Seanad Éireann díospóireacht -
Thursday, 6 May 2004

Vol. 176 No. 11

Electricity (Supply) (Amendment) Bill 2004: Second Stage.

Question proposed: "That the Bill be now read a Second Time."

Minister for Communications, Marine and Natural Resources (Mr. D. Ahern)

Molaim an Bille don Teach. I commend this Bill to Seanad Éireann.

The purpose of this Bill is to raise the ESB's statutory borrowing limit which will facilitate its major infrastructure investment programme being undertaken. This includes significant investment in renewing and upgrading the electricity network. The statutory borrowing limit currently stands at £1.6 billion which is equivalent to €2.03 billion, which has remained unchanged for the past 22 years. The Bill proposes raising this limit to €6 billion to take account of the current reality of the economy.

Management of the ESB's finances is a matter for the board and management of the company. The board has discharged its fiduciary duty prudently down through the years. Towards the end 2003, the ESB became more acutely aware of the constraint which the existing borrowing limit was putting on the company. It became apparent that for the company to accomplish its significant capital expenditure programme, it would need to rely more extensively on its borrowing capacity and that it could not continue business as usual within the confines of the existing limit.

The ESB's borrowing level is almost at €2 billion which is very close to the existing limit. Although the company has employed tight management of its cash outflows over the last several months, the remaining cash balance is expected to be exhausted by the end of May, assuming no unexpected demands for cash in the intervening period. The urgency in passing this legislation is, therefore, essential for the company to continue to operate effectively. I thank the Seanad for its co-operation in allowing for the possibility of the Bill passing all Stages today. The Government had initially decided to include the new statutory borrowing provision in the proposed Energy (Miscellaneous Provisions) Bill 2004. However, the Attorney General subsequently advised me that a stand-alone Bill dealing solely with the ESB statutory borrowing issue would be more appropriate in view of the time constraint on the enactment of this new legislative provision. The Energy (Miscellaneous Provisions) Bill 2004 will now be published later this year.

I will outline the background to ESB's expenditure programme and overall borrowing requirement. In 1982, when the borrowing limit was last set, the annual capital expenditure for ESB was in the region of £200 million, which is approximately €254 million. This year, the approved annual capital spend will be up to €1.4 billion, nearly six times what it was in 1982. This is an all-time peak level for the company and is reflective of the enormous range of infrastructural development being undertaken at this time. However, capital spending of this magnitude is not envisaged as the norm for the foreseeable future. ESB views this trend as reaching its peak in 2004 and then taking a downward turn over the next five years. By 2008 the company expects its capital spend to be around €650 million, which is about half of the current expenditure levels. This will bring the company back in line with its more normal spending trends.

It is appreciated that tripling the limit from €2.03 billion to €6 billion in one go may seem to be a quantum leap. I will provide some context for the existing and proposed limit figures. A total of €2.03 billion in 1982 terms is now approximately equivalent to €4.31 billion in 2004 terms. This gives some perspective on the proposed new limit of €6 billion. ESB has advised that its borrowings will increase to nearly €4 billion by 2008. Facilities of €1 billion are required for liquidity purposes. It is intended that these facilities will remain undrawn unless absolutely necessary. It is proposed to factor in an additional €1 billion, thus bringing the limit to €6 billion in total. Given the ever-present pressures on Government legislation programmes, it is considered prudent to use Oireachtas time wisely and not to be returning for piecemeal statutory revisions on a frequent basis. It should also be remembered that the current statutory limit had sufficient headroom built into it to cover the company for the past 22 years. The actual requirements and the projected headroom built in to the amount of the proposed new limit of €6 billion should see the company in good stead for the foreseeable future.

The aim of ESB's debt strategy is to ensure there is sufficient liquidity in the company; to ensure flexible terms and conditions consistent with the achievement of the corporate strategy of the company; to minimise the cost of debt while optimising the debt mix; to develop strong relationships with a key group of banks; and to ensure a diversity of funding sources. ESB has many sources of financing, including the European Investment Bank, syndicated facilities and bilaterals, leases, the private placement market and non-recourse financing. Having a range of different sources at its disposal provides the company with greater opportunity to avail of the best terms and keenest rates on offer. Keen funding rates underpin a more cost-effective capital expenditure programme.

The putting in place of the US private placement in December 2003 has given the company a significant financial boost. The $1 billion deal, equivalent to €868 million, is intended to fund major improvements in the power infrastructure in this country. The private placement market was an attractive option for ESB because of the range of maturities and the competitive interest rates available. It provided ESB with another source of long-term financing at keen rates. Two leading banks, ABN Amro and Barclays Capital, jointly arranged the financial deal with the principal participants being insurance companies and some pension funds. The very positive response of the private placement market is a measure of the high standing in which ESB is held internationally and also a vote of confidence in the Irish economy. ESB has not ruled outsourcing further funds in the private placement market in the future. ESB also entered into a separate €500 million revolving credit facility at the end of 2003. The facility, which was co-ordinated by the Royal Bank of Scotland, will be drawn when necessary to ensure liquidity is constantly available and will therefore assist ESB's overall funding programme.

One of the main beneficiaries of the increased revenue stream is ESB's infrastructure investment programme. Investment over the next five years is expected to reach almost €4 billion. This is designed to cater for the strong increase in demand for electricity in the Irish market and will support development of the national economy. In 2003, ESB invested more than €650 million in the development and renewal of the network infrastructure in Ireland. The replacement and upgrading of almost 17,000 km of distribution network was completed and a record 77,000 new customers were connected to the system. For 2004, the company has a target of 20,000 km of network renewal scheduled for completion.

In any consideration of the future of ESB my views are already known. I strongly oppose the privatisation of the transmission and distribution systems, which are critical national assets and should remain in State ownership. I am also opposed to any privatisation which would result in a private monopoly or near-monopoly in the power generation sector. I confirm here what I said to the Oireachtas Joint Committee on Communications, Marine and Natural Resources recently, the privatisation of any part of the company is not on my agenda.

The renewal and investment in ESB's generation portfolio both here and abroad is continuing in line with the company's corporate strategy. During 2003 agreement was reached on the closure of the old peat-fired generating stations at Rhode, Shannonbridge, Lanesboro, Caherciveen and Bellacorick. Their orderly decommissioning will take place as two new state-of-the-art peat stations at Lanesboro and Shannonbridge come into production later this year and early next year respectively.

ESB's international investment programme promotes the good reputation of the company among global energy utilities. Two major international power generation projects are expected to come to fruition shortly. These are the new 400 MW plant which will be commissioned in early 2005 in Coolkeeragh, near Derry, and a new 750 MW plant in Amorebieta, near Bilbao in northern Spain, which is due to be commissioned in late 2005.

A decision on the future of the coal-fired station at Moneypoint must be made over the coming weeks. ESB is considering what commercial decisions it should take as an investment of around €250 million would be required for emissions cleaning technology to ensure compliance with environmental obligations and maintain the plant in operation for the long term. If Moneypoint is not to be upgraded to comply with the new environmental requirements it must close by 2011 and an alternative electricity generating plant, probably gas-fired, would have to be in place by that time. If the company is to justify major new investment in Moneypoint it must be in the context of benchmarked best practice in all respects.

