Dáil Éireann díospóireacht -
Thursday, 14 Feb 2013

Vol. 792 No. 3

Topical Issue Debate

Redundancy Payments

Deputy Arthur Spring

I bring to the attention of the House the fact that I am a former employee of this organisation with former working colleagues in the House, some of whom are friends of mine. This is an issue of fairness and justice for people who were not responsible for the downfall of Anglo Irish Bank or Irish Nationwide and who have been working for the State on behalf of citizens and taxpayers to put right what a few people did wrong. The people who did wrong were senior management, directors and people who did not have a day-to-day job that was more relevant to the average industrial wage. IBRC employees have taken public abuse, have been held responsible publicly and have been vilified by many Members in the House without any comprehension or understanding of what it is like. They have been subject to the type of abuse that many of us have received over the past two years and which was also received by the previous Government.

I am raising this issue because of the terms and conditions highlighted to the employees who sit in place and do an honest day's work for an honest day's pay. To put it mildly, the pay for people on the front line was one of the lowest of all the banks. The ratio one would use is an income-cost ratio. The income of the bank was very high while the cost ratio was quite low. This is because people were quite often paid in share options - what I call "golden handcuffs". The Labour Party believes people should be looked after for a day's work and if one tells them they will be entitled to a redundancy package, one lives up to it, particularly if the State is involved.

Gary Marshall was appointed chief operating officer by the Department of Finance. I refer to correspondence of 5 September. It stated that further to the last update on the bank's ongoing consultation process, voluntary redundancy terms to be offered to all eligible employees were agreed between the bank and the authorities over the weekend. The letter confirmed that subject to certain terms and conditions, the following terms would apply to the forthcoming voluntary redundancy scheme. The terms were four weeks' base pay per year of service, inclusive of statutory redundancy entitlement. All successful applicants for voluntary redundancy were to receive a minimum redundancy payment of three months' base salary. It was envisaged that the above terms would apply in respect of redundancies made by the bank over the next five years subject to an annual review. In the event that compulsory redundancies became necessary, it was proposed that the terms would apply to them.

It is the House that decided that the special liquidator should be put in place. People employed at IBRC tried to work out the assets for the State and did an honest day's work. I note the special liquidator can take guidance from the Minister for Finance to determine whether or not a special package can be put in place to fulfil the terms and agreements that were subject to the HR department of IBRC.

There is information on the Internet relating to IBRC that says that they are entitled to the full voluntary redundancy package as agreed. It states that in the event that compulsory redundancies become necessary in the future, it is anticipated that the terms set out above will apply to any such redundancies. It states that any such proposed redundancies would be subject to a separate consultation process with employee representatives. That needs to take place immediately in recognition of what has gone on. I will give these documents to the Minister of State, the Minister for Finance and the Tánaiste to make sure the employees are given what they are entitled to.

Minister of State at the Department of Jobs, Enterprise and Innovation (Deputy John Perry)

I am taking this issue on behalf of the Minister for Finance. I thank Deputy Spring for raising this very important issue. I welcome this opportunity to address the Dáil on the subject of IBRC staff redundancies as the welfare of all employees is of utmost concern to this Government. Liquidation by its legal nature creates an immediate termination of all employment contracts with the resultant impact on the employees involved. The special liquidation order made under the Irish Bank Resolution Corporation Act 2013 is no different from other liquidations and for employees in IBRC, their employment was terminated with immediate effect following the passing of the Act on Thursday, 7 February 2013.

There is no doubt that this will have come as a shock to the employees in the bank. It is unfortunate that it was not possible to give more notice on this matter and I regret the abruptness of how this decision was communicated to the management and staff. However, it was imperative to keep the matter confidential due to the scale, sensitivity and complexity of the economic issues involved.

Nonetheless, unlike in other liquidations, it is very likely that the employees will be re-hired by the special liquidator for the duration of the liquidation on such terms as he may determine. Most employees have been rehired on monthly contracts. Some staff may be offered positions with NAMA or with other purchasers of the assets to continue to manage the loan portfolios. As is common in liquidations, the transfer of undertaking (protection of employment) regulations will not apply to the liquidation of IBRC.

