Electricity Regulation Bill, 1998: Committee and Remaining Stages.

Section 1 agreed to.

I move amendment No. 1:

In page 6, line 4, to delete "gross" and substitute "net".

I welcome the Minister to the House. We had a useful debate on this issue yesterday. I have been in contact with the ESB, Bord Gáis and other interested parties and they suggested that this amendment may make a difference to certain people operating in the business.

The definition of "combined heat and power" refers to the utilisable heat and electricity having to be greater than 70 per cent based on the gross calorific value of the fuel used. The reference to "gross" is the basis upon which most fuels are sold, whereas the power industry and the manufacturers almost universally represent the performance of their plant by reference to the net calorific value as this equates to the useful heat in the fuel. The ratio of net calorific value to gross calorific value changes for different fuels, but for natural gas 70 per cent of the gross calorific value equals approximately 78 per cent of the net calorific value.

The use of this test of 70 per cent is quite a high standard of efficiency by world standards and would result in a significant number of potential combined heat and power schemes in Ireland not qualifying under this test. A more typical and acceptable level would be 70 per cent of the net calorific value.

By way of contrast, none of the proposed new generating projects for Ireland, using state of art technology, will even achieve efficiency of 60 per cent of the net calorific value. The use of a threshold of 70 per cent for CHP represents a considerable improvement in fuel utilisation efficiency.

The effect of the use of the word "gross" as opposed to "net" as a measure is to set a higher hurdle that would lead to potential bona fide CHP plants not qualifying or may close out a significant proportion of the potential CHP market in Ireland to independent suppliers. I am concerned that medium and small scale CHP plants, using technologies and designs as efficient as the successful Guinness plant in Dublin, will not qualify under the existing definition in the Bill or, at best, they may be on the borderline. That is the case that has been made to me and I await the Minister's reply.

I thank Senator O'Dowd for welcoming me to the House. He has put a good case for this amendment. The amendment was part of an amendment Deputy Yates, the spokesperson for the Senator's party on this subject in the Dáil, tabled on Report Stage of this Bill in the Dáil on Tuesday. There were two parts to his amendment. I accepted the first part but I was not able to accept the second part of it, which is in line with amendment moved by the Senator.

I admire the work the Senator has put into this matter. Representations have been made to me and others about it. It is right that such representations should be made, but the way they are made on occasions can put the frighteners on us, so to speak, as was the case when were dealing with Committee Stage in the Dáil. I have considered the amendment carefully. We dealt with the matter two days ago. We accepted half of Deputy Yates's amendment, but I did not accept the second part of it, which proposed the net measure. I would like to accept the Senator's amendment because he has done his homework on this matter, and I have accepted some amendments to this Bill.

While this point was not ruled in or out officially, we dealt with CHP for a long period on Committee Stage in the Dáil. CHP dominated the debate but we put it to bed in a satisfactory fashion, although perhaps not to the satisfaction of all Members. I moved forward from my posi tion considerably, as did the Opposition, and we felt we dealt with the issue satisfactorily inasmuch as one can when one is trying to embrace many views. I am reluctant to open this Pandora's box again and I think it would be unwise to do so. I admire the way Members have got their teeth into this matter in a very short time, but I am not able to accept this amendment.

I thank the Minister for her reply and I appreciate what she said. The Minister may correct me if I am wrong, but, as I understand it, the definition of "combined heat and power" has only been included as recently as last Tuesday in the Bill ordered by the select committee to be printed.

That is correct. It is new.

This may be no more than a technical matter but in the view of Bord Gáis it could make a significant difference to the viability of some of its CHP plants. I know the Minister does not want to go through the legislative process again, but is there any other way around this issue?

I think there will be another amendment on this matter that I will consider. It is not the case that I do not want accept an amendment because the Bill will have to go back to the Dáil. What is the Seanad for if not to make amendments to legislation? I do not hold with the view that we should have a cut-off point here. Over the years I have accepted many amendments to legislation from the Seanad, although it annoys the party Whips because the legislation must go back to the Dáil – there may not be much time available to do that tomorrow.

