Dáil Éireann díospóireacht -
Wednesday, 20 Jun 2001

Vol. 538 No. 4

Written Answers. - Electricity Regulation.

Frances Fitzgerald

Ceist:

39 Ms Fitzgerald asked the Minister for Public Enterprise her views on the contents of the recent OECD report regarding the lack of competition in the electricity industry; and if she will make a statement on the matter. [18117/01]

Minister for Public Enterprise (Mrs. O'Rourke)

I welcome the OECD report on regulatory reform in Ireland as a constructive contribution to the debate on regulatory reform in general and with regard to electricity in particular. The OECD report acknowledges that much has been accomplished in Ireland on restructuring of the electricity sector. It makes a number of recommendations to complete the process of introducing competition, some of which we have implemented. The more salient of the recommendations in the OECD report may be summarised as follows: decisive structural change, including the diminution of ESB's dominant position in generation, and the option of divestiture; non-discriminatory, cost-effective and independently regulated access to the transmission networks; development of an all-island electricity market; liberalisation of all consumers and consideration of further acceleration; and the independent regulator to be strengthened to speed up competition and investment.

I am fully committed to the liberalisation of the electricity market. I have demonstrated this in the Irish electricity industry by the actions I have taken to promote competition. In July 1999, I sponsored the Electricity Regulation Act as the first urgent step in the process of liberalisation. This legislation repealed regulatory powers that had been vested in ESB and established the independent Commission for Electricity Regulation to oversee market opening and regulate access to the grid.

In December 2000, I signed the European Communities (Internal Market in Electricity) Regulations, 2000, which implemented the remainder of the electricity directive and which, in the main, provided for the establishment of an independent transmission system operator, known as EirGrid.

My policy in the electricity sector, as in other sectors that have been liberalised, is to allow the incumbent to compete with market entrants. This policy approach has not prevented the advent of significant competition in the air transport and telecommunications sectors. I am pleased to note that independent power producers and suppliers have shown a keen interest in entering the Irish electricity market. In that regard, it is worth noting that, to date, the CER has issued 27 authorisations to build power stations, granted 32 generating licences, and granted 18 supply licences.

On the question of access to the transmission networks, the CER is responsible for regulating and ensuring the conditions of access to the transmission and distribution grids and for approving the related tariffs. The ESB, in accordance with EirGrid's development plan, will engage in a major investment programme which will see investment of £500 million in the transmission grid over the next five years. This investment, which will be closely monitored by the Cabinet subcommittee on infrastructure, will fully modernise Ireland's transmission system over this period.

The achievement of an all-island energy market is a key policy objective being actively explored by both administrations. The final report of the consultancy study commissioned jointly earlier this year, which is expected in the next few weeks, will provide the basis for further progress in this regard. In the meantime, the initiative taken by me and Northern Ireland Minister for Enterprise, Trade and Investment, Sir Reg Empey, in December 1999 to expand the cross-Border electricity interconnector from 280MW to 400MW, which will come on stream later this summer, will contribute to the development of cross border trade.

In relation to the pace of liberalisation, I will be making an order this year to provide for accelerated liberalisation of the electricity market, moving to 40% in 2002, from the current level of about 31%. In accordance with the Electricity Regulation Act, 1999, this order will require the passing of a resolution by both Houses of the Oireachtas. About 1,400 customers will be eligible to choose their electricity supplier when 40% of the market is opened.

In a little more than three and a half years, every electricity consumer will be able to choose his or her electricity supplier when the market will be fully opened. Both the markets for green energy and for combined heat and power have already been fully liberalised. I am pleased to say that, already, with the existing opening of the electricity market, more than 50% of eligible customers have moved to independent licensed suppliers and almost 6,000 customers to green suppliers.

The OECD states that independent, well-resourced and well-respected regulatory institutions attract investment, thereby promoting competition. In my view, the OECD report has somewhat misinterpreted the situation regarding the legislative framework for the regulation of the electricity industry when it suggests that its regulatory powers can be withdrawn by me. The commission has been in place for nearly two years now and has been very active in underpinning an open, transparent and accountable regulatory process for the electricity industry. It is fully and legally independent in the performance of its functions and accountable in this respect to a joint committee of the Oireachtas.

The overall thrust of the Government's policy on the development of competition in electricity is broadly in line with that suggested by the OECD. I agree with the OECD report that we should move as quickly as we can to achieve full and robust competition. I can assure the House that that is the objective which I and my Depart ment are working towards in an orderly and expeditious manner.