Deputies will be aware of the Corrib partner's plans to land gas from the Corrib field located off the Mayo coast. This gas is expected to come to market in the latter part of 2003 and further pipeline construction work is to be undertaken by BGE on a Mayo-Galway pipeline to allow for its delivery into the national gas grid. Corrib gas, as an alternative source of gas, will play an important role in increasing consumer choice.
Completion of all pipeline projects is subject to the relevant company meeting all necessary statutory requirements. The position with the three projects mentioned is that BGE has obtained ministerial consent for the construction of the second interconnector and the ringmain pipelines. The company's application for consent to construct the Mayo-Galway pipeline is currently under consideration within my Department and I expect to be in a position to make a final decision on this issue in the very near future.
In addition to the three projects I mentioned, I take this opportunity to update Deputies on the proposed extension of the gas network to the north-west and on the developments proposed for the Northern Ireland network. Deputies will be aware of the Government's decision last year that the natural gas network should be extended to the north-west. An initial analysis by BGE on the route options for this network extension concluded that none of the possible options would be commercial in its own right and that substantial grant aid would be necessary to bring the projects to fruition. In light of this the Government decided that detailed costing should be obtained for an extension of the gas transmission system to Sligo via Ballina from BGE's proposed Mayo-Galway pipeline and to Letterkenny from the proposed Belfast-Derry pipeline.
The provision of such grant aid raises issues relating to EU state said and procurement rules. My Department has been in touch with Commission officials on this matter. The next step in moving the projects forward involves carrying out detailed engineering and planning work to establish a firm estimate of the capital costs for the Government to be in a position to make a decision on grant aid.
I am anxious to get the necessary detailed information to enable a final decision to be taken by the Government on these projects. I understand the concerns expressed to me on many occasions by Deputies and local representatives in the areas in question that these projects be placed on a firm footing. However, given that there are competition and state aid issues involved, it is essential to ensure at the outset that the approach taken to the next stage of the pro ject does not create difficulties which might result in the project being delayed at a later stage. I have, therefore, sought the advice of the Attorney General on the best approach to be taken. Once there is clarity on the best approach to adopt, I will move swiftly to get the detailed planning of the project under way.
In regard to proposed developments in the Northern Ireland network, BGE and Questar, an American pipeline company, had applied to the Northern Ireland regulator, the OFREG, to build two pipelines, one linking Belfast to Derry that would supply the planned new Coolkeeragh power station and the city of Derry and the other comprising a South-North interconnector from Gormanston to Antrim to tie into the proposed Belfast to Derry line. While Questar decided at the end of last year to withdraw from the partnership for internal commercial reasons, BGE has confirmed its commitment to continue with the development of these projects. In recognition of the wider benefits of cross-Border links, the Government supports these pipeline proposals and has decided to make a €12.7 million grant available toward the development of the Northern Ireland gas network.
Taking these infrastructure projects together, it is estimated that the number of households with access to gas will rise from 500,000 to more than 750,000 by 2010. In addition, countless small businesses, shops, pubs and so forth not currently connected will have access to gas. Given the present infrastructure developments and my proposals for full competition in the market, it is now timely to provide for independent regulation of the gas sector.
The Bill is an interim measure that uses the existing regulatory frameworks set out in the Gas Act, 1976, the Gas (Amendment) Act, 1987 and the Electricity Regulation Act, 1999, to create a coherent framework for the independent regulation of the electricity and gas sectors. Using these existing frameworks, approved by the Oireachtas, has certainly facilitated the creation of the over arching framework. As Deputies will appreciate from reading the Bill, ensuring this coherence as an end result has, however, been a complex task.
I will now give Deputies an overview of the structure and main provisions of the Bill. The Commission for Electricity Regulation was established by way of the Electricity Regulation Act, 1999. The main provisions that link into the 1999 Act comprise section 6, which sets out the duties of the commission, section 13, which deals with licensing, section 15 regarding authorised officers and section 18 on the funding of the commission. There are also links with section 16 dealing with gas capacity statements and section 19, which provides for a number of miscellaneous amendments.
