Vol. 723 No. 3
10 Deputy Leo Varadkar asked the Minister for Communications, Energy and Natural Resources if he will reconsider his opposition to the sale of State assets like ESB Powergen, Bord Gáis and ESB customer supply in view of the crisis in the public finances and the International Monetary Fund-EU intervention; and if he will make a statement on the matter. [45063/10]
As the Deputy is aware, I have responsibility for a range of commercial semi-State bodies. These companies play critical roles in the economy by providing essential infrastructure and services to consumers and enterprises. They are also significant employers and most of them contribute substantial dividends to the Exchequer.
The major energy utility companies referred to by the Deputy, ESB and Bord Gáis Energy, BGE, are key contributors to the achievement of the Government's energy policy objectives. These objectives are fully in line with EU energy policy objectives. The State utilities are collectively committed to decarbonising the energy system in support of our smart economy. They ensure security of supply to the economy, business and domestic consumers through investment programmes in the energy networks and power generation, including major renewable energy investments. The supply businesses of ESB and BGE have also contributed to the much more competitive regime now operating in the electricity and gas markets.
The Deputy is aware of the review group on State assets and liabilities, chaired by Professor Colm McCarthy. Along with officials from my Department, I have met the review group, with which I had a wide-ranging and useful discussion. I expect the group will report to Government around the end of the year. In this context, the recently published national recovery plan indicates that the Government will consider the disposal of assets. The work of the review group presents an opportunity to examine existing structures and practices within the State ownership model, and to assess how best these valuable assets can contribute to national investment priorities and help restore growth.
I agree that given the current economic situation and the severe pressures on the public finances, consideration should be given to making the best use of State assets, including their possible disposal or part disposal. The consideration must be a fully balanced one which takes account of wider policy considerations and, in the specific case of our State energy companies, the vital role they are playing to deliver policy objectives such as security of supply, competitiveness and promotion of renewable energy. I am not in favour of any measures that will undermine the significant progress made to date in network and power generation investment and offering meaningful choice to business and domestic consumers. I remain of the view that State ownership of the energy companies was and will remain a key element in achieving these objectives.
I asked the question because of a speech the Minister made some weeks ago. I do not want to go into the question of NewEra, but the Minister largely misrepresented it and then underlined his opposition to the sale of any State assets. He pointed out that a number of the semi-State companies are engaging in investment programmes, which is correct. Of course these are all the network companies that we would retain in State ownership. However, we are now in a different situation and need a stimulus in the economy. The National Pensions Reserve Fund has largely been given away to the banks by the Fianna Fáil-Green Party Government, and the best option, in my view, is to sell off the non-essential semi-State companies and a minority share in the monopoly companies to raise, according to estimates by Davy, some €9 billion, which is an enormous amount of money that could be used to fund a stimulus in the economy and avoid many of the very painful measures this Government intends to impose on the people.
The Minister did not answer my question. I asked him whether he was reconsidering his position, to which he indicated he was and he was not, which is typical of the Greens. One does not know whether they are coming, going or staying put. I will put the question clearly: will the forthcoming budget on 7 December include provision for revenues from the sale of State assets? If one looks at the budget, there is about €2 billion in tax cuts, €2 billion in spending cuts, and €700 million under the category entitled "other". Does that include the sale of semi-State assets and in the event, will he vote against the budget?
I am not completely opposed to the sale of State assets, where appropriate, but the Deputy's question asks about ESB and Bord Gáis Éireann. In regard to——
And ESB Powergem.
Please allow the Minister to reply.
ESB and Bord Gáis——
I did not ask about the ESB, but rather about ESB Powergem.
——I disagree with Fine Gael policy and do not believe it makes economic sense.
What about Bord Gáis?
I believe that separating supply generation from the network businesses would undermine the investment opportunity the State needs. With regard to the benefits we are starting to see from the competitive and effective electricity and gas markets, the policy approach is working. Deliberately breaking up those companies would undermine something that is working and the investment case we need.
I say this in particular, with regard to the Fine Gael separation proposal which seeks to sell the generation and supply businesses——
Will the Minister answer the question about the budget?
The budget will be set out next week. Whatever it says in terms of revenue streams will be true but I do not believe——
Will it include the sale of State assets?
