Joint Committee on Communications, Climate Action and Environment díospóireacht -
Tuesday, 27 Mar 2018

Commission for Regulation of Utilities: Discussion

Chairman

No. 3 is consideration of the OECD report, Driving Performance at Ireland's Commission for Regulation of Utilities.

By virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the committee. If, however, they are directed by the Chairman to cease giving evidence on a particular matter and continue to so do, they are entitled thereafter only to qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person or an entity by name or in such a way as to make him, her or it identifiable. Any submission or opening statement made to the committee will be published on the committee website after this meeting. Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official, either by name or in such a way as to make him or her identifiable. I remind members to turn off their mobile phones because they interfere with the sound system.

I welcome our witnesses. I propose that the main witnesses will speak for no more than five minutes each. If they wish to share time, they should indicate that to me at the outset. The presentations will be followed by a question-and-answer session. Dr. McGowan will start. He is the chairperson and commissioner of the Commission for Regulation of Utilities. He has five minutes.

Dr. Paul McGowan

I will get through my opening statement as quickly as possible. I am joined by my fellow commissioners, Ms Aoife MacEvilly and Mr. Garrett Blaney, and Mr. John Melvin, our director of energy and legal.

The OECD recently published its report Driving Performance at Ireland’s Commission for Regulation of Utilities, CRU. The report makes recommendations on a structured engagement between the CRU and the Oireachtas, to which we are accountable via the relevant joint committees. At the outset, we acknowledge the contribution of the committee to the peer review process and its constructive engagement throughout the process. It was very much appreciated. The peer review was carried out in 2017 and included consultation with the CRU and key stakeholders, including the committee. The review is not a review of our policy or action per se; it is a review of the organisation’s governance. This includes a review of organisational structures, business processes, reporting and performance management and accountability. The aim is to provide the CRU with a package of recommendations which, if implemented, will prepare us for an increasingly complex and challenging regulatory environment we face in the future.

Overall, the peer review finds that the CRU is a mature and well-performing regulator. I acknowledge the professionalism and commitment of the staff who have helped the CRU deliver on its mandate. Nevertheless, the review has identified a number of areas where the CRU’s overall governance can be improved. The focus for today, at the committee’s request, is to concentrate on the recommendations that address the relationship between the CRU and the Oireachtas, to which we are accountable.

Key relevant analysis and recommendations include that we established structured mechanisms for the presentation of the CRU annual reports to Oireachtas standing committees. These meetings would also facilitate discussion of long-term trends and challenges for the sectors overseen by the CRU. The report also recommends the development of a simple dashboard of high-level performance indicators that can be used to regularly update the committee, among others, on sector and regulator performance. There is a recommendation that the CRU build more transparency into some of the information sharing with the legislature and others. The committee also highlighted the OECD’s assessment concerning staff recruitment and retention challenges that the CRU faces, including a lack of flexibility to hire temporary staff to work on emerging issues.

While the review has only been published, the CRU has already made progress on some of the areas of recommendation. Over the course of 2016-2017, the CRU has established a new human resources, HR, strategy. Under that HR strategy, a comprehensive workforce plan will be carried out in 2018 to address the adequacy and skills mix required to meet the CRU’s wide and expanded regulatory remit. We would expect the outcome of this work to include a submission on additional resource requirements to our parent Departments. In 2018, the CRU will deliver a new strategic plan for the period 2019 to 2021. This project is under way. The plan and the process for the plan will draw on the outputs from the OECD report itself. A key element of it will be engagement with external stakeholders. I expect to extend an invitation to the committee or its representatives in the near future. In line with the OECD’s recommendation, the CRU has established an advisory group of three independent experts with skills relevant to our broad remit. The group will act as a sounding board. That is in line with one of the OECD recommendations.

