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Energy Bill 2016 [Seanad]: Second Stage (Resumed) (Continued)

Wednesday, 29 June 2016

Dáil Éireann Debate
Vol. 915 No. 3

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(Speaker Continuing)

[Deputy Catherine Murphy: Information on Catherine Murphy Zoom on Catherine Murphy] The Bill will allow the CER to issue directions and determinations to licenceholders and, if necessary, seek High Court orders and impose fines. I do not know what the extent of those fines will be. It is interesting to note that these enhanced powers are to enable the Commission for Energy Regulation to deal with licensed energy providers who engage in improper conduct. What constitutes improper conduct in a market? That may well be something which is subjective. When one takes into account the effect of taxes and levies, we have the highest basic cost of energy in the entire EU. I am concerned about the monopoly of the big providers of whom there is a really small number in the mainstream market in Ireland. The only genuine form of competition in the market is switching for customers, which is not all that straightforward. It can be offputting for many people, involving as it does direct debits and many other things. It is also interesting to note that we had the largest switching rate in the EU last year. That was probably prompted by the very high energy prices. However, people tend to switch between the big providers who already dominate the market. We have seen smaller providers begin to gain a foothold but it has not been enough to challenge the dominance of the main players. In that context, I am concerned about the issue of improper conduct to which the CER refers. It depends on what spectrum one is using.

While 56% the price of electricity in this country is accounted for by taxes, 44% is decided by the industry. Generally, it is the small householder or company who foots the bill because larger enterprises have a better chance of being able to negotiate their energy costs. They are bigger players and may well be able to negotiate price reductions based on wholesale prices. The average household is not able to do that. The energy companies pay dividends to Government and I wonder if that affects the decisions which are made. Indeed, the bigger the bills, the more VAT is brought in. I would hate to think that would have an impact on the decisions that are made. At the end of the day, energy is one of the main costs a household faces. Another interesting facet of this is the relationship we have between the main players. One does not have to look very far to see sponsorship and advertising and one wonders if that has a bearing on the level of proper analysis of this sector. The media must analyse companies and hold them to account given the extent to which prices in Ireland are such an outlier in respect of the prices in other countries.

According to a reply I received some time ago to a parliamentary question, the CER ceased to regulate electricity prices in 2011 and gas prices in 2014 on the basis that both markets are commercial, liberalised and operate within national and European regulations and that prices are set supposedly through competition among suppliers. If switching is the only means, one has to question that. Why are our energy prices so high and in whose interest is the Commission for Energy Regulation really working? There is a very clear focus on reducing prices, but regulating industry rather than regulating prices is really the point. The cost of living in Ireland is among the highest in Europe and our energy costs are a significant factor in that. People struggle with energy bills, and indeed the Society of St. Vincent de Paul has come to the aid of many, including some I know myself, who were not able to pay. To pick up on a point Deputy Eamon Ryan made, the then CEO of the CER, Mr. Dermot Nolan, left the commission in 2013 to take up the role of chief executive of Ofgem, the UK equivalent. Within weeks of assuming the position he had launched an unprecedented inquiry into energy prices and referred the entire sector for investigation by the Competition and Markets Authority. Interestingly, the inquiry, which went on for 18 months, found that most households in the UK were paying too much for energy to the biggest suppliers. There is a point in that. One wonders how our system would allow the CER to refer a matter it could not deal with itself for investigation given the impact of the UK inquiry. It is worth picking up on that point.

High energy costs in Ireland are not just a factor for households but for the economy as a whole. For example, we have an ideal climate for the location of data centres, yet many locate to places with far less ideal climates, perhaps because of high energy costs. Obviously, they are a key factor. An important factor in any inquiry into energy prices has to be the consequences of overcharging. If companies are found to be overcharging, customers who have been adversely affected by being cut off or whatever should be compensated. It changes behaviour if there are consequences. As such, consequences must be built in because that might well produce a result. The CER's remit no longer includes the regulation of energy and gas prices. If it does not have that power, we should look at another mechanism to ensure there is good regulation rather than simply leaving it to supposed market competition. Similarly, we must look closely at the PSO levy to ensure we get a return from it. If we are not using the contributions from the levy to create clean energy, our energy prices will continue to rise. As such, it is very important that the levy is properly managed.

When considering how to cut energy costs, we must also look at the money we are spending on old plants which cost more than they should by virtue of their age. Tarbert in County Kerry, for example, has cost between €250 million and €260 million despite the fact that it is a backup plant. Clearly, situations like that require one to look at alternative jobs for the workers. We need to manage some of those plants. While we obviously need backup, those plants will only last for so long, as well as which other forms of energy will come into the market. One must look at where people who work in those plants will go if the plants are closed. That is so in respect of some of the old peat-burning stations. Very often, they were the only places local people could get work. As such, there is a balance to be struck in navigating out of that situation.

While offshore wind and wave energy generation may be very expensive to invest in currently, it was clearly identified by the ESRI in advance of the publication of the Climate Action and Low Carbon Development Bill as having real potential and presenting a real opportunity for energy exports. Even where money was invested, the investment ceased and the information and investment we put in ended up in Scotland. Wavebob was one example where €10 million was invested. We should not be losing those kinds of initiatives. Wave and offshore wind energy generation has the potential to be the new oil because it is not subject to the same limitations as onshore wind generation. Onshore wind is problematic where there are large windfarms with large turbines in close proximity to homes. That has to be managed and the community must have buy-in if it is to accept it.

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