Seanad Éireann díospóireacht -
Wednesday, 11 Feb 2009

Vol. 193 No. 13

Gas (Amendment) Bill 2008: Committee and Remaining Stages.

SECTION 1.

Question proposed: "That section 1 stand part of the Bill."

Senator Jim Walsh

The section primarily provides for an increase in the borrowing allowance of Bord Gáis from the current amount of €1.7 billion to €3 billion. We understood from Second Stage that the €1.7 billion would be reached in 2009. We note that while that borrowing may take place in euro, foreign currency is also included. Given the volatility we have seen in the currency markets in recent times, it begs the question as to the policy that will be pursued by Bord Gáis Éireann with regard to hedging. How will that currency risk be managed? It is an important issue because obviously any revaluation of the currency in which it borrows would have an adverse impact on the €3 billion — it could limit it. Obviously if the currency decreases the company would gain. However, that is like betting on a currency. Given that we are members of the euro, which is now probably one of the two or three strongest currencies on world market, why is it necessary to allow that foreign currency element within it? Presumably all the borrowings will be for investment in our system here whether that is in the networks or in new generating capacity.

In recent weeks we have heard much about the cost of our energy. I know this is a matter in which the Minister of State has taken a keen interest. I have heard him both in this House and at our parliamentary party meetings on a number of occasions deal with queries in that regard. It has become a major issue for consumers and business. Competitiveness in the economy is a very topical and important issue. In recent days I read newspaper reports that the entry of Bord Gáis Éireann into the electricity market will have a beneficial impact on prices. I believe I read that it would result in a 10% reduction in the price of electricity. If that is going to generate real competition in that sector, obviously that is a good thing.

The purpose of increasing the borrowing allowance in this section is to allow for the large Bord Gáis capital programme up to 2012. That will be both on the procurement and supply side. Of other countries with natural resources, one comes to mind. Approximately 20 years ago people in Sweden, which one associates with considerable timber supplies, approached Ireland seeking wood trimmings. I am familiar with it because it was exported to Sweden through the port of New Ross. I remember asking representatives of the Swedish state company Domånverket, the counterpart of Coillte here, what was the purpose, given the strong supply of forests in Sweden. They told me it was to conserve their own supplies of wood. I regard this as a very astute approach. I wonder what we could be doing with regard to procurement of gas which is a finite natural resource although we were fortunate in finding more gas off the west coast.

I note the intention to improve the network so that the supply of gas can be enhanced. I refer to my area and the other seven counties out of the 32 which currently do not have a gas supply. It is imperative to redress this situation as these counties would figure low on any scale of economic indicators. As a consequence a natural gas supply to those counties would be a particular aid to attracting industry and improving competitiveness for existing industries in those counties. I hope something can be done in that regard. I acknowledge there are cost factors and that an evaluation has been carried out. In the times in which we live, the remit of Bord Gáis should be to ensure a 32-county supply of what is a natural resource.

I note the borrowing will also enable them to invest in increased generating capacity, both conventional generation of electricity and renewables. I have stated on other occasions in the House that gas is a primary fuel and it is a very clean fuel for the generation of electricity. However, it seems to be somewhat wasteful of a primary fuel and a natural resource to use it for the generation of electricity, particularly given that it is a clean fuel. Fossil fuels and oil form a major role in electricity generation. While gas is playing its part we also have coal-fired generation but the nature of coal is adding to our CO2 problems. There is an expectation that clean coals will become available and could be used. In my view we should aim to preserve our gas supply. I am not an energy economist but I question the use of such an important fuel which is within our jurisdiction for the generation of electricity. The concentration on renewables should perhaps be the sole concentration of the investment in electricity generation. A target of 30% by 2020 or 2025 for the use of renewable energy has been set. We also need to have energy independence given the finite resource and the volatility of fossil fuels. There are also issues regarding CO2, fuel and climate change but there will also be a significant price to pay. It is predicted that the cost of oil, although currently depressed, will increase considerably once there is a global economic upturn. The Department has been pursuing a policy of renewable use.

Acting Chairman (Senator Maurice Cummins)

The Senator has been given a lot of latitude on the section.

Senator Jim Walsh

The borrowing is for all of this purpose and this is the reason I am trying to deal with it in the absence of any amendments so we can get as much information as possible from the Minister of State who was very forthcoming on Second Stage.

