I am very pleased to address the House on the Second Stage of the Bill. I thank Senators for the opportunity to present this Bill.
As they will be aware, the Russian invasion of Ukraine in early 2022 led to exceptionally high energy prices. The Government is aware of the resulting financial strain on households and businesses in Ireland and has introduced numerous supports for homes and businesses to offset the increase. This includes a package of once-off, cost-of-living supports worth €2.5 billion in budget 2023 with a similar package worth €2.2 billion in budget 2024.
Significant action has also been taken at EU level. Council Regulation 2022/1854 on an emergency intervention to address high energy prices came into force in October 2022 and provided for a mandatory temporary solidarity contribution on fossil fuel production and refining and a cap on market revenues of certain electricity generators that earned unexpected surplus profits due to unforeseen circumstances. The first part of the regulation, which provides for the temporary solidarity contribution has been enacted and was commenced on 2 August last and now we must implement the cap on market revenues which is also provided for in the regulation.
I would like to provide a brief overview of the most important measures the Bill addresses before discussing them in more detail. The main purpose of the Bill is to cap market revenues gained by energy companies operating within the State and provide for the redistribution of the collected funds back to consumers. It does this by implementing a cap of €120 per MWh on electricity produced from renewable sources, namely wind, solar and hydropower. In addition, a variable cap, of at least €180, is applied to coal, oil, peat and biomass fuels.
On the basis of economic appraisal conducted by my Department, I note that these cap levels strike the balance of capturing excess revenue in the sector while maintaining positive investment signals. Applications of caps below these levels may risk Ireland's success in securing the investment needed to meet our climate targets. It is important to add that the market cap will not apply to wind, hydropower or solar energy projects, which make difference payments to the public service obligation, PSO, for surplus revenues above the relevant auction strike price under the renewable electricity support, RES, scheme as these revenues are already capped. The cap on market revenues will apply for the period from December 2022 to June 2023. The Council regulation does not provide scope to extend the cap on market revenues prior to this period. In addition a recent review by the European Commission concluded that a prolongation of the market cap measures is neither indicated or desirable.
The Bill and the EU regulation on which it is based are designed to provide assistance for final electricity customers who have experienced extremely high electricity prices. The proceeds raised by the cap will be used to support electricity customers with their electricity bills. The precise disbursement of the proceeds will be subject to a future Government decision. However, it will be taken in accordance with the requirements set out in Article 10 of the Council regulation.
The Commission for Regulation of Utilities, CRU, the independent energy regulator, is designated as the "competent authority" in the Bill, and will administer the market cap with the assistance of EirGrid, which will be the "collection agent" and will manage the collection of proceeds.
I now propose to give a more detailed overview of the Bill, which contains four Parts and 33 sections. Two Acts are referred to: the Companies Act 2014 and the Electricity Regulation Act 1999, with no amendment required to any existing legislation.
Part 1 contains standard legislative provisions that cover the Short Title, its commencement, definitions of terms used in this Bill and a standard provision enabling the expenses of the Minister to be paid out of moneys provided by the Oireachtas.
Part 2 provides for the calculation of the market cap, the return of information to the competent authority, and the payment of money that is due. I would like to describe each Chapter of this Part in detail as this is the most complex Part of the legislation. This Part is divided into 19 sections, divided into three Chapters which I will now outline.
Chapter 1 begins by describing the relevant parties who will be liable to make a payment under the Act, as well as the specific fuel sources to which the Act applies. These sections are followed by sections 8 to 10, inclusive, which provide detailed and technical information concerning the calculations required to determine the level of revenue due under the cap.
Sections 11 and 12 differentiate between the preliminary surplus revenue and adjusted surplus revenue.
The first is calculated as the monthly revenue minus the capped revenue. The second, however, the adjusted surplus revenue, takes account of various gains or losses from hedges, power purchase agreements, contracts for difference payments and monies paid to or received from traders’ hedging arrangements. This adjusted surplus revenue represents the amount for which an entity is liable to pay in respect of the market cap.
Chapter 2 details the returns which are required to be provided as well as giving the competent authority the power to request such information if it is not forthcoming. The returns must contain all relevant information, such as the type and number of fuel sources used, allowable costs of production, market revenue and the level of cap. They must also contain the relevant person’s assessment of both preliminary surplus revenue and adjusted surplus revenue, as well as any other relevant information regarding hedging arrangements or other documents which may be prescribed. This chapter concludes with section 19, which describes the appeals process and provides for the making of an appeal against a determination of the competent authority in the High Court.
Chapter 3 details the payment of due funds, additional charges for late payments and the fact that interest will apply to these outstanding funds, which is provided for in sections 20 and 22, respectively. The final two sections of Part 2 outline the requirement to maintain adequate records relating to the making of a return and state that failure to do this is an offence. Section 24 provides that the competent authority may enter and inspect premises as required to confirm that returns provided are accurate, a task in which the Garda can provide assistance, if such is required.
Part 3 outlines the market cap fund, which will be where all amounts paid under Chapter 3 above are deposited. The first section describes the establishment of the fund and the second, section 26, details the accounting obligations and provides that the National Treasury Management Agency may perform this function. It concludes, in section 26(6), with a provision that the Minister is required to provide copies of the accounts to the Houses of the Oireachtas. The final two sections of this Part, sections 27 and 28, detail the use of funds raised. These can be used to set up schemes which fulfil the criteria set out in article 10 of the Council regulation which requires they benefit final electricity consumers. The fund may also be used for refunding overpayments to energy producers, intermediaries and traders if required.
The final Part of this Bill, Part 4, distinguishes the offences and penalties which apply for providing false or misleading information to the collection agent or the competent authority. It also distinguishes offences, outlined in section 30, relating to: failure to make a return within the specified period; failure to maintain correct records; obstruction of an inspection; and breaching a provision of a scheme outlined in section 28. The subsequent section, section 31, outlines how the competent authority can carry out prosecutions in this regard and section 32 states that an organisation can be held liable for an offence committed by a member of that organisation. The final section of Part 4, which concerns information sharing, outlines that both the competent authority and the collection agent can share information, including names, data on market participation, commercial information and technical information concerning system connectivity. All information sharing shall be subject to GDPR. I have outlined the main provisions of the Bill and provided additional detail on the sections. I hope this will be of assistance to Senators.
One other element I want to share is to flag in advance an amendment we may bring in on Committee Stage. We are doing this for the avoidance of doubt with regard to a technical issue and we are examining the possibility of making a minor amendment. Our assessment is that these amendments may be needed to prevent the unintended double counting of moneys owed to the market cap fund. This issue only recently came to light during the consultation process the CRU has carried out with the industry. The industry has also described these issues in various submissions made to the Department in recent weeks. We are working with officials from the Office of the Parliamentary Counsel to include these amendments. We hope to introduce them before Committee Stage in the Seanad. This shows the benefit of the Seanad in us being able to continue to adjust and approve legislation as it goes through the legislative process.
I look forward to hearing the contributions of Senators and hopefully getting the Bill passed quickly. It is in the interests of Irish householders in these difficult times to be able to raise revenues from the surface profits in the energy sector. In this case that is primarily wind. That helps to reduce bills for everyone.
