Electricity Prices: Motion

Senator Paudie Coffey

I move:

That Seanad Éireann notes with concern:

that Ireland has the fifth highest domestic electricity prices out of 31 countries in Europe, third highest when tax is excluded, and sixth highest electricity prices for business;

that the impending PSO levy due this month will see household bills indiscriminately rise by 5% and small businesses paying €100 more on annual bills; and

that the head of IDA Ireland recently stated that Ireland needs to address competitiveness issues such as energy prices in order to grow and win more business;

and calls on Government to postpone the introduction of the PSO levy on electricity prices.

I welcome the Minister for Communications, Energy and Natural Resources, Deputy Ryan, to the House to discuss this motion, which affects every household, large business and small corner shop in the country. In a modern society, the price of electricity is one of the main facets and energies of every household and business. Everyone depends on their source of electricity. As a society, we have all become very accustomed to electricity. It is only on those rare occasions when we do not have electricity — I refer to blackouts, for example — that we truly realise the value and importance of electricity. It keeps our households lit and warm and keeps our businesses functioning and working as best they can.

I wish to explain why Fine Gael has tabled this motion. The Minister will probably give the House some very good reasons for the introduction of the PSO levy. We are concerned about the hardship and devastation that is being experienced in the current economic climate, which is unprecedented in Ireland's modern history. Many large businesses and small and medium-sized enterprises are struggling to stay competitive on a daily basis. The introduction of this levy will push many of them up to the threshold, or over the threshold, so they are no longer viable. The same thing applies to domestic households. The Minister can probably give the House the relevant figures for the large increase in the number of disconnections. This issue has been played out in the media in recent weeks. ESB Networks is disconnecting domestic households even though the people in question may be in dire circumstances. It is a reflection of the substantial financial pressures they face as they try to pay their everyday bills.

I am sure Members will agree that people do not pay their electricity bills because they have little or no other option. The introduction of the PSO levy will bring a new raft of people into the category of those who are struggling to pay their bills. As far as many of them are concerned, it might be the last straw that makes them unable to afford to pay their bills and keep their electricity switched on, especially as we enter the winter period. It would represent common sense, particularly in light of last year's cold snap, one of the worst for over 100 years, for the Government to review this policy and postpone its implementation until the economy is more stable and people's homes and businesses have more secure futures. Agencies such as the IDA, ISME and other business organisations do not normally come out so strongly or state quite so categorically that the Government should postpone the increase in the public service obligation, PSO, levy on electricity prices. They are saying this because they know the people with whom they work and the members of their organisations are put to the pins of their collars to remain competitive, viable and in business.

The lifeblood of electricity is an area that has been identified in the EUROSTAT figures. It is highly worrying to note that Ireland has the fifth highest domestic and sixth highest commercial electricity prices among 31 countries in Europe and that the Minister now proposes to introduce such a levy at such an economically sensitive time for everyone. This does not show much consideration for the hardship and realities that obtain in all our communities. The Minister will argue the reasons for the original introduction of the public service obligation, namely, to secure energy supplies and competitiveness in the market and to introduce new suppliers. While that is all well and good, there is a time and a place for so doing. Were the Minister to consult the Society of St. Vincent de Paul, MABS, the Department of Social Protection or any other agencies that deal on a daily basis with people who struggle to pay their electricity bills, he would realise there is great hardship.

I acknowledge the Department of Social Protection has announced a package of €12.6 million to assist those in receipt of the electricity allowance under the household benefits package. However, it appears quite crazy that one Department must hand out such entitlements and benefits to try to cover costs imposed by another Department and a great irony exists in that regard. I always will argue the case for those whom I describe as being from middle Ireland who are working hard — those who are lucky to have jobs — but who receive no benefits. What about those people, who are put to their pins of their collars to pay their mortgages, as well as their education and medical costs? Although they pay for everything at this time in this society, this proposal constitutes another increase on the monthly bills they also will struggle to meet. The timing of this introduction must be reviewed. While I understand the reason for a public service obligation levy and the reason this area requires attention, the Fine Gael Party believes this increase should be postponed.

I must declare a slight conflict of interest as I worked for the ESB for 20 years, albeit on the network, rather than the supply end of it. I do not believe the people, the Minister or anyone else realises the frustration experienced by the electricians of ESB Networks who must cut off families' electricity supply. I worked for the ESB when it was the main supplier and even the electrician who went out to cut off supply to a house could always engage in a certain degree of negotiation with the relevant householder. Were such an electrician to receive a fiver on having been called out, he could drive the van away and not disconnect the house. However this can no longer happen because the entire market has shifted with the advent of the new suppliers, such as Airtricity, Bord Gáis and many others, including Electricity Customer Supply. Once an instruction to disconnect comes from those organisations to ESB Networks, the same electrician who went out ten years ago to cut off supply to a house but who could turn away the van without disconnecting the family concerned no longer has such a choice or discretion. This point needs to be made and it is a sad indictment of our society that hard-nosed business decisions of suppliers now come into play and that the ESB Networks technicians who are sent out to disconnect a house or business for non-payment of bills over a period now are obliged to proceed with that, even if the affected bill payer makes offers or pleas. This is a sad development in our modern society because discretion, understanding and human feeling are gone. Without the protection of organisations such as the Society of St. Vincent de Paul, and the MABS associations nationwide, people literally would be on their own.