I welcome the provision in the Bill that the investment made by Bord Gáis will be subject to prior approval of the Minister and the Department. This is an important consideration when borrowings are being increased. On a previous occasion I noted that while interest rates are currently low, there is a risk that when we eventually emerge from this deep recession we could end up with hyper-inflation, as is predicted by some economists. One of the ways of controlling hyper-inflation will be to increase interest rates. The prudential way in which companies approach their borrowing and the currency in which they borrow and the manner in which they are able to anticipate significant interest increases which may happen in the medium term, is an important issue also.

Senator Joe O’Reilly

Ár dtús, ba mhaith liom fáilte a chur roimh an Aire Stáit. As I said on Second Stage, I welcome this amending legislation and I accept the principle and the practice that Bord Gáis should be fit to borrow more money, implement its corporate plan and expand its business. Before I make my remarks about control, we have no reason but to have absolute confidence in the management and staff of Bord Gáis and there is nothing to impugn their integrity or their actions.

I welcome the fact the Minister and the Department will have ultimate control and sanction over the spending of the money. I wish to make a broader point. I refer to the early history of the State and this aspect might be worthy of study. We are still quite a young State. The first couple of Governments of this State had a very hands-on approach to the management of the public finances. Every Minister was hands-on and implemented their executive authority. They had a sense of their own executive authority, a sense they were to act in the public good and a sense they were there to control, structure and implement. This is very visible in the history of both Administrations at the beginning, the initial Cumann na nGaedheal Administration followed by the Fianna Fáil Administration. This was a feature of the founding ages of our State. I know government and society has become more complex but we are still fundamentally the same State and same people. We now have a culture of no control and a culture where control has effectively gone outside the door. The regulator took it very easy with the banking sector — far too easy. I will make a political point. The Government has not acted in a sufficiently executive manner and has not been sufficiently hands-on in its approach. It is a Minister's responsibility to know where all the moneys are spent in the Department. In a country of this size it should not be beyond the competence of an effective Minister and his junior Minister to have a handle on how moneys are spent, where they are going and where there is a wastage of money. To this extent I am happy there is a system of control but it is important that this control is implemented across the board. There is no more glaring omission of regulation in the State. It is a huge indictment of the Government. The Government must stand condemned in its failure to do anything effective to control energy costs. If one was to chronicle the Government's failures, this would rank high on the list. The price increases for Bord Gáis Éireann and the ESB were given at a time when oil cost €140 a barrel. Now oil prices are approximately €40 a barrel. It is untenable, unsupportable and unacceptable that energy prices have not fallen dramatically months ago.

Yesterday, the managing director of a major chicken processing factory in Cavan told me his plant's annual energy bill is approximately €1.25 million. The regulator should have been insisting on the reduction of energy prices for some time. I hope there will be a hands-on approach by the Government to this. The country needs hands-on government. What is the point of a democracy otherwise? Will the Minister of State explain to Bord Gáis Éireann and the ESB that their prices are way out of line for consumers?

I accept worthy corporate objectives have been set down but none of them justifies current energy prices. The energy regulator introduced a red herring when he said the ESB purchased six months of oil supplies at high prices earlier last year, hence there could be no reduction. That is a fallacy. It has always had the policy to have a back stock of oil. Surely when oil prices dropped, its next six-month supply came in at the same lower price.

We need control of energy prices. If we are to facilitate this amending legislation, we need to know the Minister's good faith in price control. We could not, as a democratic assembly of the people, accept this amending legislation on any other terms. Raging energy prices are a huge disincentive to business and industry and cause fuel poverty among our old people. It is time for action on energy prices.

I am enthusiastic about supporting the amending legislation because it will provide for committing Bord Gáis Éireann to develop renewable energy sources. It recently purchased a substantial wind farm for €80 million and will continue to develop wind energy. It is also good Bord Gáis Éireann is entering the electricity generation market and will become a competitor of the ESB. I take the point made by my friend, Senator Walsh, that it will help to bring down prices. That, and timely and necessary Government intervention, will bring down prices.

It is important Bord Gáis Éireann purchases more wind farms and links up with farmers who have developed co-operative wind farms. The creamery co-operative model initiated by Horace Plunkett did wonders for Ireland. I accept there are problems with current milk prices and our co-operatives have gone off the rails by becoming plcs. That, however, is for a different debate. The co-operative movement was excellent for Ireland and pulled us up by the shoe laces, making us what we are today. The co-operative principle should be brought to alternative energy projects. Farmers should be brought together to form wind farms as a mutual investment for a co-operative energy supply for the national grid. We also have yet to exploit wave energy.

