Electricity Regulation Bill, 1998: Second Stage.

Question proposed: "That the Bill be now read a Second Time."

I thank you for this opportunity to debate this Bill. Second Stage in the Lower House took a long time, then we had Committee Stage and then Report Stage. We are here today to take Second Stage. I apologise for being late because I had to vote in the other House. If a Dáil Member is not in the House making a contribution they have to vote in the other House. That is why I was delayed.

This Bill is the first vital step in the process of liberalisation of the electricity sector which will take effect from February 2000. The previous Government will be aware of this because it was during its tenure that it successfully concluded the ministerial negotiations and the COREPER negotiations on the Electricity Directive. It is as part of that directive that we are now introducing the regulator. He has been appointed but he is putative because he cannot be in situ until legislation allows it. When this Bill is enacted he will be able to do his job from then onwards and through the next Electricity Directive which will be dealt with in the autumn as soon as we resume. Everything is on line for mid-February 2000.

This Bill is being put forward to establish an independent Regulatory Commission to oversee the competition in the electricity sector and to open up 28 per cent of the electricity market to competition; the arrangement worked out in 1996 was 28 per cent and after a few years it would grow to 32 or 33 per cent. After five years the EU would review it again to see how competition and the onset of it had worked in Ireland and it would decide what measures to take in that event.

As the electricity industry forms such a vital component of the competitiveness and strength of the Irish economy, this Bill, which will set out a significant part of the regulatory regime for the industry for the foreseeable future, will undoubtedly be the most important piece of legislation in this area since the original Electricity (Supply) Act, 1927. That Act established the ESB. The introduction of competition to 28 per cent of the market, with more to follow, allied with a stable regulatory regime, will have a major bearing on our future prosperity and development.

Before moving on to the lively debate in the other House, and I am sure a lively debate will take place in the Seanad, and the detail of the Bill itself, I would like to describe the background of the Electricity Directive and how the Bill came about.

The EU Directive 96/92/EC concerning the internal market in electricity came into force on 19 February 1997. Throughout 1996 detailed negotiations took place at top official and ministerial levels in Europe on the directive. On 19 February 1997 the directive came into force. We then had three years to get a regulator in place and establish an environment for the introduction of competition. Ireland has to fully implement the directive by 19 February 2000. The directive requires that 28 per cent of the Irish market be opened to competition, increasing to about 33 per cent by 2003. Fundamentally that is what this Bill is going to do.

It is interesting to look at other European countries to see what they have done. Many of them are ahead of us. We got an extra derogation of a year because we had a monopoly with regard to electricity supply. There had been internal robust competition from Bord Gáis. There was only fledgling competition from other methods of generating electricity, such as wind, wave and solar, etc. We got an extra year to allow a monopoly turn into a competitive area.

As I did on Second Stage in the Lower House, I would like to pay tribute to the Electricity Supply Board for its many long years of work, stamina and commitment to providing electricity here. Many people scoffed at the ESB in the 1920s but not many of them scoffed in the 1930s when the people began to get power and industry began to flourish. None of that progress would have happened without the ESB. It is a great credit to Dr. McLoughlin, chief engineer and innovator of the project. The Government of the day was called Cumann na nGael. It is interesting to read records of it. There was the usual scepticism from the Department of Finance who thought that it would not work. It did work and it flourished. From the mid-1940s onwards rural electrification was a big adventure. Power and light were brought to people who never thought they would have it. That unfolding saga is well documented in a book entitled The Hidden Revolution which described the emergence of the hidden Ireland into light and power.

The Attorney General has advised that while full implementation of the directive is required by February 2000, it is essential that a key part of the directive, establishing a regulator, be implemented as a matter of immediate urgency and that failure to do so risks a capacity shortage later on. The urgency arises from the fact that due to unprecedented demand for power, because of the extraordinary growth in the economy, new generation capacity to meet this demand is required by winter 2001. This means that authorisations to build new generating stations must be granted by the regulator to be established under this Bill by this autumn at the latest. Neither the ESB nor future competitors can get authorisations until the regulator is in place.

I hope I can count on the goodwill of Seanad Éireann to finalise the Bill in the coming days. As Members know, the Oireachtas Select Committee on Public Enterprise and Transport spent long hours deliberating this Bill over the past two weeks. I came to the Seanad as soon as physically possible. There has been a lot of toing and froing and preparatory work before the Bill got to this point.

The previous Minister, Deputy Dukes, published proposals in May 1997. When I came into office a discussion forum was held in January 1998. A further consultation document was published in May 1998 on which almost 60 sets of comments were received which were taken into account in the preparation of this Bill. The comments received were broadly supportive of the early establishment of an independent regulator.

This Bill is the first of two phases in implementing the electricity directive. The second phase will consist of another Bill later this year to implement the balance of the directive and the establishment of the ESB as a public limited company under the Companies Acts. The Bill will enable the Minister to establish a Commission for Electricity Regulation. It is intended that this will consist of one member initially, but the Bill will enable the commission to be expanded to three members in due course and to include the gas industry. Proposals for such a development are being prepared.