——it should include the sale of Bord Gáis Éireann or the ESB because those companies provide a significant dividend stream to the State, which represents important revenue at this time. Those companies are making massive investments in our State, and helping private sector companies use the networks to make other investments. These areas of economic policy are working. What Fine Gael is trying to do would cause enormous dislocation in what is an effective energy policy approach.
It seems the Minister has answered my question to the effect that the budget will provide for an initial public offer of the semi-States bodies. Will he confirm for me that there will be a sale of State assets under his remit in the budget next week? There is some confusion about the memorandum of understanding and perhaps the Minister can explain it. There is some suggestion to the effect that it has been agreed that if any State assets are sold, the money will have to go towards paying off the national debt and that the next Government would not have the right to use it as it sees fit. Perhaps the Minister would clarify that.
The budget next week will be written by the Minister for Finance but I do not expect any major change in the policy that I have set out as Minister responsible for an energy policy that is working in terms of bringing down prices, introducing investment in jobs and having a competitive market where State companies allow other concerns access to the networks while at the same time allowing their energy and supply companies to develop. This policy is working, it makes economic sense and is creating jobs. What Fine Gael is planning would break up all that and damage the country, which I would not allow.
Answer the question.
11 Deputy Liz McManus asked the Minister for Communications, Energy and Natural Resources in view of the commitment in the four year national recovery plan to double the carbon tax, the measures he plans to take to alleviate the difficulties this will impose on persons on lower incomes who are struggling to afford to heat their homes; if he has achieved his programme for Government commitment to publish a fuel poverty strategy; if his attention has been drawn to the increasing number of disconnections in electricity and gas; his views that the growing social problem of fuel poverty must be addressed as a matter of urgency; and if he will make a statement on the matter. [45227/10]
I share the Deputy's concerns about the risks of fuel poverty in the current economic climate. The proposal over the period of the national recovery plan to double the price of carbon from €15 to €30 per tonne underlines the commitment to actions to reduce emissions and mitigate climate change. It was decided not to increase the carbon tax rate in 2011 because of other tax increases faced by householders. The carbon tax will be increased on a phased basis in 2012-14. The Government has been, and remains, fully committed to protecting vulnerable households from energy poverty.
Such poverty is caused by the interaction between energy prices, thermal inefficiency of the home and low income. Government action to mitigate energy poverty has focused on providing assistance through the Department of Social Protection and, critically, providing energy efficiency upgrades to low-income, or at risk households, under the warmer homes scheme. Payments under the fuel allowance scheme will be around €230 million this year. The electricity and gas allowances under the household benefits package will cost around €226 million this year. Overall, therefore, the Government is spending over €450 million on relieving fuel poverty this year. This is considerably more than the UK and other European countries.
The warmer homes scheme was established to systematically address poor thermal efficiency performance of low-income housing. The scheme provides attic insulation, draught proofing, lagging jackets, energy efficient lighting, cavity wall insulation and energy advice at no cost to eligible households. These measures significantly reduce the amount of energy required to heat and light the home, thus bringing benefits to recipients in terms of energy affordability, health improvements and overall comfort.
Since 2007, I have steadily increased the funding year on year to the warmer homes scheme. This has enabled the Sustainable Energy Authority of Ireland to deliver an ever increasing number of upgrades. In 2007, 3,378 homes were retrofitted. The following year, 2008, this increased to 5,343. In 2009, I again delivered increased funding, enabling 19,126 homes to benefit from energy efficiency measures. This year, I provided funding to deliver a target for the scheme of 22,500 homes. This target is set to be exceeded by year end.
Additional information not given on the floor of the House.
Already 20,711 homes under the scheme have been completed by a network of private contractors and community-based organisations that stretch into every county in Ireland.
The increased level of disconnections is a concern for the Government, the Commission for Energy Regulation, CER, and energy suppliers. I am satisfied that all energy suppliers have put in place codes of practice setting out the steps to be taken before initiating a disconnection. This includes working with the customer and putting in place a payment plan, or working with a third party who may be acting on the customers behalf. There are also specific legal protections for vulnerable customers, which include prohibiting electricity suppliers from disconnecting elderly customers in winter months.