I will now turn to some initial thoughts concerning the CRU’s accountability framework and in particular initial ideas for a structured and effective engagement with the Oireachtas joint committees. For the purpose of today’s discussion, I will concentrate on our energy safety and energy market functions and not water. We have a number of key reporting milestones throughout a typical year. These reports would, in our view, form a strong basis for engagement with the Oireachtas committee to discuss future plans, sectoral and regulatory performance and emerging trends or future challenges. The key reports are the CRU’s annual report, which includes the audited financial statements for the CRU along with a report on the activities undertaken by us during that period; and the CRU’s annual work plan, which is a statement of our proposed work plan for the calendar year. It identifies ongoing and new regulatory actions and projects that are designed to deliver on our strategic plan. The annual work plan is part of our integrated business planning process which pulls together consideration of our financial and other resource requirements. Another key report is the CRU’s annual safety report, which is an annual report on the safety performance of the sectors we regulate. They include the upstream oil and gas sector, downstream gas, natural and liquefied petroleum gas, LPG, and the electrical contracting and gas installation sectors. Our annual customer survey is another key report. It is an annual survey across gas and electricity retail markets to identify consumer sentiment and trends in both domestic and non-domestic sectors. This survey acts a key input into retail market policy.

We have market reports, both wholesale and retail, annual and quarterly reports which analyse key statistics in the wholesale electricity, electricity and gas retail markets. They include analysis of retail market share, customer switching rates and the customer care team annual report. This report captures the work of the CRU's customer care team. It includes an analysis of key statistics, trends and case studies on our statutory complaint resolution function in the electricity and gas retail markets, as well as the water sector. This report includes an analysis of complaint volumes, including by supplier. These reports, or a subset of them, could provide a structured basis for engagement with the committee at various points of the year. They provide a mix of look forward, look back and emerging trend information. I emphasise that these only represent initial thoughts and we would be happy to use the time today to discuss this proposal and address any queries the committee may have, more generally, concerning the OECD report.

Chairman

Thank you very much. The peer review by the OECD was a good process for all of us and I welcome the CRU's engagement in it. I also very much welcome the invitation to engage with it on the strategic plan.

I have a few questions on the 2016 annual report. Does the witness have a date as to when that will be laid before the Houses? It was due to be presented in June 2017. I refer to the CRU's work programme, which it would present to the Minister for Communications, Climate Action and Environment, Deputy Denis Naughten. We would like that to be forwarded to the committee as well, following the presentation of the work programme to us. That would certainly help the committee in its oversight responsibilities. Is there an oversight agreement in place between the CRU and the Department? This was another issue that was highlighted for us in terms of conducting our business as a committee. The witness might answer those questions. Does Deputy Dooley want to come in or would he like the witness to answer those questions?

Deputy Timmy Dooley

I am fine.

Dr. Paul McGowan

We have just recently received sign off of our financial statements for 2016 from the Comptroller and Auditor General, so we would expect to submit our 2016 annual report within a very short number of weeks. We will forward that to the committee as soon as it is available.

We would be happy to forward the work programme to the committee. That is not a problem. We have concluded an oversight agreement with the Department, very much along the lines that it has concluded them with other regulators. Again, we would be happy to forward that on to the committee. It is very much a statement of our regulatory functions, recognising the independence of the CRU as an independent sectoral regulator.

Deputy Timmy Dooley

I have more of a general comment rather than an issue for the CRU. I refer to the point on transparency and accountability and the feeling there is a lack of in-depth technical understanding among committee members of the work the CRU does. It is not surprising that we do not have a packed house today because a lot of this is technical. It does not engage people in the way that it might. Similar situations arise with the finance committee, which is why the House is in the long process of developing a budget office that would assist Parliament in acting out its functions rather than just being subject to information provided by the Department of Finance and that Parliament would act with a little more strength. There is an argument for the same to apply in our engagement with regulators. There is a burden on us which maybe the committee does not take all that seriously, but the Minister for Finance, Deputy Paschal Donohoe, now regularly defers to the committee, saying it is nothing to do with him and that the CRU is directly answerable to the committee, so the committee should address the issue there. It is grand for the Minister to say that, but he has a function and he has a lot of technical backup, advisers and depth and strength behind him. If the committee is supposed to be holding the CRU to account in some way, or the CRU is answerable, in a general way, to the committee, and we are depending on our own capacity to research or to understand, as members of the committee, we do not have capacity in that regard. It is not for the CRU per se to resolve that matter. It is for the committee members. I will certainly be proposing that a recommendation be made to the Chair of the committee Chairs to see how the committee might be better resourced in meeting its obligations.