A competition for the post of commissioner was held by the Civil Service and Local Appointments Commission late last year. The successful candidate was Mr. Tom Reeves, Assistant Secretary in my Department. As soon as this Bill is enacted, Mr. Reeves can be formally appointed as the regulator and start his important work in authorising the construction of new and urgently needed generating capacity.

The commission will have a number of primary and secondary duties which will include promoting competition, securing that all reasonable demands for electricity are satisfied, promoting safety, efficiency and economy by electricity undertakings and taking account of the protection of the environment.

The new commission will be funded by the industry on a similar basis as the Office of the Director of Telecommunications Regulation. The Minister will retain the policy remit for the electricity sector generally, including deciding the degree of market opening, an issue addressed in this Bill, as well as making public service obligation and transitional regime orders.

The most striking feature of the debate in the Dáil was the high level of interest in the Bill on all Stages. The interest in the Chamber was mirrored by a similar interest outside. Committee Stage debates were attended by a large number of interested parties and lobbyists, which was very welcome. Despite what some say it is important that people express their opinions. The important issue is how one judges the veracity and authenticity of advice given. We came across an interesting example of this on Committee Stage which, luckily, was apprehended in time.

The point was made on Committee Stage that while lobbying and lobbyists are an important and necessary part of the democratic process, there may be a need to regulate that activity in the interests of accuracy of information. Deputy Stagg indicated that the Labour Party has proposals for such a Bill which will merit careful consideration by the Government. I cannot say how that Bill will be interpreted but we must have some way of knowing what lobbyists are about and who they represent. However, if one has common sense one can judge what is correct.

On the Second Stage debate, more than 30 Deputies spoke on the Bill and I was very interested to hear what they had to say. One topic which arose frequently was the high level of support and appreciation in the House for the ESB for all the hard work through the years, and especially the very hard work of the repair crews during the Christmas storms in the past few years. I join those Deputies who rightly praised the ESB staff and repair crews.

Another issue which attracted a lot of debate in the Dáil was that of the accountability of the commission. I am pleased to repeat that the Bill provides that the Commission for Electricity Regulation will be accountable to the Minister, a Joint Committee of the Oireachtas, and the Comptroller and Auditor General, as appropriate, regarding its costs and the various functions it carries out. This is necessary in terms of properly embracing the system of regulation. It is difficult to be a shareholder and a regulator, particularly as we face into an era of competition.

Ms Etain Doyle is an admirable regulator of the telecommunications industry who took office the same day as I took office. She was appointed as the independent regulator in June and the following September or October the Oireachtas Committee on Public Enterprise and Transport invited her to appear before it so it could question her about her activities. She considered the Act in consultation with her legal advisers and wrote to the committee stating that she did not have to appear as there was no such provision in the Act. Ms Doyle was correct in strictly legal terms but she quickly and confidently revisited her decision and appeared before the committee, as she has done on several occasions since. However, the point is that she did not have to do so. This Bill stipulates that the electricity regulator will be accountable to the bodies I mentioned. In the autumn I will introduce a Bill dealing with the accountability of the telecommunications regulator, not that there is any suggestion that she is not accountable. Ms Doyle went beyond the Act in appearing before the committee but the new Bill will stipulate such a provision and deal with jurisdictional matters as between the regulator and the Competition Authority.

Over 200 amendments were tabled on Committee Stage and I was pleased to see such a high level of interest. The debate was detailed and informative and many Opposition amendments were accepted which improved the Bill. On Report Stage I said that this Bill belongs to the entire House as all parties joined in the learning experience of reformulating many of the sections and the educative journey on which we all travelled.

One of the more notable amendments agreed on Committee Stage was the insertion of a prohibition on nuclear fission being used as an energy source. This is the first time that a Government's clear position on nuclear energy has been enshrined in legislation.

I will now refer to the main provisions of the Bill. Sections 1 to 3 contain standard provisions in legislation such as the Short Title, interpretations and the laying of orders before the Houses of the Oireachtas. Section 4 provides for the mechanism by which notices to be served or given under this Bill shall be addressed to the person concerned. Sections 5 and 6 provide for the prosecution of offences.

Sections 8 to 10 provide for the establishment of the Commission for Electricity Regulation and the assignment to the commission of its functions, powers and duties. Detailed provisions relating to the commission are contained in the First Schedule to the Bill. Section 10 gives the Minister the power to give directions to the commission until the scheduled implementation date of the EU directive on 19 February 2000.

Sections 11 and 12 provide for the appointment by the commission of authorised officers to assist it in the exercise of its functions, and for the obtaining of search warrants. Section 13 provides for a prohibition on unauthorised disclosure of information obtained by any person while performing his or her duties for the commission. While this section provides protection for sensitive information, an amendment which I tabled and which was agreed on Committee Stage ensures that this section cannot be used to frustrate the operation of the Freedom of Information Act, which applies to the commission.

