Tom Enright
Ceist:39 Mr. Enright asked the Minister for Public Enterprise the reason for the proposed Government levy on the North-South gas pipeline; and if she will make a statement on the matter. [27773/00]
Written Answers. - Natural Gas Grid.
This is a very complex matter and the supporting analysis is on my Department's website. The existing gas network in Ireland is owned and operated by Bord Gáis Éireann. It comprises of the Scotland-Ireland interconnector and the onshore gas transmission system which delivers gas to customers. The charge for transporting gas on BGE's system is currently calculated on a fully postalised basis. This means that the same charge is made for delivering gas through the interconnector to any point on the network, regardless of the geographic location of the delivery point.
It is necessary to change this method of calculating tariffs because it would be unfair to continue to use it in circumstances where there will be other sources of gas supply entering the country. Take, for example, a gas customer on the BGE system who was buying gas through a different import pipeline, or through a pipeline bringing gas from the Corrib field onto the BGE system. Such a customer who was paying the existing fully postalised tariff would be making a contribution towards the existing interconnector, even though the customer wasn't using it.
The new method proposed for calculating transmission tariffs is called Irish Entry/Postalised Exit. This would involve individual tariffs for entry or supply on to the Irish onshore transmission system, and a postalised rate for delivery from the point of entry to any point on the onshore system, regardless of location. Postalised transmission tariffs carry an implicit subsidy between customers in different locations. For example, because Dublin in an entry point, a customer in Dublin will pay more than the actual cost of delivery, and the surplus is offset against the extra cost of delivery to, say, Cork or Limerick.
Any system of postalisation has the potential for distortion in circumstances where a supplier could bypass the postalised system and supply a customer direct. For example, the operator of a new pipe to Dublin could charge a price a fraction below the combined Scotland-Ireland interconnector and the onshore postalised price which would be attractive to consumers.
However, the difference between the actual cost of delivery by that operator and the price charged would not be offset against the higher cost of delivery to other parts of the country but would go directly to the operator. In order to avoid this happening, the Brattle Group, economic consultants engaged to advise me on the tariff arrangements, has recommended that a public service levy be introduced to eliminate the potential for distortion which could arise in this situation. The difference between the competitive cost of delivery, and the postalised tariff, would be the amount of the public service levy. This is proposed in order to level the playing field between pipelines, whether they deliver directly to customers, or deliver to customers using the postalised system.
I would like to take this opportunity to stress that this proposal is not aimed at preventing any particular pipeline from being built. After security of gas supplies, the most important consideration is to ensure that the most cost effective option is chosen for the pipelines which are built to bring gas to Ireland. The levy is designed to ensure that only the most efficient pipes are built. This is in the best long-term interests of gas consumers throughout the country.
My Department is currently examining the allocation of costs adopted by BGE in preparing the indicative figures for the proposed levy, as I am concerned to ensure that the level of the charge should accurately reflect the costs in the system. I would also like to say that before such a levy could be introduced, primary legislation would be necessary to enable me to impose the public service obligation involved, and the necessary notification and clearance procedures would have to be carried out with the EU Commission.