I move: "That the Bill be now read a Second Time."
It is particularly appropriate that this Bill is being considered by this House, given the renewed debate at European level on the need for a common European energy policy and the changing energy landscape internationally. The Bill, when enacted, will provide an important component in driving forward the Government's progressive energy agenda. Given Europe's dependence on a small number of external suppliers, and security of supply issues, this Bill is timely. Increasing demand on fuel resources, and concerns about long-term availability of supplies are driving forward the need for consensus on a wide range of energy issues.
This Bill forms a key part of the Government's priority legislative programme. It is the result of ongoing consultation between officials of my Department, the Commission for Energy Regulation, CER, and key market players. For the convenience of the House, a detailed explanatory memorandum has been published which provides a synopsis of the Bill's provisions. The Bill proposes to assign additional functions to the CER, which is the independent body responsible for regulating and overseeing the liberalisation of Ireland's energy sector. These new responsibilities include participation in the development of an all-island energy market, regulation of the activities of electricity and gas installers and the regulation and promotion of natural gas safety.
Other provisions of the Bill include amending the definition of combined heat and power, CHP; the conferral of power on the Minister to issue policy directions to the CER; provision for the full opening of the natural gas market; and provision for the taking of emergency measures by the Minister in the event of a sudden crisis in the energy market.
In order to contextualise the various provisions of the Bill, I propose to speak briefly on the important role played by the CER in discharging its statutory functions. Established as the independent regulatory body with responsibility for electricity under the Electricity Regulation Act 1999, the CER's powers and responsibilities were extended under the Gas (Interim)(Regulation) Act 2002 to cover regulation of the natural gas market. As the independent regulator for the electricity market, the CER facilitates competition by authorising the construction of new generating plant and licensing companies to generate and supply electricity. The CER also has responsibility for the regulating of prices charged to customers by the ESB, in its capacity as public electricity supplier. Within the gas sector, the CER grants licences to suppliers and other market players and has the power to regulate prices charged to certain gas customers.
The CER assumes an active regulatory stance with regard to the operation, maintenance and development of the electricity and gas transmission and distribution networks. Partnered with this role, it also has responsibility for the approval of tariffs for third party access to these systems. In carrying out its various functions and responsibilities, the CER has a statutory obligation to exercise its powers in a manner which in respect of electricity, does not discriminate unfairly between holders of licences, authorisations and the Electricity Supply Board, or between applicants for authorisations or licences; with regard to gas, does not discriminate unfairly between holders of licences or consents and Bord Gáis Éireann, or between applicants for consents or licences; and protects the interests of final customers of electricity or gas or both.
Given its already wide-ranging knowledge and experience of both the gas and electricity markets and its statutory responsibility to carry out its activities in a fair and impartial fashion, the CER is evidently best placed to tackle the additional functions and responsibilities proposed by the provisions of this Bill. I shall now address these provisions in more detail.
Section 3 of the Bill amends the Electricity Regulation Act 1999, hereafter described as the 1999 Act, by providing that it shall be a new function of the CER to participate in the development of an all-island energy market. Currently, policy on such a market is encapsulated in the all-island energy market development framework published in November 2004 by the Minister and his then Northern Ireland ministerial counterpart, Barry Gardiner MP.
The framework, produced in consultation with the two regulatory authorities and with energy stakeholders, sets out the commitment of both Governments to achieving a single energy market that will contribute to a more secure and cost efficient service for all consumers. It includes a high level development programme setting out goals and timeframes over the next few years for an all-island approach to electricity, gas and sustainable energy.
In order to further this commitment to an all-island energy market, section 3 provides that the CER will also be granted the power to arrange for the establishment of a "single market operator" which will, when established, operate a system of contracts and arrangements for trading in electricity on the island of Ireland. This measure will serve to underpin the ongoing co-operation between the CER and its counterparts in Northern Ireland in developing the all-island energy market.
The resulting integration of the energy markets on the island as a whole will, overtime, result in a number of positive benefits, which include the removal of market distortions and the minimisation of the upward pressure on wholesale electricity costs. It will also create a more attractive location for investment in new electricity generation within the island of Ireland and serve to improve overall security and reliability of electricity supplies throughout the entire island.
Whereas section 3 provides for the development of an all-island energy market, sections 13 and 14 of the Bill amend the Gas Act 1976 to provide for the full opening of the natural gas market. The section provides that any person shall be entitled to switch his or her natural gas supplier if he or she so wishes. It further provides that a natural gas supplier acting on behalf of any person may be granted third party access to gas pipelines or facilities. The upshot of these provisions is that the benefits of liberalisation previously enjoyed by industrial and commercial consumers will be extended to all natural gas customers, allowing them to shop around for their supplier and to obtain the best value for their money. The market will then be fully contestable.
