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Seanad Éireann debate -
Tuesday, 3 Feb 2009

Vol. 193 No. 9

Gas (Amendment) Bill 2008: Second Stage.

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

I am pleased to introduce the Gas (Amendment) Bill for the consideration of the House. The Bill proposes to increase the statutory borrowing limit of Bord Gáis Éireann from €1.7 billion to €3 billion. The enactment of this Bill will give Bord Gáis Éireann the legal ability to access funds to develop the strategic direction set out in its five-year corporate plan up to 2012 and beyond. The Bill proposes to amend section 23 of the Gas Act 1976 which provides for borrowings by Bord Gáis Éireann for capital purposes. There were no amendments to the provisions of the Bill on Report and Final Stages in Dáil Éireann.

Since its establishment in 1976, Bord Gáis Éireann has played a vital part in the growth of the economy through the development of a gas network that runs to almost 12,500 km of pipeline serving more than 600,000 customers. Bord Gáis Éireann has transformed the gas network in the past ten years through the construction of the pipeline to the west, which stretches from Dublin to Galway and down to Limerick; the South-North pipeline from Dublin to Belfast, providing security of supply of natural gas to Northern Ireland as well as supplying towns en route; the Mayo-Galway pipeline, which has facilitated the delivery of natural gas to several towns along the route in both Galway and Mayo, and which will facilitate the transportation of Corrib gas to the Irish market in due course; the north-west pipeline from Belfast to Derry, also supplying towns along the route; and the second gas interconnector with Scotland, which has secured the supply of gas to Ireland since its completion in 2002.

These projects have provided for the delivery of gas to towns in the midlands and west, including along the Mayo-Galway pipeline which was constructed to facilitate the delivery of Corrib gas to the market. They have also provided security of supply of natural gas to Ireland through the second interconnector and, through the South-North pipeline, security of supply to the island as a whole, including Northern Ireland. All these have contributed greatly to the development of the economy over the past ten years.

The Members of the House will be aware that Bord Gáis Éireann has a statutory mandate to provide a system——

While I do not intend to interrupt the Minister of State unnecessarily, could we have a copy of his script, if possible?

I apologise for not distributing it earlier. We will make it available and if it needs to be autographed or anything else, we will facilitate that as well.

The Members of the House will be aware that Bord Gáis Éireann has a statutory mandate to provide a system for the supply of natural gas that is both economical and efficient. Unfortunately, the requirement to deliver a network on an economic basis means that some areas miss out on the benefits of natural gas as the construction of the necessary infrastructure does not meet the economic criteria set out. However, Bord Gáis Éireann has developed the network extensively since its establishment in 1976 and now 18 counties in Ireland and four in Northern Ireland are connected to the natural gas network.

Members will be aware that the procedures for determining whether towns or locations can be connected to the network were changed in agreement with the Commission for Energy Regulation in such a way that instead of towns being evaluated individually, they would be taken in groups or clusters. This resulted in several towns being connected that would not have qualified under the previous method. Eleven towns along the Mayo-Galway pipeline were earmarked for connection to the natural gas network in phase one of Bord Gáis Éireann's new towns analysis under this connections policy. Six of these have been connected and the remaining five will be completed this year. Phase two confirmed that six more towns will be connected. Cashel was connected in 2008 and the remaining five phase two towns will be completed this year.

Bord Gáis Éireann has almost completed phase three of its new towns analysis as part of its connections policy to establish whether it is feasible to extend the gas network further. I understand the publication of this report is imminent. However, I reiterate that the locations under examination must meet the economic criteria before the network can be extended to these areas.

Bord Gáis Éireann's gross borrowing is expected to reach the existing statutory borrowing limit of €1.7 billion this year. The existing debt is made up mainly of long-term facilities put in place to fund the large gas transmission projects, to which I referred, that were completed over the past ten years. The expansion of the gas network in recent years from 8,200 km in 2000 to its current 12,500 km has also been funded by long-term debt matching the expected life of the infrastructure.

The operation and development of the gas network in the next five years includes adding another 1,500 km of pipeline to the network; the connection of 150,000 new customers; replacement of the remaining cast-iron network with polyethylene pipes; and investment in new systems and technology to provide improved customer service. Bord Gáis Éireann will continue to meet its emergency response standards and pipeline safety standards.

Bord Gáis Éireann also intends entering the domestic retail electricity market this year. With its existing customer service operations, billing systems and mechanisms related to its retail gas business, savings can be made in this area when providing a retail electricity service, thus providing added value to both Bord Gáis Éireann and its customers.

