Seanad Éireann debate -
Tuesday, 29 Jun 2010

Vol. 203 No. 11

Electricity Regulation (Amendment) (Carbon Revenue Levy) Bill 2010: Committee Stage

Sections 1 and 2 agreed to.

SECTION 3

Senator Joe O’Reilly

I move amendment No. 1:

In page 5, after line 53, to insert the following:

"(6) No carbon revenue levy is payable by an electricity generator that has purchased the full value of their carbon allowances available to them until the end of 2012 in a commercial transaction.".

The logic behind this amendment is that it is very unfair to expect a new entrant to come into the market on the basis of already existing market structures and which will continue to be in place from now until 2012. A new entrant into the market will have to pay a separate lump sum for the carbon allowances it will require. It is also to be noted that this lump sum is to be paid on top of what it pays for the power stations it has purchased. One of the ways in which I believe this to be unfair is with regard to market competitiveness. Any new entrant will do so under existing market structures that will be in place until 2012. These structures will leave the new entrant at a competitive disadvantage as it will be competing with existing businesses which received 85% to 90% of their carbon allowances for free under the Kyoto carbon trading provisions.

The new entrant will be, in effect, treated the same as the existing generators who were given 90% of their carbon allowances for free and therefore the new entrant will be paying on the double. New entrants will also be competing with companies which are making unearned profits through charging customers for the release of carbon emissions for which they already have an allowance.

If we are to be truly serious in our commitment to creating more jobs and incentivising more people to enter into new businesses, we need to make it as easy as possible for them to do so. If it is financially impossible for new entrants to enter into this market we will not see any growth in this sector and as a result, the capacity to create jobs will be greatly diminished.

This amendment is predicated on principles of fairness and on the principle of creating the most conducive environment for job creation and creating a level playing pitch, so to speak, in competitiveness terms. This amendment proposes to address a possible anomaly in the legislation. I commend the amendment to the Minister and ask him to consider embodying it in the legislation, either in its totality or in a version.

Senator Jim Walsh

I have listened to the points made by Senator O'Reilly. The motivation behind his amendment is just as he articulated. Over recent years and thanks to the Minister and his Department, there has been a significant co-ordinated effort being made to inject real competition into the area of electricity generation. This is not an easy task. Many countries, in particular smaller countries such as Ireland, have had a State monopoly on the generation of electricity. The State company was established to provide for the electricity needs of the country. This arrangement has provided a good example of how the semi-State sector can play a part and be efficient. The ESB has been a remarkable company, not least in the international business it has built up with its expertise in consultancy services.

In order to provide competition, which is legislated for in EU regulations, there has been a growth in green energy provided by alternative suppliers and this is to be welcomed. The Minister has spearheaded the construction of the interconnectors which will provide energy from our neighbouring island and in time from France and continental Europe. The amendment recognises where significant investment has been made. I am familiar with the arrival of Endesa into the Irish market. It has purchased Tarbert and Great Island stations. Great Island station is quite close to my home and I know many of the people who have worked in Great Island. The purchase of the Great Island station means jobs and competition will all be supported. I raised the following point during the debate on Second Stage. I concur with the thrust of the legislation regarding the carbon levy, specifically where windfall profits are coming back. There is an anomaly where new entrants, who are not in production at this stage, have factored the windfall into the purchase price of the facilities. It could have the effect of creating a distortion in the market.

Senator Joe O’Reilly

That is the point of my amendment.

Senator Jim Walsh

I can see the difficulties if the Minister makes an exception for specific companies, even though the Bill makes provision for exceptions in certain areas. I am not sure it envisages this eventuality. I ask the Minister to see if there is some way this can be recognised so those with the historic investment will find themselves in a position to treat it as a windfall and repay it but those who factored the windfall into the capital costs of the purchase cost of generating stations will not be in a such a position. I hope this will not have an impact on further investment in these facilities to bring them to their maximum potential. I look forward to the Minister's reply on the conundrum presented by Senator O'Reilly's amendment.

Progress reported; Committee to sit again.