The Bill before the House is short, with only two sections. Section 1 is the main provision and gives effect to the change of limit to €6 billion by amending subsection (4) of section 4 of the Electricity (Supply) (Amendment) Act 1954. This section of the 1954 Act was originally amended when the borrowing limit was raised to its current level of £1.6 billion by the Electricity (Supply) (Amendment) Act 1982. The new subsection (4) repeats exactly the wording of the existing subsection (4) except for the change from the amount in pounds to the new higher amount in euro.

Given the nature of the amendment and the size of the provision, the Office of the Parliamentary Counsel felt it more appropriate to restate the subsection in its entirety with the new higher amount rather than making the amendment by the isolated substitution of the monetary amount. I concur with this approach as it facilitates a clearer understanding of what is being proposed by all who will read this Bill. Transparency and clarity of understanding is a key tenet of the Government's White Paper on better regulation, which was launched by the Taoiseach in January this year and the approach being taken in this Bill is in line with the spirit of easier accessibility of legislative provisions. Section 2 provides for the Short Title, collective citation and construction of the Bill and is a standard drafting provision.

ESB is one of the major State companies and its operations and service affect the entire economy and every citizen. It is a major source of employment and its expenditure budgets are substantial by any standards. This year marks the company's 77th year in business. I commend the board, management and staff for their commitment and professionalism in delivering reliable electricity down through the years. There are many further challenges and opportunities facing ESB in the deregulated energy and electricity markets. ESB is changing and adapting to meet the new demands of the energy sector. I wish the company well as it continues to adjust in the new area of deregulation, and in its endeavours to give the country a high quality electricity supply and infrastructure. I hope the foregoing will give Senators a reasonable summary and outline of the ESB's borrowing requirement in the context of the present infrastructure investment programme. I will be glad to provide any further information to the Senators to facilitate their consideration of the Bill, and I thank them again for their forbearance in bringing the Bill quickly through the House.

Mr. Finucane

We have no difficulty with allowing all Stages of the Bill to be dealt with this morning because it is non-contentious. It simply raises the borrowing capacity of the ESB. Considering the context of modern Ireland and modern times, and having regard to the skill deployed in the ESB, it is understandable that the borrowing requirement should be revised accordingly.

The ESB was established in 1927. It has served the country well, and there is tremendous respect for what it has done over the years. In recent times the word "liberalisation" has crept in. Many people anticipated that with liberalisation, the overall cost of electricity would fall. It is a cause of concern over the past three years that ESB charges have increased by 25%, which is certainly not consistent with the overall inflation rate. That has caused concern to the business consumer as well as to the domestic consumer. The cost of electricity for the domestic customer is less in Ireland than it is on average in Europe, but for the business customer the cost is greater than the European average price. Liberalisation has had limited impact over the past few years. When it comes to generating capacity, there is one other strong player in the market, Viridian. In a submission to the Minister in 2002, the Competition Authority stated:

...because of the manner in which the EU electricity directive has been implemented, we have a regulated, nominally vertically separated, super-dominant undertaking which brings none of the proven benefits of competition (as shown in other countries), but which costs, apart from the efficiency losses associated with separation, additional wasted resources in terms of the increased regulatory burden.

That is quite a strong statement, but in reading the Competition Authority's assessment and the documentation it produced, as well as other documents, I wonder about the ESB's attitude to Eirgrid. The statutory instrument introduced in 2000, which deals with the separation of Eirgrid for the transmission aspect, has not yet been implemented. Questions are being raised more than three years later with regard to that separation and what is happening in that area. The Minister is well aware that after all this time, Eirgrid appears to be stillborn. There appears to be no enthusiasm among ESB staff to transfer to it. One wonders about the ownership of Eirgrid and whether what is happening in the European context is desirable. I know that the Commissioner for Energy Regulation, Mr. Tom Reeves, recently submitted his views on this matter to the Minister. I have a copy of his comments, and he appears to have reservations about whether Eirgrid should be established at this stage. I would like to know what is happening to that statutory instrument introduced in December 2003. The concept was one of evolution, with generation on one side and transmission on another, along with distribution and supply.

One element which I have raised before the Joint Committee on Communications, Marine and Natural Resources, is causing concern to the committee. The Minister is aware that there has been great enthusiasm in this country for the wind energy concept. Farmers in particular viewed it as an alternative form of income. Farmers with land which, was not of value to them looked enthusiastically at the possibility of wind turbines. The Minister promoted that concept in accordance with the Kyoto Protocol as something we would like to see in this country as part of a wind energy programme. The concept was enthusiastically grasped. In seven years, the level of wind energy going into the system is about 211 MW.

Already, by means of AER VI, it is hoped that another 828 MW will come on stream, which will bring the total to over 1,000 MW. There are also applications stacked up within the ESB regarding other wind energy projects totalling nearly 1,000 MW. My concern relates to the moratorium because concerns were expressed by the ESB about the stability of the system as a result of all these wind energy projects coming on stream. The ESB concerns led to a moratorium on further applications. I also understand that the energy regulator expected to have a report ready at the end of April, but I do not know if that has been achieved. The ESB also has an input to the various stipulations and criteria for further wind energy projects because it had concerns regarding turbines and other issues.

There is an element therefore of waiting to see what new projects will emerge. If there is a megawatt capacity between the North and South of Ireland of about 7,000 MW — including 5,500 MW in this country — when does someone decide how many megawatts of energy the system can take if there are already concerns regarding the 211 MW within the system and concerns about stability? It is worth bearing in mind that concerns about stability have been expressed in many European countries, such as Denmark and Italy, which have enthusiastically grasped the wind energy concept.

At some stage, someone must say that the system can take only a certain amount of the wind energy and all the wind energy projects which have been given planning permission, as well as those stacked up in a queuing system within the ESB, will have to be reconsidered. In local authorities around the country, various wind energy projects are going through the planning process and there is an expectation from the people behind them — private companies as well as groups of farmers — that these wind energy projects will be established. I am concerned that with people having gone through all that process there will come a point when someone decides that no more projects can be accepted. What thinking has gone into bringing this jigsaw together to see what is achievable or desirable, where we might stop, and what would be sustainable? The wind energy aspect should be looked at very seriously by the Commission for Energy Regulation, within the ESB and within the Department. We should have a position paper regarding what level of wind energy is attainable, desirable or sustainable. That area concerns me.

The statutory instrument SI 445 was issued on 20 December 2000. At some stage, someone will have to say whether that statutory instrument is sustainable or feasible or whether it will ever be implemented. The Commissioner for Energy Regulation has written to the Minister in that regard, and someone in the Department must decide whether Eirgrid will ever get off the ground as a separate entity,or whether in the current context it is desirable that it should do so.

I recently met ESB personnel involved in the grid and transmission area. I was very surprised about the forced outages and availability across all generators, something about which the Minister should also be concerned.