The CER has just published its decisions on disconnection charges and on how the costs of disconnection are allocated between suppliers and customers. I welcome these developments. Measures to protect vulnerable customers from disconnection, high energy bills and thermally inefficient housing will be set out in the proposed affordable energy strategy. I expect the strategy to be submitted to me shortly, with a view to bringing it to Government in the coming weeks.
Perhaps I should ask the Minister to reflect on what it is like to be poor and cold. We are in a very cold spell at the moment, and I ask him to consider the thousands of people who have a choice either to be desperately cold or desperately worried as to whether they can meet their bills. Already, about a quarter of the population is in arrears with some type of household bill.
I ask the Minister not to give the House the type of answers we get time and again, which do not provide a response to the question being asked. In the programme for Government the Minister promised that a fuel poverty strategy would be published in 2009. Why does the Minister make these promises when he does not deliver on them? That is a very clear promise. It is clear that it will be 2011. Why does he do it, and raise people's expectations and hopes, just to dash them?
That strategy will be presented within the coming weeks. It has been completed in my Department and we have to work within time lines with the Department of Social Protection and at Government level before publishing it. We will do that. I fully understand and accept what the Deputy is saying. In this very cold weather this issue is of critical importance, and I sympathise and have a sense of what those families are going through. That is why something like €450 million has been provided to try to help such families in such difficulty. Retrofitting 22,000 homes to ensure they do not have to use as much fuel is a critical and real response. Furthermore, the disconnections policy issue, which was raised at an Oireachtas committee, will be changed, with a different approach to be taken to ensure people are not inappropriately cut off and that the cost is not fully borne by the householder. We recognise this is an issue that must be tackled through a series of measures, including buildings, low incomes and disconnection policies so that people are not moved from a difficult to a worse situation.
The Green Party drove the carbon levy idea. This tax, when introduced, was on the basis of there being in place a special fuel scheme to protect people on low incomes. This appears to have been abandoned. Perhaps the Minister will explain how he can justify this. The carbon levy is to be doubled under the four year plan. The Government has not yet told us how the effect of this will be mitigated for low income families.
Before the Minister goes on again about the warmer homes scheme, that scheme, desirable and all as it is, is extremely limited in that one must be in receipt of the fuel allowance to qualify for it. Thousands of people living in substandard cold homes, whose fuel bills are high because of the condition of their homes, will never get help under the warmer homes scheme. What does the Minister propose to do to help those people?
It is critical that we target people in receipt of fuel allowances because they are the ones in extreme poverty.
Not necessarily.
It is right that the warmer homes scheme targets these people. Also, this scheme has been increased ten-fold since the coming into Office of the Green Party. I have outlined how further funding can be provided and, a more effective way of delivering it by using the ESB, Bord Gáis and other energy companies to continue that work. Keeping heat in is the best way to tackle fuel poverty. This is the most useful thing we can do to ensure people's homes are warmer. I am committed to ramping up this scheme through the provision of further funding. Deputy McManus is correct that we must target this area.
We must address this issue in the context not only of people in receipt of the fuel allowance but for those involved in other social welfare schemes. We must recognise the energy performance of buildings as being the key metric and must use our regulatory and social welfare provisions to make improvements in this area and to ensure private landlords upgrade their houses so that those in rented accommodation who are in fuel poverty are least affected.
That is cold comfort to people living in fuel poverty.
12 Deputy Leo Varadkar asked the Minister for Communications, Energy and Natural Resources the reason he approved the purchase of Northern Ireland Electricity by the ESB and if he is satisfied with the price paid in view of the large debts of NIE; and if he will make a statement on the matter. [45064/10]
With the agreement of the Government, ESB received my consent, and the consent of the Minister for Finance, to the acquisition of Northern Ireland Electricity, NIE, in July last. These consents were given after consideration by my Department and the Department of Finance of detailed legal and financial advice in relation to the proposal and its implications for the ESB Group, including financial gearings, borrowing levels and investment programmes.
Under the terms of the transaction, ESB will pay £1,034 million, or €1,248 million, for the NIE Group, subject to certain adjustments when the transaction is complete. NIE is a regulated utility and its revenue is derived principally through charges for transmission and for use of its distribution system. NIE's regulated asset base at 31 March 2010 was £1,007 million, or €1,215 million. ESB will also assume obligations of NIE, including those under a £175 million Eurobond, which is the only debt to be taken on by ESB in this transaction. NIE made a profit after tax of some £60.6 million in its last financial year.