The Bill proposes extending the remit of the commission so that it encompasses responsibility for the regulation of the natural gas sector. This adaptation will include changing its name to the Commission for Energy Regulation. There are a number of reasons for choosing the commission. First, there are similarities between the electricity and natural gas sectors. The two industries are in direct competition with each other in the domestic market through the supply of alternative means for cooking and heating and in the UK, for example, many of the regional electricity companies are now involved in the gas market with their own gas supply arms.
There are also commonalties between these sectors in regard to regulatory activities such as price setting and monitoring quality of service. Furthermore, there is an increasing dependency on natural gas by electricity generators. Regulation of both markets by the commission will mean there is one body with an oversight role in ensuring that there is sufficient gas capacity to meet the demand of the electricity market. The fact that the CER is already functioning effectively as regulator will assist in the speedy implementation of independent regulation in the natural gas sector.
The use of the Electricity Regulation Act, 1999, also means that other more important issues, such as the accountability of the regulator, have been dealt with in a manner already approved of by the Oireachtas. The commission has obligations to the Comptroller and Auditor General and the Minister in regard to its accounts. It is also required to account for the performance of its functions to the appropriate joint committee of the Oireachtas whenever so requested by the committee. These obligations ensure accountability and they will continue to apply to the commission in its extended role.
The Gas Act, 1976, established Bord Gáis Éireann as the State owned monopoly operator of the natural gas transmission system. The 1976 Act has undergone a number of amendments in relation to the provision of pipelines and third party access rights. The Bill updates these provisions in the light of the proposed transfer of functions to the commission and as a result of the proposed increase in the level of market opening. The relevant provisions in the Bill linked to the 1976 Act comprise section 8, in regard to the functions of the board, section 9, in regard to consents for the construction of pipelines, section 11, on third party access arrangements, and section 12, dealing with ministerial shareholder functions. As in the case of the 1999 Act, there are also a number of consequential amendments to the 1976 Act set out in section 19 of the Bill.
The Gas (Amendment) Act, 1987, was enacted as a consequence of the demise of the old town gas companies and gave the power to the Minister to confer town gas functions on Bord Gáis Éireann by order under section 2 of the Act. This allowed BGE, which had formerly been only engaged in gas transmission activities, to take over the town gas operations in areas such as Clonmel, Cork and Dublin and to avoid any disruption for the thousands of town gas customers that may otherwise have arisen. As a result of amendments tabled by me and accepted by the Seanad, the Bill now provides, in section 19, for the transfer of the Minister's powers under section 2 of the 1987 Act to the commission and for the possibility of having other undertakings, in addition to BGE, operating as town gas companies.
My decision to provide for competition in the area of town gas distribution is based on a number of reasons. First, the extension of the natural gas network being undertaken by BGE will bring gas to many areas of population not previously supplied. This development presents an important opportunity for the introduction of competition into this area of the market and, by presenting opportunities to new market entrants, will act as a spur for the growth of competition throughout the gas market. Second, my decision to reduce the third party access eligibility threshold to zero by 2005 to allow for full competition requires that a mechanism be put in place for the commission to effectively regulate the domestic supply market. The framework established under the Gas (Amendment) Act, 1987, provides an effective solution for this.
Combining the existing frameworks contained in the 1976, 1987 and 1999 Acts through the proposals in this Bill has been a complex and painstaking task but one that will result in the provision of a coherent and effective framework within which the commission can carry out its duties for both the gas and electricity sectors. In preparing the Bill, my officials have consulted the main players and interest groups in the gas industry as well as with other relevant Departments and agencies. Where possible, the concerns expressed by the relevant parties have been taken on board during the drafting process.
