Molaim an Bille seo don Teach.
I am grateful for this opportunity to present the Energy (Miscellaneous Provisions) Bill 2006 for the consideration of the House. Initiated in March, the Bill is an important component in the Government's progressive energy agenda. In conjunction with the Bill, the Government's proactive approach to energy matters is demonstrated by the recent publication of the Green Paper on Energy Policy, Towards a Sustainable Energy Future for Ireland, with a commitment to its development as a White Paper shortly, the National Oil Reserves Agency Bill 2006, soon to be considered by this House, and the recent publication of the Electricity Regulation (Amendment) (Single Electricity Market) Bill 2006 to give a statutory underpinning to the creation of a single wholesale electricity market.
The last initiative is of particular importance, as it is a concrete expression of what can be achieved on all-island matters through co-operation and mutual respect to the economic benefit of all and in line with EU policy on strengthening market integration for reasons of competitiveness and security of supply.
I wish to take this opportunity to recognise formally Senator O' Rourke's significant contribution in the initiation of the North-South energy project some years ago and I look forward to the support of the Seanad for this important legislation. While the Bill has undergone a number of significant changes since it was initiated, reflecting inter alia a constructive debate in the Dáil, a key objective is to expand the functions of the Commission for Energy Regulation, CER, the independent statutory body responsible for regulating and overseeing the liberalisation of Ireland’s electricity and natural gas sectors. These new responsibilities will include participation in the development of an all-island energy market, authorising and securing the construction of an interconnector, the regulation of the activities of electricity and gas installers, the designation of a shipper and supplier of last resort for gas and the regulation and promotion of natural gas safety.
Established as the independent regulatory body with responsibility for electricity under the Electricity Regulation Act 1999, the CER's powers and responsibilities were extended under the Gas (Interim) (Regulation) Act 2002 to cover regulation of the natural gas market. Given its wide-ranging knowledge and experience of both the gas and electricity markets and its statutory responsibility to carry out its activities in a fair and impartial fashion, the CER is best placed to tackle the additional functions and responsibilities proposed by the provisions of the Bill. I now propose to address these provisions in more detail.
Section 3 amends the Electricity Regulation Act 1999, to which I will refer as the Act of 1999 for ease of reference. It provides that it shall be a new function of the CER to participate in the development of an all-island energy market. This preliminary legislative component is necessary for the successful implementation of the provisions of Electricity Regulation (Amendment) (Single Electricity Market) Bill 2006 under consideration by Dáil Éireann.
Policy on an all-island energy market is encapsulated in the all-island energy market development framework, which was published jointly in November 2004 by the then Minister responsible for energy matters, Deputy Dermot Ahern, and his Northern Ireland ministerial counterpart. The framework, produced in consultation with the two regulatory authorities and energy stakeholders, sets out the commitment of both Governments to achieving a single energy market that will contribute to a more secure and cost efficient service for all consumers.
Section 3 also provides that the CER will be granted the power to arrange for the establishment of a single market operator that will, when established, operate an essential system of contracts and arrangements for trading in electricity on the island. The resulting integration of the electricity markets will result in a number of positive benefits over time. It will remove market distortions and minimise the wholesale cost of electricity. It will also create a more attractive location for new electricity generation and investment and thereby improve security and reliability of electricity supplies throughout the island.
Sections 17 and 18 amend the Gas Act 1976 to provide for the full opening of the natural gas market. These sections provide that "any person" shall be entitled to switch his or her natural gas supplier if he or she so wishes. They further provide that a natural gas supplier acting on behalf of "any person" may be granted third party access to gas pipelines or facilities. The upshot of these provisions is that the benefits of liberalisation previously enjoyed by industrial and commercial consumers will be extended to all natural gas customers, allowing them to shop around for their suppliers and to obtain the best value for money.
Section 19 amends the Gas (Interim) (Regulation) Act 2002 by providing that the CER may designate a supplier and shipper of last resort to supply gas to final customers in certain specified circumstances. This prudent measure is designed to minimise the impact on the market and consumers in the exceptional circumstance of a supplier withdrawing from the market or being unable to supply gas to its customers for whatever reason.
Sections 4 and 13 may be of most significance to the public. They amend the Act of 1999 by providing for the regulation via the CER of electrical contractors and gas installers, respectively. In conjunction with section 9, which provides for the taking of emergency measures in certain specified circumstances, and section 12, which provides for a natural gas safety framework, these sections demonstrate that two of the central concerns in the drafting of this Bill were safety and security of supply in so far as they relate to energy matters. It is with this in mind that I am particularly pleased to put forward these provisions for the consideration of Members of this House.