Again, as would be the case in the liquidation of an Irish company with foreign subsidiaries, the liquidation of the Irish company does not automatically place the foreign subsidiaries into liquidation. This is the case for the IBRC and the foreign subsidiaries have not been automatically placed into liquidation as they have a separate legal existence. It is up to the special liquidator to decide whether or not to wind up those subsidiaries or to sell them as a going concern. Employees of IBRC subsidiaries, including foreign subsidiaries, have not had their contracts of employment automatically terminated. They remain employed by those subsidiaries pending the decision of the special liquidator on the future of the subsidiary. However, this is clearly a very difficult time for the employees of IBRC subsidiaries as they await the outcome of the special liquidation process.

Employees will rank as preferential creditors ahead of the floating charge holders and unsecured creditors in respect of certain amounts owing to them on a winding up, including accrued wages and salaries, holiday pay, sick pay, statutory redundancy, pensions contributions and claims for damages arising from accidents.

I will list the instances in which employees rank as preferential creditors. All wages and salaries in respect of services rendered to IBRC during the four-month period prior to the winding up, subject to a maximum claim of €3,174.35 per employee; all accrued holiday remuneration up to the date of the winding up; all sums due in respect of sick leave up to the date of the winding up; all contributions due from IBRC in respect of any superannuation benefits scheme, including a PRSA, and any contributions deducted from employees as at the date of the winding-up; statutory redundancy lump sums, less the amount of any rebate due from the Department of Jobs, Enterprise and Innovation; any compensation awarded by the Employee Appeals Tribunal in respect of pay in lieu of notice and in respect of any claim for unfair dismissal; and any compensation due under the Workmen's Compensation Act in respect of damages and costs in relation to an accident occurring in the course of employment prior to the relevant date, save to the extent insured. In the normal course of events, liquidators do not make payments in respect of preferential claims owing to employees until all assets have been realised, which in the case of IBRC is envisaged to take approximately six months. In those circumstances the employees will be able to make a claim in respect of two things: their statutory redundancy entitlements from the Social Insurance Fund, and arrears of pay, sick pay, holiday pay or pay in lieu of statutory redundancy notice, limited to €600 per week up to a maximum of eight weeks from the insolvency payments scheme. The Minister for Social Protection will rank as a preferential creditor of IBRC in respect of any payment made to employees of IBRC from the social insurance or the insolvency payments scheme. The special liquidators will assist any employee in respect of the processing of claims under the insolvency payments scheme or the Social Insurance Fund. Further information in relation to the Social Insurance Fund and the insolvency payment scheme is available on the Department for Social Protection's website.

In conclusion, I wish to take this opportunity to acknowledge the significant efforts the directors and staff of IBRC have made to the stabilisation and maintenance of value in IBRC. I regret the abruptness of how this decision was communicated to the management and staff. However, as already indicated, it was imperative to keep the matter confidential due to the scale, sensitivity and complexity of the economic issues involved.

Deputy Arthur Spring

With all due respect to the Minister of State, the issue is one of fairness. In the event that compulsory redundancies become necessary, it is proposed that the terms set out will be applied to these redundancies. That is the core issue. Directors and senior management have received redundancies or have been paid off. I intend to make this fight on another day. They have received lucrative payments. However, the people who put their shoulders to the wheel have an expectation that was signed up to by a State organisation, the IBRC.

I refer to legal advice from William Fry which states that IBRC has been placed in liquidation by a ministerial order made under the Act, called a special liquidation order. Unlike other forms of liquidation, no order or shareholders' resolution was required to commence the liquidation. On the making of the order by the Minister for Finance, two joint special liquidators were appointed. The special liquidators have full custody and power over all the assets and undertaking of IBRC and the power to carry on its businesses so far as may be necessary for the liquidation.

The poignant part of the advice states that these powers are to be exercised subject to the right of the Minister for Finance to give instructions to special liquidators as to the manner in which the liquidation is to be conducted. It is within the gift of the Government to do what is right by the employees, to give them what they are entitled to. I welcome the news that many of them will be kept on and that they will eventually be wound down. It is all a question of fairness. There is a legal framework but assets need to be protected. Heaven forbid we put €15 billion of State assets at the risk of industrial action, although this has not been indicated. Businesses and assets are put at risk. We need to tackle this issue.