Members will have noted a case a few weeks ago in which a man chained himself to the nearby ESB headquarters. This man genuinely was trying to address the backlog in his bills but because of the hard-nosed business attitude of suppliers, which do not appear to recognise the hardship that exists on the ground, his offer to try to pay off his backlog over a period was rejected. This is not the kind of society we need to develop as one cannot lose sight of real need, especially in a recessionary time. I remember when the ESB operated retail departments and people could buy appliances such as washing machines using their ESB bills. However, as I have told many people, those who could not qualify to have the price of their washing machine put on their ESB bills and who were struggling with their bills, qualified for mortgages shortly afterwards. This demonstrates how the ESB always had a responsible role in the manner in which it managed its customers and bills. It had the track record of not lending to those who it knew could not afford such appliances. Shortly afterwards however, banks, credit unions and other institutions lent money hand over fist to such people, who then got into difficulty and tried to repay the loans through recourse to moneylenders and others who prey on such vulnerable people.

These are the matters that must be considered before coming up with the great principles and policies of increasing the price of electricity simply to secure our energy supplies. Our energy supplies will survive and have done so since the original setting of the public service obligation levy to zero. Moreover, they will continue to survive in the next few years because those companies and the State are strong enough to carry it. However, many of the people who will be cut off will not survive and this is the reason I have tabled this motion. It is an appeal for common sense to enter the debate to reflect the pure pain being experienced on the ground at present during the current recession.

On the subject of energy supply and security, some Members of this House serve on the Joint Committee on Climate Change and Energy Security and progress has been made on the main interconnector to the United Kingdom. However, I have always thought it would be better to build a second interconnector to mainland Europe to facilitate the establishment of a ring main encompassing Ireland, the United Kingdom and mainland Europe. We then could consider all the possibilities of getting highly competitive prices from mainland Europe and the United Kingdom. This would introduce the necessary competition into the markets and also would enhance security of supply because we no longer would be an island sitting out in the Atlantic Ocean but would have a ring main, similar to that which can be found in any commercial installation or household, whereby in the event of one element of the ring main being unable to provide supply, one can always divert to the other.

Moreover, there is potential in such an approach because one can also export, were we to develop some of the renewable energies about which one likes to hear. Other speakers may develop the point further to the effect that many barriers exist to the development of wind energy farms. Some that come to mind are the problems associated with offshore licensing and the lack of a long-term spatial planning strategy for wind energy. There are areas of detail that must be ironed out to introduce proper competition in the area of renewable energy. Many barriers exist to companies that are interested in investing in renewable energies, both in the planning and regulatory systems, that must be ironed out. This is how competition and security of supply should be introduced.

I conclude by noting that my former employer, the ESB, pays millions of euro in dividends back to the State. I understand that €74 million was paid a couple of years ago and the amount probably was greater this year. Surely some of these millions of euro in profit could be diverted into postponing this PSO for the reasons I outlined previously. I refer to the humane reasons that would help people who now are put to the pins of their collars to meet their weekly and monthly electricity bills.

Senator Maurice Cummins

I second the motion so ably proposed by my colleague, Senator Coffey. There is no question but that high energy prices cost jobs. Utility costs such as energy usually make up most of the non-labour related costs of businesses. When international companies come to Ireland or elsewhere seeking countries in which to establish bases, they examine closely how the economy's cost competitiveness compares with other countries. High Irish energy prices remain a top concern for businesses and enterprise agencies that are tasked with selling Ireland as an investment location.

The head of the IDA, Mr. Barry O'Leary, stated recently on "Morning Ireland" that a number of barriers to growth and winning more business had been discussed and that it is quite clear we need to be more competitive in areas such as energy. That statement is by a man who is trying to bring businesses to Ireland. He is stating clearly the cost of energy is inhibiting businesses from coming here. Surely we must listen to the man who is trying to sell Ireland and bring businesses here.

The latest EUROSTAT statistics on energy prices, which were outlined in part by Senator Coffey, show that Ireland has the sixth highest domestic electricity prices of 31 countries in Europe, behind only Luxembourg, Austria, Italy, Germany and Denmark. When tax is excluded, prices in Ireland are the third highest, behind only Luxembourg and Italy. With regard to my point on business costs and competitiveness, Ireland's electricity prices for businesses are the sixth highest among the 31 countries. These are facts, not just statistics, and we must listen to them, especially when preparing policy.

The public service obligation, PSO, levy is designed to support the policy objectives of security of energy supply and the use of indigenous fuels, such as peat, and renewable energy sources in electricity generation. Specifically, the proceeds of the levy are to be used to recoup additional costs incurred by energy suppliers in having to source a proportion of their electricity supplies from such generators. The PSO levy is entirely a decision of the Government. It will indiscriminately increase energy bills for all users. It is estimated that household bills will increase by approximately 5% and small businesses will end up paying more for their annual energy at a time when they are on their knees.

The Department of Social Protection announced that welfare payments, made available via the household benefits package, will be increased at a cost of €12.6 billion. In essence, one Department is increasing welfare payments to cover charges set by another Department. This is ludicrous. That public spending has increased as a result of the Government imposed levy exposes the dearth of sensible policy on the part of the Government. There is no vision, no joined-up thinking and no plan such that people can be confident in the policies advocated by the Government.

Many in this House never witnessed hardship, yet there are many people suffering hardship. They are unable to make mortgage repayments and to pay ESB and other utility bills. As Senator Coffey stated, when a person cannot pay his electricity or gas bill, he is certainly on his knees and in dire straits, yet we are talking about increasing bills.

Senator Coffey, who worked for the ESB for many years and who is well aware of the circumstances affecting the organisation, has outlined the current position on suppliers. It is disgraceful that people are cut off and then charged exorbitant fees in order be to be reconnected. The Money Advice and Budgeting Service, MABS, and the Society of St. Vincent de Paul have appealed to suppliers. I appeal to the Minister to make representations to suppliers to cut reconnection charges to a minimum. Such charges are another burden imposed on people. Being cut off is bad enough but having to pay a reconnection fee that is even greater than the sum owed in the first instance is crazy.