Members of the House will be aware that Bord Gáis Éireann is also in the process of constructing a 445 MW combined-cycle gas turbine electricity generating plant at Whitegate, Cork. The board's plan is to develop a portfolio of electricity generating plant, including renewable generation and flexible power plants, to support renewable power generation. This access to its own supply of electricity will ensure a stable, vertically integrated business model, which will ensure, in turn, Bord Gáis Éireann's long-term competitive commitment to the electricity retail market.

As I mentioned to Members of the Dáil when the Bill was introduced, Bord Gáis Éireann has an ambitious capital investment programme of up to €2 billion over the coming five years with a view to becoming a competitive dual-fuel supplier in the Irish market. The enactment of this legislation to increase the statutory borrowing limit to €3 billion is an integral part of this process. This development is in line with the Government's energy policy framework document, Delivering a Sustainable Energy Future for Ireland, which specifically provides for the sustainable development of State energy companies. Bord Gáis Éireann's commercial direction will provide competition and environmental sustainability, which are key pillars of the policy framework.

The development of business interests outside its traditional core business of natural gas transportation and supply does not impact negatively on the price of gas to Bord Gáis Éireann customers. The company's gas business is regulated by the Commission for Energy Regulation which allows Bord Gáis Éireann a regulated rate of return on its transportation business. It can only recover costs on investments approved by the Commission for Energy Regulation, CER. In setting the rate of return, the CER applies the cost and level of borrowing of an efficiently operated and financed company with comparable systematic risks to Bord Gáis Éireann. Therefore, the board is incentivised to borrow funds as efficiently as possible.

The security of gas supplies was to the fore recently when difficulties between Russia and Ukraine emerged following last Christmas. I assure Members that Ireland is not experiencing any impact on gas supply arising from that situation. Ireland's demand for gas is met almost entirely by imports from the United Kingdom. Irish imports account for approximately 5% of the UK gas market. The vast bulk of UK gas demand is met by indigenous North Sea production and imports from Norway. The UK is also interconnected with continental Europe and receives some gas from Russia. However, this accounts for less than 2% of the gas in the UK system. On this basis, the recent Russia and Ukraine situation did not impact adversely on Ireland. However, the situation clearly underlines the strategic importance of diversifying our sources of gas supply. In this regard, the Corrib gas field, which could meet 60% of our annual demand for gas for approximately five years, is very significant.

The part Bord Gáis Éireann has played in the development of the economy since 1976 has been significant. The robust gas supply network developed by Bord Gáis Éireann, including connection to the UK grid through the interconnectors, has guaranteed security of supply in the long term. Given that 60% of our electricity is generated by gas, the secure supply of natural gas has provided the necessary assurance to prospective competitors in the electricity generating sector that investment in electricity generation in Ireland is an attractive business proposition. In this context, the development of the gas network, while not physically reaching all areas, has benefitted all areas of the State through its support of the electricity market. In the process, Bord Gáis Éireann has contributed €686 million in dividends to the Exchequer since its foundation, including €28 million paid in December last year.

Since 2000, Bord Gáis Éireann has increased turnover from €496 million to €1.2 billion. Profits have increased from €70 million to €142 million. Net assets have increased from €672 million to €1.3 billion, placing the utility on a sound financial footing. This success has allowed Bord Gáis Éireann to develop its network continually, making a vital contribution to the national economy and providing excellent service to its customer base. It is in a strong position to meet the challenges it faces in terms of environmental sustainability and competition while ensuring a safe and secure supply of natural gas.

It is important to note that an increase in Bord Gáis Éireann's statutory borrowing limit does not give it permission to raise its borrowing to his level. Each project put forward by Bord Gáis Éireann will require the approval of the Minister for Communications, Energy and Natural Resources with the consent of the Minister for Finance. The board is obliged to act in its best interests and no proposals will be supported that would put the long-term sustainable future of the utility at any unnecessary risk. Ongoing borrowing levels will be monitored and will be subject to full commercial criteria, such as ability to repay and protection of the balance sheet. Clearly, Bord Gáis Éireann plays a pivotal role in our economy. I ask the Members of the House to support the proposed increase in Bord Gáis Éireann's statutory borrowing limit to €3 billion. Go raibh maith agaibh.

Ar dtús báire, ba mhaith liom an tAire Stáit a fháiltiú go dtí an Teach. Gabhaim buíochas leis as ucht an léiriú ag thug sé dúinn ar an t-ábhar tábhachtach seo. The objective today is to amend section 23 of the Gas Act 1976 and to increase the statutory borrowing limit of Bord Gáis Éireann from €1.7 billion to €3 billion. This would allow Bord Gáis Éireann to develop and work on what is a very fine corporate plan up to 2014. In the interests of the country, my party will support the legislation, as we did in the Dáil, on the premise that flexibility should be allowed Bord Gáis Éireann in this area.