It is important to note these sections include a commencement provision, which serves to ensure the market will be fully open no later than the 1 July 2007 deadline set by the EU directive requirements. However, so as not to delay matters unnecessarily, and should the necessary administrative and technical measures be in place prior to this date, provision is also made allowing the Minister to make an order or orders to open the gas market either in part, or in whole, in advance of this deadline.
Turning to the new powers and responsibilities to be allocated to the CER, sections 4 and 11 of the Bill amend the 1999 Act by providing for the regulation by the CER of electrical contractors and gas installers, respectively. These sections, in conjunction with section 8, which provide for the taking of emergency measures in certain specified circumstances, and section 10, which covers the issue of natural gas safety in general, demonstrate that central concerns in the drafting of the Bill were the issue of safety and security of supply in so far as they relate to energy matters. It is with this in mind that I am particularly pleased to put forward these provisions for the consideration of Members of the House.
Sections 4 and 11 provide that the CER may establish standards of training for both electrical contractors and gas installers in regard to safety in their areas of work. Under the provisions of the Bill, the CER will have the power to designate persons to be electrical or gas safety supervisory bodies, which will be required to operate in accordance with criteria and procedures published by the CER. Under CER oversight, these bodies will be allocated responsibility for the registration of electrical contractors and gas installers, as appropriate. They will have the power to inspect work carried out by their various members, monitor and review the training of their various members and suspend or revoke the membership of one of their members for certain specified reasons, including where work carried out by that member is unsafe or of an unsatisfactory standard.
In order to ensure fairness and transparency in the activities of any such body, and between such a body and its various members, any fees or charges imposed by any such body will be subject to CER approval. Furthermore, any decision by such a body to suspend or revoke the membership of one or more of its members will be subject to appeal to the CER.
Both sections also provide that the CER shall have responsibility for the following associated measures relating to the activities of electrical contractors and gas installers. It will have the power to appoint authorised officers for the inspection of electrical or gas works; the designation, by means of regulations, of certain works as being solely the province of electrical contractors or gas installers, as appropriate; the designation of the requirement for completion certificates for specified works carried out; and the power to prosecute rogue installers or contractors.
Section 11 also provides for a natural gas transmission system operator and a distribution system operator to appoint a gas emergency officer, with powers to enter land and take emergency measures, where there is a danger to a person or property arising from natural gas. This reflects the particularities of the use of gas as a source of energy, such as its combustible nature and the means by which it is transported, as well as the multi-operator environment envisaged for the market. The CER will also have the power to appoint a gas safety officer to assist in the carrying out of its new gas safety functions.
Section 12 is an enabling provision, which acts as an addendum to section 11, allowing the Minister to make an order to extend certain of the Bill's natural gas safety provisions such as regulation of installers to include liquefied petroleum gas, LPG. Whereas sections 4 and 11 focus on the activities of individual tradespersons in order to provide for proper regulation of their activities, the purpose of section 8 is to take account of the probability, however remote, of a sudden crisis taking place in the energy market. Its provisions are, therefore, designed to ensure the physical safety and security of persons and energy infrastructure, as well as the integrity of the transmission and distribution systems for natural gas or electricity, are protected. Under the section's provisions, the Minister can, where there is such an evident cause of major concern within the energy market, by order, direct the CER or certain electricity or natural gas market players to take whatever safeguard measures the Minister considers necessary with regard to the circumstances. It is important to note, however, that this is not a carte blanche provision. ln making such an order, the Minister will be obligated to ensure that, whatever action is taken under this section, the potential impacts to the gas and electricity markets are kept to a minimum. Also, any direction given must not go beyond what the circumstances of the particular crisis dictates. A standard revocation-amendment provision is included to allow for the fact that such crises are likely to be, by their nature, short-term. These provisions are in line with EU requirements on security of energy supply.
As previously outlined, section 10 of the Bill serves to expand the functions of the CER to include the regulation and active promotion of natural gas safety. ln this context, the CER will be required to consult the National Standards Authority of Ireland regarding standards and specifications relating to gas safety. The purpose of this provision is to copperfasten Ireland's continued success in meeting with international best practice. Similar to section 11, section 10 also takes account of the nature of gas as a source of energy. Towards this end, the section imposes certain obligations on the CER as to how it will regulate natural gas safety. Under the section, the CER, having consulted with the Minister, will be required to establish and implement a natural gas safety framework. This framework must include, but is not limited to, inspection and testing regimes for downstream transmission and distribution pipelines, and for storage and liquefied natural gas facilities. Any such framework must also focus on the regulation and certification of natural gas installers and provide for procedures for the investigation of complaints against them.