Section 14 provides for the commission to grant licences to electricity undertakings, which can include the ESB, to generate or supply electricity to eligible customers. In addition, any generator using renewable, sustainable or alternative sources of energy can supply any customer, no matter how big or small. This section effectively introduces competition to 28 per cent of the electricity market. Any applications for such permits which are still with the ESB shall be deemed to be an application to the commission. Section 16 provides for the granting of plant authorisations by the commission. An undertaking would not be permitted to build a generating station without such authorisation. Section 17 makes provision for applications for authorisations.

Section 18 gives the Minister the power to specify the criteria for the granting of authorisations. These criteria may relate to the safety and security of the electricity system, protection of the environment, public service obligations, energy efficiency and other matters. Sections 19 and 20 allow the commission to modify any licences or plant authorisations it has granted. Where such modifications are not agreed but are still considered necessary by the commission, the modifications may be imposed, subject to minimum notice and certain conditions. The commission may decide to hold a public hearing before reaching its decision. There is also recourse to an appeals procedure for the parties concerned which is set out in sections 29 to 32. It is proper there be an appeals mechanism because no matter with what official mechanism a person engages, such as paying water rates, he or she is entitled to an appeal. It is a citizen's right, and I am glad we have included an appeals procedure.

Sections 21 and 22 set out the way in which the commission may hold public hearings where it considers that representations or objections to proposed modifications to licences or authorisations raise matters of sufficient public interest. These sections also define the terms under which reports of such hearings will be prepared and how the concerned companies or individuals will be informed of the outcome of the hearing. Sections 23 to 26 give the commission powers to enforce by direction the conditions of licences or authorisations it has granted and to take immediate action, if necessary, to protect public health, safety or the environment. The commission may apply to the High Court for an order to ensure compliance with any direction it has issued, if necessary.

Sections 27 and 28 define those customers who will be eligible to choose their supplier of electricity from 19 February 2000. Those customers are defined by the level of their electricity usage. This level is set to introduce competition to 28 per cent of the market initially, and this will increase to 33 per cent by 2003. In line with the Government decision of April 1996, all electricity customers will be entitled to purchase electricity which is produced using a renewable or alternative form of energy as its primary source. The policy decision to change the level of market opening above and beyond that required by the EU directive will remain with the Minister. However, as a result of an amendment I tabled on Report Stage in the other House, originally an Opposition amendment which I had worded in the legal jargon of the Bill, if the market were to be opened further, it would require a resolution of both Houses of the Oireachtas to do so.

Sections 29 to 32 provide for the appeals mechanism in cases where applications for licences or authorisations are refused by the commission or where modifications to them are not agreed in the discourse between the commission and an applicant. Appeal panels may be established to hear and determine appeals regarding applications and modifications to licences or authorisations and they will have the powers, rights and privileges vested in the High Court or a High Court judge. The Minister will, by order, determine the membership of appeal panels.

Section 33 provides that the ESB shall prepare a grid code and a distribution code for the operation of the electricity transmission and distribution systems for the approval of the commission. These codes will set out the technical aspects relating to connection to and operation of the transmission and distribution systems for use by licence or authorisation holders. This sounds very complicated and complex. When I began my study of the Bill in preparation for the debate, I thought it was horrendous in its complexity and that I would never master it. I thought that until Committee Stage when Deputy Stagg mentioned that he was dealing with the Bill in chunks by studying the night before the amendments for the next day and examining them again the next morning. That is how Committee Stage developed into a fraternity of interests. We all believed we were learning. The Bill would be difficult to absorb, understand and work through as a whole. I was glad also of the assistance of my officials in working through it.

Section 34 provides that the ESB shall offer to enter into agreement with any licence or authorisation holder or eligible customer regarding connection to and use of the transmission or distribution systems. The commission may give directions to ESB as to the matters to be covered by the contents of such agreements. Section 35 provides that the ESB shall prepare a statement setting out the basis for the level of system charges for connection to and use of the transmission or distribution systems. That statement will be available so that prospective market entrants may estimate and plan for the charges to which they would be liable. Section 36 provides for the approval by the Commission for Electricity Regulation of the statement of charges prepared under section 35.

Section 37 provides that the Commission for Electricity Regulation may grant permission for the construction of direct lines for the transmission or distribution of electricity from licence or authorisation holders to eligible customers, where access is refused on the basis of a lack of capacity in the existing transmission or distribution system. Section 38 provides that the ESB will prepare a statement for the approval of the commission, setting out estimates of future generation and transmission requirements. This statement will be revised annually and will be available to licence and authorisation holders. It will also include a statement on the demand for electricity generated from renewable, sustainable and alternative sources generally.