It is worthy of note that Bord Gáis Éireann has 600,000 customers nationally at present. It has made very good use of moneys and resources to date and it is a very successful company. An interesting by-product of the current credit squeeze is its assistance to players such as Bord Gáis Éireann, which can afford to purchase major wind farms, as it has done recently.

The strengthening of the hand of Bord Gáis Éireann in this regard is a by-product of our current position. I am impressed by the legislation's mandatory provision to the effect that Bord Gáis Éireann would not be given carte blanche and the Minister still will have control on expenditure. I refer to both the Ministers for Communications, Energy and Natural Resources and Finance in this regard. Such a provision is both worthy and necessary and it is worth making the point on Second Stage that in the past 11 years, a culture has existed that featured excessive lack of control and a lack of minding the pennies. In the current climate and for the next year, everyone at a domestic level will be obliged to manage money in a different fashion. Similarly, the country will be obliged to so do and a different culture must pervade. Moreover, one must hope that such a culture will extend itself for longer than in the past and that it will endure for a long time in the interests of the country.

I wish to make a point to the Minister of State that I also made on the Order of Business in this House some weeks ago and which then received general acceptance as being an important issue. Last summer, Bord Gáis Éireann was awarded a price increase of 20% that was predicated on the fact that at the time, crude oil cost €145 per barrel. At present, however, oil costs less than €50 per barrel or somewhat less. While the price fluctuates, it now is approximately one third of what it then was. The Minister of State should take seriously the suggestion I am about to make. It should have happened long ago and had such a measure been taken in advance of last night's negotiations with the social partners, we may have had a different outcome. At a minimum, there should be a 10% reduction in the current prices of gas and electricity. The regulator stated in respect of the ESB that it had a six-month supply of oil in backlog at an expensive price and for that reason, an instant decrease in its prices could not take place. If it is the case that the ESB had a six-month backlog of the expensive oil, presumably it also had a backlog in supply of cheaper oil at the outset of the crisis. Consequently, there is no justification for failing to reduce energy costs. Great energy poverty exists among our social welfare recipients and high energy costs constitute a significant barrier to successful industry. One of the major employers in my own locality, Wellman International of Mullagh, County Cavan, recently cited its energy costs as being its greatest disincentive. Moreover, many companies that have closed down have cited the significance of high energy costs. My point is that gas prices should be reduced immediately. Bord Gáis Éireann is a commercial success and while I do not wish such success to stop, consumers should not fail to benefit from both that success and the pain they may have accepted in the past. I make this point to the Minister of State not in a flippant or time-filling way but in a serious manner. He should respond to this point and should take this to be a serious proposition.

The Leader of the House, Senator Cassidy, assured me on the Order of Business a few weeks ago that he intended to bring this matter to higher echelons and similarly, I ask the Minister of State to act on it. At a minimum, there should be a decrease of 10% to 20% in gas prices. There should be a reduction in both ESB and gas prices of a dramatic nature and were such measures presented to the social partners, they might look on other propositions in a different fashion. This matter is both urgent and serious and it is a shame it has not happened to date. The public is becoming angry in this regard and it should not be the case that high energy prices are dislocating jobs. This matter must be tackled head-on.

I will mention in passing a point that is not relevant to today's debate. The issue of price control must be grappled with to a much greater extent. It also constitutes a huge element in the cross-Border trade and while I recognise the VAT dimension, price control must be central. Why can superstores in one part of an island sell at radically different prices to superstores in another part? This issue must be investigated.

The proposed new borrowing limits, which Fine Gael supports, will allow Bord Gáis Éireann to increase its involvement in the renewable energy area. This is an excellent development in the context of Ireland's Kyoto Protocol obligations and its future in respect of energy supplies, sustainability, security etc. The Minister of State should encourage Bord Gáis Éireann to opt to purchase and develop wind farms. It is important that Bord Gáis Éireann should become an aggressive competitor to the ESB. This will be necessary for consumer pricing, the quality of supply etc. Obviously, Bord Gáis Éireann requires the proposed capital, flexibility and upper borrowing limits in order that it can compete against the ESB. It is important to ensure that Bord Gáis Éireann's gas supply becomes accessible to as many local communities as possible. The Minister of State referred to this and I agree. This policy should be continued and there should be constant monitoring to ensure continual significant investment in extending pipelines and access. While I note 18 counties have complete coverage and 600,000 customers now are supplied, it is important to acknowledge that some areas of the country are without a gas supply.