I join Senator Coffey in asking that the Minister postpone the introduction of the levy until there has been a full re-examination of the circumstances that obtain. I hope he will not give us any lectures on renewable energy. Let us speak about ordinary people who find it difficult to pay their ESB and gas bills at present and who will be asked to pay more when the PSO levy is introduced.

Senator Martin Brady

I move amendment No. 1:

To delete all words after "Seanad Éireann" and substitute the following:

"commends the Government for:

its comprehensive actions to deliver a secure, sustainable and competitive energy supply, including its commitment to increasing competition as the best means of exerting downward pressure on electricity prices in the long term, and improving the regulation of energy markets, with resultant benefits to consumers;

its policy of enhancing security of supply and reducing our exposure to volatile international fuel prices through increased fuel diversity, with particular focus on indigenous resources;

its decisive actions to mitigate energy costs for large energy users as well as its supports for domestic consumers; and

recognises

that Ireland faces particular challenges in terms of energy cost competitiveness, including significant dependence on volatile imported fossil fuels, particularly gas and a requirement for major investment in energy infrastructure, following two decades of under-investment;

that the implementation of Government policies, along with falling natural gas prices, has led to significant reductions in Irish electricity prices in recent years, bringing them closer to and in some cases below EU and eurozone averages for both domestic and business consumers;

a significant number of domestic and business customers could reduce their electricity bills and more than offset the cost of the PSO levy by availing of reductions offered in the competitive electricity market or by engaging in Government supported energy efficiency programmes;

that the PSO scheme and levy, which has been in place since 2001, is to support the continued contribution of peat-generated electricity, to increase security of supply and to deliver on the Government's 40% renewable electricity target, which in turn will contribute to achieving Ireland's legally binding EU renewables obligations."

An Cathaoirleach

Is Senator Brady reserving the right to speak later?

Senator Martin Brady

Yes. The Minister wants to speak first.

Minister for Communications, Energy and Natural Resources (Deputy Eamon Ryan)

I thank Senator Brady for allowing me to speak. I am very glad to have the opportunity to set out some of the details of our energy policy and the crucial issue of pricing for householders and businesses. I want to correct what I regard as some of the misapprehensions about the competitive position of electricity prices. The opportunity afforded to me by the Seanad in this debate is very welcome.

Electricity prices for businesses and households have fallen dramatically in the past 18 months. This has delivered real savings for consumers and has pushed prices in certain key categories below the eurozone average. That is the reality and it is important we let people know it and not instil greater fear in them and generate considerable negative sentiment that is not backed up by that reality. Given the challenges we face and the need to be competitive, we need to lower prices. We need to keep them down and help out families who face real difficulties at this time. We will do that.

Let me set out the background and some of the challenges faced in this regard. The challenges arise from a lack of historical investment in infrastructure. Our prices spiked very high because, for a long period, especially through the 1990s, no price increases were granted. Demand rose as our economy grew and we had to make a very dramatic and quick catch-up investment, which in itself increased the price of electricity. There was a great increase in demand and we had to invest in our networks such that factories would not have to switch off. The main disincentive for investment would be if a company such as Intel ever had a power blackout because we did not have the network in place to deliver the electricity. That would have been the biggest killer of investment. It was crucial we invested and made up for the lack of investment that occurred throughout the 1990s. That imposed a cost, particularly in the early and middle part of the last decade.

One reason our prices were high was because we used a very high proportion of imported fossil fuels, especially gas, in electricity production. We were over-reliant on imported gas from which an excessively large proportion of our electricity was derived. We had no gas stream of our own and it was all imported. We did not have control over the price of gas and when it spiked, we were caught out along with Italy and the Netherlands. Comparable countries had a similar proportion of gas in their electricity production sources and, consequently, had similarly high prices. This is one reason our prices were high.

One reason we introduced a PSO in 2001 was that we recognised we had to move away from over-reliance on a single fossil fuel. We had to have diversity of supply for security and pricing reasons and to ensure we would not be caught out when, as the International Agency Energy stated, fossil fuel prices started to rise, as they were expected to do. We also have an issue by dint of our geography in the sense that this is a small island with many power stations which tend to be less economic. This, unfortunately, helps to push up prices. We also have a different geographic structure from neighbouring European countries with which we must compete. While Holland, Denmark and other countries have dense population structures, we have the exact opposite. Some 40% of houses here are one-off houses in the country and attaching wires to them is expensive. On the distribution network, the average length to a home in the United Kingdom is 25 m. In Ireland, it is 75 m and we all have to pay for the extra 50 m of wire and cable. A number of factors are driving up prices which we have to take into account. However, there are also a number of factors now driving prices down. We should be honest in politics and recognise this rather than engage in point-scoring all the time.

One of the benefits in recent years has been the move to having a single electricity market on the island, North and South, an historic development. Its achievement was a huge engineering feat and is helping to bring prices down. We have a bigger market and do not now have to have two spinning reserves, North and South.

We have also succeeded in bringing about competition. We deregulate not for some ideological reason or free market ideology but because competition works. We have significant companies involved in the electricity market, including the ESB, Bord Gáis, Endesa which has invested massively in this country in recent years, Scottish and Southern Electricity and Veridian. These large companies with international expertise are competing for Irish customers. This, too, has helped to bring down prices and overcome some of the disadvantages I outlined. We have also, using these market mechanisms, seen significant new investment and are beginning to have larger more modern and economic power stations, two of which were opened this year in Cork. These are the plants that will produce a more competitive supply. This has all happened in recent years because of the good policy set out in the White Paper and recent Government papers. Endesa has brought a large amount of money into the economy.

