Dáil Éireann díospóireacht -
Tuesday, 15 Feb 2000

Vol. 514 No. 3

Written Answers. - Electricity Generation.

Ivan Yates

Ceist:

109 Mr. Yates asked the Minister for Public Enterprise if her approval has been sought for, or if she has authorised, the purchase by ESB of a turbine for the power station at Ringsend, Dublin 4, where there is a doubt regarding the adequacy of gas capacity; if she has satisfied herself that this expenditure is fair in terms of level competition in the power generation sector; if a public subsidy is involved; and, if so, if this will be extended to other independent electricity power generators. [4386/00]

Ivan Yates

Ceist:

111 Mr. Yates asked the Minister for Public Enterprise the process pursued by ESB in the disposal of the Ringsend power station to Dublin Bay Power; if she was consulted; and if this disposal adhered to Department of Finance procedures for disposals from the public sector. [4388/00]

Minister for Public Enterprise (Mrs. O'Rourke):

I propose to take Questions Nos. 109 and 111 together.

Due to concerns about electricity generating capacity for late 2001 and early 2002, I have given limited and conditional approval for capital expenditure by the ESB on certain specified aspects of its planned new gas-fired generating plant at Ringsend including preparatory work related to the planning process and more recently the procurement of a turbine and associated expenditure.

The Electricity (Supply) (Amendment) Act, 1982, obliges the ESB to secure my approval for any expenditure proposed for capital purposes.

In 1998, the ESB gave my Department advance notice of its intention to build a large new gas fired generating plant at Ringsend.

In the light of the pending opening of the market to competition and the expressed intention of a number of independent players to enter the Irish market, I have at all times exercised my statutory functions in relation to the ESB proposal on the basis of legal advice.

In November 1998, on the basis of legal advice, I gave the ESB approval for the capital expenditure involved in the preparatory work up to completion of the planning permission process.

On 1 December 1999, again on the basis of legal advice, I published a letter which set out the conditions under which I would be prepared to give approval for further capital expenditure by the ESB on the Ringsend project.

That letter made clear that I could only consider giving an approval in relation to expenditure for the turbine after I had received a written undertaking from the ESB that, if I am of the opinion that competition law makes it appropriate, the ESB would sell its interest – including any interest in any consortium having an interest – in any generating station to be built at Ringsend on appropriate terms.

Following receipt of explicit acceptance of that condition by the ESB, the company sought approval to enter into commitments up to £120 million in relation to the procurement of a turbine and associated works.

Following due consideration and after taking further legal advice the ESB was given the necessary letter of capital approval on 23 December 1999.

The specific issue of level competition and the question of possible public subsidy referred to in the Deputy's question were specifically addressed in my Department's professional assessment of the ESB's application. My Department's consent therefore, specified that the relevant financial arrangements between the ESB and Dublin Bay Power Limited must be on an arms length basis and governed by terms and conditions such as to preclude the passing on or conferral on Dublin Bay Power Limited, Statoil Dublin Bay AS, or the partnership, Dublin Bay Power, of any financial advantage derived by the ESB as a State owned monopoly and dominant player in the market which would fall to be classified as a State aid.

In this regard, the draft terms and conditions of the loan agreement are required to be submitted for prior ministerial approval as soon as possible. The rate of interest and other conditions of the loan must be those likely to be experienced by similar private-sector projects so as to avoid any suggestion of State aid or similar advantage to this project. In particular, the ESB was advised that I will need to be satisfied that the interest rate charged and other loan conditions applied to the project reflect its stand-alone borrowing capacity rather than the borrowing capacity of the ESB itself.

On the issue of the site, the Commissioner for Electricity Regulation in a letter to my Department on 18 November 1999 indicated that the question of the site at Ringsend being transferred to Dublin Bay Power without any public tender or other offer process was of concern to him. This matter was duly taken up with the ESB who indicated the site had been leased to the Ringsend consortium, Dublin Bay Power Limited for 35 years. The company indicated that the lease has been negotiated at full open market rent and the ESB had conducted the negotiations on an arms length basis with the assistance of an independent valuer.

ESB has taken the view that a tendering process was not required for these arrangements by virtue of the ownership remaining with the ESB; the control remaining with the ESB through its majority share in the partnership, and rent having been established on the basis of open market as determined by independent valuation.

In my letter of 1 December 1999 to the chairman of the ESB, I reiterated that the commissioner for Electricity Regulation had raised the question as to whether there should be third party access to sites which are owned by the ESB as a result of its monopoly position pre-liberalisation.

The treatment and procedures followed by the ESB in relation to the Ringsend site is one of a number of complex competition issues arising in relation to the Ringsend plant which are the subject of continuing inquiry by my Department.

The allocation of scarce gas pipeline capacity for the ESB and other independent power producers wishing to enter the market will be the subject of legislative proposals which I expect to put before the House in the very near future. The constrained pipeline capacity will be of short duration.