When this matter was raised on Report Stage in the Dáil on Tuesday, we broke Deputy Yates's amendment on this matter into two parts. I accepted the first part and Deputy Yates and I debated the second part. The Senator's amendment is different but the intent is the same. The Senator talked about the viability of CHP plants. A large part of the Report Stage debate in the Dáil dealt with the role CHP has to play.

The first draft of the Bill contained no provision for CHPs. We advanced from that position to one where, if we had taken a wrong turn, which did not happen, there would have been a 100 per cent market opening through CHPs. We then reached consensus on Committee Stage. Bord Gáis wrote a letter to our press secretary, presumably the same as that received by Senator O'Dowd, which I saw and which made a great deal of sense. I opened the CHP at the Guinness plant and what it can do is dramatic. Not accepting this amendment will not limit the operations or development of CHP. The amendment proposes a technical reduction by 8 per cent. When this Bill is enacted and is under the aegis of the regulator, it will allow a developmental process, which is good. We have reached consensus on CHPs and I do not want to change that.

I appreciate the Minister's comments. Did she say she may put down an amendment at a later Stage?

No. Senator O'Dowd said he understood the constraints of going back to another legislative assembly with amendments made here. I said I did not have a difficulty with that, as I may accept another amendment which seems to make sense as it clarifies matters. Perhaps I did not make that point clearly. That is not the reason I am not accepting the amendment. I am not accepting it because, to a greater or lesser degree, depending one's point of view, we have dealt with CHPs. It would not be in the best spirit of how we formulate legislation to re-open the debate.

Different fuels have different calorific values. This definition sets a high mark for gas.

We looked at that. A higher calorific value output – terms which I thought I would never understand are tripping off my tongue – of 85 per cent was proposed by engineers. This highlights how we feel we have reached a fair consensus, more or less. It would be unwise of me to accept the amendment. This will not hinder the development of CHPs.

Amendment, by leave, withdrawn.
Section 2 agreed to.
Sections 3 to 8, inclusive, agreed to.

I move amendment No. 2:

In page 11, subsection 3(a), line 9, after "Board" to insert "or between applicants for authorisations".

This amendment seeks to clarify the ambiguity relating to an amendment the Minister accepted in the Dáil, which seems to make it more difficult for the ESB to be treated as an applicant for authorisation in the construction of a generating station. We wish to ensure the ESB is not disbarred from the 28 per cent or 33 per cent competition. Given that it had a monopoly, it would be ironic if it could not apply for authorisation to construct a generation station or a licence to transmit electricity on the grid, where liberalisation is taking place. This would seem to be totally contrary to what was intended. Will the Minister ensure that without fear or favour, the ESB will be treated like any other applicant seeking an authorisation for the construction of a generating station?

This is an interesting amendment. In the ebb and flow of the debate on this Bill, which began last February on Second Stage, the central players veered between wanting competition as a general precept, wanting to give as much as possible to incoming competition and wanting to keep everything to the ESB. I also noticed the difference as my colleagues in Opposition listened to the debate, read it and thought about it. However, we must be as fair to the incumbent as we are to the incoming competition. It would be daft to penalise incumbent businesses at the expense of incoming businesses.

We wanted to achieve a balance in providing proper access etc. to incoming independent power producers, including CHPs, while at the same time not discriminating unfairly against the ESB. Last Tuesday I accepted an amendment put down by Deputy Yates, which I considered very carefully. Everyone seemed happy about that. One could continue putting down amendments to this Bill forever. However, the amendment, on reflection, appeared to be a little stark and could, without meaning to, have the effect of discriminating against the incumbent. We pondered this before Senator Costello put down his amendment. Deputy Yates put down the related amendment on Committee Stage when it was not accepted. He then resubmitted it on Report Stage when I accepted it, although it now seems too strict.

Senator Costello's amendment proposes that the Minister and the commission would have to carry out their functions under the Bill in a manner which does not discriminate unfairly between holders of licences, authorisations and the board "or between applicants for authorisations". We consulted the Attorney General who advised that the amendment can be accepted. However, he recommended the insertion of the words "or licences" after the proposed new wording. If we are to do that another amendment will have to be moved before the Bill returns to the Dáil. I hope to accept the amendment, which evens out the process, with the addition of the words "or licences". It should read "or between applicants for authorisations or licences". That would give an even deeper authenticity to the levelling out process.