We recognised a year and a half ago that, owing to our overdependence on fossil fuels, the fact that our networks had increased prices and that we were in an economic crisis, we had to bring down prices. With the regulator and in a proper fashion so as not to disrupt a regulated market, which allowed the continuation of an all-Ireland approach, we brought down prices for large energy users by up to 45%. These are price reductions that have occurred in the past two years and improved our competitiveness. More than €500 million was taken from the ESB and used to achieve lower prices for other consumers. That is the reality of what happened as a result of Government action and it has had a beneficial effect. Two or three years ago the head of Intel was screaming that prices here were too high. He recently acknowledged that something has been done and that it was starting to work. Therefore, let us not scare the people at a time when they are scared enough. Let us acknowledge that certain things have been done which help to achieve competition.

Senator Paudie Coffey

The Minister should tell that to those who are trying to pay their bills.

Senator Maurice Cummins

He should tell it to the chairman of the IDA.

An Cathaoirleach

The Minister to continue, without interruption, please.

(Interruptions).

Deputy Eamon Ryan

Senator Maurice Cummins

We are telling the truth and giving the facts.

Deputy Eamon Ryan

——wants the Irish consumer to face a difficult price increase. What we need is diversity of supply. The PSO was introduced in 2001 to protect the consumer in the long run and develop alternative supplies which would be less volatile. No one wants to increase prices. The PSO was introduced for strategic reasons which made sense.

As well as prices for the average Irish household being about 2% below the eurozone average, there is an opportunity, because we have introduced a competitive market, for householders to shop around and obtain a further 10% to 14% reduction. Approximately 30% of householders have already done this and there is nothing to stop the remaining 70% from obtaining this reduction by switching supplier. This has been done to ensure we will develop a competitive market and it is possible with one telephone call. This facility is not available in Northern Ireland or other European countries.

We have a competitive market here as a result of the adoption of a good policy approach which is overseen by the Commission for Energy Regulation. Last Friday the business market was deregulated. This means it is now fully competitive, with five or more serious competitors seeking customers' business. Similarly, we will move in the domestic sector to adopting such a deregulated approach, which is the right way to keep operators honest and ensure they keep their costs down. They know they must compete with other supply companies and thus keep down prices for the Irish householder. The CER implements a range of European regulations, from which we benefit. It has introduced a regulatory approach, as well as competition, and fundamentally changed the market from one in which there was a monopoly ten years ago to one which is made up of five serious competitors, plus a range of other suppliers, willing to offer an electricity supply to Irish households. It has worked and is resulting in reduced prices, in a way with which we should not interfere or distort.

An Cathaoirleach

The Senators will have an opportunity to respond later.

Deputy Eamon Ryan

I am responding to the motion which seeks to stop the public service obligation. I have set out the effect of taking this course of action. I do not have any interest in price increases but I have an interest in ensuring this country is not left exposed by being completely reliant on imported gas as its source of electricity. Such an eventuality would present a real threat to our long-term interests.

I can work with the Fine Gael Party on the basis that we need to protect those who are most vulnerable. I was pleased the Minister for Social Protection was able to provide increased funding to ensure those on low incomes and at risk of fuel poverty will not be affected by any increase in the public service obligation. This is an appropriate and correct response.

The Minister is speaking nonsense.

Senator Paudie Coffey

He did not read the motion.

Deputy Eamon Ryan

I did read it.

Senator Feargal Quinn

I congratulate the Minister on mounting a spirited, energetic and enthusiastic defence of his policies. While he appears to be on top of his brief, I have some difficulty with the figures he has provided as they do not correspond with the figures available to me.

We need investment to return the economy to growth. We must find a way of achieving this objective. As a grocer, I learned many years ago that one can increase one's revenue by reducing one's margin or rate. This occurred in the area of taxation, for example. When the former Minister for Finance, Mr. Charlie McCreevy, announced a reduction in betting tax from 20% to 10%, many of us howled. Following that reduction and a subsequent further reduction to 5%, revenue from betting tax increased. It is possible, therefore, to increase income by reducing taxes.

In the case of energy we must ensure we are competitive. I am slightly confused by some of the figures the Minister has used because according to my figures, business electricity costs remain above the European Union average. We must keep costs in line with our competitors in the EU. Closer to home, it is astonishing that customers in the North pay much less than we do for electricity. The Minister indicated that this is not the case, whereas my figures show that customers in the South must pay 15% more per annum than customers across the Border. As we have seen, businesses on this side of the Border are struggling to compete and many are losing the battle to survive because of higher costs.

According to IBEC, 60% of Irish companies cite energy costs as the greatest non-pay problem for their businesses. I am not sure if the Minister disagrees. However, the businesses IBEC represents are under intense pressure to cut costs in order to compete in a very unforgiving international market. Their competitors in that market enjoy lower energy costs. The introduction of the 5% PSO levy on ESB bills, which the Minister defended, is regrettable because it will put even more pressure on SMEs in particular. We also really need to reduce costs such as those relating to network charges, which represent approximately 20% of a typical energy user's bill.

We must also bear in mind that the wholesale energy market rose by 2% last month and the latest Bord Gáis energy index would have hit a two-year high had currency movements not absorbed the increase in prices. It was primarily the strengthening of the euro against the US dollar and sterling that prevented energy reaching a record level not experienced since October 2008. The largest move in the energy index was recorded in respect of oil, which increased by 10% in price during September. Electricity prices rose and the increase in demand due to darker evenings resulted in more expensive electricity peaking plants to be called upon to produce power.