Public service obligations and transitional arrangements will be very important. PSOs will ensure the cost of ensuring the supply of electricity to remote and peripheral areas will be shared equally. That is fair, equitable and democratic. Section 39 provides that the Minister, following consultation with the Minister for the Environment and Local Government, shall make an order directing the commission to impose public service obligations on the board or other licence or authorisation holders in the general economic interest. These obligations may relate to security of supply, regularity, quality and price of supplies, environmental protection, and use of indigenous energy sources. The cost of these obligations would be recovered from all electricity users.

Section 40 provides that the Minister shall by order, subject to the approval of the European Commission, provide for the recovery from consumers of electricity of specified costs or revenue relating to generating stations constructed or under construction before 19 February 1997 which the ESB may be unable to recover as a result of the implementation of the EU directive. That is very important. We all welcome competition and there is a general acceptance that it is good. There is no way out of it because it has been laid down in law by EU directive. Since the introduction of that directive, there has been a general welcome for competition in the belief it is good for consumers and firms. If firms are keen and competing in the marketplace with confidence in their wares, they will do good business. In a country where strong economic growth is forecast for the next few years, albeit at a lower level than heretofore, competition is necessary and important.

However, a monopoly did exist before this and that cannot be ignored. It possessed a number of stations throughout the country, some of them still full of life and vigour and fit to operate for years to come. There was a review of generating stations in 1995 which laid out the life of each of the stations throughout the country. There is a need for a transitional regime where there would be pricing differentials between the older stations, which served us well in their day, as did the people who worked in them, and the entrants into the new regime.

I will not make orders under either of these sections until the EU directive is fully implemented. The enabling powers set out in these sections will ensure, for now, that anyone who is issued a licence by the commission will be aware that a public service obligation regime and a transitional levy will be a part of the implementation of the electricity directive as a whole. There is a mechanism under which the Government had a right to avail of a transitional regime and last October we did so by writing a preliminary notification to the EU. It stated that we would make a more detailed submission – I am due to do so in the coming months – which would set out the reason we need a transitional regime in Ireland, namely, that there are a large number of stations throughout the country which supply many people's energy needs. This matter will be dealt with in an orderly fashion under the transitional regime.

I will use the public service obligation to ensure the continued use of peat-fired power stations, subject to certain conditions, and the promotion of renewable and alternative energy. It is also my intention that there will be a transitional regime, probably for a period of five years, which will ensure that certain ESB stations, which are effectively State investments, do not become "stranded", that would be the wrong course of action to take, or unable to operate because of the introduction of competition.

The detailed work to provide the basis and foundation for these measures will be done in the coming months. I have already informed Members about the provisional notification we issued to the EU and we are obliged to make a final application in October.

Sections 41 to 46 contain repeals and amendments of the Electricity (Supply) Act, 1927, and an amendment to the Freedom of Information Act, 1997, to include the commission in its terms. The principal repeals are those of sections 37 and 38 of the Electricity (Supply) Act, 1927, which gave the ESB power to authorise and permit the generation, distribution and supply of electricity by other electricity undertakings. This power will now be vested in the commission.

Section 47 provides that the power to make a special order to compulsorily acquire land for the purposes of constructing or reconstructing a power station shall be transferred from the ESB to the commission and that the commission may then confer the functions of such an order on any plant authorisation holder or applicant.

Sections 48 to 51 provide that certain powers relating to the laying and use of electric lines, currently resting with the ESB, may, with the consent of the commission, also be exercised by holders of plant authorisations.

Sections 52 to 54 provide that certain regulations already made by the ESB shall also apply to other electricity undertakings and eligible customers. Certain further regulations made by the ESB shall be subject to the consent of the Commission for Electricity Regulation.

The First Schedule sets out in detail the functions, powers and duties of the commission and sets out the basic terms and conditions of employment for members. It provides that the costs of running the commission shall be recovered by a levy on the electricity industry. It also states that the commission will be accountable to the Minister, a Joint Committee of the Oireachtas and the Comptroller and Auditor General.

Current market and global developments mean that the introduction of competition and independent regulation are inevitable. I understand the fears expressed by many who work for the ESB. If one has spent one's entire working life being employed by a company which enjoyed a monopoly, it is understandable that one would fear the onset of competition. Politicians have no difficulties in this regard because we face competition each time we put ourselves forward in local, national or European elections. There is always jostling, pushing, jousting and competition among politicians. However, it is understandable that a person who has spent their life working for a company that never faced competition would feel concerned and timorous about the onset of competition.

Like Telecom Éireann, the ESB is in a good position because its years of service to the State will stand to it. For the first time, it will face a competitor which may offer cheaper electricity and which may aim to provide access in a competitive fashion. I have no doubt, however, that the ESB will enter into the jostling and jousting of the competitive arena but perhaps not as keenly as politicians who must make their pitch and sell their wares in the three week run-up to an election. The ESB will have a longer period in which to face up to the onset of competition.

