committee. It was a useful exercise and many points were explained. Given that the providers are appearing before the committee next week, I am sure that will take on a life of its own and will follow on naturally from today's information.

The joint committee adjourned at 1.20 p.m. until 9.30 a.m. on Wednesday, 25 February 2015.
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