I agree with the Minister that the inclusion of the words "or licences" would improve the amendment. We are trying to plug a loophole which might prevent the ESB from participating fully in the competitive process we are now creating for 28 per cent of the market, to be increased to 33 per cent.

The amendment is competitive in its own way.

Yes. It would be very ironic if we were to exclude one of the competitors, which is at present in a monopoly position. The amendment increases the competitive nature and ensures the incumbent is as involved in the competition process as all the applicants for new authorisations are. If we are talking about new authorisations for the construction or reconstruction of generating stations, we must also talk about the granting of licences to generate and transmit electricity. The Minister's amendment, on the Attorney General's advice, is in agreement with what we are proposing. I am not sure if it can be taken on the Floor of the House or whether it must be tabled on Report Stage.

It will be done this morning, either way. Amendments were taken on the hoof in the Dáil.

I am pleased to support the Minister's amendment.

An Leas-Chathaoirleach

An amendment can be made to an amendment on the Floor of the House on Committee Stage.

Government amendment No. 1 to amendment No. 2:
After "authorisations" to insert "or licences".
Amendment to amendment agreed to.

Deputy Yates's amendment on this matter was to promote competition. It would be ironic if, in so doing, competition was removed and another player was allowed have a monopoly, which could have been its effect.

Amendment No. 2, as amended, agreed to.
Question proposed: "That section 9, as amended, stand part of the Bill."

I raised on Second Stage the question of the promotion of renewable, sustainable and alternative forms of energy. The Minister has peppered references to that throughout the legislation, which is very desirable. How can we marry the two? Section 9(4) refers to the promotion of competition in the generation of electricity, ensuring that all reasonable demands by final customers for electricity are satisfied, ensuring licence holders are capable of financing and so on. On one hand, there is an emphasis on ensuring a good and cost effective service is supplied to the public but, on the other hand, there is an emphasis on promoting sustainable and alternative forms of energy.

The likelihood is that those seeking licences and authorisations will not go down the road of sustainable and alternative forms of energy to any great degree. They will concentrate almost exclusively on a gas turbine form of energy, which is putting all the eggs in one basket and will make it difficult to promote the Minister's aspirations in the legislation. It is always more difficult and expensive to get alternative forms of energy, which will be smaller by their nature. How will we resolve the contradiction between competition and cheapness on one hand and, on the other, moving into the unknown in relation to biomass, wave energy and so on?

I accepted many amendments to the Bill in the Dáil from Deputies Sargent, Yates and Stagg, many of which related to renewable and sustainable energy sources. The Bill was considerably strengthened in the course of its passage through the Dáil. The Bill allows 100 per cent for sustainable energy sources in the top up and spill arrangement. It was considerably strengthened in regard to renewable sources, mainly due to the amendments tabled by the Opposition spokespersons, many of which I gladly accepted.

The commissioner now has quite strong duties under the legislation. He must have regard to the development of sustainable and renewable energies. We accepted an amendment last Tuesday which was directly related to a Government decision of 1996 and which gives renewable energies a central role. The Bill is greatly strengthened in that regard. How it will work out in practice is another matter. The commissioner has very strong duties to promote renewable energy sources and so. The Senator is asking how we can know if a competitor, such as Viridian, will participate in that interaction. That will be the work of the commissioner because he has duties under the legislation to greatly encourage that process.

We are very far behind in this regard. Denmark gets 14 per cent of its energy from wind and we get only about 2 per cent. We inserted a reference to biofuel in the Bill at Deputy Stagg's request. Deputy Yates tabled an amendment about increasing the percentage of renewable sources. We did as much as we can. It is now up to the commissioner, with the legislation under his arm, to encourage that. We felt that renewable sources needed such a boost here, given that other countries are much more advanced in the usage of such sources and are much more enlightened about sustainability. The commissioner must now undertake his tasks in that regard.