From the ESB's point of view, its history has shown that it is more than capable of meeting this challenge head on in an energetic and innovative manner, and succeeding. The advent of competition is not only a challenge for the ESB, it is also a major opportunity. The ESB will be able to compete in the entire EU market for the generation and supply of electricity. People often forget that the company will now be in a position to bid and compete not only here and in Northern Ireland but also in markets outside this island.

Following the establishment of the ESB as a public limited company under the Companies Acts – further legislation will be introduced in this regard later in the year – the board will be in a much better position to face up to the rigours of competition. This change of structure will facilitate developments in respect of alliances or changes in ownership which may become necessary or desirable over time. It is well known by now that I have a pragmatic rather than ideological approach to those issues.

The electricity sector in Ireland, and the ESB in particular, is strong, vibrant, robust and well positioned for the challenges of the new era. While I welcome the prospect of new entrants into the electricity market, I know the ESB will face up to this new era with the same spirit and determination which it has always shown.

I am pleased that I could come before the Seanad to present the Bill. I look forward with interest to the Members' contributions. For many years our electrical power has been supplied by the ESB. A similar situation obtained in respect of Aer Lingus in the provision of flights but that has now changed with the advent of competition from Cityjet, Ryanair and other airlines. That is not to say that Aer Lingus is not a good airline because it has a great record and a great future. Likewise, the ESB is a great company with a terrific record and a viable future.

I agree with the Minister that this is an important Bill. Having read the Second and Committee Stage debates from the Dáil and Select Committee on Public Enterprise and Transport, I must acknowledge that the Bill represents the distilled wisdom of all Members who commented on it. It is clear that the Bill was amended in a positive manner during its passage through the Lower House.

As the Minister stated, the Bill has been driven by the European directive which states that we must open our electricity market to competition. That is a good development and it represents part of the trend in modern European thinking that we should move away from State controlled industry and investment into an arena where the State may continue to have an important role to play but where it can no longer corner the market for itself or tolerate unfair competition.

In the debates on the Bill in the Lower House and at the Select Committee many Members commented on and paid tribute to the role played by the ESB during the past 70 years. Employing over 8,000 people, the ESB has been a major force for change in our society. The task it undertook at the foundation of the State was to modernise our homes and the economy. The rural electrification programme was a great cause of wonder, amusement and amazement to the population when it was first launched. We can liken the arrival of electricity to Irish homes in the 1920s and 1930s to the situation which will obtain in the near future when the Internet arrives in many more people's homes.

The ESB played a major role in terms of public policy in the early days of the State and that is greatly appreciated. It was a major and constant employer and it made a significant contribution to the social fabric of this country. It is an efficient organisation and has had a positive influence on society. After it was set up it had to generate its own income from its own resources and it did not rely on the State to supplement any losses it might have had. If it had debts, it had to carry them and sort out its own problems.

In view of the significance of this legislation, the ESB has modernised itself. It has slimmed down in terms of the number of employees; it has increased its activities nationally and internationally and has become in many ways what it will become in the future, that is, a plc diversifying, modernising and on top of the changes that are taking place. It must be at the cutting edge of change and it is ready, willing and able to meet the challenges it must now face.

I understand from the Minister that legislation that will enable the company become a plc is promised. That will have a significant impact on everybody, particularly the workers. Like Telecom Éireann, the ESB has brought its employees on board. While at times in the past industrial relations in the company were very strained, they are now excellent. Part of the changes that have taken place in the company have resulted from a combination of good management and sound worker participation in decisions regarding change.

The ESB has expanded its activities in the North of Ireland, the UK and overseas. It is a progressive, positive company but there are a number of issues which will create problems for the company as it moves into competition. The variety and type of power generating stations it has are not as modern or economic as some of its competitors will be. While it is a very highly capital intensive business, a modern new power station run by Bord Gáis, or whoever, would compete with the older technology and the longer term investment. If stations have been in existence for 40 years, they cannot be as effective and as competitive as a new modern station.

I welcome the commitment in the Bill to peat fired generating stations and so on. There is a commitment in it that, if a generating station is using indigenous fuel, there will be a pricing policy whereby the ESB could recoup any losses it may clearly make on that alone. With the regulator in place and with the vigilance of the Department and Minister, it will not be a case that any such losses would be written off against these generating stations. A clear and incisive view will be taken of the management and accounting systems in place in these stations to ensure that procedures in them are transparent and effective.

I am concerned about the impact of the increase in competition in this market. I welcome competition but the increase in competition may pose a difficulty for domestic consumers. Domestic electricity prices in Ireland are the third lowest in the European Union. Northern Ireland's domestic customers pay 24 per cent more for their electricity than ESB customers and industrial customers in Northern Ireland pay 18 per cent more. That means that while the average electricity bill for a two month period for a family in Drogheda is £52, the average bill for the same period for a family across the Border in Newry is £65 – a difference of £13. There will be competition in respect of the heaviest users of electricity and some of those users will transfer to new competitors. When there is competition, domestic consumers will be faced with a price increase. I would like the Minister to comment on this. When Telecom Éireann introduced a billing redistribution – I am not sure if that is the correct technical term – it increased the charges for domestic calls overnight. That price increase was severe and it had a serious impact on the domestic consumers whose bills increased significantly, although they have subsequently decreased. We must prepare more for such change. What role will the electricity regulator have in this area? The ESB will have to lose market share. While it will compete for every single customer when competition enters the market, it will have more domestic and fewer industrial consumers. That will pose a problem in regard to costing. It will also pose a problem for domestic consumers. I would like the Minister to respond to that issue.