Deputy John Perry

I do not believe it is fully within our capacity. The special liquidation order was made and is no different from any other liquidation. I repeat what the Minister stated in the House. The employees' employment was terminated with immediate effect. The liquidator is the man in charge and he has complete autonomy with regard to the operation of the company, including its selling out over six months. The workers will have the opportunity of employment by the liquidator, who is issuing short-term contracts, and some may also avail of employment in NAMA. I expect the bank's book and assets will be sold, which will provide employment opportunities for staff. They are in receipt of immediate redundancy payments from the liquidation but they will remain in employment for the moment. I am certain that those seeking jobs in the banking sector will be successful. I would not be pessimistic about their opportunities for finding jobs in the future. The State is meeting its obligations under the Act-----

Deputy Arthur Spring

It was always going to be wound up.

Deputy John Perry

Whatever was the position prior to the date when the Minister took decisive action would not stand up. The Government has no role in how the Act is applied.

(Interruptions).

Traveller Community

Deputy Finian McGrath

I thank the Ceann Comhairle for the opportunity to raise this matter, the burning of a Traveller family's home in County Donegal. This horrific attack was an appalling act in itself but it also highlights the terrible discrimination against Travellers in this country. The deafening silence in this House and from most of the political parties demonstrates once again the hostility that exists towards Travellers. We cannot praise President Obama or open pubs in his honour while at the same time staying silent about blatant racism and discrimination in our own country. Ku Klux Klan activities such as this incident in which a home was burned must be challenged. Staying silent when a house provided to a family is burned down should never be an option.

Local politicians who stoked up this issue must be challenged and dealt with by their political masters. Racism and discrimination should never be tolerated in any democratic or inclusive society. The Donegal Fianna Fáil councillor Seán McEniff stirred it up in the beginning when he said that Travellers should live in their own communities away from settled people. That is a disgraceful statement. I challenge all the leaders of political parties and all public representatives to stand up for the civil rights of Travellers and not to fudge the issue when dealing with their own members who act in a disgraceful manner. Apartheid was wrong in the past and it is still wrong today to treat a minority in such a way. The Fine Gael councillor Eugene Dolan from Ballyshannon, a former mayor of the town, said that Travellers could be sent to Spike Island for all he cared.

We need to face the fact that Travellers are experiencing higher levels of mortality. Life expectancy for Travellers is 11 years lower for women and 15 years lower for men than in the settled community. This has not changed since 1987. This is not the case for the settled community. Travellers also suffer with mental and physical health problems such as diabetes and cardiovascular conditions and have higher rates of suicide. That is the real world for Traveller families. We need to focus on these health inequalities among marginalised groups such as Travellers. I urge the Minister to take action against those who are stirring up this issue.

Deputy Dessie Ellis

Ireland is proud of its place in the world. It is a nation, almost alone in Europe, which since the first formation of its nationhood has owned no slaves, colonised no land, divided no peoples. This is only half of Ireland's story. Ireland has a great shame that it denies. The great stain on this nation's character is the grave mistreatment of a small but significant population of Irish people who are members of the Traveller community. Travellers are regarded by a large proportion of the population as being acceptable targets for hatred, derision, slurs and discrimination. The slurs directed at the Traveller community are commonplace among all sections of Irish society just as the N-word would have been in the white society of Mississippi in the 1960s.

This casual hatred is no different from racism - I accept that it relates to Irish people of a unique and distinctive ethnicity - and it infects our culture. Although passive in most individuals, it gives cover, comfort and inspiration to those who wish to do physical harm.