We talk about electricity outages, breakdowns and faults but I was surprised to learn that from 1997 to 2004 there was a rapid deterioration in that area. There has also been a deterioration in terms of system availability and generation capacity. Concern has to be expressed in both those areas when one considers the major power outage that occurred in New York last year and those in other countries. I wonder if there is concern at this stage about the graphs which highlight difficulties in those areas and the ESB system being able to provide an efficient electrical output for the future in terms of the business plans and domestic consumers. I would be interested to hear the Minister's reaction to that point.

On the point the Minister raised about Moneypoint, it is easy to go back in history but I remember the debate at that time on establishing a coal-burning station at Moneypoint and the famous debate with regard to the proposed nuclear station at Carnsore Point. Nuclear energy was considered out of order and I welcome that because if it were to be considered now, especially with the scale of the disaster at Chernobyl, there would be a furore. However, we have to consider the alternative forms for the production of electricity.

When Moneypoint was going ahead, environmentalists suggested that scrubbers be put into the chimneys but, because of financial constraints on the ESB in building that generating station, they were not put into the chimneys. The European Union has now dictated that the ESB has to make a decision in that direction by 2011. My understanding is that a decision will be made in the next few months and it will have profound implications for Moneypoint. If it proceeds with spending the €250 million to address the environmental problems in Moneypoint and put in place environmental controls, which I hope it will do because it is a successful, established company, will it have the same generating capacity? Naturally, we will see an improvement in the environment as a result.

I grew up in Foynes, in Limerick, although I am now living in Newcastle West, and I was always concerned that nearly 50% of the country's sulphur dioxide emissions were being spewed into one specific area along the estuary. Due to the confluence of the winds it was usually spewed into an area surrounding Foynes. We often hear about acid rain and other environmental concerns but that was always a specific concern of mine. I always believed Moneypoint was a major contributor to that problem and that has been proven now. An improvement in the situation at Moneypoint is long overdue, and money has to be spent in that area. If there are concerns with regard to the generation aspect, the ESB will need a re-adapted Moneypoint because extra generating capacity will have to be created.

On the long-term stability of the electricity market, despite the reservations I expressed about wind energy and the experts' concerns about how that will affect the electricity supply, what is important now is an interconnector between the United Kingdom and here. The Minister will correct me if I am wrong but I understand the possibility of two interconnectors between the UK and Ireland is being considered. If we are concerned about stability in the future and so on, it is important to have that interconnector.

I read in a newspaper during the week, and this may be of concern to the Minster also, that the workers in the ESB have said that if certain concessions are not given with regard to negotiations for a pay increase, there may be a threat to our supply in the next few weeks. I hope sanity will prevail and discussions take place because the last thing we need at this stage is an ESB strike which will inhibit supply. In fairness to the ESB, it has an excellent industrial relations record, with the exception of minor aberrations over the years, and I would like that to continue.

Mr. Kenneally

The purpose of this Bill is to provide, inter alia, for the raising of the statutory borrowing limit of the ESB from £1.6 billion to €6 billion as set out in section 1. It is necessary to amend the legislation where the borrowing limit is stipulated, something which has not been done for 22 years. This revision is necessary so that the ESB can fully, and in accordance with its statutory obligations, implement its capital expenditure programme. I am pleased to note there is no implications in terms of Exchequer costs or its staffing levels. I have no doubt this measure will find general favour, particularly in the light of the service which this organisation has given to the State and its people since it was founded in 1927.

The ESB has to be regarded as one of the success stories of Irish business and also one of the most successful of the many semi-State companies set up to bring us out of the economic stagnation of post-colonial Ireland. It has been involved in generating power since it built the first major power plant at Ardnacrusha, County Clare, in the late 1920s, a venture which was not without its critics and sceptics at the time. Now the company is at the leading edge of power generation with its newest plants, including the latest combined cycle gas turbine power plant at Poolbeg in Dublin. The ESB, and we as a nation, have come a long way in the past 77 years but it is essential that we examine the role of the ESB in a society which has changed dramatically since the board was founded over three quarters of a century ago.

For example, the ESB has stated that Ireland has one of the fastest growing electricity markets in the developed world. It grew by over 40% over the past ten years, far ahead of growth in the rest of Europe. The growth in the economy and the increasing number of new housing units and businesses is also reflected in its returns. In the past year alone, a total of 63,000 new customers were connected to the electricity network.

This Government has been trying to encourage competition in what is both a sizeable and lucrative market, and a vital national resource. We have lived with this service for so long and, in fairness to the board and its employees, have been served so well by them that we sometimes take them for granted and have little interest in finding out just what they are about and the size of the organisation. The ESB has never been a drain on the public finances because, by its very nature, its product has been in demand and it has had a monopoly position for decades. The ESB accepts that the days of that monopoly in the generation of electricity are over and that it has special responsibilities in regard to the distribution of that power. The ESB's policy is clearly outlined on its website. It states:

With the progressive opening to competition of the electricity market in Ireland, it is essential that ESB Networks, which will remain a monopoly business in the new market, provide services in a transparent and equal basis to all electricity customers, irrespective of who their electricity supplier is. This requirement is clearly set out in the legislation that established the new electricity market structures in Ireland, and is incorporated into the licences issued to ESB by the Commission for Energy Regulation.

Like any major corporation, the ESB has had its share of critics over the years and has occasionally attracted bad press. Most of us at some stage have had occasion to grumble about power failures, missing street lights or a perceived absence of proper voltage. On the other side of the coin is the service its employees have given, often under the most extreme conditions. They have bravely worked to repair the damage caused by snow storms, major flooding and storm force winds, more often than not before those extreme conditions have abated, so that as few people as possible would be inconvenienced for the shortest time possible. It is appropriate to recall the individual acts of courage and heroism and acknowledge the contribution the workforce has made, often beyond the normal call of duty. Their safety record is to be envied, and in any broad assessment they must be seen as a company and workforce which have delivered for the State and its people.

Their operations have not of course been confined to the home market. A valuable arm of the ESB's business is in international consultancy, an area which has provided valuable revenue and also enhanced both our national and international reputations and that of the board worldwide. According to its own statistics, ESB International has a presence in over 25 countries worldwide and has carried out projects in over 100 countries. That is about half the entire number of countries around the world. Few, if any, Irish commercial companies can boast such an international presence. The company is currently developing power projects in Bilbao in Spain and Coolkeeragh in Northern Ireland. It employs over 1,400 people, 200 of whom are outside Ireland, and has representative offices in London, Cork, Bilbao, Glasgow, Bahrain, Abu Dhabi, Belgium, Vietnam and Malaysia.

If there is a reservation in anyone's mind about the possibility of interests from outside the country becoming players in the Irish electricity market, we might remember that the ESB itself and, by extension, we as a nation have benefited from its involvement in nearby Britain, where it has operated the country's first independent power plant at Corby since the early 1990s. It had been using that system in the north wall since the early 1980s and it was the first station to use that modern technology in Europe.