What guarantees, if any, can the Minister give or what instructions, if any, can the regulator give about this issue? It is important that ordinary consumers should continue to benefit compared to electricity users in Northern Ireland and that they do not suffer as a result of this change. There is a possibility that they might suffer. While it would not be the wish of the ESB or the Minister that domestic consumers would suffer as a result of this change and that is not something they are proactively pursuing, domestic consumers will face a significant price increase unless we set in train measures to ensure that if that were to happen, it would be phased in, commitments would be given on electricity prices or the regulator would make the necessary contribution to stabilise the market for the consumer.

This is an important Bill which can set out useful policies for the island of Ireland. With the advent of the Good Friday Agreement and with what, I hope, will happen later today with the establishment of an executive in Northern Ireland, this is a good opportunity for the people of the North and the South to co-operate on an energy policy for this island. Deputy Perry made an excellent contribution recently in the other House about North-South co-operation. This might be an area we could examine with a degree of certainty and co-operation. It is a very important area for co-operation and this issue is non-contentious. If the Minister could tell the people in Northern Ireland that they would have cheaper electricity—

They would flock down here.

They would, or we might flock up there but, better still, we could strike a balance whereby they would see the benefit of co-operating with the South.

This is a serious issue which will have to be addressed and this is a golden opportunity for us to examine that area. The world economy moves in cycles and demand for power goes up and down. By their nature businesses and economies are cyclical. It would be a positive development if we could plan ahead, get into a niche market and have a combined North-South effort whereby we would supply electricity through the grid to the UK or elsewhere. That is a road we would like to go down. We would all wish that to happen and I hope it will.

Other questions also arise. A number of Deputies raised the issue of wind energy and other alternative forms of energy in the debate in the Lower House. Ongoing research and development in that area are important. Companies like the ESB are big enough and committed enough to examine alternative sources of energy and to support and sponsor them through their budgets. I do not know if the regulator would have any powers in this area. He should be able to recoup costs from all other companies for areas like this. It would be a significant development and a benchmark for the regulator if that were his intention. I do not know what his intentions are, but I hope that would be his intention. I also hope that a significant activity like research and development into alternative forms of energy would be supported by all the people who would benefit from the sale of electricity here.

Another issue arises, which is ambiguous. I welcome the fact that the Government amended the Bill on Committee Stage to include the decision on nuclear fission which means there will be no nuclear generated electricity, in the 26 counties at least. Successive Governments have clearly enunciated our policy on Sellafield and the processing and power industries to the UK. We must address the moral issue of buying in nuclear generated electricity from outside the State. I cannot prescribe how this can be resolved. However, there is a difficulty. We cannot say we will not produce it ourselves while at the same time accepting it from others.

Yes, that issue arose.

Another important issue raised in the Dáil was underground cabling. This arose in Cork Harbour and north County Louth in the context of the erection of pylons. Perhaps it is the role of the regulator to ensure that when we are installing new lines they should be underground, if possible. That may be more expensive, but if it can be done, it must be done. We should move in that direction. If we are protecting the environment, we should do so visually as well as in other ways.

This Bill is welcome. It is important as it brings about significant and major changes to the country and the ESB. The ESB is clearly ready, willing and able to meet these challenges. I have no doubt that the ESB will continue to be as competitive and efficient in the marketplace as it is now. It is good for the country that business will have a choice, for example, Cement Roadstone can choose whether to buy its power from Platin power station while other high users of electricity will also benefit greatly. The needs of the domestic consumer must be addressed. I ask the Minister to respond to that issue.

I welcome the Minister and compliment her on bringing forward ground-breaking legislation. It has been referred to as making history and marking the end of one era and the beginning of another. While I was preparing this contribution it struck me that if this or any other Minister had attempted to introduce a Bill like this five, eight or ten years ago, it is odds on he or she would have been a strong candidate for the electric chair. The ideologues would have rained fire and fury on his or her head. It is significant how times have changed and how market forces and conditions have brought about the glo balisation of markets and a move towards liberalisation. Just as that applies in private industry, it also applies in the semi-State sector.

This Bill introduces competition to the electricity industry for the first time and provides a regulatory framework to oversee and manage this competition. It is the most important legislation on the electricity industry to be introduced since the establishment of the ESB under the Electricity (Supply) Act, 1927. Like the Minister and other speakers, I pay tribute to the management and workforce of the ESB. Although it enjoyed a monopoly position and at times caused grief to individuals and communities, it has served and continues to serve the country and has a proud record of achievement. Its biggest critics cannot take that away from it. That record has been maintained throughout its 72 years of its existence, since it was established statutorily.