Energy security is a highly important issue in that at present, Ireland has available to it six days' supply of gas. Members should recall the dispute between Russia and Ukraine and the former's recent treatment of the latter. The Minister of State correctly identified that this dispute did not have an impact in an Irish context and it is helpful to the House that he did so. However, at the same time, this should ring alarm bells and is of concern as it brings into focus the question of security of supply. Consequently, it is important that Bord Gáis Éireann proposes to invest capital expenditure in the creation of greater storage facilities for gas and wind energy, as well as for the development of renewables. I understand its corporate plan proposed expenditure on renewables and storage facilities of €15 million, €80 million and €194 million last year, in 2009 and 2010, respectively. This development is crucial and the Minister of State should continually impress on Bord Gáis Éireann that it should continue such capital expenditure on those priorities, as outlined in its corporate plan.

It is important to continue to exploit Ireland's offshore gas natural resources. However, it should be brought ashore in a much more sensitive fashion and in a much more co-operative and interactive manner with local communities. Although ultimately decisions must be made, the manner in which the bringing onshore of gas from the Corrib gas field has evolved has not been satisfactory and we should try to correct this in future developments. However, it is critical to bring onshore offshore gas in a manner which is acceptable to local populations.

I believe it will be extraordinarily important to examine Ireland's transportation sector to remove its over-reliance on oil, from the perspectives of emissions, the ultimate cost of Kyoto Protocol fines and general security and sustainability. We should consider sources of energy arising from renewables and other sources and the commercial availability and widespread use of electrically-powered cars. All Members will wish to acknowledge — it would be wrong to do otherwise — the huge contribution made by my Dáil colleague, Deputy Coveney, to this debate on electric cars and their development. At present, he is preparing a paper on the subject for the Oireachtas Joint Committee on Communications, Energy and Natural Resources. People should make use of electric cars and gas-powered cars and there should be a diversification of the transport sector, as well as a removal of our dependence on oil.

We should consider broadly renewable technologies and wave energy. While there has been recent investment in wave energy technology and its development, that must be ongoing. I certainly support the amendment and believe it is necessary to give an important company with a good track record, such as Bord Gáis Éireann, the flexibility and room to expand. I believe it must expand much further into renewables. While the company is moving in that direction, it must do so to a greater extent. It must establish more storage facilities and compete strongly against the ESB in supplying electricity. It must also bring offshore gas fields onshore.

The objectives are important and, by and large, are set out in the corporate plan of Bord Gáis Éireann. It is important for the House to have a democratic input and to monitor the development of the commercial companies in question. For a while, we let the power of the Houses of the Oireachtas slip to a detrimental degree. Current events might make us assert the role of the Oireachtas more and involve it more. We should be proactive in promoting and encouraging renewables and sustainability. The country has a significant opportunity in that regard and, from a patriotic perspective, I support the legislation.

There should be good competition with the ESB in terms of consumer prices. I await the Minister of State's reply on energy costs with great interest. Instant and radical reductions in energy prices are necessary. If they are not made, we could hardly tell ordinary, hard-pressed people about wage restraints and other sacrifices. It would be appalling were we not to take this golden opportunity to provide them with cheaper energy. A statement from the Minister of State would be welcome.

In aonacht le mo chara ar an taobh eile den Teach, ba mhaith liom fáilte a chur roimh an Aire Stáit, atá anseo inniu chun an Bhille gairid tábhachtach seo a phlé. Aontaím le mórán den méid a dúirt an Seanadóir O'Reilly san óráid a thug sé.

While the Bill is short, it is none the less important and is intended to increase the borrowing provision of Bord Gáis Éireann from €1.7 billion to €3 billion. The Minister of State outlined what developments were yielded by the 2002 increase in permitted borrowings. It is important that Bord Gáis Éireann be able to fund its capital programme and provide necessary infrastructure in the interests of our energy objectives. That Bord Gáis Éireann is expected to reach its borrowing limit of €1.7 billion in 2009 is interesting.

Interest rates during this recession are exceptionally low, possibly as little as 0% in the United States of America. I am waiting to see whether one will be paid deposit interest on borrowings. Were that day to arrive, we might all be at the bank to find out what we could borrow. Many commentators believe that deflation will occur in many western economies this year, which would impose its own challenges. Now is probably a good time to consider increasing borrowings and to stress test their costs. A number of economists have forecasted that, when we get through the recession in one, two, three or four years' time, hyperinflation will be a risk. Apparently, it is a feature of downturns. This downturn, which appears to be deep, could result in hyperinflation. If so, the House can rest assured that interest rates will pursue it to get it under control.

It is important we learn the lessons of the past decade, a time when we might not have foreseen a rainy day and borrowed and invested accordingly. When interest rates are low, we should ensure we do not go to the other extreme and fail to plan for when the repayments will be in excess of this year and next year's levels.

Like Senator O'Reilly, it is welcome that the Minister will, as a shareholder, maintain control over investments on a case by case basis. This element is especially important. Bord Gáis Éireann has been a success. Not only is it involved in the gas market, it is also involved in electricity generation. While many claim it has done so to compete within the energy field, I am sceptical whenever I see State companies competing because they often do not provide the extent of competition found in the private sector. We must be mindful of this issue.