On Sunday night a number of cowards filled with hatred set out to burn to the ground the home allocated to a family with ten children. They did so having failed to force Donegal County Council to refuse to house the family in question purely because its members are Travellers. I commend Donegal County Council and others, such as that in Kilkenny, which have not bent to pressure in the context of attending to the housing rights of citizens. Those to whom I refer carried out this heinous act in the aftermath of comments made by two councillors in the area. The comments in question can only be branded as being anti-Traveller and racist. Councillor Sean McEniff stated that members of the Traveller community should be sent to Spike Island and that they should be housed in isolation or segregated. Councillor Eugene Dolan backed up the comments made by his colleague. To date, no actions of censure have been taken against these individuals who are supposed to be leaders in their communities and who represent two of the parties in this House. It is shameful that Deputy Martin and the Taoiseach did not take action in respect of the comments made by the councillors in question.

An Ceann Comhairle

The Deputy must conclude. I will return to him when the Minister of State has replied.

Deputy Dessie Ellis

There have been cases of judges making horrible and derogatory comments about members of the Traveller community and using terms such as the K-word to describe them in open court. I use the latter term because using the actual word for which it is substituted is no less heinous than using the N-word.

Deputy John Perry

I thank Deputies Finian McGrath and Ellis for raising this matter to which I am replying on behalf of the Minister for Justice and Equality, Deputy Shatter, who, because of other business commitments, is unable to be present.

The shocking incident in which a house at Parkhill, Ballyshannon was destroyed by fire in the early hours of Monday, 11 February is of great concern to the Minister and, I do not doubt, to every Member of this House. The Minister understands that the house was completely engulfed by flames and that gardaí were obliged to evacuate a number of other houses in the vicinity. Thankfully, it appears that no one was injured. However, this incident clearly had the potential to give rise to a tragic and possibly fatal outcome. The Minister wishes to pay tribute to the Garda and fire service personnel who responded very effectively to this emergency incident. He is well aware of the suggestion that the fire may have been started deliberately and might have been the result of an anti-Traveller attack. Needless to say, the Minister and the Government would condemn acts of this nature without reservation. Anyone motivated by discriminatory and racist attitudes should be aware that all illegal actions will be met with the full force of the law.

The current position is that the incident is under investigation by An Garda Síochána. The Deputies will appreciate that it would be inappropriate to comment in any more detail on the progress of that investigation. We need to allow the Garda the space and time to do its job. In the event that the investigation indicates that the fire was the result of a criminal act, the Minister has every confidence that the matter will be pursued by the Garda in a thorough and fully professional manner. On behalf of the Minister, I appeal to anyone who has any information which might be of assistance to the Garda to come forward.

The commitment of An Garda Síochána to tackling racially-motivated crime is underlined by the work of the Garda racial, intercultural and diversity office, GRIDO, the services of which are available to any person who believes a crime to be motivated by discriminatory or racist attitudes. In such cases, the office will assist victims as well as the investigating gardaí in order to ensure that all incidents will receive appropriate attention. The GRIDO also monitors crimes which have a racist motivation on a continual basis to ensure that all such crimes are properly recorded and investigated.

The Minister is aware of course that issues relating to the accommodation of members of the Traveller community have been brought into the debate on this matter. Travellers in Ireland have, under the Constitution, the same civil and political rights as others. Those rights include access to public services such as local authority accommodation. All the protections afforded to ethnic minorities under EU directives and international conventions apply to members of the Traveller community. This is because the domestic legislation which gives effect to these international instruments - the Equality Acts, the Unfair Dismissals Acts and the Prohibition of Incitement to Hatred Act - explicitly protect members of that community.

Government policy in respect of the accommodation of members of the Traveller community is implemented through the Housing (Traveller Accommodation) Act 1998. Under this Act, all relevant local authorities are obliged to adopt and implement multi-annual Traveller accommodation programmes, with the aim of improving the rate of provision of accommodation for members of the Traveller community. Over many years, significant funding has been made available for the provision of Traveller-specific accommodation. The Minister wishes to assure the Deputies that there is no question of the Government entertaining any suggestions that members of the Traveller community should be regarded as anything less than equal participants in modern Irish society.

Deputy Finian McGrath

The Minister of State indicated that there is no question of the Government entertaining any suggestions that members of the Traveller community should be regarded as anything less than equal participants in modern Irish society. Many of the members of that community to whom I talk and with whom I deal on a daily basis are of the view that this is not the case. They believe that people do not take them seriously when they raise particular issues.