The ESB started from humble beginnings but has grown into one of the largest commercial entities in the State. It is a huge employer. It has transformed areas where power stations were set up and brought new life to communities which were being denuded because of emigration. One of the greatest challenges in its history was rural electrification. This could only have been brought about by men and women of great vision and foresight who saw the need for rural electrification and by the commitment and determination of the ESB to take on the huge task and go to the corners of the country to deliver electric power.

I recall as a young child arriving at my house and being told to look up at the ceiling and watch as the first electric light bulb in our home was switched on. It was mesmerising, a source of fascination and amazement. It was a miracle. We spent about two hours looking at it trying to figure out what it was all about. Looking back, we realise how the scheme dramatically transformed the country. It played a hugely significant role in laying the foundations for economic development. However, it has played an equally significant role in and brought unimaginable improvements to the quality of life of those who availed of the service. I think of my mother and the chores she had to carry out before the arrival of electricity. It is a small but significant example.

The ESB, through ESB International, enjoys a worldwide reputation for expertise and high standards. It has carried out consultancy work in every corner of the globe, in large countries with strong economies and in the Third World, and helped to set up new generating stations and networks. I pay tribute to the commitment to duty of ESB workers who have faced many challenges in meeting deadlines and dealing with emergencies. The best examples of this are last Christmas and the one before when homes in many parts of the country were plunged into darkness and left without power to cook their Christmas dinners. The workmen of the ESB came out in force and sacrificed their Christmas celebrations to climb poles and repair fallen lines and structures in order to restore power. My extended family and my wife's extended family in the south and west can give adequate testimony to the enthusiasm and commitment of the workers. It will be a hard act to follow for the competitors lining up to join in the new environment of liberalisation of competition.

As the Minister said, the market is changing rapidly and we are witnessing liberalisation in many sectors. In this case it is leading to a progressive opening up of the electricity market to competition. Directive No. 96/92/EC concerning the internal markets in electricity came into force in 1997. Ireland must implement it in full by February 2000. It requires us to open 28 per cent of the Irish electricity market to competition by that time, increasing to 32 or 33 per cent by 2003. The purpose of the directive is to allow independent electricity generators to contract directly with designated eligible customers for the supply of electricity; that is, customers consuming above a specified threshold.

The Minister, her predecessor – as the Minister has acknowledged – and their officials prepared for the implementation of the directive in a very professional and consultative way. Wide ranging and extensive consultations have taken place with the relevant parties. The success achieved by the Minister and her officials has enabled her to bring forward this Bill earlier than required. She said that in excess of 60 submissions were received on the proposed transition. A significant part of the process involved the publication of proposals in May 1997 by the then Minister, Deputy Dukes, followed by a discussion forum set up by the Minister, Deputy O'Rourke, in January 1998. A further consultation document was published in May 1998 and comments on it were taken into full account in the preparation of the Bill.

Another step was the recruitment of the Commissioner for Electricity Regulation. I congratulate Mr. Tom Reeves, who was recommended for the post by the Civil Service Commission, following an open competition. He will be appointed to his new post by the Minister as soon as the Bill is enacted. There is no doubt he will have a daunting task. He and the commission will be funded by the industry they will serve and the commission will exercise its many functions under a range of primary and secondary duties.

It must focus primarily on the protection of the interests of the final customers and ensure non-discrimination between electricity undertakings. It will also have to promote competition, safety, security of supply, efficiency and economy. It will have to take into account the protection of the environment. A huge duty which will be taken from the ESB will be the licensing the generation and supply of electricity and authorising the building of electricity generating stations. It will be responsible for the development of a mechanism for electricity trading. The Bill will provide the regulator with powers of entry and the power to obtain records and documents. These powers are considered necessary to ensure the commission can exercise it functions fully.

I wish to comment on the issues of independence and accountability, which were covered fully by the Minister. While the commission will be independent in the performance of its functions and will be funded by the industry it serves on a similar basis to the Office of the Director of Telecommunications Regulation, I warmly welcome a number of changes the Minister has introduced in the Bill. Her decision to retain the policy role with regard to the electricity sector is of vital national interest. The inclusion in the Bill of clearly defined areas of accountability for the regulator and his office is extremely important. For example, the office of the regulator will be subject to the following requirements: it will have to report annually to the Minister on the performance of its functions; it will have to report to a joint Oireachtas committee and it will have to subject itself to an audit by the Comptroller and Auditor General and to the Freedom of Information Act.

I agree entirely with the Minister and others that, while ceding powers in such a vital sector of the economy in line with the European directive and requirements, we must retain, and be seen to retain, open and democratic accountability. There is a farcical situation in the telecommunications regulator legislation, where the regulator's office is legally accountable to nobody. That said, I compliment the regulator on co-operating with the Oireachtas committee when she realised there was a lacuna in the Act. I further commend the Minister for reassuring us that the lacuna will be filled by amending legislation.