Together with the Minister for Finance and my Government colleagues, I am confident that this transaction, when complete, will be an investment that will be to the benefit of both economies in terms of potential synergies and will critically underpin the delivery of the ambitious renewable energy targets set by both administrations North and South. It will allow for greater co-ordination and network planning in relation to the integration of high levels of wind onto the systems.
Security of energy supply is critical for business and domestic consumers and continued cost efficient development of the networks North and South will ensure that the island of Ireland has secure, environmentally sustainable, energy supply for the long-term. This is crucially important for business confidence and competitiveness in both our economies.
In light of the detailed analysis of ESB's own due diligence and all the metrics of this transaction provided to my Department and to our legal and financial advisers, I am satisfied that ESB will pay a fair price for the NIE assets. The acquisition will increase the regulated earnings of ESB and contribute to the value, profitability and growth of the group.
This decision may turn out to be the biggest made by the Minister during his time in office. I hope he has made the right decision. I am concerned that adequate scrutiny has not been given to this acquisition.
Does the Minister agree that the €1 billion being spent by the ESB would have been better invested in the Republic of Ireland rather than on purchasing an asset in Northern Ireland? At a time when we need investment in our economy, would it not have been better to spend that money here? Can the Minister confirm — this is important — that the only obligations the ESB is taking on from its purchase of NIE is the €175 million Eurobond? According to NIE's accounts, it is carrying a debt of almost €1 billion, a debt almost equal to its value making its real value approximately €100 million, yet ESB is paying €1 billion for it? Perhaps the Minister will confirm — this is important for the future — that the only debt the ESB is taking on is the €175 million Eurobond?
The position is as stated in my reply. This acquisition has been thoroughly examined by financial advisers for my Department, the Department of Finance and the company.
Which ones?
It makes sense because this is a regulated asset which provides a steady regular return. There is very low risk attached to it. It broadens the regulated asset base which provides the company with stability and does not push up gearings to the high levels, in regard to which the Deputy expressed concern. This makes business economic sense. The acquisition has been examined at length because it is a large deal.
On the Deputy's strategic point that we should not be investing in Northern Ireland, I disagree with that. We have during the pass three years moved to a single electricity market which is to the benefit of people North and South. This deal will further develop that. There will be economies of scale from this and developments on the network in the North will benefit from ESB's involvement. Through this single integrated distribution network we can gain efficiencies across the Border regions and on our whole network. We have huge advantages on this island in one of the fastest growing areas of the e-economy, namely, smart grid, because we have a single distribution network. That is advanced by this deal, which makes strategic and economic sense. I do not understand Deputy Varadkar's figures.
The country is in crisis. There are 450,000 people unemployed and the Minister thinks it appropriate to spend €1 billion on power lines and €500 million on roads in Northern Ireland. The sooner this Government is out of office the better if that is its approach.
I wish to raise with the Minister the recent statement by the Green Party that it had been misled and betrayed. Yesterday, on "The Week in Politics" the Minister for Community, Equality and Gaeltacht Affairs, Deputy Carey, said he felt betrayed by the Green Party. The Minister for Tourism, Culture and Sport, Deputy Hanafin, said the same.
Deputy Varadkar must remain relevant to the question.
The Green Party in its statement said it had been misled and betrayed. Who misled and betrayed the Green Party?
The Minister for the Environment, Heritage and Local Government, Deputy Gormley, said the people felt that. I want to return to the key issue which relates to presenting economic growth for our country.
I ask Members to remain within the confines of the question.
Fine Gael is saying we must show where the growth is and where the new jobs are.
In Northern Ireland, apparently.
One area from which growth and new jobs will come is the green e-economy through the development of new electric vehicles, smart metering and renewable generation, which will bring with it a whole range of different services. There are huge economic opportunities for Ireland in this area. We are getting good at it. This investment fits in within that context. Fine Gael cannot on the one hand state in its NewEra document that it will do this, that and the other and on the other hand seek to stop any element of this happening, suggest we break up companies so they cannot invest and stop investments which make strategic sense. Fine Gael cannot on the one hand talk up growing the country and on the other come in here and when provided with specific policy details on how to do so state its opposition to everything. That makes no economic sense.