In its annual results for 2002, the ESB group reported that turnover was €2.1 billion and profit before interest and tax increased to €250 million, an increase of 26% on the previous year. Capital investment was €864 million, the highest ever recorded by the company and an increase of 58% on the previous year. The ESB and its divisions are engaged in an investment of over €3.5 billion over the next five years, the largest ever by any company in the history of the State.

As I stated earlier, the ESB, in common with every other business in the country, has to take cognisance of the changing face of society and look to accommodate desirable changes and aspirations in Ireland. Among those is a desire on the part of the majority of people for a cleaner environment. One need only look at the enthusiastic way in which the people of Ireland have embraced two very desirable initiatives introduced by the Government in the last few years. First, there was the plastic bag levy designed to take unsightly and widespread litter from our roadsides, fences and hedgerows. It has been successful and implemented willingly by the people, who have been quite happy to forgo the dubious benefits of plastic bags for an enhanced environment. The second initiative was the smoking ban, which is almost universally accepted as a success and the benefits of which I need not labour here. I will limit myself to saying that the stiffest opposition did not come from smokers, who largely welcomed the measure, but from vested interests, meaning that it had a much narrower focus than that of the Minister for Health and Children.

Equally, the ESB is moving away from the less desirable methods of electricity generation and closing down several peat-burning stations. All of the existing peat generation units are due to be replaced by two brand-new peat stations, which are currently under construction and will be located at Shannonbridge and Lanesborough. That move has not been without industrial relations problems, but the plan is being implemented and our environment will be all the cleaner for it. It is interesting to note that the company is the largest green generator and supplier of renewable power, with hydroelectric power stations on the Erne, the Shannon, the Lee and the Liffey.

A wholly owned subsidiary of the ESB, Hibernian Wind, has been developing wind farms at Carnsore Point in County Wexford and Moneypoint in County Clare. Those who can remember back three decades ago will recall the proposal to build a nuclear power station in Carnsore, a suggestion that attracted widespread opposition and was dropped shortly afterwards. Moneypoint, the second site of wind generation, has been one of the less clean generating plants, using enormous quantities of coal with its resultant pollution potential. I am surprised and not a little disappointed at the attitude of sections of society, not least those who would class themselves as environmentalists, who have voiced very strong opposition to the location of wind power masts in sometimes remote locations. Spurious arguments such as the noise of the vanes lend nothing to the debate, as they are founded on misinformation. I am quite prepared to accept that the masts may be visually intrusive, but it is difficult to believe that there are no suitable remote locations, such as valleys where the wind funnels, which could not accommodate such masts, would be out of general sight. We cannot have an ever-increasing demand for electrical power on the one hand without conceding something on the other and wind power must be the cleanest means of generation.

I would similarly like to see resources being set aside for a full investigation of the potential of wave power. As the most westerly country in Europe, bordering the Atlantic, there must be potential for the use of estuaries and other areas of water for the generation of electricity from wave power. Turlough Hill, the pumped storage hydro scheme in County Wicklow, is still a showpiece of electricity generation in Ireland and shows the kind of innovation of which the ESB is capable. While it may have been built in the 1970s, it is still a relevant example of what can be achieved if a commitment exists to the best principles of the proper use of resources and care for the environment. It is the fifth largest generating station in Ireland and is particularly beneficial as it operates as a storage scheme.

As the public company in the field of electricity generation, the ESB should be more proactive in both those areas, and studies should be carried out and reports and recommendations produced as soon as possible. Perhaps there may even be the possibility of exporting power, with resultant benefits for the economy and the balance of payments. We might well take a look at the Danes' experience. There appears to be new broad agreement in their parliament regarding a commitment to the principle of wind power and ensuring continuity of supply on the Danish market. The Danish Wind Industry Association suggests that Danish politicians recognise that the wind industry is an important engine for growth and welfare which contributes billions of euros to the Danish balance of payments, as well as employment for more than 20,000 people. A new agreement in parliament there will result in upwards of 750 MW of new wind power capacity in Denmark over the next five years. Electricity provided by wind will increase from 20% to more than 25% of the annual national consumption.

I am no weather expert, but it appears to me that we are as well, if not better, placed than the Danes to take advantage of wind power, exposed as this island is to Atlantic winds. I often wonder why such an obvious possibility should be so neglected, from the point of view both of encouragement of and investment in research. The concept of wind energy is far from new, with the windmill providing motive power for centuries all across Europe and the New World. With our modern technology and forward thinking, I have no doubt that it can still play a vital part in our development.

We are not alone in our reluctance to use natural and clean methods of electricity generation. Britain has only one commercially operating wave farm, Wavegen's plant on the island of Islay off the west coast of Scotland, which supplies power to about 400 local households. There may be a long way to go yet in refining that system, but it must be included as one of our options for the future. On the other hand, there are currently about 60 operating wind farms in the UK, supplying enough power for 250,000 homes each year or about 0.3% of total UK electricity consumption. There is also one commercially operating offshore wind farm which supplies enough energy to power up to 3,000 households.

There should be room also for the small operator in the power generation of the future. I know of one landowner in my constituency who is exploring the possibility of setting up a small hydro scheme on a stream running through his land which has the potential of powering a small town. Wherever there is clean energy available, we should encourage its use to the benefit of our economy and our environment. According to the ESB, 56% of the Irish electricity market has been opened to competition. The market will be fully open to competition in 2005, and the ESB has been facilitating that and made virtual independent power available at discount prices to the independent supply sector.

The electrical power industry is changing to accommodate modern thinking and the demands of today. It is up to the ESB to lead and shape that change, and it must be encouraged to do so wherever possible. We must facilitate that where we can, and increasing its required borrowing through this measure is a step in the right direction. I commend this Bill to the House.

Mr. Quinn

I am breaking one of my usual rules of objecting to the passage of all Stages of a Bill on the one day because the Minister has explained the position adequately. As Senator Finucane also said, this is a Bill for which we can make that exception.

I must confess that when I first read this short Bill I was taken aback by the huge amounts involved, but the Minister explained the position. Increasing borrowing powers from €2 billion to €6 billion at the stroke of a pen is dramatic. This is probably the largest such increase to be included in any legislation in the history of the State.

Notwithstanding that, I find myself asking whether this enormous figure is enough. The reason the figure is so big is because we have some catching up to do, owing to a failure over the past decade or more to invest in electricity generation. Now that we have belatedly decided to play catch-up, my concern is whether we are doing enough to get back in step with the growth of demand. We should ensure we get this right, once and for all. We have come to expect electricity every time we switch it on. Many of us may recall visits to other countries and always finding a candle beside the bed in the hotel. One then realises not every country has enjoyed the satisfaction and confidence we have had with our electricity system over the years.

My concern is strengthened by recent events in other countries on this front. Within the past couple of years, there have been massive power outrages in several places, most notably in the eastern part of the United States and, closer to home, in Italy, our European partner. In both cases. the economic damage caused by the system failures was enormous and out of all proportion to the length of the disruption. Apart from the direct economic cost, a high price was paid in social and human terms. However, I recall one occasion when we had a power failure and a number of people spoke to me afterwards of its benefits. Instead of sitting at home watching television or listening to the radio, they played chess or draughts or monopoly and even talked again with the family. Sometimes there are disadvantages to an uninterrupted power supply.