On Second Stage I raised Bord Gáis Éireann's investment in gas storage facilities. This is important in ensuring security of supply, particularly when one observes what recently happened between the Ukraine and Russia. Security of supply is no longer assured. I accept the Russia-Ukraine stand-off does not directly affect Ireland's supply. However, it was a timely warning and it is important we work on security of supply. However, if we had a good and properly developed renewables sector, it would ensure an indigenous supply of domestic energy. The commitment to storage is a welcome facet of Bord Gáis Éireann's corporate plan and a further reason to be confident about giving it the latitude to increase its borrowing limits to €3 billion.

Bord Gáis Éireann's track record to date has been good. However, it is necessary for it to extend the network to the last remaining 12 counties. This comes back to control and regulation. There will have to be a hands-on approach to these matters. The Minister of State should be knocking heads together, demanding the network is extended to the remaining 12 counties. The Oireachtas has made recommendations and approved amendments to the gas Acts to allow extra borrowing. This should, therefore, be linked to the importance of extending gas supply to the 12 countries that still do not have access to it.

Prices must be slashed. There is no reason there cannot be a 20% reduction for the consumer. There is no reason the Minister cannot bring in the ESB and Bord Gáis Éireann to get results on this. The House is giving unanimous support to the Bill. The Minister of State must say, bona fide, he will act on energy prices. We must also act on developing the renewable energy sector. Renewables have merits in reducing CO2 emissions and saving us from Kyoto fines. It would also help in boosting the construction industry. Building wind turbines would constitute a large construction project which would provide much employment. We must act on the green energy agenda now. The time for platitudes and aspirations on this is over.

Security of energy supply is important and we should reaffirm Bord Gáis Éireann's commitment to invest in storage facilities. Fine Gael will support this amending legislation, as it did in the Dáil. It gives an endorsement and latitude to a company to implement what I believe is a good corporate plan. All we need are assurances from the Minister of State that he will be the people's champion in getting stuck into ensuring targeted price reductions are made. These individuals are ultimately answerable to taxpayers and the Oireachtas. We may have gone too far with deregulation, in that there is a lack of control, and with the laissez-faire approach to Government. We must call a halt in this regard because matters have become too serious.

Minister of State at the Department of Communications, Energy and Natural Resources (Deputy Seán Power)

I am pleased to introduce the Gas (Amendment) Bill for Committee Stage consideration in the Seanad. The Bill has one provision, namely, to increase the statutory borrowing limit that applies in respect of Bord Gáis Éireann from the existing figure of €1.7 billion to €3 billion. Its enactment will give the company the legal ability to access funds to develop the strategic direction set out in its five-year corporate plan up to 2012 and beyond.

The Bill amends section 23 of the Gas Act 1976, which provides for borrowings by Bord Gáis Éireann for capital purposes. It is unusual that amendments have not been tabled in respect of the Bill. I thank Members for their co-operation with the Bill to date.

I will now deal with a number of the issues raised by Senators Walsh and O'Reilly during their extremely constructive contributions. As stated on previous occasions, the monopoly of wisdom does not lie solely on one side of the House and it is important to take on the views of all Members.

The use of gas to produce electricity is the cleanest form of generation outside renewables. Gas-fired plants will increasingly be used as back-up to wind-generated electricity. The emphasis, however, will be firmly placed on developing renewables.

Senator Walsh referred to the dangers attached to borrowing. In the past, we used to refer to borrowing millions and people would become somewhat uncomfortable. More recently, however, the talk has been of borrowing billions. Most people might not even be sure of the number of zeroes in 1 billion. We are discussing major amounts of money and increasing Bord Gáis Éireann's abilities by expanding its borrowing capacity. There is no doubt that the company is taking on a major responsibility. However, it has been in existence for over 30 years, has proven itself to be an extremely capable performer and has played its part in developing the economy.

The treasury department of Bord Gáis Éireann will seek the best value on offer in the markets at any particular time and the Bill gives it the necessary flexibility to do so. In the past, the company has taken the steps required to minimise risk, which is a job in itself. I am satisfied that Bord Gáis Éireann will proceed in a professional way and will minimise the risks involved to the best possible extent.

