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Energy Bill 2016 [Seanad]\Second Stage
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Snippet Contents:

It falls to us to be radical in the approach we take. We must work very hard in this area. While there was much informed debate by previous Governments and Parliaments and much good work done, the targets now in place and the deadline we are ticking towards are such that we will really have to involve ourselves in a programme of action to ensure we meet our commitments. We can do that if we get the same kind of buy-in across the House.
The proposed legislation gives greater enforcement and sanctioning powers to the CER regarding wholesale electricity and gas market abuse, largely as a result of the 2011 remit regulation. As the Minister knows, the remit relates to wholesale energy products that introduce a market-monitoring framework to detect and prevent market abuse. If properly implemented, it will ensure that the consumer is ultimately better served and has access to the cheapest electricity at a given time.
The all-island single electricity market, referred to by the Minister as the SEM, has existed since 2007. The interconnection between Ireland and Northern Ireland is particularly important from a Northern Ireland perspective. The North relies on electricity imports from the Twenty-six Counties to make up for its insufficient local electricity-generation capacity.
The Bill provides for an extended legal definition of the existing SEM in the Electricity Regulation Act 1999. This will enable decisions of both regulators, in the North and South, to develop new market rules for the SEM, known as the integrated SEM. We certainly have no shortage of acronyms. This development requires compliance with the new EU internal energy market rules, with an approaching enactment deadline. Obviously, therefore, it is important that the Bill be passed relatively quickly. Meanwhile, the integrated SEM will replace the existing SEM. This needs to happen by the end of 2017 owing to changes in the EU legislation designed to harmonise cross-border trading arrangements across all European electricity markets. While we do not have the single market across the Union just yet, obviously the passage of this legislation and other efforts will ensure we have a more open market for the trading of electricity, which, as I stated, can only benefit all the consumers in this State. As the Minister well knows, our energy costs in this country are quite high. This inhibits the attraction of foreign investment. Notwithstanding how well we have done, it certainly causes difficulties.
The potential for Brexit is a further complication. It may or may not transpire later this month following the referendum in the United Kingdom. The ESRI indicated in a recent report that the electricity market in Britain would remain independent of that of the rest of Europe in the event of an exit. It stated interconnection with Britain would leave Ireland vulnerable to any problems that might exist in terms of capacity within the British market. This would be of concern to the Government and those of us on this side of the House. Under these circumstances, the enhanced interconnection between Ireland and the rest of the European Union could be extremely costly from Ireland's perspective.
There are still some questions that remain for me. First, would the regulator have sufficient resources to carry out the investigations and impose the administrative sanctions, were they to arise as a result of the passage of this legislation? It would be interesting to know what increased resources the regulator has envisaged. Will they mean a cost to the State? Will the regulator generate them from existing revenue-generating capacity? Second, issues arise surrounding whether there will be a sufficient independent appeals mechanism in place to deal with the new powers afforded to the regulator. I am open to correction in saying that, under this Bill, any penalties subject to High Court confirmation can be appealed only by way of access to the courts. I would like some clarification on that. Has any consideration been given to an appeals mechanism within the existing structure, which mechanism would be applicable prior to recourse to the courts? As I understand it, different countries have different approaches in this regard. Should it also be possible to appeal against certain decisions without having to engage in a judicial review process?
My party is very concerned over the current high level of retail energy prices footed by consumers despite the collapse in the wholesale gas price regime. While there is some recovery in wholesale gas prices, we are still a long way from the peak we are all familiar with. There is clearly not an appropriate drop from the consumer's point of view. Customers are not seeing retail operators make the equivalent cuts in electricity and gas bills. Wholesale gas prices decreased by 29% in 2015 but the retail equivalent was only 5%, amounting to a reduction in bills of approximately €50.
Retail electricity and gas prices still remain excessively higher than average energy prices across the European Union according to EUROSTAT. Ireland has the third highest prices among the 28 EU member states. This has an impact on our competitiveness and ability to attract foreign investment and retain our own small to medium enterprises, which depend so much on competitive energy costs to compete with other operators within the Union.
Any planned retail energy bill decreases will be negated by the planned PSO levy increase of more than 30% this October. This will see electricity bills go up even more. For consumers, it now costs approximately €200 more for a typical household electricity bill than five years ago. There has been a 21% increase in this particular period. Given the wholesale energy price trends, it is hard to fathom the extent to which the consumer is being fleeced here.
Large wholesale gas price reductions are not being passed on to the consumer. Wholesale gas prices are at a six-year low, driven by an abundant supply and a strong euro. Energy companies have failed to pass on decent reductions in wholesale energy costs to retail customers. Household gas and electricity retail prices fell by only 5% in 2015, as I stated.
The 2015 White Paper on energy states that CER has statutory responsibility to protect the interests of consumers and ensure prices are fair and reasonable. We would like to see greater involvement by the regulator in dealing with that. As one knows, the White Paper also states it would enhance consumer protection and market monitoring, ensure the competitive markets are delivering for all customers and ensure that energy suppliers include additional information on their customer bills, including information on energy usage and how it compares to that of other customers. The litmus test of this rhetoric will be to see the plight of consumers addressed with real action.
The regulatory regime must be reformed and empowered to take account of the impact of current retail prices being foisted by energy providers on consumers, thus affecting competitiveness. Key reforms include permitting CER to investigate competitive practices in the energy sector and allowing for sanctions against energy companies where they are shown to be engaging in what can only be described as anti-competitive practices. The ultimate litmus test of this legislation is whether the regulator's enhanced powers will enable it to tackle wholesale market abuse. Energy companies need to be brought to account over prices charged, particularly those charged to the household customer.
In 2014 in the United Kingdom, the energy regulator wrote to the largest power suppliers in Britain seeking an explanation for customers as to why a decline in wholesale gas and electricity prices had not led to lower fuel bills. The question must be asked as to why this has not happened in this jurisdiction. One must ask what the energy regulator is doing about the insufficient price decrease. Perhaps it would be helpful if the Minister engaged in this process and reported back to us in due course. No credible reason has been given.
I look forward to discussing the main provisions of the Bill on Committee Stage. I thank the Minister for his offer to engage fully with spokespersons and Members on the other side of the House to ensure any amendments will be dealt with in a less adversarial way than might have been the case heretofore.