As regards the power failures in New York and Italy, I clearly remember that in each of those cases the blame for the system failure was put down to inadequate investment, mainly in the grid system that connects the network of generation plants and brings power down the line to customers. The reason for the inadequate investment was attributed, at least in part, to changes in the regulatory system, which apparently placed too little emphasis on this aspect of electricity supply.

My concern is deepened by the mixed experience we have had in this country as regards the regulation of the electricity industry. In the case of the telecommunications sector, I believe the telecommunications regulator was given the wrong instructions. The brief was to ensure there was fairness between the various competing bodies. My belief at the time was that we were incorrect in that regard. We probably should have said that the objective was to create competition, not just to ensure fairness between the various bodies. I am not sure whether that applies to deregulation in the electricity area. Deregulation undertaken by us on the initiative of the EU was meant to bring about more competition. More pertinently, it was meant to deliver lower prices to customers.

As far as I can see, the deregulated regime for electricity has not yet delivered on either of these points, competition or prices. For most customers, there is still no alternative supplier to the ESB. Meanwhile, the price of electricity to the end user has continued to rise instead of falling, as we had been led to believe it would. This is true particularly in business from whence the knock-on effect of rising costs percolates through the whole economy.

It may well be that in addition to failing to deliver on its promises, deregulation is actually causing other problems that did not exist before, such as the way investment in the grid system is apparently being discouraged in some places. Perhaps the time has come for us to revisit the question of regulating the electricity industry, in the light of our experience to date. However, in saying this, I am not criticising the work of the electricity regulator. I am asking whether deregulation is delivering what we expected of it and, if not, whether there is anything we can do to improve matters. There is no reason whatever that, such arrangements, regardless of whether they originate in Europe, should be considered as cast in stone forever.

Let us examine the service we have come to expect every time we switch on. By and large, the ESB has served the country well for the best part of 80 years. We should ensure that it has all the necessary borrowing powers to carry out its job properly, as this Bill provides, and to ensure that it operates in a regulatory framework that helps rather than hinders its work. If I have a criticism of the ESB, it is that it has been slow over the course of its history to pay enough attention to the potential that exists in alternative methods of power supply. Previous speakers mentioned this aspect.

From the point of view of geography and climate, this country is well placed to exploit the potential of wind power and wave power, but these are both areas in which we have allowed other less favourably situated countries take the lead. Senator Kenneally talked about Denmark, for example, and Italy. In the 1930s we led the world in seeking to generate power from our peat resources. For many years, until economies of scale took over, peat-fired power generation played an important role not only in the economy, but in helping to develop many parts of the country that would otherwise have been devoid of any industrial activity. Those days are largely gone, but they have not been followed by a similar pioneering approach in developing alternative sources of energy production.

I realise that for the foreseeable future the vast majority of electricity generation needs must still be met from oil and coal. Other sources of energy probably will always be in the minority. However, that minority could be an important part of the overall effort. If for no other reason, our obligations under the Kyoto Agreement should encourage us to pull out all the stops in this regard.

I believe the House will support the Bill. Members recognise the need for it and the great work that has been done over the years. However, we recognise too that not enough attention has been paid to alternative sources of energy. I believe the Kyoto Agreement has put the onus on us to do something about that area. We must undertake those obligations with a spirit of enthusiasm. I believe this initiative will give the ESB the opportunity to become more actively involved in that area. We should encourage it to do so. We should also ensure it has the necessary fuel to be able to do so.

Mr. Daly

I support the Bill and pay tribute to the ESB for its foresight and imagination in dealing with energy supply since its foundation. From the development of the plant at Ardnacrusha to that at Moneypoint, it has given a deep commitment to ensuring that the energy requirements of the country are adequately provided. It has also offered imaginative and forward-looking proposals and kept abreast of international developments in energy generation and electricity supply. I compliment it on its work at Moneypoint where up to 400 people are directly or indirectly employed providing a substantial proportion of the energy supply for the country.

The ESB has recently received approval from An Bord Pleanála to undertake a €200 million investment to clean up the emissions and bring it into line with international emission requirements. The board will decide before the end of June on proceeding with that development and I urge the Minister to use whatever influence he can with the ESB to ensure that it proceeds with this investment as planned. This would ensure not only that the station continued to meet international emissions standards but will also help the Government decide in 2008 whether Moneypoint should continue as it is or be re-equipped to use natural gas. Many people, locally, nationally and internationally, believe there is a great opportunity to exploit the potential of clean coal technology, which has been promoted very vigorously by the governments of France and Germany. This would utilise the large reserves of coal for energy generation at a time when energy supplies are tightening. Otherwise, we might be tempted to use our natural gas grid to generate electricity, which would be a waste of very valuable resources. We could continue to use Moneypoint, the most efficient energy generating station in the country and probably in Europe, as a centre for generating electricity from coal burning which has been very efficiently done elsewhere.

To close Moneypoint would damage the economy of the region. I urge the ESB to proceed with the €200 million investment cleared by An Bord Pleanála. The proposal came before An Bord Pleanála because An Taisce objected to the permission granted by the county council. An Bord Pleanála's report indicated that An Taisce's objections had no merit and were based on a misunderstanding of the role of the planning authorities and the overall policy issues which are matters for Government. An Taisce's decision to lodge objections to that decision, which was intended to protect the environment, has undermined the confidence of many in my constituency in the role of An Taisce and is one of the main reasons for the present negative public perception of An Taisce. I have supported An Taisce although I have had many confrontations with it especially, for example, over the proposed heritage centre at Mullaghmore. In this instance, however, its objections had no merit. The report also found that it had misunderstood its own function and role. It is essential to proceed with the investment which will go ahead in June if the board of the ESB approves. The work will take from 2005 to 2007 and will be completed before the Government decides in 2008 on the future of Moneypoint. The future of the plant is critical for the reasons I have outlined, especially for the development here and bringing into effect a clean coal technology regime so that we can ensure the long-term survival of coal generating at Moneypoint

While the ESB has always been keenly aware of its importance in the economic and social development of the western areas, it is worth reminding it that its record has been one of very proud achievement especially in the context of the rural electrification scheme. I welcome the recent decision to modernise the rural network, especially along the western seaboard because in recent years there have been serious breakdowns and it is necessary to invest heavily in modernisation and fitting new transformers and lines in areas that have been underdeveloped and where demand for more and better supply increases daily. The consistent breakdown in the system is due to lack of investment. The ESB's decision is welcome and steps are already being taken to modernise and upgrade the network in the rural areas especially west Clare, north Kerry and the west. This is an important decision and a very valuable and timely opportunity. Some of the funding we are allocating and endorsing today will be available to upgrade and modernise the system to enable a continuous supply in the western areas.