I do not wish to labour the point, but there seems to be something of a contradiction in the Bill, probably due to the Minister's generosity in accepting the amendments.

On one hand, the Bill is promoting liberalisation and competition but, on the other hand, it has a very strong inbuilt social and environmental consideration, which is extremely welcome. There is also an appeal mechanism. Clearly, one or two large conglomerates could service the entire 28 per cent. However, at the same time, a smaller, less efficient and less financially stable operator could seek a licence and authorisation. If the regulator decides in favour of the weaker, smaller operator, the larger operators will say on appeal that they can guarantee a much more inexpensive product. How do we guard against that? There are provisions in the legislation but there could be many appeals if the regulator does accepts small suppliers using renewable energy but which are not as strong in their production.

That is conundrum which the regulator will have to solve but we have given him the powers to work through it as far as possible.

Question put and agreed to.
Sections 10 to 17, inclusive, agreed to.

I move amendment No. 3:

In page 17, lines 12 and 13, to delete subsection (6) and substitute the following new subsection:

"(6) An order under this section shall provide that use may not be made within the State of electricity generated whether within or without the State by nuclear fission.

This relates to the discussion we had on Second Stage. The Minister accepted an amendment from the Opposition on the use of nuclear fission in electricity generation. That stated that no order would be provided to enable the use of nuclear fission. That is done with the best will in the world but how can that be prevented? There are very few European grids which do not use nuclear power as part of the generation process. In Britain, BNFL has a number of plants which provide power from nuclear fission. The electricity is generated further in the North of Ireland. There is an interconnector between there and the South. That means that we face a difficulty in ensuring that nuclear fission is not used as this legislation requires.

My amendment would spell this out in greater detail by saying that an order under this section would provide that use would not be made within the State of electricity generated by nuclear fission either within or without the State, in other words, electricity generated by nuclear fission would be banned from our generating process. That clearly states that all our energy needs will be produced by non-nuclear fuels.

It will be difficult to monitor this. How can it be guaranteed that energy produced by a company from another jurisdiction does not have an element generated by nuclear fission? The position will be strengthened if the Minister accepts this amendment which states categorically that no order will be given for the production of energy generated by nuclear fission.

I wish we could do this but we would be in contempt of the EU if we did. When we debated this issue on Committee Stage I tabled amendment No. 82a and it was accepted. The amendment arose from a commitment I gave earlier on Committee Stage to Deputy Sargent. I said I would introduce an amendment on nuclear fission. We produced an amendment which stated that nuclear fission would be specifically excluded as an energy source for any future generating stations to be authorised under this Bill. The amendment read: "An order under this section shall not provide for the use of nuclear fission for the generation of electricity." It was an Opposition amendment and it was welcome. This is the first time that any Government's clear position on nuclear energy has been enshrined in legislation. It is a step forward.

The current position on interconnection and importation of nuclear generated electricity is that, as of now, no part of Ireland is connected to any electricity system which uses electricity generated by nuclear fission. We all acknowledge the broad consensus on nuclear electricity. If the North of Ireland, to which we are linked by the interconnector, was connected with Scotland – and that is an issue they are debating – it would be impossible to identify which fuel was used to generate the electricity. The Senator and I discussed this briefly yesterday. Electricity does not come with a tag on it which tells the user from where it came. It is not possible to identify electricity generated by nuclear fission.

A prohibition on persons in Ireland who would voluntarily enter contracts with other member states would be against the EU electricity directive, Article 19(5) in particular. We consulted an expert on EU law and were told that it allows for free movement of goods and services within Europe. No Legislature here would have the power to say to the North of Ireland that it cannot connect with Scotland or wherever else. It is not a difficulty at present because the interconnector between Scotland and the North is not in place. The North is nuclear free, as is the South. We have given expression in the Bill that any new generation station in this State will never use nuclear fuels but we cannot change the law for other countries. It is a conundrum.