Bord Gáis Éireann is examining the possibility of storing gas in salt mines. It has made a provision of up to €200 million in its capital plan in respect of such a project.

The issue of pricing was discussed in some detail during last week's Private Members' business in the Dáil. We have asked the regulator to examine the possibility of bringing forward a much earlier reduction in prices. The costs relating to oil and gas have been low in recent months and we would like this to be reflected in the price consumers are obliged to pay for the energy they use. In August of last year, enormous price increases were sought in respect of gas and electricity. At that stage, the regulator decided to adopt a new approach by granting an increase of approximately 50% of the amounts sought. The regulator then agreed to review the position later in the year. This was done in December, by which time the position globally had changed dramatically. As a result, the price of one form of energy remained the same and there was a slight decrease in respect of the other.

There are a number of factors at play with regard to oil and gas. However, my colleague, the Minister for Communications, Energy and Natural Resources, Deputy Eamon Ryan, announced last week that we could expect a further — possibly a double digit — reduction in energy prices in the near future. We asked the regulator to meet the stakeholders and to return to us with a number of options within a matter of three to four weeks. These will then be presented to Government. I am satisfied that we will be in a position to reduce the price of energy further. That price is a major factor, particularly in respect of the level of competitiveness to which everyone is referring at present in the context of the threat to jobs in different sectors.

Over 50% of electricity produced in this country is generated through the use of gas. As Senators are aware, gas was discovered in recent years off the west coast at Corrib. The find in question will have a lifespan of approximately 15 years. Unfortunately, we encountered a number of obstacles and difficulties in trying to bring the gas ashore but we are as committed as ever to doing so. Recent events have clearly demonstrated the need to develop the project and ensure that the gas is brought ashore as quickly as possible. This gas should provide up to 60% of the country's needs during the 15 year lifespan to which I refer. It is a considerable resource.

Senator O'Reilly referred to the recent difficulties involving Russia and Ukraine. These illustrated the need to ensure, to the greatest possible extent, that there is security of supply. When one is depending on other countries which are dealing with their own problems, one realises the risks involved. What happened in the case of Russia and Ukraine highlighted, in no uncertain terms, the need to develop our own sources of energy. As an island nation, Ireland has resources which have remained underdeveloped for a long period. We were probably slow to commence projects relating to wind and wave energy in particular. However, much progress has been made in recent years and we will continue with our efforts in this regard.

The area of renewable energy has attracted much investment in recent times. Various sectors are feeling the pinch as a result of the credit crunch and the difficulties being experienced in the global economy at present. The energy sector, particularly as it relates to renewables, offers great hope for the future. There has been a major increase in the amount of money invested in this sector. When one considers the ambitious targets we have set in respect of renewables, it makes sense that people should engage in such investment. The future is bright as regards the renewable energy sector. The Government will continue its support for the sector.

Senator O'Reilly referred to competitiveness and the importance of a further reduction in energy prices. In recent years, we have imported over 90% of our energy needs, which makes us extremely vulnerable. This illustrates the importance of developing alternative sources of energy. We have focused our efforts on making progress in this regard and on reducing our level of dependency in the coming years. We have ambitious targets for renewable energy and I am sure we will be able to maintain the significant progress made in recent years.

On comparisons between Irish energy prices and those of other European countries, while price is important, it is not the only factor one must consider. In Spain, for example, consumers must still pay the outstanding cost of providing energy infrastructure. The cheap energy Spanish people currently enjoy will not last forever and energy prices will increase substantially at some point. Moreover, many Irish people would find it objectionable if the State were to adopt the nuclear option pursued by France. Factors other than price are at work in many cases.

Ireland was late in entering the race to develop renewable sources of energy and is probably paying the price for this failure. Nevertheless, the Government is serious about tackling the cost of energy. As the Minister indicated recently, a double-digit decrease in energy prices is anticipated in the near future. I will be pleased to address any other issues Senators may wish to raise.

Senator Martin Brady

I am glad to have an opportunity to say a few words on the Bill, the purpose of which is to amend section 23 of the Gas Act 1976 to allow Bord Gáis to complete its ambitious plans. I will speak generally on the price of energy, particularly gas. Gas bills for the most recent billing period, which includes Christmas, doubled for most people in my constituency. Elderly people are now afraid to switch on their heating systems, which is a serious matter. Small businesses such as hotels and the catering industry are also affected and I am aware of a number of businesses collapsing as a result of the excessive cost of energy. While the Minister has given a commitment to take action, he must do so quickly because the increase in the cost of energy is a significant drain on many businesses.