I have had a long association with the ESB in some previous work, especially in the fisheries area and to an extent I am disappointed that the fisheries dimension of the board's activities has been played down in recent years. Since the inauguration of the Ardnacrusha plant and its involvement in the Shannon fisheries, it has played a major role in scientific research and developing the fishery aspect of its remit, for which the legislation provides. The emphasis recently has shifted from that and I hope that we could count on the ESB, in whatever new regime emerges, to again take the pioneering role in exploitation of fishery resources where it has hydro stations. It has made a very valuable contribution to investment in places such as Castleconnell whose salmon fisheries are internationally recognised and are a major tourist attraction. Some might ask what this has to do with the generation of electricity, but it has everything to do with the social and economic development of which the ESB has always taken account.

I appreciate the work of the board and the co-operation it has given us at all levels. I have had many opportunities to talk to people in Moneypoint and in the ESB generally about various issues and always found them to be forthcoming and forthright in business where it maintains a very high standard. I am glad that in its magazine, which is delivered to us regularly here, we can see a record of the work the board is doing not only in areas such as Moneypoint and the hydrotechnical engineering but also its social dimension which is so important. The rural dimension was critical to the overall development of rural areas. I hope that dimension and Moneypoint will continue for the foreseeable future; the Government should recall the importance of that station and will consider clean coal technology to keep it going bearing in mind its economic impact on places such as west Clare and its social impact on more remote rural areas.

Mr. McCarthy

I welcome the Minister, Deputy Dermot Ahern. This is usually the area of responsibility of Senator O'Meara, but I have done some research for the purpose of the Bill.

I wish to raise a number of issues, including the sustained increase in ESB charges. An imbalance exists in this regard in terms of the profits made by the ESB in recent times. Last year there was an increase of 13.25% and a 5% increase was imposed in January of this year. The cost of first-time connections has increased by €200. The annual report for 2002 revealed that the ESB made profits in the region of €250 million, an increase on the previous year's €159 million.

The service is a good one on which we are dependent. I accept that it must be paid for, but it is difficult to reconcile the large profits being made and the increased charges passed on to householders. This is unfair on the consumer, especially in light of the dividend that the company pays to the Minister for Finance. Last year the ESB paid €70 million to the State, the highest dividend ever paid by a State company. There is sufficient leeway to ensure that charges of this magnitude are not levied against householders.

It has been estimated that recent increases have added an average of €12 to household ESB bills. The Minister should examine this matter with a view to putting some balance into the system and halting the inordinate increase in ESB charges, particularly in view of the profits made by the company and the dividend it pays the State.

The energy regulator, Tom Reeves, warned the Minister that significant losses could be incurred by the ESB if the efficiency of older power stations is not improved. His advice should be heeded. He also stated that stations must be more often available to the national grid during the year and breakdowns or forced outages must be reduced. He probably reiterated those points when he recently addressed the Joint Committee on Communications, Marine and Natural Resources. I urge the Minister to take these points on board.

The deficit in the ESB pension fund has deteriorated by a further €100 million. The net deficit stands at €900 million. I understand that this is more to do with the actual investment as opposed to poor management, but it is a cause of great concern to employees and other interested parties.

Last February the Minister claimed that by developing an electricity interconnector project between Britain and Ireland, he was securing an electricity supply for the country. I welcome that fact. However, given the clear anti-nuclear policy of the Government, I wish to clarify if the project is dependent on energy produced at Sellafield. If that is the case, it flies in the face of Government policy. Will the Minister clarify the matter? The interconnector is a weak form of supply in the sense that we will only gain from it if there is a surplus in Britain, which cannot always be guaranteed.

There is widespread unease among the eight trade unions representing ESB workers. They warned that widespread industrial action might be on the cards following a number of weeks of talks between management and the Government. We can do without that type of industrial unease which has potential for strikes. The country was badly crippled for a number of weeks by the An Post dispute. Members of the House were aware of its negative effects. It is important that meaningful dialogue takes place between the Minister, his officials, ESB management and the unions representing workers.

Workers are seeking an 18.5% pay increase and a 20% stake in the company. Presenting a response to this will be difficult for the Government. Great credit is due to these workers in that the workforce has been reduced from 12,000 to 7,500 in recent years without them resorting to strike action, which is a considerable achievement given the number of unions involved.

The three year programme, Sustaining Progress, will lapse shortly. This provides an ideal opportunity for the Minister and others involved to reach agreement on the outstanding issues. We need to take a cautious approach. We do not wish to see a repeat of the industrial unease inflicted on the country in recent times by An Post. Many of the outstanding difficulties can be resolved through dialogue, thus avoiding strike action and power cuts.

The Labour Party has no difficulty accepting all Stages of the Bill. The role of the Seanad is to produce good legislation and it is incumbent on us to do so. By expressing our opinions in this forum we can contribute to stronger legislation.

Mr. U. Burke

I welcome the Minister. I also welcome the Bill, in so far as it indicates a clear acknowledgement of the need to upgrade the ESB network and continue its expansion. It is time to re-assess the provision of our electricity supply. In order to upgrade a plant such as Moneypoint to comply with EU regulations regarding CO2, we have been told that the increased cost to the consumer could be as high as 20%. At the same time, we are effectively stifling the production of electricity by cleaner and less expensive means. Why can we not reconcile both approaches?

Over the years we have seen the phasing out of the old peat burning stations throughout the country. One of the first to go was Screeb in Connemara, followed by Bellacorick, Milltown Malbay and Caherciveen along the western seaboard. Peat burning stations in the midlands are now being closed, which we recognise is being done because of inefficiency.

We must also acknowledge the co-operation of Bord na Móna with the ESB over the years in the production of electricity and the provision of a continuous supply at difficult times when other sources of energy supply were threatened. Will the Minister comment on our potential for clean energy production, especially from wind?

In terms of what happened at Derrybrien in County Galway, enormous damage was done by a subsidiary of the ESB to the confidence people could have in alternative energy sources, a matter I raised previously with the Minister in the House. That subsidiary, Hibernian Wind Power, was reluctant to admit its failure at that site. Apart from fears among the local community concerning that incident, it had a serious impact in terms of the potential development of wind energy throughout the country.

Many local co-operatives groups and private individuals, who are landowners and engaged in joint farm ventures to gain an alternative source of income, had been progressing applications for wind farms. The confidence of potential financiers in terms of investing in these projects was immediately blown. They changed the methods and the way in which they would finance such projects in future as a result of the hesitancy and stubbornness of Hibernian Wind Power to come forward and recognise it was the cause of that landslide. Those engaged in many similar projects that were at planning stage or at advanced planning stage and in the process of being financed found it difficult to advance them. It is unfortunate regarding the development of wind energy that this happened and the way in which it was handled by that subsidiary of the ESB is regrettable.

Will the Minister comment on the fairness of access to and distribution of contracts to those seeking contracts with the ESB to access the national grid? From the distribution of contracts at the last offering, it is clear there is a strong bias in favour of subsidiaries of the ESB. I am not sure why that is the case. Is there a fear of competition from alternative sources of energy and alternative providers? Major investment and confidence in alternative energy sources has been instilled by many private individuals, landowners and co-operative groups who have shown that this the way to go. However, there seems to be a reluctance within the ESB management or board to accept there are alternative and cleaner methods of supplying energy. Nobody wants to see Moneypoint closed by 2011 because of the major proportion of energy it supplies. If that happened, how could we replace the proportion of power generated by that station by alternative energy means or at alternative locations?