I have maintained an open door policy in regard to consultation on the Bill and I have received some useful suggestions for amendments to the text. As a consequence, I will put forward a number of amendments on Committee Stage that have resulted from this process. One of the most notable of these will be a proposal to insert a new section to deal with third party access to upstream pipelines, which link production platforms in gas fields to onshore terminals and are the responsibility of my colleague, the Minister for the Marine and Natural Resources. The amendment, which is being put forward at the request of the Minister, ensures that Ireland's EU obligations in this area are fully complied with.
I remind the House that the Bill is an interim measure. While it establishes the basic principles and methodologies governing the regulation of the gas sector, further work will remain to be done in this area, work that could not have been carried out at this stage given the short timeframe within which the Bill is required. I advise Members, therefore, that I propose to initiate a comprehensive review of gas sector regulation immediately upon enactment of this Bill.
The aim of the review is the development of a modern regulatory regime appropriate to a multi- operator environment in which full competition is the order of the day. As part of the review, I will undertake a wide consultation process with interested parties. While it is too early to identify the specific issues to be addressed in the review, I can confirm that it will include an examination of issues resulting from the ongoing work in the EU on the revision of the current gas directive. It is also my intention that a thorough consolidation and repeal of the Victorian and early 20th century gas legislation that remains on our Statute Book will be undertaken as part of this work. This will provide much needed clarity for market players and customers alike.
I wish to outline some of the more important provisions in the Bill. Sections 6 and 7 and the Schedule provide for the transfer of functions from the Minister to the CER, as well as expanding the current duties of the CER in light of its role in regard to the natural gas sector. These duties include advising the Minister on the gas industry, promoting competition in gas supply and protecting the interests of final customers. The Schedule identifies a number of the functions to be transferred to the CER from the Minister in the Gas Act, 1976, in relation to the construction of gas pipelines and in the Gas (Amendment) Act, 1987, in relation to town gas distribution.
Sections 3 and 9 amend the existing provisions in the Gas Act, 1976, dealing with pipeline consents. A new section is to be inserted in the 1976 Act so that BGE and all other prospective builders of pipelines will in future make their applications for consent to build pipelines under this one section. There is also a separate provision dealing with consents for construction of upstream pipelines, which are the responsibility of the Minister for the Marine and Natural Resources. In addition, the section gives a new power to the commission, where it considers necessary, or where directed by the Minister, to conduct a competitive process for granting consent for the building of a particular pipeline in a specific area.
Section 11 deals with third party access rights and provides for increased market opening by reducing the threshold above which consumers can source their own gas. It is my intention that full market opening be introduced by 2005, and this provision allows for this to be done by way of statutory instrument. Section 13 provides for a licensing framework covering operators engaged in the supply of natural gas, the operation of distribution or transmission pipelines and the storage of natural gas. No such framework has existed until now.
Section 14 requires gas undertakings to keep separate accounts for their different gas activities such as supply and transmission and, where appropriate, consolidated accounts for other non-gas activities. This is to avoid discrimination, cross-subsidisation and distortion of competition and is based on the provisions of the current EU gas directive. Section 17 provides that the Minister may impose public service obligations or PSOs on natural gas undertakings, for instance, in regard to security of supply, technical safety or environmental protection. This section specifically excludes using PSOs for non-commercial extensions of the natural gas network.
Section 19 provides for a number of miscellaneous amendments, mainly to the Gas Act, 1976. The section also includes an amendment to the Gas (Amendment) Act, 1987, designed to allow persons, in addition to BGE, to become town gas distribution system operators.
The Bill's provisions provide a sound mechanism for establishing, within the shortest timeframe, independent regulation of the natural gas market. Additional legislation will be needed to provide a regulatory regime compatible with the fully competitive multi-operator gas market envisaged after 2005. For the present, however, this Bill is a significant step forward in achieving this goal. I look forward to hearing the views of colleagues on this important legislation. I commend the Bill to the House.