Consumers and business people are asking why gas and electricity prices are increasing at a time of falling oil prices. This does not make sense but no one has explained the reason.

As Senator O'Reilly noted, we must consider the use of alternative sources of energy. Years ago, in many counties, notably Cavan and Monaghan, water provided the main source of energy for a large number of industries such as tanneries, factories and mills. We must seriously consider harnessing water to generate energy, perhaps by reverting to the use of mill races. Considerable research has been done in this area. We must encourage and incentivise those with know-how who are willing to develop energy sources such as wave, wind and water.

I welcome the Government's new initiative to provide grants for insulation works as it will create a significant number of jobs. Clearly, given the large number of inquiries Members are receiving about the programme, take-up will be substantial. The scheme is a good move for consumers as it will create employment and give people a lift in these recessionary times.

Senator Jim Walsh

I welcome the response of the Minister of State who consistently demonstrates a firm grasp of the issues in this complex field. Both Senator O'Reilly and I emphasised the importance of competitiveness. The Minister of State echoed the Minister's comments in the other House about the likelihood of a double-digit reduction in energy prices. Such a move would be welcome to consumers and businesses in the current climate. It behoves us all to play our part in solving the current economic problems and Senators from all sides have articulated this need in a constructive manner. While we are all loath to accept a decrease in our living standards, it will be inescapable in the current global recession.

Recent increases in energy bills have caused angst among domestic and business users. The Minister acknowledged the need to ensure we have a competitive climate in which businesses can operate and emphasised the importance of competitiveness in the areas for which his Department has responsibility. The purpose of these efforts is to achieve efficiencies and retain the maximum possible number of jobs during a period when Ireland, Britain, the rest of Europe and the United States are haemorrhaging jobs. Unemployment is devastating families and is probably the greatest affliction a person can experience in an economic downturn. I welcome efforts being made in this regard.

The ESB competes with Bord Gáis in the field of electricity generation. Those who live in proximity to a generating station will be aware of the spending power exercised by ESB employees in their area. I understand the average salary among the 6,000 ESB staff is in the order of €76,000, a considerable sum. I was astonished to learn the company increased pay in the current climate. While people are entitled to pay increases in normal circumstances, everyone must be conscious of the impact of their actions on those whose wages are being substantially reduced — it is not uncommon to hear of private sector salaries being cut by 15% — and the large number of people who are losing their jobs. The ESB's decision to hold wages to the current level for the next two years is a belated but necessary and welcome step.

The Minister of State noted the Government's strong emphasis on renewable energy sources, and investment in wind energy and wind farms has been significant. Senator O'Reilly referred to the co-operative society movement. When I was chairman of a co-operative we used to hold meetings in Horace Plunkett's house. Co-operatism and volunteerism will come back in vogue in the current climate and should be promoted. We have learned of the excesses of some of those who control capitalist corporations and the manner in which they salted the books on their shareholders and others. We must ensure these practices do not recur. We should encourage the values which prevail in the co-operative movement. Technology in the wave and tidal energy area is not as developed as it might be. What emphasis, if any, is Bord Gáis Éireann putting on that area as distinct from wind energy? This is an island country and if technology can be developed to extract energy efficiently from wave and tidal power, it would be a great advantage to us. Obviously, it would be very clean energy. Given the interconnectors we are building and on which so much emphasis is being placed by the Department and the Minister, it would perhaps open avenues to export energy. Has Bord Gáis Éireann a remit and commitment in that area?

Senator Joe O’Reilly

I thank the Minister of State for his thorough replies and genuine effort to address the issues raised. I was not entirely happy with his reply on energy prices. I would like him to tell the House that there will be action on energy prices this month. He mentioned double digit figures, as did the Minister in the Dáil. We should be talking about a 20% reduction. Let us be radical about this. Employment and many businesses depend on low energy prices as do old people who are in need and who are finding it difficult to live. It has been a particularly difficult and long winter and those old people need that reduction in energy prices.

It would be great if the Minister did something radical within the calendar month. I do not see why the regulator could not talk to the interested parties and the Minister within three days and implement the reduction by the weekend. If it will take the rest of this month, so be it but it should not go beyond the end of the month.