In the context of action being taken, a further three houses belonging to Traveller families have been burned down. Those families were genuinely on the housing list. Nobody has yet been charged in respect of the commission of these three horrendous crimes. I ask the Minister of State to ensure that action will be taken to protect these citizens and to uphold their rights. Will his party be taking action in respect of the comments made by some of its local councillors who have been involved in stirring up emotions in respect of this issue? The actions of those individuals have led to some of these attacks taking place. There is no point in Fine Gael washing its hands of this issue. People are stirring up emotions and then other misguided individuals become involved and commit acts of violence. That is completely unacceptable.

Deputy Dessie Ellis

The incident such as that which happened in Donegal should be viewed in the same light as racism. I am aware of another incident in my constituency involving people who were walking home to a refugee centre. On four different occasions cars drove by them and objects were thrown. This type of incident can lead to something much worse. Is there any way we can strengthen our anti-hate laws in order that we might address this matter? Time should be made available for a full debate on issues relating to the Traveller community in the Dáil. Traveller Pride Week takes place each year. We should invite members of the community to come to the Dáil for a day and we should see to it that a debate on Traveller issues will also take place in the Seanad.

There are a number of examples relating to how badly members of the Traveller community are treated. Dublin City Council's budget for the maintenance of Traveller accommodation was cut from over €1 million to €50,000. In God's name, how could the council be expected to carry out maintenance on Traveller accommodation across the entire city for that amount? There is sheer discrimination against Travellers. The leaders of Fine Gael and Fianna Fáil should take action against the councillors who made particular remarks. What was said was unacceptable.

An Ceann Comhairle

The Deputy must conclude. Other Members are waiting to raise matters.

Deputy Dessie Ellis

I have heard Deputies in the House use the same anti-Traveller tone as that employed by the councillors in question.

An Ceann Comhairle

The Deputy is over time. I am afraid that I must cut him off.

Deputy John Perry

I again thank the Deputies for raising this matter and for the views they expressed. I will certainly pass on the points they made to the Minister, Deputy Shatter.

I reiterate that the Garda authorities will pursue any evidence which points to the commission of a criminal act. We are all aware that the incident which occurred in Ballyshannon could have resulted in great loss of life. If anyone has information which indicates that the fire was started deliberately, there is a clear obligation on him or her to provide it directly to the Garda.

In the context of existing legal protections for members of the Traveller community, it is important to repeat that the key anti-discrimination measures, namely, the Incitement to Hatred Act 1989, the Unfair Dismissals Act 1997, the Employment Equality Acts and the Equal Status Acts, specifically identify Travellers, by name, as a protected group. That is the law of the land. All of the protections listed in the EU's racial equality directive apply across the nine grounds on which discrimination is considered unlawful. The latter are contained in our domestic legislation and apply in respect of members of the Traveller community.

The Minister wishes to reaffirm that discriminatory and racist attitudes have no place in a modern civilised society. We cannot make matters any clearer than that. The law of the land applies equally to everyone.

The Minister is assured that the gardaí will pursue all illegal acts with vigour and professionalism.

Pyrite Panel Report Recommendations

Deputy Alan Farrell

I thank the Minister of State for taking this issue. I am fully aware of the work the Department and relevant bodies are undertaking to implement the recommendations of the report of the pyrite panel. I acknowledge it is a long and complex process to oversee the implementation of these recommendations, particularly as priority has been given to remediation rather than any other issue. I find it necessary, however, to highlight a particular recommendation in section 22 of the report with regard to home insurance issues that may require a new and more robust approach by Departments.

The report highlighted the discrimination on the part of insurance companies not only against home owners who had pyrite in their homes but also against home owners who have had their homes remediated and the pyrite removed, and I include myself in that category. This is a very personal issue for me as I am one of the 12,500 home owners affected by this issue. The report stated that the panel had been made aware that home owners are facing huge difficulties regarding insurance cover for houses affected by pyrite and some are being refused cover even in cases where remediation work has been undertaken and all pyritic material has been removed. It also states that this is not considered acceptable and should be adequately dealt with by the relevant parties.