Will the Minister consult the ESB and ask it to be open and transparent about access to the national grid? As he is aware, the IDA and other industrial managers have indicated there is a deficit in energy supply to meet requirements in the west. We welcome the provisions of the Bill if it is proposed to upgrade the national network, particularly in the west where there is a deficit in supply identified by major industrialists who wanted to establish there.

Senator Kenneally and other praised the ESB on its work. It is important to recognise the professionalism of its workers who deliver services at all levels throughout the country. The ESB has probably one of the greatest records and received the fewest number of complaints of any service provider in the country.

Much concern about the impact on health of living adjacent to high tension power lines has been expressed by people living close to them. This issue has never been fully addressed. While there is a concern in that regard, there will always be opposition, whether it is short-lived or otherwise, to the location of such lines. Many people have legitimate concerns that living adjacent to such power lines causes health risks. While the World Health Organisation has clearly indicated there is no health risk or link to cancer associated with living near such power lines, it is important if there is to be an increase in the ESB's expenditure, as proposed in the Bill, to upgrade the network that such concerns are addressed. I ask the Minister to comment on that issue. The upgrading of 17,000 km of the network is a very welcome development.

Mr. P. Burke

I welcome the Minister. When I was young I was told to keep away from two items, the fire and electricity, but I am not sure that is what youngsters are told today. The change that has taken place regarding the way electricity was installed in houses up to 50 years ago compared to the way it is done today is unbelievable. The average household uses far more electricity today than was used by a household 20 years ago. There are many more gadgets and implements powered by electricity than there were 20 or 30 years ago. It is easy to understand how the consumption of electricity has increased dramatically in the past number of years.

I greatly appreciate the work done by ESB employees. As Senator Kenneally pointed out, in wind and rain, on a Monday or a Sunday, ESB workers always came to the rescue if power lines were down and whether it was for business or private individuals, they always did the work promptly and efficiently. The ESB was always a well-run State body and a model for other companies, many of which did not progress along the lines of the ESB. Everybody admired the way it went about its business.

I will not hold up the passage of the Bill but I come from an area where the infrastructure is not what it should be in comparison to other areas. As Senator Ulick Burke pointed out, there are some difficulties getting infrastructure in place when objections, are made by various people. I compliment Maol Muire Tynan, whom I am delighted to see in the Chamber, because since she joined the ESB she has done great work in outlining to public representatives what is happening there, how it is going about its business and what is required to help with the infrastructure. She has done a great job from a public relations point of view, which has major benefits for public representatives also.

The Minister said borrowing has not changed in the past 22 years and that the ESB has many sources of financing, including the European Investment Bank, syndicated facilities and bilaterals leases, the private placement market and non-recourse financing. He said the putting in place of the US private placement in December 2003 has given the company a significant financial boost.

The Minister also stated the ESB entered into a separate €500 million revolving credit facility at the end of 2003 and that this facility, which was co-ordinated by the Royal Bank of Scotland, will be drawn when necessary to ensure liquidity is constantly available and will, therefore, assist ESB's overall funding programme. He indicated the figure for borrowing, £1.6 billion, for the past 22 years has been much the same. However, the Royal Bank of Scotland is providing €500 million and there is a private placement with a US firm. If the ESB goes public, will those interests become involved in share dealing and will they be able to obtain a portion of the company? How does the private placement operate and is it another form of funding or borrowing?

The Minister stated the figure for borrowing, £1.6 billion or the equivalent of €2.3 billion, has remained unchanged for the past 22 years. However, I take it that the figure has changed because the ESB has borrowed further moneys through the private placement and from the Royal Bank of Scotland.

I welcome Minister's statement that he strongly opposes the privatisation of the transmission and distribution system because they are critical national assets and should remain in State ownership. It is a pity Eircom did not go down the same route because there are certain rural areas, which are not getting a fair deal from that company. There is no doubt that if the ESB was privatised, it would seek to supply electricity to mass markets and more rural communities would be left on the hind tit.

I wish to comment on the closure of Bellacorick power station. People in the area are concerned about the loss of 100 jobs which will result from this. The Minister will have noted recently that a former Member of both the Seanad and the Lower House, Mr. Myles Staunton, was putting together a €100 million rescue package for Bellacorick which could lead to an alternative source of electricity being produced in the area. I hope the Department will give consideration to Mr. Staunton's proposals.

I compliment the Minister on the Bill. I hope it has a quick passage through the House.

Minister for Communications, Marine and Natural Resources (Mr. D. Ahern)

I again thank Senators for their forbearance in allowing me to bring the Bill through the House in such an expeditious manner.

A number of Members referred to the cost of electricity. Senator Kenneally provided figures to show the cost of residential electricity in Ireland is below the EU average. The position is different for industrial users. However, with the opening of the market in 2005, large industries will have the opportunity to seek out other operators and suppliers because of increased competition. The cost of electricity is not an issue for the political system. The Houses passed legislation regarding the establishment of an office of independent regulator which determines the cost of electricity. I have no input, nor does my Department, in that area. Unfortunately, whether they are being tongue-in-cheek, displaying mere ignorance or engaging in political opportunism, some people continue to refer to the fact that Government charges are X, Y or Z. They continually refer to electricity, gas and telecommunications charges in this manner but these are all determined independently of the political process and based on criteria which allow the companies involved to invest in their infrastructures while obtaining some economic return.

People must accept that the companies in the areas to which I refer must invest in new technology and IT systems to ensure they can operate in the new open market as opposed to the closed market in which they operated heretofore. The ESB is significantly reducing its market share over time. Senator Finucane referred to the Competition Authority. However, this is one area in respect of which even those people in Europe who dictate the opening of the various markets have acknowledged that in a relatively small island market such as ours, the move towards competition in areas such as telecommunications, electricity and gas is much more difficult. It is easy to make provision on paper but it is more difficult to encourage competition in reality.

One of the reasons the Government decided to promote the construction of two 500 MW interconnectors was to sustain the security of supplies going forward but also to introduce a further element of competition to the market. As Members are aware, we have already asked the CER to gauge the degree of interest in a private sector built and operated interconnector. The CER has undertaken to run a competition in this respect and there has been some significant interest from the private sector. If there is not sufficient interest, we will then proceed to construct and operate an interconnector which would be underpinned by a guaranteed regulated revenue stream. The latter would be regulated by the CER. We hope the interconnector will be in place by 2009.

Senators Finucane, Quinn and others referred to system availability. The CER is taking specific measures to ensure the level of availability of the ESB's infrastructure reaches an acceptable level. This legislation was introduced because the ESB is investing so much money. This is also relevant in terms of the cost of electricity in this country.

In terms of network reliability, the ESB is carrying out extensive work on renewing its network. In the period 2001 to 2005, the ESB will spend €200 million in Galway, €60 million in Sligo, €130 million in Mayo, €132 million in Donegal, €40 million in Roscommon and €54 million in Westmeath on network upgrades. Members will recognise that this represents a significant level of renewal of the ESB's infrastructure.