I acknowledge a point made by Senator Martin Brady who hails from the beautiful drumlin county from which I hail. He said that for generations, the traditional mills were powered by water, by the native streams and rivers of the area. There were flax and corn mills all along the streams. That was the case in Cavan and Monaghan and the traditional mills were very famous. There was one close to where I live in Bailieborough.

As Senator Martin Brady said, this water energy should again be harnessed and used to generate electricity for domestic supply at a minimum. Why not have surplus supply sold to the grid? We must become imaginative about this. I would like the Minister of State to address that. As I said earlier and at length on Second Stage, wave energy is critical.

Will the Minister of State tell the House that before 1 March, there will be a 20% reduction in energy prices across the board? That would be an adequate response by Government to what is a very serious situation. We cannot continue to be another report, study or meeting with the regulator away from action. We need it now. Again, I thank the Minister of State for his replies.

Deputy Seán Power

I thank Senators for their very positive contributions. I very much appreciate their support in progressing the Bill through Committee Stage. The Bill has been passed by the Dáil and will make its way to the President for consideration and signature into law.

As I mentioned earlier, we are attempting to increase the statutory borrowing limit of Bord Gáis Éireann from its existing €1.7 billion to €3 billion. This will provide the company with the legal ability to access funds to develop its strategic direction which it has outlined on a number of occasions.

Bord Gáis Éireann has been in operation for over 30 years and in that time, it has developed the gas network which runs to almost 12,500 km of pipeline serving over 600,000 customers. The expansion of its natural gas network in the past 30 years has ensured that a clean, efficient and environmentally clean fuel is available to a considerable portion of the population. Another portion of the population does not have the opportunity to avail of this fuel and I hope we can increase that service throughout the country.

The board has made a critical contribution to the development of the economy in many ways. Major infrastructure projects delivered by the board over the past 12 years have been on time and within budget. They include the pipeline to the west, from Dublin to Galway and on to Limerick; the South-North pipeline, from Dublin to Belfast; the Mayo-Galway pipeline, which will facilitate the transportation of Corrib gas to the Irish market; the north-west pipeline from Belfast to Derry; and the second gas interconnector with Scotland, which has secured the supply of gas to Ireland since its completion in 2002.

In that time, Bord Gáis Éireann has paid close to €700 million to the Exchequer in dividends. An increased ability to borrow funds will allow Bord Gáis Éireann to develop the gas network further over the next five years and it is planned to extend the network by a further 1,500 km and to connect another 150,000 new customers during that period. For safety reasons, all remaining cast iron pipelines will be replaced by polyethylene pipes. Bord Gáis Éireann will also invest in new systems and technology to improve its customer service further.

Wave energy was mentioned and the possibility of further investment in that regard. Bord Gáis Éireann is actively involved in the development of renewable energy. At present the focus is mainly on wind energy but it is also looking at various methods of generating electricity through renewable sources. The technology in regard to wave energy is very much in its infancy and at an early stage of development. Bord Gáis Éireann is very keen to support the development of this technology through its strategic investment division with a view to securing a varied portfolio of renewable generation.

The emphasis has been on the wind energy area and it is obvious technology in that area is much further advanced and developed. One can see it working quite well around the country. We are still very conscious of the resource we have off our shore and are very keen to develop that.

Senator O'Reilly asked about energy prices. A review of the price was not due for some time but we have asked for one to take place as a matter of urgency. The regulator will meet interested parties over the next few weeks and we expect he will come back and present options to us in three to four weeks when the matter will be brought before Government. From our point of view, that cannot happen quickly enough. As the Senator will be aware, the responsibility of setting prices is not something that rests on the Minister's shoulder but is the regulator's job. We are anxious that the regulator does his job and that we get a decision on this as quickly as possible.

While Bord Gáis Éireann's safety standards are of the highest quality, there is no room for complacency and there is always room for improvement.

The board will continue its endeavours to further improve its emergency response standards and pipeline safety standards. It is now taking a leading role in the energy sector generally as well as building a portfolio of electricity generating assets, including the 445 MW plant at Whitegate and other wind-based renewable projects it is seeking to develop.

A retail domestic electricity business provides much needed competition in that sector. We talked about reducing pricing, something on which we could all agree. There is nothing better than competition to reduce prices. We encourage it and it continues to be our policy.