This brings me to one of my favourite topics. I have said on previous occasions that moving to central European time would make for brighter evenings and would have the effect of reducing energy consumption, thereby leading to a decrease in the energy bills of householders and businesses. In the context of reducing carbon emissions, this would give rise to economic benefits such as increased time for tourists to visit different places and increased energy savings. When one considers what is happening in the UK, it is obvious that we in Ireland may have no choice in this matter. A Private Member's Bill on daylight savings time has just been proposed in the House of Commons by Ms Rebecca Harris, a Conservative MP. In addition, the Energy and Climate Change Committee at Westminster has indicated that this month British MPs plan to examine whether to extend daylight saving hours in order to save energy. This committee, which scrutinises British Government policy on reducing greenhouse gases, electricity generation and transportation fuels, will hold an evidence session on 28 October.

An argument has been put forward to the effect that, in the context of daylight savings time, road safety is a major issue. However, much of the negativity comes from just one study carried out in the 1960s when Britain and Ireland moved to central European time for a three-year period. The study in question suggested that, during the period to which I refer, there was a small increase in accidents in the mornings but people forgot that there was a dramatic reduction in the number of accidents which occurred in the evenings.

It is amazing that despite the decrease in prices during the past two years, Ireland remains the second most expensive economy in the eurozone behind Finland. I do not refer to energy costs alone in this regard. Overall costs in this country are a massive 16% higher than those which obtain in Germany. We are becoming much more competitive as an economy and this is despite the fact that certain commentators indicated we could not achieve this. We need to continue this drive towards competitiveness and to reduce rent, wages and energy prices. Our costs are still much too high. This is because we failed to benchmark our costs, such as, for example, energy costs for businesses, against those which obtain in other EU countries.

There are exciting new projects which will hopefully contribute to a reduction in energy costs for consumers. GT Energy, a geothermal energy company which is exploring the potential for a geothermal energy plant in Newcastle in south County Dublin, a project of which the Minister will be well aware, has, in the hope of constructing Ireland's first geothermal electricity facility, lodged a planning application with the council there. The company states that the proposed facility at Newcastle could provide up to 4 MW of electricity, which could provide power for up to 8,000 homes. This energy would be fed directly into the grid. GT Energy has operations in both the UK and Iceland. According to Iceland's Foreign Minister, the energy source is "the cleanest, most stable, probably cheapest source of renewable energy in Europe".

In light of recent renewable energy targets and possibilities, it is interesting that Denmark has recently announced its intention to abandon all energy produced from fossil fuels in the future. A report compiled by its climate commission indicates that Denmark could create an energy network completely free of fossil fuels by 2050 as a result of falling renewable energy costs combined with rising oil and gas costs. The report predicts that biomass and wind energy could provide the majority of the country's energy needs.

I am aware the Minister, Deputy Eamon Ryan, is extremely enthusiastic about renewable energy. However, he has not been enthusiastic with regard to even opening the door to the possibility of nuclear energy. I am of the view that this is the wrong approach. We should at least give consideration to the matter. I am not sure that it is the right thing to do but if we are going to compete, we should not exclude this option.

The fifth Irish Sustainable Building Show begins at the RDS tomorrow. A Dublin architect, Mr. Patrick Daly, who owns the first zero energy house to have been built in Ireland, will speak at the event. It will be interesting to hear what he has to say. While innovations such as those developed by Mr. Daly are very exciting and will bring down energy costs in the longer term, we must, at the very least, bring our energy costs in line with those in Northern Ireland. Energy is a major factor for businesses, which are currently feeling the pressure. In fact, the cost of energy is the primary non-wage consideration for these businesses. We must also give serious consideration to the energy savings that would accrue if we moved to central European time and had an additional hour of daylight as a result.

Our task now is to ensure there will be no future hikes, particularly any which are sudden in nature and which give rise to major job losses. If we reduce energy prices, more businesses might be in a position to compete. When businesses remain in operation, it leads to additional revenue being brought in for the Government. This would be a preferable development. I am of the view that we can do things ourselves and that we need not rely on others. However, we must be competitive. To achieve the latter, we must ensure we take action in respect of the various matters which make us uncompetitive. Energy is but one of those matters. I urge the Minister to ensure we do not allow energy costs to run out of control again.

Senator Martin Brady

I agree with the previous speaker. Every businessperson and householder I have met in recent months made the point that the cost of energy, particularly as it relates to business, is too high. This cost is one of the major overheads which affects all businesses.

I have never spoken to a member of the public who fully understands what the PSO levy involves. This mechanism was never explained to energy customers or the public at large. There are some Members of this House with whom I spoke earlier who know nothing about it. The levy was not explained in an adequate fashion and there is much confusion in respect of it as a result.

Competition should drive down prices but this has not happened in the energy market. The cost of electricity has increased. Householders and businesses are obliged to consider their budgets. Service providers should be conscious of this fact and take it into account. I am not sure whether, in the motion before the House, Senator Coffey is stating the PSO levy should be put on ice temporarily until matters resolve themselves and in order that householders and businesses might enjoy some breathing space. I believe that is the approach he is suggesting. On the other hand, if I heard him correctly — he can clarify the position for me later — the Minister is stating that if we do not proceed with the PSO levy, we may not have a continuous supply of electricity, particularly if difficulties arise in respect of oil or gas supplies. The Minister also appeared to indicate that if we do not diversify into the area of alternative energy, we could find ourselves in a bad situation.