The recommendations in section 22 of the pyrite panel's report include that the Central Bank and the National Consumer Agency should consult Government to address issues with regard to having minimum cover home insurance policies. The second point was that the insurance industry should remove additional restrictions on dwellings that have been certified as having been cleared of pyrite in accordance with today's certification process by way of the Building Control Act. The third point in that section was that the insurance industry should not withhold standard household insurance cover to dwellings specifically affected.

According to the National Consumer Agency, this issue has been raised by it with the Central Bank and support has been offered if it is to pursue this policy. However, the Central Bank has stated it is not within its control or remit to force insurers to take on particular risks. That leaves home owners in a quandary. The Irish Insurance Federation, a representative body for some Irish insurance companies, has stated that the report has been noted, that it understands a certification process is ongoing, that it is happy to engage with Government and relevant bodies in this process, and that it is awaiting the outcome of this process. In other words, it is sitting on its hands until it is forced to do something and, in the interim, home owners must wait. The implications of this are that until such time as the insurance companies do something, home owners are actively discriminated against even though the terms and conditions in almost all insurance policies protect the insurance companies against pyrite related claims. The standard terms and conditions of any household insurance policy, which I came across today, state: "We will not cover loss or damage arising from faulty workmanship, faulty design, faulty or inadequate drains or drainage systems, inadequate foundations or using faulty materials."

With regard to the recommendations in the report it is becoming increasingly obvious that regardless of the preconditions included in some insurance policies to protect the insurer, a resolution on this issue is not likely to be reached without Government intervention. For that reason and on behalf of the 12,500 home owners across this State affected by this issue who have had or are in the process of having their homes remediated, I request the Government to address the question of how we can help vindicate these citizens' rights and protect these property owners. It is our duty and responsibility to do something quickly.

Minister of State at the Department of the Environment, Community and Local Government (Deputy Fergus O'Dowd)

I thank the Deputy for raising this very important issue. I want to make it clear at the outset that the Minister for the Environment, Community and Local Government has no regulatory or oversight role in this specific area. The Financial Services Ombudsman is the statutory authority with responsibility for dealing with these complaints, and I would encourage home owners with a complaint about refusal of household insurance cover to contact that office.

Home owners who have had their homes remediated have been through a difficult and stressful process. However, following completion of remediation works and certification that their homes have been fully remediated in accordance with best practice, it now appears that they are being presented with a further obstacle. While I do not know the extent of the problem it is unacceptable, even if it is only happening to a small number of people, and is a cause of concern. I do not understand the basis on which an insurance company would refuse home insurance for dwellings which have had pyrite remediation works undertaken involving the removal of the pyritic material and the works having been certified as being removed.

The pyrite panel stated in its report that it had been made aware that some home owners faced difficulties in obtaining insurance and in some cases were being refused cover, even in cases where the dwelling had been remediated and all the pyritic material removed. The panel considers this practice to be unacceptable and both the Minister, Deputy Hogan, and I agree with that view. One of the recommendations in the pyrite panel report which deals with home insurance issues recommends that the insurance industry should remove any additional restrictions on dwellings that have been certified as having the pyritic material removed and that standard household insurance cover should not be withheld for dwellings specifically affected by pyrite.

In correspondence with the Irish Insurance Federation, IIF, in October 2012, the Minister, Deputy Hogan, indicated that he would be seeking its engagement in advancing the recommendations in the pyrite panel report dealing with general and home insurance issues. He also raised with it the issue of refusal of insurance to home owners who lived in estates where pyrite might be a problem but whose own dwelling may not be affected. In its response the federation indicated its willingness to engage with the Minister. The Department of the Environment, Community and Local Government will be pursuing this matter shortly with the IIF and the appropriate regulatory body.