The legislation prohibits an order to made for the use of nuclear fission for the use of electricity. That would prohibit BNFL from seeking a licence. BNFL, however, would not necessarily do that. Some other body in the North of Ireland could do that, it would then link up to the interconnector with Scotland and we would be linked to that. It could be easily bypassed by a generating conglomerate involved in nuclear fission. There is nothing to prohibit it using the interconnector and providing the energy as if it were coming for Sellafield.

This legislation should monitor that but even if that is done to prevent nuclear power entering our grid, are we breaching the regulations on the free movement on goods and services in the European Union? As this is a nuclear-free zone and it is Government policy that there is no nuclear power—

We have enshrined that amendment in the legislation.

What powers could be given to the regulator to inspect, supervise or monitor or to include in the order a condition specifying the principle and substance of the legislation to ensure we are not affected by nuclear energy which could be transmitted by one or other of the conglomerates which may compete? Perhaps there is scope for the regulator to impose certain restrictions in terms of supervision and prohibitions.

The advice of Attorney General before we got the Community advice was that if it is lawful in another State to do something we do not have the power to override that legal right. In addition, there is also the free movement of goods and service within the European Union. It is against the spirit of Article 19.5 of the directive. The regulator would not have the power to override the laws of Scotland, the UK or France.

There is a moral power in a country taking a stance, as we have done over the years – I think of Carnsore Point in the early 1970s. There was a great new age of nuclear power but people marched and protested against it, and I am glad we allow it. The EU has brought many changes to us and one of those is the free movement of goods and services. The Oireachtas does not have the power, for example, to say to Northern Ireland that it cannot link up with Scotland. There is no legal power, only a moral imperative which is moving away from nuclear power towards other forms of power. We could not include such a power in legislation, which is a pity having gone so far.

We could end up getting nuclear power through the back door despite all the campaigns against Sellafield and Carnsore Point and the fact this county does not import any nuclear based goods or services, which is clear Government policy. Are there opt outs in the Maastricht or Amsterdam Treaties in relation to matters of this nature? If it is Government policy and if something is regarded as detrimental to the interests of a country, can we opt out? Can we bypass competition which we would see as inappropriate to our national interest? There may be opt out clauses of which we might avail.

That may well be as this develops. The directive states that contracts for the supply of electricity under Articles 27 and 88 with an eligible customer in the system of another member state shall not be prohibited if the customer is considered to be eligible. The word "eli gible" refers to the 28 per cent about which we spoke. It is useful that we are having this debate but we do not have the legal right to say to the North of Ireland, for example, that it cannot do business with Scotland. We are already connected to the North of Ireland which is not connected to Scotland as yet. It is proper that we are connected, particularly in the light of the talks taking place today and yesterday, and I praise those who are still working mightily in this regard. Are we to say we want to do business with the North but that it cannot do business with Scotland? This House cannot do that.

As the Minister has accepted an amendment and the legislation will go back to the other House, there may be a brief interlude during which she might explore the matter further.

I have explored it with Community lawyers and officials have explored it with the Attorney General since this amendment was tabled yesterday evening. I would love to be able to say I could stop the North of Ireland doing business with Scotland but I do not have the right to do so.

I do not mean for us to stop doing business with Scotland and Northern Ireland, which is very desirable. This is a historic day with the first sitting of the Scottish Parliament.

I thought about that as I talked. They all wore posh morning suits. I thought it was a little—

Too much? They should wear kilts. The more business we do with Scotland and the other areas of the British Isles, which are now getting degrees of self-government, the better. Could there be a constraint which would protect something which has been jealously guarded by us and which would ensure there would be no nuclear based energy or power in use on this island? Could we include in an order conditions which would ensure the type of energy we use would derive from those sources mentioned, including wind, hydro, biomass, waste, biofuel, geothermal, fuel cells, tidal, solar or wave energy. Nuclear energy is not listed—

That is for our country.

That is for our own generation.

In terms of what will be available in our national grid, could we not provide the same terms? While not interfering with the interconnector, are there ways in which it could be adjusted so that we do not take from the nuclear fission sector?

It goes into a vast pool of power. It is useful that we are having this debate but there is no way to differentiate. The regulator does not have the power to say to Northern Ireland that it cannot do business with Scotland or the UK. That is the bottom line.

