I thank Senator Jim Walsh for his kind words and for raising this matter on which I welcome the opportunity to speak to Members.
Bearing in mind today's debate and my response to the debate on energy issues in this House last Thursday, it is reassuring that Senators have demonstrated a robust interest in energy matters generally. The Minister for Communications, Marine and Natural Resources, Deputy Noel Dempsey, and I look forward, therefore, to the support of Senators in discussing and agreeing the energy (miscellaneous provisions) Bill 2006, which is scheduled for publication shortly.
The Minister for Communications, Marine and Natural Resources has no direct responsibility regarding natural gas connection policy. Under the Gas (Interim) (Regulation) Act 2002, this responsibility has been given to the Commission for Energy Regulation, CER, a statutorily independent body established under the Electricity Regulation Act 1999. Among the CER's functions are the granting of licences and consents for the construction or operation of the natural gas network. An associated function involves responsibility for establishing the detailed criteria for evaluating natural gas network extensions, which are set down in its connection policy.
In carrying out its functions, the CER must have regard to the protection of the interests of natural gas consumers. There is therefore an onus on the CER to ensure that a proposal to extend the natural gas network is economically viable before issuing consent. We must also take into account the fact that the natural gas network is paid for by natural gas consumers. The Act of 2002 states a public service obligation cannot be imposed for the purpose of extending the natural gas system to new areas of supply on a non-commercial basis. It is evident, therefore, that any uneconomic network extension would involve, as a direct consequence, the increase of natural gas tariffs for all consumers. The CER's objective in setting its connection policy is therefore clear — it is to achieve a balance between the expansion of the natural gas network and keeping down the cost of natural gas to consumers.
Bord Gáis Éireann, BGE, which owns and operates the natural gas network, is mandated under the gas Acts to execute only economically viable projects that will earn a reasonable return on investment. Consequently, any proposed extensions to the network must first meet with BGE's strict economic criteria. While it is open to other companies to seek a consent or licence to construct or operate a natural gas pipeline, it is evident that economic return on investment would be even more of a prime motivating factor for them.
On the matter of bringing gas to Wexford, BGE engaged DKM Economic Consultants in 2001 to conduct a review of potential future gas transmission markets in Ireland. One of the potential markets considered in the consultants' study was a connection off the Cork-Dublin pipeline servicing Wexford via New Ross and Enniscorthy. This route, rather than the existing connection to Waterford, was explored as the Waterford connection did not have sufficient capacity to supply Wexford. The study found that the construction of a 62 km high-pressure transmission pipeline would be necessary to bring gas to Wexford. It was estimated that such a pipeline extension would require grant aid, a subsidy greater than 90%, or a grant in excess of €20 million in 2000 prices, if it were to be allowed to proceed. Such a proposal fell into the category of being economically unviable. However, with the concurrence of the Minister as a shareholder, Bord Gáis recently proposed changes to the CER's current connection policy. If adopted, the proposed changes will improve the prospects of towns and other areas hoping to connect to the natural gas network. The CER is engaged in a public consultation process on the proposed changes. I expect it will make a decision shortly on whether it will adopt the Bord Gáis proposals. Bord Gáis has advised me that it plans to update its 2001 study on future gas markets after the CER has made its decision known. The revised study will incorporate updated information on projected demand, costs and any revision of the CER's connection policy. As part of the task of updating the 2001 study, Bord Gáis will consult local development agencies and authorities in the potential market regions, including County Wexford. Work is scheduled to begin on the updated study with a view to commencement following the outcome of the CER consultation on connection policy, with a scheduled completion date of early 2007.
I would like to conclude by speaking briefly on the Department's role in the development of gas infrastructure. While the CER must, of necessity, focus on the economic viability of future gas projects, the Department must take a broader policy perspective that reflects Government policy objectives, including balanced regional development. The Department is engaged in an assessment of the role, if any, of natural gas infrastructure in facilitating regional development, having regard to the national spatial strategy. This assessment has commenced with a feasibility study and cost-benefit analysis of bringing gas to the north west. The initiative of Bord Gáis in bringing forward its proposals to the CER for a change in the connection policy is to be welcomed. In that context, I welcome the commitment of Bord Gáis to update its study on future gas markets across the regions.
I accept the point made by Senator Jim Walsh, who is from County Wexford, about the availability of natural gas in the surrounding counties of Waterford, Carlow, Kilkenny and Wicklow. I hope Bord Gáis will look favourably on any application to extend the network into County Wexford. I assure Senator Walsh that the Wexford county manager, Mr. Eddie Breen, is proposing a project that will deal with the issues he has raised by ensuring that Bord Gáis will have a proper investigative role in deciding whether gas should come to County Wexford. I thank the Senator for raising this issue.