Other companies are entering the market in my area. For example, Endesa has purchased some generating stations. I hope it has done so to generate electricity rather than to incinerate, which is not the way the country should go. Perhaps one incinerator might be required, but a proliferation would lead to our losing control and remaining on the second last step of the ladder of the waste disposal hierarchy. We should be considering the top end, namely, prevention in the first instance and minimising, recycling and reusing. While we are heading in that direction, the thrust of incineration will be to undermine our attempts because incinerators will need to be provided with waste.

I welcome the investment in transportation and the pipe network. I agree with Senator O'Reilly that there has been much inflation in energy prices. According to the regulator and others, it is linked with the international price of gas. However, we can make the necessary economies. Like Senator O'Reilly, I am a member of the Joint Committee on Communications, Energy and Natural Resources. None of the regulators who has appeared before it has given me the sense that competition, price control and value for money for the consumer are a major feature of his or her thinking. This deficiency must be strongly tackled.

There has been much debate in the past week on the cost of public service pensions. As I have stated previously, they will be unsustainable regardless of any increase in contributions. A number of Senators referred to the defined benefit scheme at Waterford Crystal. Many defined benefit schemes in the private sector are in serious difficulty because of the significant global drop in stock markets and investments. I do not know how people could have been insulated other than to have their pension funds on deposit, which might not have been acceptable during the past decade. We are also losing sight of defined contribution schemes. People put their money into funds and were not guaranteed returns, but have seen their funds depleted because of the stock markets.

Why am I saying this in a debate on Bord Gáis Éireann? I do so because it still has golden parachutes. If one leaves Bord Gáis Éireann, one gets multiples of one's salary and a 50% pension until reaching the age of 65 years and getting the proper pension. This situation is not sustainable. While it is a profitable company, is it right that, in 2009, we are repeating the mistakes we made in many semi-State companies? We must be consistent across the public and private sectors. There is no reason workers in one industry should be featherbedded against workers in another industry who may be often more productive.

The Minister of State outlined the benefits derived from the last borrowing which increased from €700 million to €1.7 billion, saying that the second gas interconnector from Dublin to Galway and Limerick, the north west pipeline from Belfast to Derry, the south-north pipeline from Dublin to Belfast and the Mayo-Galway pipeline were all an essential part of the investment programme. That came to a bill of €1.41 billion. It is also good that the company's profit after tax in 2006 was €142 million. I am not sure what percentage return on investment that represents but it is a sizeable sum of money. I also note the dividends paid to the Exchequer. The Minister of State cited the cumulative dividend for that year as €28 million at December 2008. The Exchequer will welcome these dividends as the fiscal position becomes more serious.

When business is profitable, whether in private, semi-State or State organisations, it is easy to let costs slide. We must ensure, particularly in companies that do not have real competition, that the efficiencies and cost-effectiveness are primed and subject to constant attention and that executives and those working within the companies are measured by their performance in that area and in the development of the company.

It is good to see that the gas network has grown from 112,000 to 600,000 but I am disappointed to note that Bord Gáis Éireann has re-partitioned the country. It was unfortunately partitioned in 1922 but now we have lost eight counties. Wexford, Kerry, Donegal, Sligo, Leitrim, Roscommon, Tyrone and Fermanagh are not connected to the natural gas pipeline. That puts those counties at a disadvantage industrially and commercially from the point of view of attracting industry into their areas. I would like to see that tackled.

I am more familiar with my own county where the gas comes to our front door, in Arklow, but does not come into Wexford, and to the back door in Waterford but does not come into New Ross. If I may be parochial, I would like that to be examined.

The Minister of State spoke about the need for security of gas supplies and mentioned the difficulties between Russia and Ukraine. We are dependent on Britain, the old enemy. It is important, given the industrial unrest in Britain, that we try to ensure we have other sources of supply so that we are not caught in a political argument between two countries, such as happened in Russia and Ukraine, or by industrial relations difficulties, such as are occurring in Britain, or by conflict. Security of supply is essential and is a priority with the Minister who I hope will address it.

I support the Bill and the increased borrowings and hope that some of the borrowings will be used to provide a pipeline to Wexford.

I welcome and support this enabling Bill which is designed to increase the borrowings of Bord Gáis Éireann. We are suffering the effects of the recession with job losses and contraction of business activity and many are struggling. The investment to which the Bill will give rise and which the Government is overseeing and safeguarding is extremely important. We rely heavily on fossil fuels and energy security arises in the case of gas. While reliance on gas has increased, we do not have sufficient domestic reserves and gas and energy prices have skyrocketed. Many are struggling to pay bills. The Money Advice and Budgeting Service must be one of the growth businesses in this climate.