Furthermore, in the interests of transparency, the CER will be required to report to the Minister on an annual basis on the functioning of this framework. The CER will also have the power to direct natural gas undertakings to advise their customers and the public as to natural gas safety. By providing for a gas safety framework, for reporting mechanisms to be in place, and for the power to issue directions, a more comprehensive and holistic approach to natural gas safety will be achieved. Apart from issues relating to safety and security, the Bill also serves to rectify an impediment in current legislation. It goes without saying that east-west and North-South electricity interconnection are critical planks of the Government's energy policy. Both can provide strong physical links with Northern Ireland and mainland UK, and will serve to integrate Ireland into wider European markets.
Section 7 amends the 1999 Act for the purpose of providing for an electricity interconnector owned by a person other than the ESB to be subject to authorisation and licence granted by the CER. For technical reasons relating to the definition of the electrical transmission system, the section also provides that such an interconnector shall not be part of the transmission system except where it comes to the issue of calculating and imposing charges for the transmission system's use. Under the provisions of the section, the CER may also, with the consent of the Minister, secure the construction of an interconnector by specified means, including by competitive tender; by authorisation granted without a prior competitive tender, but which must be seen to be necessary and in the long-term interests of final customers; or directly, by requesting the transmission system operator to provide for its construction as part of the CER's development plan.
Provision is also made to ensure an interconnector operator shall offer access to the interconnector on the basis of published non-discriminatory terms, which will be subject to the approval or, if deemed necessary, the direction of the CER. To ensure fair play between interconnector operators and applicants for access to the interconnector, a dispute appeals mechanism is also provided for with the CER as final arbiter.
While concentrating in the main on new functions to be allocated to the CER, the Bill also provides for the improvement of its inner workings and administration. Towards this end, section 9 provides for an acting chairperson to be appointed to the CER by the Minister in circumstances where the chairperson is unavailable to perform his or her duties or functions. This allows for a degree of flexibility in the inner workings of the CER and takes account of the various contingencies which can occur outside the normal day-to-day operations of any organisation.
Further flexibility in the internal workings of the CER is provided for by allowing the chairperson to have a casting vote where a difference of opinion has not been resolved through the usual decision-making process. Such a mechanism is a standard provision, in this case modelled on similar mechanisms governing the workings of the Commission for Communications Regulation, ComReg. To enhance the accountability of the CER to both the Minister and the Oireachtas, while also reflecting the reality of the day-to-day business operations of any publicly accountable body, the appropriate timing of the submission by the CER of its annual accounts and work programmes is provided for.
Again, using similar provisions governing the activities of ComReg as a template, section 6 provides that the Minister may, in the interests of the proper and effective regulation of both the electricity and natural gas markets, give general policy directions to the CER relating to the exercise of its statutory functions. It is important to note that such powers would be used sparingly and always in the public interest. Any policy direction which the Minister may wish to put forward will be subject to a public consultation process. Such a process can serve to improve upon the modus operandi of the CER by increasing its awareness of public concerns and issues.
Section 5 amends the Act of 1999 by replacing the definition of combined heat and power, CHP, with a new definition of CHP as set out in Directive 2004/8/EC, and by providing for the methodology through which the various forms of CHP can be calculated. CHP is the simultaneous generation of useable heat and electricity in a single process. It makes use of the heat produced in electricity generation instead of releasing it into the atmosphere and has a less detrimental effect on the environment than if heat and power were produced independently. It is not strictly a renewable energy but contributes to general energy efficiency and can make considerable energy savings for businesses and industry.
The new definition will facilitate the establishment of a guarantee of origin system for high efficiency CHP, establishment of appropriate support mechanisms and reporting to the European Commission as required by the directive. It is an important step in ensuring that support for CHP in Ireland can be targeted to achieve optimum energy efficiency and environmental protection. Section 5 also provides for the appointment by the Minister of a person who will be allocated responsibility for the calculation and certification of power-to-heat ratios of specific CHP units.
Section 15 deals with a further legal lacuna by providing that a 10% capital stockholding in the ESB be vested in the Minister to give him or her the same legal entitlement as other capital stock shareholders. The Minister, the person to whom the ESB normally reports in a shareholding capacity, does not have any shareholding representation in the company and, accordingly, does not have the rights and obligations of other stockholders, such as voting rights at annual general meetings. At present, the issued capital stock in the ESB is apportioned between the Minister for Finance — 95% — and the employee share ownership plan — 5%. Following consultation with the Office of the Attorney General and the Department of Finance, it was agreed to rectify this matter through the divestment by the Minister for Finance of 10% of the capital stock to the Minister for Communications, Marine and Natural Resources.
The Bill is an important measure in the delivery of the Government's developing energy policy. By focusing on the issue of safety while also taking account of the need to progress the integration of an all-island market for energy, the Bill will, on enactment, have considerable benefits for all electricity and gas consumers, be they industrial or domestic. The Minister and I look forward to working closely with the CER on ensuring the speedy implementation of the Bill's various provisions following enactment. I therefore look forward to listening carefully to the views of Members of this House on this important legislation and their assistance in progressing the Bill into law.