It is in Northern Ireland.
The Deputy is talking nonsense.
We do not want to grow the economy in Northern Ireland.
We do not know how the energy area can and will grow.
The Minister is more interested in Berlin and Belfast than he is in Ireland.
13 Deputy Leo Varadkar asked the Minister for Communications, Energy and Natural Resources his view on the proposal to reduce reconnection and disconnection charges; and if he will make a statement on the matter. [45065/10]
The increased level of disconnections of gas and electricity customers is a concern for the Government, the Commission for Energy Regulation, CER, and energy utilities. I emphasise the key message for all customers, which is to contact their suppliers to make arrangements before the situation gets to the point of disconnection. I am assured by all energy suppliers that they will continue to work with all customers in genuine difficulty.
The CER has announced its decision that the cost of disconnections for electricity and gas be shared equally between the supplier and the customer in the case of non-payment of account. This is an interim measure commencing on 22 December and will remain in place for 12 months. I welcome this measure and the CER's recognition that the current economic climate is placing additional pressures on energy consumers and that customers' rights needs to be enhanced. I also welcome the regulator's decision to review disconnections charges levied by networks companies and the revision of the code of practice for disconnections to include additional supplier measures to assist domestic customers in managing their bills and reducing disconnection rates.
The Government is committed to mitigating the cost of energy for all consumers and policy and regulatory actions taken to date are paying dividends. EUROSTAT data on energy prices across the member states up to the end of June 2010 indicate that, in the 12 months to June 2010, Ireland experienced the largest decrease in electricity prices in Europe for medium to large business consumers with falls of between 20 and 35%. This compares to an average 4% fall across the rest of the Europe.
Ireland's domestic energy prices have also improved in relative terms in the period to June 2010, with Ireland's domestic electricity prices equivalent to the EU average and Ireland's gas prices now 5% cheaper than the EU average. While working to keep downward pressure on energy prices, we will continue to address the needs of vulnerable consumers in these difficult economic times.
I am also working closely with the Ministers for Social Protection and the Environment, Heritage and Local Government to deliver a fully cohesive Government response to the challenges of addressing energy affordability in Ireland. I expect the affordable energy strategy to be submitted to me shortly with a view to bringing it to Government in the coming weeks.
Additional information not given on the floor of the House.
This strategy will be the framework for building upon the many measures in place to protect vulnerable households at risk from the effects of energy poverty. These measures include social welfare supports such as the fuel allowance and the household benefits package advice on energy efficiency. The warmer homes scheme, WHS, administered by the Sustainable Energy Authority of Ireland provides significant energy efficiency improvements in low-income homes. Improving the thermal efficiency of houses is a critical means of addressing energy affordability.
I am pleased that the CER has moved on this matter and that the cost of disconnection-reconnection will be shared. We have discussed the extent to which people are having their power cut off or "de-energised", as the ESB likes to describe it. It is appalling that when people come to an agreement to sort out their bills, they are then charged for reconnection.
However, something has come to my ears in recent days about which I am concerned. While the ESB is cutting off power to vulnerable people who cannot pay their bills, it is giving free electricity units to senior managers and executives and retired executives. Will the Minister confirm that the ESB does not give free electricity units to its well paid employees while it cuts off power to its customers?
I have not heard details of that but I will come back to the Deputy——
Can the Minister confirm this is untrue?
I have never heard of such an arrangement. I will check and come back to the Deputy straight away.
Would the Minister be horrified if it was true?
Yes, I do not believe that it would be appropriate. I prefer to reply to the key issue of those in danger of disconnection because these are the people we have to care about. We have witnessed a change in the arrangements whereby the disconnection charge has been lowered but it is critical that under the new arrangements suppliers have to give clear written communications and refer to MABS in disconnection cases. There has to be a minimum of four successful contacts with the customer, at least two of which would be in writing, with each attempt to be made no less than three working days apart. There has to be a mandatory notice of supply disconnection with a minimum of seven to ten business days notice.
The CER has responded and the utility companies will have to respond further in recognising that there are customers in difficulty who have to be managed. The changes in the code will help and we will have to monitor everything to make sure people are not cut off in difficult times.
We cannot take Question No. 14 as Deputy D'Arcy is not present.
Question No. 14 lapsed.