There have been many contributions today and last week, not only by Members of this House, but also by Members of the Dáil on the provision of natural gas to various locations around the country, which to date have not yet been connected to the natural gas network. As I said before, Bord Gáis Éireann is obliged to have regard for economic factors when assessing the potential for rolling out its gas network and in some cases it is just not economically feasible to bring gas to particular locations.

I know Members on all sides are anxious and make the case that gas be provided to particular areas such as small villages. We cannot ignore the economics of that. If it is not viable to bring gas into one area, people who are receiving it pay more than they should for it. Bord Gáis Éireann has made some changes to the way it deals with areas. Instead of dealing with an area on its own, it can now be dealt with as one of a cluster, which means more areas can receive gas.

Bord Gáis Éireann has always tried to be as flexible and as innovative as possible when examining the economic feasibility of delivering gas to locations. It proposed to the regulator that the economic criteria for assessing towns might be amended so that instead of looking at locations individually, towns could be grouped before the economic criteria are assessed. This proposal was accepted by the regulator and it resulted in several towns being connected, whereas under the previous policy this would not have been possible. Under its new towns analysis established in line with the new assessment criteria, Bord Gáis Éireann is close to completing phase 3. Hopefully, several more towns will have been found to meet the required economic criteria for connection to the network.

All these developments are in line with the Government's energy policy framework document up to 2020, Delivering a Sustainable Energy Future for Ireland, which provides for the sustainable development of the State energy companies as well as ensuring environmental sustainability, security of supply and competition in the energy sector for the benefit of customers.

There has been much discussion recently on gas prices. As I mentioned before, the gas business section of Bord Gáis Éireann is regulated by the Commission for Energy Regulation, which allows it a regulated rate of return on its transportation business. It can only recover costs on investments approved by the regulator. In setting the rate of return, it applies the cost and level of borrowing of an efficiently operated and financed company with comparable systematic risks to Bord Gáis Éireann.

However, rising energy costs are a major concern. The two-phase approach to tariff regulation adopted by the regulator last year resulted in price increases in the Irish market which were lower than those in some other markets, where increases in gas tariffs of over 40% were imposed. The Irish gas tariff increase was 20%. In taking this approach, it took account of the difficult economic situation and the impact of price increases on business and consumers.

While the regulator is required to ensure that regulated tariffs are cost reflective, the Minister has asked it to look at the possibility of lowering energy costs to consumers in a non-distortionary fashion through an expedited review of tariffs. If current trends in energy prices, particularly gas, continue, a double digit cut in gas prices might be feasible later this year. Looking at the long-term pricing of gas, there is no reason that cannot be achieved and we are very confident it will be. The Government's priority is to ensure that swift action is taken in the interests of energy consumers.

The part played by Bord Gáis Éireann in the development of the Irish economy for more than 30 years has been significant. We have a robust gas supply network with a secure supply in the long term. This security of supply of natural gas has also supported investment in electricity generation in Ireland in recent years. I thank the Members of this House for their support for the proposed increase in the statutory borrowing limit for Bord Gáis Éireann to €3 billion and for the passing of this Bill through all Stages in a very efficient manner. I acknowledge the very constructive contributions from Members.

Question put and agreed to.

Section 2 agreed to.

Title agreed to.

Bill reported without amendment and received for final consideration.

Question proposed: "That the Bill do now pass."

Senator Jim Walsh

I compliment the Minister of State. Many Ministers come into the House, but he has shown himself to be very au fait with the issues that come before us. Senator O’Reilly is involved with the Joint Committee on Communications, Energy and Natural Resources and knows it covers a wide, broad and complex range of activities. It can be quite challenging to keep oneself briefed and up to speed on everything. I commend the Minister of State in that regard. I know he is well assisted by some very good civil servants who have been with him here. There is a lot of debate on the public service and private sector at the moment. We are fortunate that there are excellent people working within the public service who are indispensable to the services we provide.

Senator Joe O’Reilly

I am happy to second the vote of thanks to the Minister of State and endorse the remarks of Senator Walsh.

Senator Martin Brady

I would like to be associated with the remarks. The Minister of State is always very straightforward. There are no fancy frills or veneer, and what one sees is what one gets, which is to be welcomed. I would also like to thank his efficient officials who are here today.

Question put and agreed to.

Sitting suspended at 1.10 p.m. and resumed at 2.30 p.m.