It seems Senator Coffey is posing the question as to whether we should give people more time and diversify at a later stage when we are in a better position to do so. Individuals outside the Houses have suggested to me that perhaps we should not proceed with the PSO levy and that the ESB should increase its prices in order to pay for the cost of diversification. I am of the view that this is a risky approach because, irrespective of who operates the mechanism, customers will end up in the same position.

We do not want a situation to develop whereby other countries might perceive Ireland, if it does not proceed with the PSO levy or diversify into the area of alternative energy, to be refusing to co-operate in respect of dealing with climate change. That is not an issue but it has been mentioned.

Senator Coffey also mentioned Airtricity and wind turbines. It is true that Airtricity has provided a number of these throughout the country.

They interfere with television reception and the people affected are receiving no assistance from the company, we should look into the matter. The Senator also mentioned the old system of ESB disconnections where an electrician would call out. That still happens and I witnessed it approximately eight months ago when I met a constituent. The ESB employee called out but we made an arrangement; he rang his office and did not disconnect the customer. The employee may have acted on his own but it was nice to see the gesture.

I am very reluctant to go along with the motion in the current circumstances, although I empathise with many of Senator Coffey's points.

Senator Nicky McFadden

I welcome the Minister of State. I will speak on two issues relating to contradictory policies being pursued by the Government. There is an idea that people will no longer be able to pay for their electricity usage in the post office because they will not be allowed to pay less than €20. Like Senator Coffey I am a former employee of the ESB and I know many people paid €5 from their ESB bill on a weekly basis and maintained their budget as a result.

The public service obligation, PSO, is a classic example of one hand not knowing what the other is doing, with policies cancelling each other out. The objective of this Government should be to reduce carbon dioxide emissions and our dependency on fossil fuels. The levy will not achieve this. We should also consider business, and small businesses in particular, which will end up paying €100 extra. I wonder how that will help small businesses to be competitive. The small boys will end up paying for the big boys yet again, which I object to.

Fairness, in my estimation, is about making those who are better off pay more but this is not necessarily the case with this PSO levy. As I mentioned, the big boys will get away with it and the smaller people will end up having to pay for big business. How will another levy on small business help them in competitiveness? It will bring them in the opposite direction.

Professor Richard Tol from the ESRI, an environmental economist, has indicated that the PSO levy will cancel out what people hope to gain from it. He spoke about how the money will be spent, with the levy raising €157 million. Some 9% of this will go to the public service, with €78 million going to subsidised peat-powered electricity. The remaining €43 million will go to wind power. Although we all agree wind power is the way to go, it is horrendously expensive but has the benefit of reducing our carbon footprint, which we are desperate to achieve. It is worth paving the way for reductions in carbon emissions by investing in wind power.

The investment of €78 million from the PSO levy in peat is extraordinary. I agree with Senator Coffey in asking why we cannot invest in cheap interconnectors to Europe to access nuclear power, which is much cheaper. If that came about, we would not have to invest as much in wind power.

Other speakers mentioned how €33 will impinge on household budgets. I am aware of so many households having their electricity cut off as we speak, and I am canvassing houses where there is no light or heat. I welcome the introduction of a grant by the Minister for Social Protection that will help some of these people but those on middle incomes of approximately €20,000 per year who are just about managing will be penalised. There is a grandiose campaign about "The Power of One", which encourages people to leave appliances unplugged or only boil a cup of water, which is to be commended, but a levy of €33 per annum is being put on these unfortunate people. It is wrong.

We should postpone the introduction of the levy until the economy recovers and we are more competitive or the people are able to make ends meet. That it will cost somebody €99.88 to have their electricity disconnected is bizarre. I do not understand how the Government can stand over that. The Department of Social Protection has to bail out those on low incomes while another Department increases the PSO levy. That makes no sense and is not sound economics. It is daft.

I have a concern with regard to jobs and competitiveness. How will the levy create more jobs? If we are serious about creating more jobs, how will a PSO levy to this extent help create more jobs? It will not do so as businesses cannot be competitive while paying it.

I accept the PSO charge is regrettable but it is in place for historical reasons since the 1990s.

Senator Nicky McFadden

It is to pay for fossil fuels.

An Cathaoirleach

Senators must not make exchanges across the floor to one another.

Senator Nicky McFadden

I was being provoked, a Chathaoirligh.

Senator Mark Dearey

Someone who changes supplier will get the 5% PSO charge back plus another 9% in savings. That is sound advice to struggling households to assist them in finding a way out of the difficulty in which they may find themselves. The majority of householders, however, have not yet done that, with only 26% making the change. I know the Minister for Communications, Energy and Natural Resources has come in for some criticism for encouraging people to switch from the ESB. However, we need to encourage people to shop around for a different electricity supplier. Once the ESB's share of the domestic market is reduced to 60%, we will have a fully deregulated domestic sector. It behoves all of us to encourage such a development by advising those who visit our clinics to make the switch to save 14% on their current bills. MABS should do the same. This should also be presented in an honest way by the Opposition.

I commend the amendment to the motion.

Senator Paudie Coffey

What about IDA Ireland?

Senator Mark Dearey

I accept there are larger users which need to enjoy competitiveness in energy prices, many of which are lobbying for it. For example, while IBEC's chief researcher, Mr. Fergal O'Brien, recently asserted electricity prices are higher in Ireland, its pre-budget submission does not quote any statistics to back this up. Mark Fielding, chief executive of ISME, never tires of saying Irish energy prices for his members are among the highest in Europe when in fact they enjoy prices 3% lower than the European average. Many of the claims about Ireland having higher electricity prices seem to be anecdotal.

I accept there are price bands which are 12% higher than European averages, however, which need to be tackled. There are different truths according to the different bands in which companies find themselves. Some will find the market competitive; others will not. We must, therefore, continue to drive competitiveness.