Sections 4 and 13 provide that the CER will have overall responsibility for the regulation of electrical contractors and gas installers in respect of safety in their areas of work. Under the provisions of the Bill, the CER will have the power to designate electrical or gas safety supervisory bodies that will be required to operate in accordance with criteria published by the CER. Under CER oversight, these bodies will be allocated responsibility for the registration of electrical contractors and gas installers as appropriate and will have a number of powers, including the power to inspect work carried out by their various members, the power to monitor and review the training of their various members and the power to suspend or revoke the membership of one of their members for certain specified reasons, including where work carried out by that member is unsafe or of an unsatisfactory standard.
To ensure fairness and transparency in the activities of any such body and between a body and its various members, any fee or charge imposed by it will be subject to CER approval. Any decision by such a body to suspend or revoke the membership of one or more of its members shall be subject to appeal to the CER.
Both sections also provide that the CER shall have responsibility for a number of associated measures relating to the activities of electrical contractors and gas installers, including the power to appoint authorised officers for the inspection of electrical or gas works, the designation by means of regulations of certain works as being solely the province of electrical contractors or gas installers as appropriate and the power to prosecute rogue installers or contractors.
While we have in Ireland an exceptionally professional service provided by installers and contractors, as in all industries we must protect their good name and the assurance of quality work for the benefit of the consumer. The provisions of these sections underwent considerable revision and refinement during their passage through the Dáil. A detailed listing of material for inclusion in these documents is provided in both sections to ensure a comprehensive regulatory regime. Provision is also made for an appeals mechanism to resolve disputes related to the suspension or revocation, by a designated body, of the membership of one of its members, to ensure fairness at all times.
Section 13 also provides for a natural gas transmission system operator and a distribution system operator to appoint a gas emergency officer with powers to enter land and take emergency measures where there is a danger to a person or property arising from natural gas. The CER will also have the power to appoint a gas safety officer to assist in the carrying out of its new gas safety functions.
Section 14 is an enabling provision, which acts as an addendum to section 13, allowing the Minister to make an order to extend certain of the Bill's natural gas safety provisions, such as regulation of installers, to include liquefied petroleum gas, LPG.
The purpose of section 9 is to take account of the probability, however remote, of a sudden crisis taking place in the energy market. Under these provisions, the Minister can, in an emergency, direct the CER or other energy market players to take necessary safeguard measures. The Minister must ensure that, whatever action is taken under this section, the impacts on energy markets are minimised. These provisions are in line with EU requirements on security of energy supply.
Section 12 expands the functions of the CER to include the regulation and promotion of natural gas safety. In this context, the CER will be required to consult the National Standards Authority of Ireland regarding standards and specifications relating to gas safety. Under this section, the CER, having consulted with the Minister, will be required to establish and implement a natural gas safety framework. This framework must include, but is not limited to, inspection and testing regimes for downstream transmission and distribution pipelines and for storage and liquefied natural gas facilities. The CER will report to the Minister annually on the functioning of this framework.
Section 8 amends the Act of 1999 for the purpose of providing for an electricity interconnector owned by a person other than the ESB to be subject to authorisation and licence granted by the CER. For technical reasons relating to the definition of electrical transmission system, the section also provides that such an interconnector shall not be part of the transmission system except where it comes to the issue of calculating and imposing charges for the transmission system's use. Under the provisions of the section, the CER may also, with the consent of the Minister, secure the construction of an interconnector.
I hope this House will join me in commending the Government on its recent decision to give the go-ahead for the construction of a 500 MW east-west interconnector between Ireland and Wales. As a follow-through on this Government decision, the CER has been requested to proceed with a competition to select a developer to secure the construction of this interconnector by 2012 at the latest. On completion, the interconnector will be owned by EirGrid to ensure this strategic asset remains in public ownership.
Section 10 provides for an acting chairperson to be appointed to the CER by the Minister in circumstances where the chairperson is unavailable to perform his or her duties or functions. Further flexibility in the internal workings of the CER is provided for by allowing the chairperson to have a casting vote where a difference of opinion has not been resolved through the usual decision-making process.
A suggestion was made in the Dáil by the Opposition that provision be made to allow for the possibility of a rotating chairpersonship which would be at the discretion of the Minister. This was incorporated into the Bill as it provides an additional measure of flexibility.
To enhance the accountability of the CER to both the Minister and the Oireachtas while also reflecting the reality of the day-to-day business operations of any publicly accountable body, the appropriate timing of the submission by the CER of its annual accounts and work programmes is provided for.
Section 7 provides that the Minister may, in the interests of the proper and effective regulation of both the electricity and natural gas markets, give general policy directions to be followed by the CER in the exercise of its statutory functions. Any policy direction which the Minister may wish to put forward will, in line with established and best practice, be subject to a public consultation process.
I will now address other provisions of the Bill. Sections 5 and 6 amend the Act of 1999 by replacing the definition of combined heat and power, CHP, with a new definition of CHP as set out in Directive 2004/8/EC, and by providing for the methodology through which the various forms of CHP can be calculated. CHP is the simultaneous generation of usable heat and electricity in a single process. It makes use of the heat produced in electricity generation instead of releasing it into the atmosphere, and has a less detrimental effect on the environment than if heat and power were produced independently. It is not strictly a renewable energy but contributes to general energy efficiency and can make considerable energy savings for businesses and industry.