The cost of fuel has been a dominant topic of debate in this and the other House. Petrol prices have gone through the roof and come down again, which is welcome, but electricity and gas prices have increased significantly and we need transparency on those. We have a high dependency on fossil fuel. Electricity prices for industrial and commercial customers in the second half of 2007 were between 3% and 52% respectively above the EU average. That must be examined.

It is important that we proceed with this initiative in order to create jobs. I am happy to support the Bill.

This Bill is simply intended to allow the borrowing capacity for Bord Gáis Éireann to increase from €1.7 billion to €3 billion. There is an onus on the Government and the Houses of the Oireachtas to allow all State agencies, particularly those in the semi-State sector, to perform to the best of their abilities. There is obvious concern in increasing a credit capacity at a time when as a nation we are finding it difficult to borrow additional resources. The market for borrowing money is becoming limited and the cost of borrowing is increasing. The work of Bord Gáis Éireann in reorganising itself as a general energy company must be recognised. It is to our advantage to have competing interests, not only in respect of the fuel types or energy sources offered but also in offering consumers a choice. Bord Gáis Éireann is well on the way to achieving this. I hope the result will be better services and lower prices for the consumer. The Electricity Supply Board will need to examine this process.

This is a consequence of the competition directive on energy activity but we can no longer take energy for granted. We are reaching a point at which there is no certainty about the world's economy or access to traditional energy sources. In the past month we have seen that much of the natural gas coming into Europe comes from Russia through Ukraine and political difficulties there resulted in the supply being cut off, albeit temporarily. That part of the infrastructure, however, remains at risk.

We fortunately had the foresight to examine how we access our outside sources of natural gas, for example, in pipelines through the United Kingdom that originate in Norway. We can also be sure that fossil fuels are at their peak. They will not exist for use by the generations of the next 40 to 50 years. It has been said that the price difficulties caused by our regulation system need to be examined. There is no doubt there is a mismatch between the ability to achieve the supply at source of the fossil fuel products and what the consumer is being charged, particularly commercial consumers. That needs to be recognised in some way. The ongoing talks about how we reorganise have recognised that, and I suspect there will be some short-term relief, either from the Government or from the Minister working with the regulator, to bring about price savings. It will be a short-term relief, because eventually gas and petrol prices will rise again. Even if the short-term relief cannot be provided, at a time when the economy needs a kick start, nobody would deny that this relief would be a worthwhile outcome.

The sense of the Bill is about recognising the energy market. As it remodels itself, I would like to see Bord Gáis Éireann continuing its work, relying less on natural gas as its main product, but trying to source gas from whatever Irish sources exist. The gas supply off Kinsale is coming to an end. We will eventually see some gas coming from the Corrib field, and there are hopes of some gas in the Porcupine Basin, but these sources will run out. All agencies involved in the energy sector, be they commercial or semi-State, will have to bite the bullet on renewable energy. These are companies that have considerable resources, including their own property portfolios. These offer an opportunity to invest in an area that needs greater investment.

In spite of the general feeling that there is a need to pare back on public expenditure, additional public expenditure of at least €150 million has been just announced in the other House for insulation for housing and public buildings such as schools. I hope that sum will be increased to cover insulation for local authority housing as well.

Energy companies have a responsibility to sell as much of their product as possible and maximise their profits, but also to make sure the resources they are selling are sustainable in the future. As Bord Gáis Éireann remodels itself, and as the Houses give it the sanction to allow it carry out the necessary investment, I hope that a core principle of its work and the work of the ESB will not only be to work together to achieve energy security for this country, but also to work together to make sure that energy, as it is produced, is used as it is needed. If we operate to those principles, we will have an environmental benefit and an economic benefit for generations to come.

I welcome the Minister of State, Deputy Power, to the House and I am delighted to have the opportunity to say a few words on this Bill. My maiden speech in this House in 1993 was about the gas interconnector in Dundalk. At that time, I said I hoped the gas supply would be extended to the west and to County Mayo. I have seen where that has nearly come to fruition. The pipeline has been laid in most of Mayo, but there is no gas yet. I hope the Corrib gas situation will be resolved. I wish the forum taking part in negotiations the best of luck in that respect.

Senator Walsh made the point that there are eight counties without gas. It is true to say that counties without gas will be at a disadvantage in the future. I welcome the development of a gas supply in Mayo, but it would not be in place were it not for the fact that the gas find off the west coast means there must be a pipeline linking Mayo with the north-east pipeline.

