Mr. Jim Gannon:

I thank the committee for inviting us to join it today. We are here to discuss utility connections to rural areas and offshore islands. As we have not previously addressed this committee, I might start with a brief outline of our role. The Commission for Regulation of Utilities, CRU, is an independent economic and safety regulator. Our mission is to protect the public interest in water, energy and energy safety. Our vision is to provide safe, secure and sustainable supplies of energy and water, for the benefit of customers, now and in the future.

In line with our current strategic plan, which runs from 2022 to 2024, our four key priorities are to ensure security of supply, drive a low-carbon future, empower and protect consumers, and enable our people and organisational capacity. We have a wide and expanding range of statutory functions, including to regulate some of the key utility companies in Ireland. Under the Electricity Regulation Act 1999, we regulate the activities of the electricity distribution network operator, ESB Networks. Under the Water Services Acts, as amended, we have a similar role in respect of Uisce Éireann.

One of the key elements of the CRU’s work is to implement five-year revenue control programmes for the utility network providers under our remit. The purpose of revenue control processes is to set allowed revenues; in other words, the amount of money allocated to the respective companies to cover their capital and operational expenditure over a five-year period. In this process, the CRU also examines the cost and performance of the companies over the previous five years. In setting the allowed revenues, the CRU has regard to protecting customers and ensuring fair tariffs and charges; ensuring the network companies can finance their undertakings and deliver improved services; setting efficiency targets, reporting requirements and incentives to ensure delivery of high-quality, efficient outcomes for customers; and ensuring the companies have sufficient revenue to enable them to deliver secure supplies and meet national priorities, including climate and environmental obligations.

Turning first to ESB Networks, in the fifth price review, PR5, the CRU decision on revenues for the 2021 to 2025 period provided access to the funds necessary to deliver the climate action plan. It included an electricity networks capital investment programme of €4 billion in total.

It placed very strong incentives on ESB Networks to facilitate the transition to a low-carbon future and better service for customers. It also provided, for the first time, an agile investment framework to allow for flexible and innovative approaches to the changing needs of the system and the policy underpinning it. Specifically for ESB Networks, the PR5 decision provided a step change in revenue including a 20% increase in operational expenditure and an 84% increase in gross capital expenditure to a total of €2.8 billion.

As part of the reporting and incentives framework, ESB Networks reports annually to the CRU on the delivery of its capital expenditure programme, including connections. The link to the latest report is attached to our opening statement for Oireachtas committee members.

Turning now to Uisce Éireann, the CRU’s revenue control 3, RC3, process was the first five-year revenue control for Uisce Éireann, following two shorter revenue control periods from the outset of the CRU’s regulatory role. It should be noted that there is a different process with regard to water, given that the Government provides Exchequer funding to Uisce Éireann. This process includes the Minister for Housing, Local Government and Heritage publishing a water services policy statement, following which Uisce Éireann submits a strategic funding plan to the Minister that sets out the arrangements Uisce Éireann proposes in order to implement the objectives of the water services policy statement.

The Exchequer funding allocations set out in the strategic funding plan reflect the upper ceiling that would be provided by the Exchequer to fund Uisce Éireann operations and investments, with final funding allocations being confirmed based on the CRU revenue control process.

The CRU RC3 decision again provided for a step change in capital investment by Uisce Éireann in water and wastewater services, totalling over €4.5 billion in capital expenditure over the five-year period to deliver significantly improved customer and environmental outcomes.

The CRU publishes an annual investment plan monitoring report setting out the progress made against the RC3 investment plan across the previous year. To date, two such reports have been published covering 2020 and 2021, and are available on the CRU website. It should be noted that the CRU monitors and reports on the delivery of major projects and programmes at a national rather than a granular, regional or local level. As part of this monitoring, the CRU seeks input from a range of stakeholders, including communities, on the work undertaken by ESB Networks on stakeholder engagement in particular, and support for same.

In addition to revenue controls, the CRU is also actively engaged in a number of major projects and programmes to support active customers and citizen and renewable energy communities. I thank the committee and welcome any questions.