The new definition will facilitate the establishment of a guarantee of origin for high-efficiency CHP, the establishment of appropriate support mechanisms and reporting to the European Commission as required by the directive. It is an important step in ensuring that support for CHP in Ireland can be targeted to achieve optimum energy efficiency and environmental protection. Section 6 also provides for the appointment by the Minister of a person who will be allocated responsibility for the calculation and certification of power-to-heat ratios of specific CHP units.
Section 21 deals with a legal lacuna by providing that a 10% capital stockholding in the ESB be vested in the Minister to give the Minister the same legal entitlement as other capital stock shareholders. Currently, the Minister, the person to whom the ESB routinely reports in a shareholding capacity, does not have any shareholding representation in the company, and accordingly does not have the rights and obligations of other stockholders. At present, the issued capital stock in the ESB is apportioned between the Minister for Finance with 95% and the employee share ownership plan with 5%. Following consultation with the Office of the Attorney General and the Department of Finance it was agreed to regularise the position through the divestment by the Minister for Finance of 10% of the capital stock to the Minister for Communications, Marine and Natural Resources.
Section 16 confers on Bord Gáis Éireann the power to create capital stock in amounts equal to the net assets of the board, in line with Government policy to support the establishment of employee share ownership plans, ESOPs, in commercial State companies in appropriate cases. The basis for the policy is to provide an incentive to employees for enhancing the value of the company. Up to 5% shareholding in the company, subject to an upper limit of €38,000 per employee, may be provided in return for changes that give value to the company. BGE is a statutory corporation and does not have shares in the way that a company set up under the Companies Acts would have. This provision is necessary, therefore, in the absence of the introduction of legislation to convert BGE into a limited company, to give the board the power to create capital stock for the purposes of the ESOP. The board will only create capital stock for distribution of the appropriate share to employees when final agreement on the ESOP is reached.
Section 20 raises the statutory borrowing limit of Bord na Móna plc to a new limit of €400 million. The upper limit of €127 million has remained unchanged since the passing of the Turf Development Act 1998. The core business of Bord na Móna plc has been the supply of peat to the peat-fired electricity generating stations as well as producing peat-based products for use as domestic fuel and in horticulture respectively. While the company intends maintaining these businesses, its future strategy is to develop interests in the renewable energy sector, including investment in co-fuelling peat-fired power plants with biomass, wind farms and possible waste-to-energy.
Bord na Móna also intends to develop a waste management facility, including landfill and composting. The strategy will be financed through a mixture of own resources and debt. The statutory borrowing limit needs to be increased, therefore, to allow the company to borrow the required resources. An increase in the statutory borrowing limit does not, as such, constitute approval to increase actual borrowing to this limit. Shareholder interests will be protected at all times as any proposal from the company will be subject to prior ministerial approval and rigorous assessment before any commitment to capital expenditure is made.
In June 2005, Government approval was secured for the rehabilitation of abandoned mine sites at Silvermines, County Tipperary, at a cost of €10.6 million over a four-year period. North Tipperary County Council has agreed to undertake the rehabilitation works operating as an agent on behalf of my Department. Part 9 of the Bill provides a legal underpinning for this by granting powers to expend funds on mine projects, powers of entry to lands and compulsory acquisition of lands where necessary and by giving discretionary powers to recover State expenditure on rehabilitated lands. It is anticipated that the compulsory acquisition powers will not be required. However, it is safer to cover all eventualities so that the project can be planned and progressed without running the risk of encountering unnecessary and possibly lengthy delays.
This proposed legislation is an interim measure pending enactment of a comprehensive Minerals Development Bill, which was approved for drafting by the Government last June. The intention is that this interim legislation will be repealed as soon as the Minerals Development Bill is enacted.
Section 22 provides that on commencement of the Planning and Development (Strategic Infrastructure) Act 2006, no additional consent requirements are superimposed where an application for approval has been made or a consent given in respect of electricity transmission lines, strategic gas infrastructure or State developments which require environmental impact assessments. It is, therefore, essentially a clarifying provision, which also safeguards against unnecessary duplication of applications for strategic gas infrastructure, in line with the intention of the Act.
The Bill is an important component in the delivery of the Government's developing energy policy. By focusing, in particular, on the issue of safety, while also taking account of the need to progress the integration of an all-island market for energy, the Bill will, on enactment, deliver considerable benefits for all electricity and gas consumers. The Minister and I look forward, in particular, to working closely with the CER and various industry bodies on ensuring the speedy implementation of the Bill's various provisions, following enactment. I look forward to listening carefully to the views of Members of this House on these legislative proposals and to their assistance in progressing the Bill into law.