The statistics given by the Minister of State are interesting. I did not know that as much as 60% of our electricity was generated by gas. Around 5% of our gas comes from the UK, which is significant, and I notice that only 2% of the UK gas market is supplied by Ukraine or Russia. The problems with the pipeline were not a significant factor for the UK, but it highlights the amount of gas produced in Britain, and what it means to its economy now that it is in a downturn. The British can generate millions and millions of pounds in revenue from these natural resources, which they can use to stimulate their economy. We do not have that wealth, which is one of our problems. We have gas, but we are not getting any royalties from it. We do not have any oil. While the perception in the past few years was that we are very wealthy country, we do not have any real wealth in oil, gas, diamonds or gold.

The Minister of State's speech highlights the significance of gas to this country. We have all seen how prices in petrol and diesel rocketed in the past couple of years, and are now back down again. While the energy regulator has granted price increases to the energy suppliers, we need to bring down the price of electricity. A number of producers in industry are dependent on gas and electricity for exports, and they are under severe pressure. Our householders are under pressure as well. Their budgets are being cut, and the Taoiseach has just announced the cuts that will take place in the next few months. We need to get our prices in order. We need to get our competitiveness back and we need to examine gas and electricity prices.

This Bill is basically about increasing borrowing for Bord Gáis Éireann, and Fine Gael welcomes that. The company needs funds, it needs to plan for the future and it is only right that it has the borrowings it needs. It has a huge infrastructure right across the country, and it supplies very small towns. Will there be a facility to connect villages that are near connected towns? There are people who are interested in availing of this possibility.

I wish the Minister of State well with the Bill, and I give it my full support.

I welcome the opportunity to speak on the Bill. I will not discuss it in great detail. We all know what it is about. I have a script, but I do not intend to rely on it. I will speak about a matter that affects customers in a real way. It has been raised by Senator O'Reilly and others. I refer to the cost of energy, particularly gas. Last week, I spoke to a lady who had just received a monthly gas bill of €475 in respect of her three-bedroom house. When I looked at my own bill, I noted that it was similar. Senator Burke mentioned the horrendous effect of such costs on people on a tight budget. If three people are sharing a house, a gas bill of €100 a week represents a fair amount of money for them.

If one asks business people what is crippling them, the first thing they will refer to is the cost of energy. It is a particular difficulty for people in the restaurant and hotel sectors. Energy costs are helping to put people out of business. We need to examine that. As Senator O'Reilly said when he was talking about gas, the ESB needs to have an aggressive competitor. There is no doubt about that. We cannot talk about this issue forever. We have to do something about it if we are to help households. The woman who showed me her gas bill told me she knows many elderly people who are afraid to turn on gas heating in case they will be landed with a huge bill.

Some Senators spoke about the topical issues of home insulation and energy conservation. Many private companies are available to test the energy efficiency of houses or other establishments. They determine whether energy is escaping and, if so, where it is escaping. I understand that the fee for that service is approximately €240 or €250. Many people, particularly elderly people, are not in a position to pay such a fee. Something should be done to subsidise it. Perhaps people in certain categories, who cannot afford energy efficiency testing, should be entitled to free testing. If the cost of testing the energy efficiency of houses is deterring people from getting it done, they will not get a start at all. There is no doubt it is a good idea. It will create jobs, as Senator O'Reilly has said.

The need to consider alternative sources of energy, which has been raised by Senators O'Reilly and O'Toole, is a hobby horse of mine. This country has many resources. In my home county of Cavan, mills used to be driven by water. The millraces are still in place. There is no reason such ideas cannot be re-examined and moved forward. The day will come when we will have to seriously consider alternative energy. It is obvious that we will be less dependent on oil as the years go by.

People often ask me why decreases in the price of oil are often accompanied by increases in ESB and gas prices. Although I have asked Ministers and people in various quarters why that is the case, I have yet to get a straight answer. When I am asked why ESB and gas costs are increasing when the price of oil is dropping, I am not able to give a satisfactory answer. I will leave it at that. I thank the Chair for giving me an opportunity to say a few words.

I acknowledge the contributions of Members of the House. They have all supported the provisions of the Bill. Senators raised a number of matters that were also raised during the Dáil debate on the Bill, including issues pertaining to security of supply, costs, competitiveness and the extension of the gas network.

Senator Burke spoke about the exclusion from the gas network of certain villages that are on the periphery of towns that are served by the network. It is clear that people in some areas would like to be connected to the network. I remind him that no locality will be served by the network if it does not make economic sense. Following a change that was made to the relevant system of evaluation, towns are no longer judged individually. Centres of population can now be considered in groups or clusters. This gives them a better chance of being included, obviously. A number of towns have been already successful in this regard.

I was also asked about the possible extension of the network. I remind the House that Bord Gáis Éireann is obliged to consider economic criteria when it is examining whether it is feasible to extend the gas network to a particular location. I assure the Senators who have raised the matter that we have made some changes to the process. I hope we will continue to see the extension of the network and the subsequent connection of more and more homes to it.

