Dáil Éireann díospóireacht -
Thursday, 27 May 1993

Vol. 431 No. 5

Ceisteanna—Questions. Oral Answers. - Alleged Breach of EC Competition Laws.

Eamon Gilmore

Ceist:

6 Mr. Gilmore asked the Minister for Transport, Energy and Communications if his attention has been drawn to the comments made by the EC Commissioner for Competition, Mr. Karel Van Miert, in which he indicated his intention of initiating legal action against a number of countries, including Ireland, for what he alleged were abuses of national monopolies concerning imports of gas and electricity; his response to Mr. Van Miert's statement; the steps, if any, he intends to take to protect the position of public companies such as the ESB and Bord Gáis, especially in the light of our peripheral position; and if he will make a statement on the matter.

Mr. Cowen

The House will appreciate that as Ireland's electricity network is not connected to any other country this is very much an academic issue.

The Competition Directorate of the EC Commission initiated formal proceedings against Ireland some time ago under Article 169 of the Treaty for alleged infringements of Community law by retaining exclusive rights in relation to the import and export of electricity. As part of this procedure the Commission forwarded a reasoned opinion to the Irish authorities in November 1992. A detailed reply addressing the matters raised by the Commission was issued earlier this year. It is now a matter for the Commission to decide whether to refer the matter to the Court of Justice. While I am aware of Commissioner Van Miert's recent comments, I have had no formal indication of the Commission's position. I take the view and have indicated to the Commission that moves to change the existing structure of the industry should be taken within a clearly defined policy framework. This view has been supported by the EC Energy Council which indicated that while supporting progress towards completion of the internal energy market, full consideration should be given to the circumstances in member states and to the need to ensure security of supply and to protect the interests of small customers.

A review of the electricity industry was carried out by my Department and the ESB to examine how the industry might best be structured in the future to provide the most efficient and economic service for customers. Arising from the review, proposals for the restructuring of the electricity industry were recently approved by Government. The restructuring is intended to bring the electricity industry in Ireland into line with requirements for a more open energy market. It will introduce greater cost transparency and facilitate competition. The Commission will be fully informed of the proposed changes in the electricity industry.

No communication has been received from the EC Commission in regard to natural gas.

Mr. Gilmore

I am puzzled as to how the Minister can say that this is an academic issue since the ESB, apparently in response to Commissioner Van Miert's legal initiatives, is proceeding with subdivision on the approval of the Government. The ESB also has an application for a price increase before the Minister about which I will be asking later. We recently had the very direct statement from Commissioner Van Miert of his intention to proceed with legal action. Is the Minister taking seriously this statement made by Commissioner Van Miert? Is the Minister satisfied that there are no grounds for such legal action against this country, particularly in relation to electricity supply?

Mr. Cowen

The reason it is an academic issue is that we have a stand alone electricity grid and a stand alone gas grid, pending completion of the gas pipeline. The Commission alleges that under existing legislation the ESB has exclusive import and export rights in respect of electricity and that this is incompatible with Articles 30, 34 and 37 of the EC Treaty. We have not accepted that Ireland is in breach of its obligations under the Treaty. The point was made to the Commission that changes to the structure of the Irish electricity industry were under consideration. Decisions have now been made on the restructuring appropriate to the energy market here.

The changes proposed are designed to allow for a more open energy market while retaining the benefits associated with a single electricity company. Work is now beginning to determine the detailed legislative changes needed to implement the organisational changes which the Government has recently approved. The proposed changes in legislation will introduce a more open market structure. The electricity industry will also be subject to independent public regulation. All of these requirements are in line with the EC Commission requirement for the completion of the internal energy market. The option of amending those parts of the existing law which refer to imports and exports will be considered as part of this process.

Mr. Gilmore

Is it not the case that the recently announced changes in the ESB are as a direct response to EC requirements? Is the Minister in any way concerned about the impact of EC liberalisation of competition generally on Irish consumers, who have recently had to endure an increase in telephone charges and who may now be faced with an increase in the cost of electricity and possibly gas in order to comply with the various EC requirements, and about this bludgeoning of the Irish consumer by Commissioner Van Miert who is threatening to take this country to the European Court over alleged non-compliance with the various competition rules?

Mr. Cowen

It would be incorrect to suggest that the price increase application was made on the basis of trends within the European Community. Presumably, the application was made on the basis of securing and ensuring the financial stability of the company and meeting its capital requirements for energy generation in the future. That is the reason we have an application for a price increase, which has nothing to do with the European Community. I stated in my original reply that moves to change the existing structure of the industry should be taken within a clearly defined policy framework. We have already put down some markers on that, now that the EC Council of Energy Ministers is approaching the question of the liberalisation of the internal energy market. Therefore, I do not accept that the Government is not ensuring that our interests are represented at EC level so that we obtain the best possible deal.

The restructuring was to meet the trend emerging in Europe but it is also very much in the interests of the company. I am glad to note, as a result of work undertaken within the ESB, that it has the approval of staff. Indeed, it will be on the basis of consultation with staff that such reorganisation will be effected. A task force has been established, with one of the officials of my Department participating, to help to implement the necessary changes which the chairman, board, management and staff agree is in the best interests of the company; even from its own selfish point of view, it should be more competitive and seen to be more cost-transparent throughout its business operations.

Mr. Noonan

(Limerick East): The Minister confirmed that the Government recently approved an internal restructuring of the ESB for the reasons he outlined. Will he confirm that, at the same Cabinet meeting, he made his colleagues aware of the ESB's requirements for capital, particularly on the transmission side? Will he also confirm that the Cabinet agreed that these were a matter of priority, and that this investment capital would be contingent on an annual increase of approximately 3 per cent in ESB charges each year over the next five years?

Mr. Cowen

In considering that position one must — and I will be insisting on assessing existing generation capacity within the ESB — to ascertain to what extent we are getting full and proper utilisation of existing plant before agreeing to capital projects which will impose further financial hardship of financial commitments on the ESB. That type of assessment is necessary within the context of any application. There should be no presumption that increases should be effected on the basis of funding future capital projects, which would require Government approval in the first instance.

Mr. Noonan

(Limerick East): With respect, I did not ask the Minister about capital costs on the generation side. I asked him about capital costs on the transmission side, in respect of which the ESB put a clear programme to Government, which the Government agreed and which will require increases of up to 3 per cent each year over the next five years to deliver. Will the Minister confirm this and not pretend to the House that there will be long consideration of the merits of the application when it has already been agreed in principle?

Mr. Cowen

The question of proposals with regard to transmission is being considered by my Department. I will not approve any increases until I am satisfied that all the relevant factors have been taken into account. Quite apart from investment in transmission there is a need to ascertain whether we are getting the best utilisation from existing plant. The question also arises of what level of overcapacity one needs to meet peak periods of demand. All these issues must be considered and a decision has not yet been taken.

Mr. Gilmore

Has the Minister made any recommendation to Government regarding an increase in electricity pricing?

Mr. Cowen

I have made no such recommendation.

Mr. O'Malley

In connection with the matter with which the Minister dealt a moment ago, that of capital investment, will he agree — given that the ESB has already spent a lot of money on the fourth set of 300 megawatts at Moneypoint — it would make far more sense for it to complete the fourth set, building up Moneypoint to 1,200 megawatts capacity, rather than building a new power station in Dublin which it proposes to do and of which I get the impression the Minister has approved?

Mr. Cowen

Phase I of the Poolbeg extension was approved prior to my appointment. The question of further investment in Moneypoint will have to be considered in my assessment of the future generation capacity of the ESB and how we should meet that demand.