Deputy Alan Farrell

I thank the Minister of State for the response; it is appreciated. As he stated, the insurance industry representatives will make themselves available to discuss this matter with the Department. However, home owners such as those who contacted me in recent weeks are unable to shop around for insurance, as most consumers do when their renewal comes up. A lady who contacted me yesterday evening was in a position to save over €500 on her home insurance policy but was unable to move to that insurance company because when she rightfully divulged that her property had pyrite in the past but had been repaired, the insurance company said it was sorry but it does not insure properties which have or have had pyrite. That is unacceptable because in most if not all home insurance policy clauses there is a specific clause which relates to the usage of faulty materials, faulty workmanship, a faulty design, etc. In other words, the insurance companies are already protected and therefore they are actively discriminating, and it is interesting that the previous Topical Issues matter was on the subject of discrimination. This is another form of discrimination by a body corporate against home owners, private individuals who are unable to shop around and get a proper insurance quote. In some instances they are unable to get any insurance. It must be remembered that there is no obligation to have home insurance, but it is important that people have it.

Notwithstanding that the terms and conditions already exclude pyrite related issues in properties, I presume the insurance companies are worried about the administrative cost of turning down pyrite related claims. There are 12,500 homes allegedly affected by this-----

An Ceann Comhairle

Deputy, we are over time.

Deputy Alan Farrell

I ask the Minister of State, in the strongest possible terms, to ensure that everything possible is done on this matter as quickly as possible because the individuals to whom I refer have gone through an horrific process, as the Minister of State rightly pointed out. This is a continuation of that and it is unfair.

Electricity Generation

Deputy Barry Cowen

I thank the Ceann Comhairle's office for allowing me raise this issue. Lumcloon Energy Limited was granted planning permission three years ago for a new power station at Lumcloon, Ferbane, County Offaly. Three years later no energy has been generated.

This is because the Department of Communications, Energy and Natural Resources has yet to decide on the terms on which the plant can sell electricity to the national grid. This is delaying construction and the creation of 500 potential jobs. Permission was granted for a 350 MW station almost three years ago by An Bord Pleanála and there is already a connection to the national grid. The Department is forcing up electricity costs by as much as 15% for businesses and home owners alike by refusing to give the go-ahead for new power plants such as that in Lumcloon.

Page 4 of the single electricity market committee's December 2012 document on the future of the single energy market, DS3 System Services Third Consultation, calculates the savings that can be made by new system services, namely, €295 million per annum in addition to the existing €60 million for harmonised ancillary services by 2020. It adds that the benefit is derived from a reduction in total SEM production costs and dispatch balancing costs as a result of facilitating high levels of wind on the system. Lumcloon, it states, is essential to achieving this target. As the overall energy expenditure is somewhere above €2 billion annually, this €295 million saving should benefit the consumer by up to 15%. Even allowing for expenditure to incentivise new plants such as that of Lumcloon, half of the saving would wipe out the residential electricity price increase of 5.9% instigated by Electricity Ireland on 1 October last year. The increase is resulting in many families having their power cut off or relying on the Society of St. Vincent de Paul for support.

Lumcloon will be built without Exchequer or taxpayer investment. I want the Minister to explain why the Department is continuing to hold back on the project when it can act as an essential backup to the proposed wind farms in the region.

Deputy Fergus O'Dowd

I thank the Deputy for raising this matter. I am responding on behalf of the Minister, Deputy Rabbitte.

The Minister has no actual statutory function in this matter. Responsibility for the regulation of the electricity generation market is a matter for the Commission for Energy Regulation, CER, which is an independent statutory regulator. In regard to giving the go-ahead, the Deputy may not be aware that such authorisations on licences are wholly regulatory matters and the Minister has no role of approval.

A generator connecting to the network must hold an authorisation to construct or reconstruct a generating station and a generator licence. The CER is responsible for assessing and for granting or refusing to grant these permits. The conditions imposed in the authorisation and in the licence must be met by the generator and compliance is monitored by the CER.

The CER was assigned responsibility over the regulation of the electricity sector following the enactment of the Electricity Regulation Act 1999 and subsequent legislation. The CER's responsibilities include the liberalisation of the electricity generation and retail market in order to encourage the entry of competition and new investment. Market rules were established for both a wholesale electricity market and a retail electricity market, while licensing processes and procedures have been introduced for all market participants. The electricity sector has continued to develop under the regulatory guidance of the CER.