On average, Irish small businesses enjoy slightly cheaper electricity prices than their European counterparts. Domestic customers enjoy prices fractionally below the European average. Those households which will feel the effect of a €30 addition to their bills have a way out by switching user.

The future is in renewables, not in nuclear generated power. Senator Coffey likes to present the nuclear option as one in which we build a nuclear power station and just plug it in. One has to build a massive regulatory and inspection regime——

I welcome the Minister of State, Deputy Conor Lenihan, and thank him for ensuring common sense prevailed with the timely dredging of the Bandon river recently. It was much appreciated in the area.

Deputy Conor Lenihan

The Senator is welcome.

Senator Nicky McFadden

It is a pity the Minister of State did not do the same for the Shannon.

Senator Michael McCarthy

We are living in uncertain economic times in which people, particularly those on middle and low incomes, have seen their take home pay reduced. We are about to face the harshest budget ever to be delivered in the history of State. We are aware of what brought us to the brink of economic collapse but people are still struggling. The banks have received much support from the Government but have not returned it to people and small businesses. An increase in electricity prices will put pressure on households, particularly those with young families, and struggling businesses. I have spoken in the House on several occasions on measures to promote the rural economy which are revenue neutral. We must do more to help the rural economy. It is all very well to tell people to switch supplier but there are many who will have to bear the brunt of the increase in ESB prices.

The ESB's latest annual report informs us its chief executive officer has an annual salary of €458,000 per annum. When a bonus, pension contribution and other benefits are added to this, his total package comes to €654,000 per annum. That is insane. No one is worth that kind of money. If action is not taken on salaries like this in semi-State companies, what message will be sent to the thousands who have already lost their jobs or face losing them in the near future, to those households which have seen their incomes reduced and to those on social welfare rates, the lowest possible earners in the State, who are on very tight and strict budgets? In the current environment it is immoral and situations like that should be examined.

In recent weeks, I had occasion to deal with a couple, both of whom were pensioners. The man died and I attempted to transfer, in a case which is still ongoing, the household benefits package, the recipient of which is now deceased, to his next of kin. In so doing the ESB wanted the surviving partner to switch to direct debit. The person concerned does not want to use direct debit and is not into that kind of detail. Direct debit is something the individual has never done, yet the ESB wants the person concerned to switch to direct debit because it would collect the bill every month or two months from her. I rang the ESB and explained the situation. The only alternative the person concerned can have because she does not have a bank account is to pay a €300 fee which is repayable after 14 months.

With all due respect, for people who are pushing 80 years of age that kind of scenario is not good enough. For the individual to have to pay €300 just because he or she will not use the direct debit, even though the case involves the transfer of an existing scheme for which the Department of Social Protection has responsibility, is difficult. The household benefits package is a very good scheme, in particular for those who are dependent on welfare to eke out an existence in the current economic turmoil. It is not good enough that a company like the ESB, which has already entered into this agreement with the Department of Social Protection, should impose such charges. Since the scheme was opted into the direct debit system is obviously the sole way of collecting the money, but a €300 charge to a pensioner, who is now grieving the loss of a partner, so as to avoid direct debit is not acceptable.

I will be making my views known to the Minister of State because I do not believe anybody would stand over this. I accept that the ESB does its business in a particular way and that we all use Internet banking and direct debits, but there are still sections of society that do not use and will not use such services. To expect anyone to pay the kind of money to which I referred, which is repayable after 14 months, needs to be examined. I will communicate my views to the Minister of State in order that such an anomaly can be addressed. It is bad enough that someone would bury someone close to him or her, but to then have financial hardship inflicted on him or her in order to continue a service which has already been provided is not acceptable.

I urge the Minister of State to take my points on board in regard to the salary of the CEO of the ESB. It is immoral and insane. During the Celtic tiger era there was a lot of mist surrounding these issues but now that the mist has cleared there is a real forensic examination of the manner in which CEOs of semi-State companies are being paid. If somebody on €30,000 has his or her salary reduced to €28,000, why should someone then be paid a package worth €650,000? It is absolutely criminal and I urge the Minister of State to take my points on board.

Senator Niall Ó Brolcháin

I welcome the Minister of State, Deputy Mary White. It is always a pleasure to have her here. She always gives us a good reception.

Much of the debate has not referred to the motion or the introduction of the PSO levy, which is imminent. My information is that the PSO levy was introduced in 1999, 11 years ago. I do not quite understand the point that——

Senator Nicky McFadden

It was introduced at nil.

Senator Niall Ó Brolcháin

I do not quite understand the point of that Bill.

Senator Nicky McFadden

It was introduced at zero.

Senator Niall Ó Brolcháin

As the Senator will recognise, the whole point of the PSO is that it is a balancing act. Opposition is a wonderful place to be and right now it is an absolutely fantastic place to be because the wonderful thing about it is that it is quite possible to put forward points by talking about one side of the balance sheet and not the other side. It can talk about all the good stuff while ignoring the harsh realities of how to raise money to pay for it.

Indeed.

Acting Chairman (Senator Geraldine Feeney)

Senator Ó Brolcháin to continue, without interruption, please.

Senator Paudie Coffey

If he is asking a question we will answer it.

Senator Niall Ó Brolcháin

The NewERA document refers to an investment of €7 billion to create 105,000 new jobs, yet these particular jobs would be under threat if the PSO levy was removed, and that is a reality. I would like Fine Gael to come clean and say if it is in favour of closing the power stations to which I referred. Is it against jobs in the turf powered stations in the midlands? One cannot really have it both ways, otherwise it has to be absolutely clear what money it is ring fencing to substitute for the 5% levy. Let us be absolutely clear about this.