Amendment put and declared lost.
Section 18 agreed to.
Sections 19 to 27, inclusive, agreed to.
Question proposed: "That section 28 stand part of the Bill."

Section 28(2) states: "The Minister may prescribe procedures, including procedures relating to access to the transmission or distribution system. . . ". The possibility of laying high voltage cables underground was raised on Second Stage. How will those who receive the contracts relate to the existing system and will there be an alternative system of transmission and distribution? Has the Minister any idea what will happen in relation to new competitors coming into the market? How will they distribute and transmit the energy?

I issued a trading mechanism paper last week which appears to have been received fairly well, and a second paper has now been prepared. These will be formulated during discussions with the regulator.

The question of underground cables was raised yesterday by Members on both sides. It seems to me that towns who wish to enter the tidy towns competition often manage to persuade the powers that be to lay the cables underground. This takes huge effort. These are usually small towns and it seems that the power of the people works in achieving this. I am told that this is extremely expensive. Perhaps it would be easier to achieve in the case of new ventures. However, there would have been no rural electrification scheme if pylons had not been erected.

Discussion papers will be drawn up on trading mechanisms, transmission and grid access and the formation of companies which will be separate from the ESB, although the ESB will own the grid, prior to the publication of the next Bill on foot of the electricity directive. There will be further debate in the autumn on these issues.

Question put and agreed to.
Sections 29 to 54, inclusive, agreed to.
Schedule agreed to.
Title agreed to.
Bill reported with amendment and received for final consideration.
Question proposed: "That the Bill do now pass."

This has been a very useful debate, even though there was an in-depth debate and analysis in the other House. There was a useful expansion and elucidation of concerns expressed in this House. I thank the Minister for the manner in which she steered the Bill through this House and for the open manner in which she approached all the issues and concerns raised. This is no surprise given her history in the processing of legislation. Her approach has always been pragmatic and open rather than one of exclusive ownership and I thank her for that. I also thank Members for their co-operation.

I wish to be associated with the remarks of Senator Fitzgerald. This has been a useful and open debate, one which I and other Members enjoyed. I concur with the views expressed that the Minister was helpful in supplying information on Second Stage. I thank her for her courtesy and for being so informative.

I concur with the remarks of Senators Fitzgerald and O'Dowd. I compliment the Minister and her staff on formulating a good Bill which was teased out fully in the Dáil. I compliment and thank the Minister for her generosity in accepting a number of worthwhile amendments and for the manner in which she handles debates in this House. Her approach is always open, lively and very often robust. We appreciate this and thank her for it.

I thank Members on both sides for the open way they approach legislation. The way in which this Bill was debated in both Houses is a model of how legislation should be approached. It was debated in committee for several hours each day over an eight or nine day period. There was plenty of time for debate and teasing out of the issues. The Bill is now in completely different shape with several insertions. The original Bill was sterile in merely appointing a regulator but the regulator now has many more powers to look at renewables and sustainables. Competition has been evened out properly, rather than everyone veering one way at the expense of the incumbent. This arose as a result of the time allowed for the Opposition and myself to put forward our points of view. This is a lesson in how Bills should be debated. We are putting in place legislation which will affect people, for good or ill, for a long time. Sometimes those who draw up legislation believe that if their Department publishes legislation it must be right. However, everyone has ideas and different points of view and these ideas might be just as valid as mine or my officials' ideas. Amazingly, this is the manner in which this legislation progressed. This is legislation of the people rather than of one Government. It arose from arrangements made by the previous Government in 1996 and early 1997 when it accepted the electricity directive through COREPER and ministerial interventions in Europe. It is not my or the Department's legislation, it is all-party.

I particularly thank Senator Fergus O'Dowd and our spokesperson, Senator Liam Fitzgerald, and Senators Joe Costello, Kathleen O'Meara, Pat Gallagher and Brendan Ryan who tabled amendments. The debate has been very invigorating and interesting.

I thank my two officials present and a third official, Mr. Sean Griffin, who worked on this legislation. Sadly his wife's father died this morning and that is the reason he not here. He has been very involved in the legislation.

Question put and agreed to.