While the OECD is not critical of the parliamentarians, it highlights the lacuna that exists. The CRU can resolve all its problems, but if the committee does not engage with it, or we do not feel qualified or empowered, then there is a problem. Although not while there is such a quality regulator, in the way the CRU does its business, the committee has a responsibility to ensure that we are covered on our side. In the same way if the CRU did not have the technical capability, it would get it, and rightly so. However, we do not and that is a result of how weak Parliament generally is, versus parliaments in other jurisdictions around the world, where they are heavily resourced and have more powers. Parliament here is very weak. We thought new politics would begin a process, but it has not happened. There is a backlog of Bills. We have the capacity to bring forward Bills, but if the Government does not give the money message, it does not go anywhere. In my view, the committee is being prevented from carrying out its side of the responsibility in terms of the work that the CRU does. We will make a proposal on that through the Chair, that the committee needs to address that.

Dr. Paul McGowan

I will not respond directly to what Deputy Dooley has said, but in terms of our role in regard to this, the CRU issues a number of key publications throughout the year, which capture the key issues, trends and challenges that we face as a regulator. They are the sort of documents that could be issued to the committee in advance to allow time to absorb the key messages, or key issues. Then, we can have a more fruitful, structured engagement with the committee and be held to account for our actions, either what we have done or what we propose to do. We would welcome that as a regulatory authority.

The CRU is very conscious that we talk a different language. We acknowledge that. We are all prone to fall into jargon. We are looking at developing our communications strategy this year. One of the things at which we are looking very closely is using non-technical language to try to ensure people know who we are and what we do. That is also to assist the political process. We look to our communications, the way we communicate and the nature of the language we use in our reports to try to ensure that what we say is as accessible as possible to allow for fruitful engagement. That is all I want to say. One of my colleagues might want to add something.

Ms Aoife MacEvilly

To add to that, if one delves into some of the CRU's detailed decisions, it is correct that they are very technical. What may be more interesting for the committee are outcomes. I was struck by Deputy Smith's very simple question early on as to whether competition is really delivering for customers. I refer to the idea of the dashboard, which would point to the outcomes that the CRU's decisions are delivering to customers. If we can get that right, we can have a good dialogue around the outcomes, which everyone can understand, because it is something the members' constituents will face as well. There are ways the CRU can help to make this work better too.

Mr. Garrett Blaney

The sectors that we regulate have a fundamental impact on the economy. They affect every consumer in the country. Security supply is a critical dimension. The CRU is quite technical and I agree with Dr. McGowan that we have work to do to try to explain ourselves better. Unfortunately, when something goes wrong, everyone knows about it, but we see it as very important to ensure that one is fully informed before things go wrong. That accountability is very much welcome.

Deputy Timmy Dooley

That is why I referred to the budget office here earlier. It allows Parliament to hold Government to account on that. We do not have to go back to where we were with the Central Bank of Ireland and the financial services regulator which all operated to a very high standard, but when it hit the fan, it hit the fan, and nobody was prepared for it. Quite frankly, nobody ever cared about what went on at a finance committee for years. It was only about the budget at the end of the day. To an extent, it is the same in this case in that there will not be an issue until the lights do not come on some morning, or they go out some morning. Then we will all be responsible. We all had degrees of access to the information, but we were not suitably qualified to raise the appropriate issues and ask the questions. That is why I asked some of the questions earlier about why we have these gaps in certain areas. I thank the witnesses for their ongoing engagement. The issue is certainly not on the witnesses' side of the fence.

Chairman

I refer to Ms MacEvilly's comment on the dashboard for the public and the consumer. If one were to ask anyone on the street today what do CRU or the Commission for Energy Regulation, CER, do, the vast majority will not know.

What is being done is in the interest of consumers but we all need to improve our own communication and the language used. We must let people know exactly what is happening here in the committee system. I take this opportunity to thank all the witnesses for coming in for both sessions. We will publish all the opening statements on our web page. Is that agreed? Agreed. Is it agreed to postpone the private session? Agreed.

The joint committee adjourned at 5.40 p.m. until 3 p.m. on Tuesday, 17 April 2018.