The issue of security of supply was mentioned during the course of the debate. The Commission for Energy Regulation is developing long-term strategic plans for the licensing of the Kinsale field as a storage facility. The Department of Communications, Energy and Natural Resources is working with the Northern Ireland Department of Enterprise, Trade and Investment to examine options for increased gas storage on an all-island basis. The Members who spoke about security of supply highlighted the recent difficulties between Russia and Ukraine. The dispute in question, which was widely covered in the newspapers, reiterated the importance of security of supply. It is important for us to develop the Corrib gas field and to bring those supplies ashore as quickly as possible. We are making every effort to ensure that happens.

The Department of Communications, Energy and Natural Resources is working with the European Union to deliver fully integrated regional gas markets in northern Europe and to provide for the diversification of supply. The storage of liquefied natural gas is an important element of security of gas supply strategies around the world. The development by Shannon LNG of a liquefied natural gas terminal near Tarbert, which is on the Shannon Estuary, is another important element of the development of the market in the context of security of supply. When the Corrib field is in full production, it will significantly reduce our reliance on imports during its lifespan. It is estimated that it will meet 60% of annual demand and 40% of peak demand for approximately six years, until supply is expected to start to decline. It is thought that significant potential exists for further substantial oil and gas finds in Irish waters. One of the Department's key priorities is to encourage further exploration activity in the Irish offshore zone.

Statistics on Ireland's energy imports underline the imperative need to reduce this country's dependence on fossil fuels. The Government is committed to delivering on ambitious targets for the accelerated development of renewable energy, which will progressively and sustainably reduce our dependence on imported oil and gas. Installed wind-powered electricity generation capacity has now reached 950 MW and is set to reach more than 1,000 MW by the end of this year. As wind power penetration increases, we are on target to provide 15% of our electricity from renewable sources by 2010. This figure is set to increase to 40% by 2020, assuming there is a consistent build rate of the necessary infrastructure. While we have set ambitious targets, we have shown in recent years that we have the capacity to meet such targets. There is a willingness to do so.

Last Friday, I had the pleasure of meeting a number of people who are involved in the industry. They are making a valuable contribution to the renewable energy sector, which is one of this country's real success stories. At a time when many sectors of this country's economy are experiencing serious difficulties and are concerned about the future, the renewable energy sector can look to the future with great confidence. The Department of Communications, Energy and Natural Resources looks forward to working with those involved in that sector to achieve our important goals.

The goals and objectives of Bord Gáis Éireann are in line with Government policy. It is crucial that there is competitiveness in the various sectors of the energy industry. Bord Gáis Éireann provides competition in the gas and electricity retail sectors while ensuring that the natural gas transportation network, which is a strategic national infrastructure asset, is developed and maintained to the highest specifications in terms of safety and cost. Bord Gáis Éireann ensures that it is operated as efficiently as possible by the independent transportation system operator, Gaslink. Bord Gáis Éireann maintains the network to ensure the long-term security of the supply of natural gas in Ireland. The proposed increase in the statutory borrowing limit of Bord Gáis Éireann will give the board the financial ability to continue the impressive growth of the organisation. It will also allow Bord Gáis Éireann to continue to make a considerable return to the State as shareholder, not only through dividend payments but also through increased shareholder value. A strong State-owned gas network will provide comfort to potential investors looking to the State. The guarantee of supply of natural gas has been instrumental in recent years to the decision by various players to invest in electricity generation in Ireland. The continued strong performance of Bord Gáis Éireann will contribute towards the presentation of the State as an attractive location for investment. We recognise the competition that exists from other countries and that we must make ourselves as attractive as possible to those who are willing to invest here and create much needed employment.

I note Members' concerns regarding gas prices. Bord Gáis Éireann is granted a rate of return by the Commission for Energy Regulation that allows it to recover its costs plus a small margin for future development of the network. Any approved gas prices are based on the optimal company standard applied by the regulator. Under its establishing legislation, and according to competition rules, Bord Gáis Éireann is obliged to operate a system that is economical. It cannot, therefore, operate at a loss, as this would undermine other suppliers, existing or potential, in the open competitive gas supply market. Decisions on Bord Gáis Éireann prices are a matter for the regulator. It must also purchase gas in advance, which is why decreases in wholesale gas prices are not immediately reflected in domestic prices. The request for a substantial price increase last summer was not granted, with the regulator opting instead to review the matter towards the end of the year. This was a wise decision, as proved by the subsequent decrease in wholesale prices.

I thank Members for their constructive contributions. I look forward to putting the Bill on the Statute Book as quickly as possible.

Question put and agreed to.

When is it proposed to take Committee Stage?

Next Tuesday.

Committee Stage ordered for Tuesday, 10 February 2009.
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