The Minister's decision to retain the policy role in the electricity sector gives her powers to make orders relating to public service obligations, which is extremely important and to which she referred in detail. It also gives her powers relating to price, quality, security of supply, regularity, the protection of the environment and the use of indigenous resources. These are extremely important matters of national interest and are necessary safeguards to strike the right balance, on one hand, between independence and accountability and, on the other, between independence and the vital national interest.

The gradual and progressive opening up of the electricity market to competition must be promoted through increased efficiencies, downward pressure on prices, the denial of the right to cherry pick – there must be a clear, unambiguous protection mechanism to deny the right to cherry pick – certainty of security of supply and the highest standards of safety, among other matters. It must be conceded that the ESB has set standards in these areas which are second to none in Europe. The new competitive environment must be obliged to continue this excellence of service under the proposed new regulations, which will allow open competition in the generation and supply of electricity to eligible customers. There must be no diminution of standards. There must be no question of sacrificing low prices, quality of service or standards of safety in this new environment.

The previous speaker commented on concerns that domestic consumers may be asked to pay the price for competition among the big customers. I know the Minister will take every step in forthcoming legislation to ensure that is minimised as much as possible, or avoided if at all possible.

We need not look very far to see experiences where privatisation went badly wrong. The UK is a prime example of this. The nationalisation of the UK electricity industry led to huge price increases. The UK rail service is a disaster; I have read a number of articles about how it has gone from a high state of efficiency to inefficiency. The UK water boards are another example of how the UK authorities do not seem to have their act together in terms of privatisation. However, I would not presume anything like that about this Minister, who, so far, has progressed the implementation of the directive in a very professional way.

There are many contenders lining up for a slice of the cake in February 2000. IVO is involved in the building of the 120 megawatt generating station in the east midlands. Although it has not started yet, it is already a significant milestone and the first indication of competition in the area of electricity generation. Cement Roadstone Holdings and Viridian are also gearing up. Marathon Petroleum surprised everybody at a forum early last year when it said it was interested in entering the market. There are rumours it might join up with the other companies I mentioned to form a larger grouping. Bord Gáis and Canadian Power are also involved. Another independent venture, the Ireland Power Group, was also created recently. Enron, one of the world's largest energy companies and the first into the British market after liberalisation, indicated at the beginning of the year that Ireland was of significant interest.

That sounds daunting for the ESB. Nevertheless, despite the potential of this huge investment, I am convinced the ESB is well able for the many challenges and opportunities which the new era of liberalisation will inevitably bring. It has proven itself to be a vibrant and strong organisation. It has shown a tremendous spirit of determination and initiative, both in terms of the domestic challenges and developments, which it has met to the highest possible standards, and, more importantly, in taking its skills and expertise to every corner of the globe, where it has successfully competed for consultancies in large rich economies and Third World economies.

As the Minister said, there will be great new opportunities for the ESB in terms of generation, transmission and supply, in that the whole EU market has been opened up to it. With the future legislation the Minister has signposted, the ESB is likely to face a number of options, including plc status, strategic alliances, further employee share ownership, public-private partnerships or a combination of these elements. The Minister's assur ance that she will only consider what is best for the ESB and its consumers is to be welcomed.

The ESB has done a great deal of preparatory work to get ready for competition. It was heartening to hear the chief executive and his officials at a meeting of the Joint Committee on Public Enterprise and Transport some months ago say that the company has been gearing itself to meet the challenges and opportunities which liberalisation and competition will present. Undoubtedly its wide experience in competing for consultancies through ESB International as well as its involvement in the liberalised telecommunications sector through Ocean will give its competitive edge a robustness. The chief executive officer assured us that the company is clearly focused on growth and on expanding its horizons.

The ESB is not the first to go down this road. It will have the benefit and insights of others because it availed of the opportunity to study the transitions which took place within Telecom Éireann and Aer Lingus as they became more market driven. Everyone conceded that there was pain involved in those transitions but there is no doubt that the movement to more market driven business has been of enormous benefit to both companies. More importantly, there have been enormous benefits for consumers.

I commend the Minister for her approach to Committee Stage of the Bill. Significant amendments have been introduced. The Minister has separated the licensing of generation and supply in section 13. That is very important because it promotes competition and does not shackle the company. In the initiated Bill the application was licensing of generation and supply. A completely new opportunity to licence electricity from combined heat and power was also introduced.

I pay tribute to the Minister for introducing an anti-nuclear subsection. It is now enshrined in legislation that it is illegal in this jurisdiction to generate electricity from nuclear fission. That addition will be warmly welcomed by all concerned about what is happening in Britain.

I have no doubt that the process on which the Minister has embarked will be successful and I wish her and the staff and management of the ESB every success in the healthy competitive environment which lies ahead.

Debate adjourned