Many Members referred to wind energy and acknowledged that it is Government policy to consider sources of renewable energy. In the immediate future, we are of the opinion that the best hope of success lies in the area of wind energy. It is true that difficulties have arisen in this area, mainly because of our success of which we are victims.

Recently, I signed a statutory instrument providing for 44 new projects, mainly wind, to join the grid and generate new energy on the system. They were included before the moratorium was put in place by the CER on the advice of the ESB national grid. The moratorium relates to the technical restriction on the grid. If a huge amount of wind energy is added in one go, as is happening, it can lead to instability on the grid. The CER, therefore, must take that into account because we do not want to have a situation, as instanced by Senator Quinn, like that of the US, Italy and the UK which suffered significant breakdown in their networks. We must proceed cautiously.

As a result of the moratorium, significant discussions, negotiations and meetings were put in place between the various interests and I understand the CER will make a substantive decision shortly on the proposals from the ESB national grid regarding new wind connection offer policy. The system operators have agreed that no new offer will be made to a wind generator until the CER decision is made.

I share the concerns of Senator Finucane on the Eirgrid situation. This has been a dogged issue over the past number of years and is one of the issues I have found most frustrating. Our policy and desire was to separate the grid transmission system from the ESB, but this is not yet in place. It is disappointing that Eirgrid is not up and running. I said recently at a joint Oireachtas committee that I am opposed to reverting Eirgrid to the ESB because that would send negative signals to an opening market. Once we can get over the significant industrial relations issues, I believe the Eirgrid model will be effective and beneficial to all the players in the market. In a market where we are endeavouring to do all we can to ensure openness, transparency and competition, it is vital that people are confident that the grid is separated from the dominant company.

Senator Burke referred to his disappointment that the AER contracts were won by the ESB. My job would not be worth two minutes if I had intervened in the provision of contracts to any of the promoters of wind energy. It is somewhat disingenuous of people to constantly criticise the Minister or come knocking on his door when they, through the media and other commentators, insist there should be no political involvement in any of these areas. Of course, when things go wrong, they come knocking on the doors of the politicians. Neither I nor my Department had hand, act or part in the giving out of the AER contracts, and I stand over that. People may be disappointed but in effect that suggests that they want one of the low-bidding operators in an open market to be excluded from a competition. In other words, they suggest we should favour those people who came in with higher bids. I do not accept that in an open market situation.

Senator McCarthy raised the issue of the level of the company's profits. We should take pride in the fact that the ESB is such a significantly profitable company and not a company in difficulty, like some of the other semi-State companies. It has managed its position well and kept electricity prices relatively low, in comparison with other EU operators. It is up to the regulator to ensure that a company such as the ESB pays its overheads and costs and that at the same time it is able to reinvest to part-fund its extensive capital programme.

I thank Senator Kenneally for his positive remarks on the contribution of the ESB to Irish society. We often underestimate that contribution and only comment or compliment the ESB when difficult situations arise. ESB personnel are out in hail, rain or snow ensuring that every citizen has what we regard as an absolute right, electricity. I also thank the Senator for his comments on wind energy. Hopefully, the issue of the moratorium will be set right shortly.

Senator Daly mentioned the future operation of Moneypoint. As I said in my opening remarks, this is primarily an issue for the company. It is a significant decision for both those involved in Moneypoint and the nation. A suggestion was made that the station should move to gas-fired energy generation. To do that would mean that approximately 80% of all the electricity we generate would be gas-fired. Given that average gas-fired energy generation in the EU is 33%, it would create a difficulty for us to be over reliant on it. Pie charts for Ireland showing our electricity generation, compared to those for the rest of Europe, show a massive gap in the area of nuclear energy generated electricity.

Ireland has decided it is vehemently against nuclear energy. However, there are downsides to that decision. The countries of Europe which have nuclear energy have a greater diversity of sources for electricity generation and are not over reliant on one type of generation. Nuclear energy is also cheaper in some instances and has, we are told, no effect on the ozone layer. As Ireland continues to be vehemently against nuclear energy, some of the downsides are the type of generation we can operate and price. The decision on the future of Moneypoint will have to be calculated not alone from the financial aspect but also from the security of supply aspect and fuel diversity.

My Department, in conjunction with the CER, has commissioned a study on fuel diversity and the future of Moneypoint. The study is being undertaken by DKM and the ESRI and is due to be completed shortly. The ESB is also carrying out its own studies and will ultimately make a decision. Any business case submitted to the company must be predicated on the introduction of a best practice agreement at the plant. This is a prerequisite for gaining shareholder approval.

Any Minister would be concerned at the result of the ballot by the ESB group of unions on industrial action. I am heartened that it will have no effect in the immediate term and I hope there will be no disruption in the future. The Department has had a number of discussions with the group of unions over the past months. While no further meetings are planned, my officials will be available to continue discussions at any time. I should explain that these discussions took place following the submission of a claim by the unions to increase their current shareholding of 5% to almost 20%. At the same time, they were negotiating with the company on an increase in their salaries of approximately 18%. Taken together that is very significant and must be dealt with in that context. In these discussions, the ESB group of unions has yet to set out any basis for its exorbitant claim to increase the shareholding from 5% to almost 20%.

The Electricity (Miscellaneous Provisions) Bill 2004, which will be brought forward later, will deal with emissions trading, windfall gains, the regulation of the interconnector between this and our neighbouring island and policy directions to the Commission on Energy Regulation. It will also deal with an anomaly regarding the shareholding of the Minister.

The purpose of this Bill is to increase the borrowing requirement for the ESB to allow it to invest in infrastructure and avoid the type of scenario witnessed in the USA, the UK and Italy where electricity supplies were interrupted across vast areas for some considerable time because of the failure of the governments in those countries to invest and a number of other reasons to do with interconnection with other countries, which is not a problem for us. We are investing now to ensure that does not happen here. Given that investment began in 2001, the ESB was already planning major investment in infrastructure in order to ensure there are no breakages in our electricity system.

People ask why electricity prices are increasing. We cannot invest €4 billion over four years and not expect somebody to pay for it. That must be paid for and that is one of the reasons the price of electricity has increased relatively significantly in the recent past. However, our electricity prices are still floating at approximately the EU average and below the EU average for residential users. It is not envisaged that electricity prices will increase significantly in the coming years because of the level of increases over the past while. The reason for this investment and the reason we introduced the Bill is to ensure the ESB is allowed to borrow and carry on its business. It is a good business and the ESB must be complimented on its foresight in investing in the necessary infrastructure. It would bring down this House and the Dáil if the electricity went off in the future. The ESB is, in effect, investing in the future supply of electricity. I again thank Senators for their complimentary remarks on the Bill.

Question put and agreed to.

Acting Chairman (Dr. Henry)

When is it proposed to take Committee Stage?

Mr. Kenneally

It is proposed to take it now.

Agreed to take remaining Stages today.