In terms of electricity prices, Senator Dearey has already made it quite clear that the electricity price we currently have is roughly 98% of the European average. The figures are being disputed here. My information is that the figures being quoted in the latest EUROSTAT document, according to Fine Gael, are three years old. I am not quite sure whether it has the latest EUROSTAT figures or whether it is called in from old figures before the Government came into power.

Senator Paudie Coffey

They are from 2010.

Senator Niall Ó Brolcháin

The figures we have show that we are 98%——

Senator Paudie Coffey

Our figures are quoted from May 2010.

Senator Niall Ó Brolcháin

It is said there are lies, damn lies and statistics, and people can quote all sorts of figures. However, the reality is that when we came into government the price of electricity was considerably higher than it is post-PSO levy. That is a reality and if Fine Gael wants to refute that point I would like to see its figures because the figures are quite clear that electricity prices are much closer to the European norm now than they were when the Green Party came into government. That is the reality.

Senator Dearey has also pointed out that energy regulation in terms of other electricity suppliers such as Bord Gáis and Airtricity allows for substantial reductions in electricity prices. I do not want to see electricity prices increasing. This is a good motion in some ways. It is starting a good debate. We are asking questions in regard to the various costs to business. One of the key costs to business is power, including electricity and gas.

Ultimately, I do not want to see turf-powered stations in the future. Turf is not a renewable energy resource. We have decimated the Bog of Allen, in particular. It is not environmentally friendly. I would like to see them replaced, but I would also like to see the jobs retained. I would like to see the replacement, on a gradual basis, of that energy source with wind energy in that region and swapping jobs. That is——

Senator Paudie Coffey

It is in the NewERA document.

Senator Niall Ó Brolcháin

A number of attempts have been made to misrepresent the Fine Gael position, including by the Minister. I want to make it clear that it is not only Fine Gael who is stating this. Mr. Barry O'Leary, the head of the IDA, has stated Irish energy prices are too high and that the high cost of energy acts as a barrier to growth and is impeding the country's ability to attract more international business. On 10 August Mr. Mark Fielding of ISME stated the levy was an additional cost on business and that our electricity prices were already 15% ahead of the EU average, which puts us at a distinct disadvantage with our international competitors, as it puts further pressure on Irish jobs and livelihoods. I do not know what statistics the Minister quoted because the EUROSTAT statistics dated May 2010 clearly indicate that of 31 countries Ireland has the fifth highest domestic electricity prices in Europe and the sixth highest business prices. This is not the time to increase energy costs.

I acknowledge the investment made in electricity networks and infrastructure. Investment in interconnectors should continue, a matter about which I spoke earlier. Work on the east-west interconnector is progressing and there should be further investment in a ring-main interconnector to mainland Europe. We would then have energy security and real competition and it is possible we would not have to build nuclear power stations. However, we would be able to buy cheaper nuclear energy supplies. If we generate large amounts of energy from renewable resources, we can export supplies to the United Kingdom and mainland Europe. It is our job in opposition to make these points and highlight matters of concern for individuals and businesses. In our excellent NewERA policy document we show new ways of finding capital to invest in infrastructure that would ensure security and competitiveness in the Irish energy sector.

Will the increase in the PSO result in an increase in household bills of 5%? Words of sympathy are no good because people have been put to the pin of their collar. The Minister mentioned a new code of practice in disconnecting customers, something I welcome. It should be robust, firm and flexible to protect, in particular, domestic householders who are struggling. The Minister attached much of the blame for the PSO levy on the regulator. The Minister has discretion to postpone the levy by way of a statutory instrument until individuals and businesses are in a better position to pay their electricity bills because they are certainly struggling.

Amendment put.

The Seanad divided: Tá, 26; Níl, 21.

Tá

Boyle, Dan.
Brady, Martin.
Butler, Larry.
Carroll, James.
Carty, John.
Corrigan, Maria.
Daly, Mark.
Dearey, Mark.
Ellis, John.
Feeney, Geraldine.
Glynn, Camillus.
Hanafin, John.
MacSharry, Marc.
McDonald, Lisa.
Mooney, Paschal.
Ó Brolcháin, Niall.
Ó Domhnaill, Brian.
Ó Murchú, Labhrás.
O’Brien, Francis.
O’Donovan, Denis.
O’Malley, Fiona.
O’Sullivan, Ned.
Ormonde, Ann.
Walsh, Jim.
White, Mary M.
Wilson, Diarmuid.

Níl

Bacik, Ivana.
Bradford, Paul.
Burke, Paddy.
Buttimer, Jerry.
Cannon, Ciaran.
Coffey, Paudie.
Coghlan, Paul.
Cummins, Maurice.
Doherty, Pearse.
Donohoe, Paschal.
Fitzgerald, Frances.
Hannigan, Dominic.
Healy Eames, Fidelma.
McCarthy, Michael.
McFadden, Nicky.
Phelan, John Paul.
Prendergast, Phil.
Regan, Eugene.
Ryan, Brendan.
Twomey, Liam.
White, Alex.

Tellers: Tá, Senators Niall Ó Brolcháin and Diarmuid Wilson; Níl, Senators Paudie Coffey and Maurice Cummins.

Amendment declared carried.

Motion, as amended, put and declared carried.

An Cathaoirleach

When is it proposed to sit again?

Senator Dan Boyle

Ag 10.30 maidin amárach.

Seanad Éireann debate - Wednesday, 6 Oct 2010

Electricity Prices: Motion

Tá

Níl

Seanad Éireann debate -
Wednesday, 6 Oct 2010