The single electricity market, SEM, is the wholesale electricity market for the island of Ireland, regulated jointly by the CER and its counterpart in the North, the Utility Regulator. By combining what were two separate jurisdictional electricity markets, the SEM became one of the first of its kind in Europe when it went live on 1 November 2007. The SEM is designed to provide for the least costly source of electricity generation to meet customer demand at any one time across the island, while also maximising long-term sustainability and reliability.

The decision-making body which governs the market is the SEM committee, consisting of the CER, the Utility Regulator and an independent member, who also has a deputy, with each entity having one vote. The detailed rules of the SEM are set out in the trading and settlement code.

If the Deputy is concerned over the ancillary services payments and their role in the economics of new generation plant, he should note the details of capacity and ancillary services mechanisms are a matter for the SEM committee acting in consultation with EirGrid-SONI, the transmission system operators, TSOs. Again, I have no function in this matter.

The SEM committee and the TSOs on the island are currently engaged in a programme led by the TSOs called DS3 - Delivering a Secure, Sustainable Electricity System - which has the aim of ensuring that the electricity system can continue to be operated in a safe and secure manner with increasingly high levels of wind generated electricity to 2020. The system services workstream is one of a significant number of work areas examining system policies, system tools and system performance. While the Minister has no direct role in respect of DS3, he is encouraged to facilitate progress as it will facilitate increased penetration of electricity generated from renewable sources, thereby enabling Ireland to reach our mandatory renewable target by 2020.

System services are services which the TSOs will need from generators or from demand in order to be able to operate the system securely. In the context of higher levels of wind, they include more flexible and fast-acting plant. The system services workstream is currently at an important stage of consultation with external stakeholders such as Lumcloon Energy and all generators. A consultation on the TSO's views on the financial aspects was open between 19 December 2012 and 13 February 2013. EirGrid has met over 20 stakeholders since the consultation opened.

It would be highly inappropriate for the Minister to interfere with this transparent, independent regulatory process, which is being led by EirGrid-SONI and which is subject to a decision by the SEM committee. The outcome of the process will benefit all citizens. While there is no ministerial function in this process, I encourage all industry players to participate in the open and consultative regime. I impress on them the need to engage directly with the TSOs and the regulatory authorities as these bodies have the statutory responsibility in regard to this matter.

Deputy Barry Cowen

Some facts need to be re-established. Permission for the plant was granted three years ago, as was the licence to generate. Permission to connect to the national grid has been granted. Funding is in place and vetting has occurred. The CER has been 11 months seeking to devise a pricing mechanism. The Minister of State may choose to hide behind the CER. I do not doubt that he is entitled to do so but I warn him against placing all his trust in this area. In saying so, I am not casting aspersions. We all know the reference I am making.

Let me pose some questions on which the Minister of State might wish to elaborate. Will subsidies continue to be paid to old power plants, some of which are over 30 years old? Will old plants be phased out? Will they be upgraded? If so, will funds be made available for this purpose rather than having the plants subsidised in the manner in which they have been subsidised to date or the manner in which they might continue to be subsidised? In whose interest is the Department acting? What has happened in this instance might serve as a microcosm indicating how big the issue might grow. It is not in the interest of home owners and businesses who are struggling to pay their electricity bills.

I hope the Department is not jeopardising targets for 2020 by failing to ensure that plants such as that in Lumcloon are completed. Will the Minister of State, on behalf of the Government, respond to my constituents who are crying out for jobs such as the ones that could be provided at the plant, bearing in mind that there has been full planning permission for three years, international investors are ready to come on board and connection offers to the electricity grid have been in place for the past 18 months? Why are the financial contracts necessary to allow construction to begin still being denied?

The regulatory system has been in place for the past ten or 12 years. Prices have not decreased. Wind energy policy is stalling if my example is anything to go by. We need a review to determine whether the system is fit for purpose, whether efficiencies are being delivered and whether there is a pricing structure that benefits the consumer.

Deputy Fergus O'Dowd

The Minister has absolutely no function in regard to the CER. It is proper that it is totally independent of the Government. That is how it should be. Regulators must operate in an open and transparent manner. The Deputy has raised important questions and I will ask the Department to respond to him thereon. The key office he should contact in regard to the points he made is that of the regulator.