Noel O'Flynn (Cork North Central, Fianna Fail)

The CER is accountable to the committee which I chair and has been brought before the committee on numerous occasions to explain its decisions and its actions, in line with the statutory duties and responsibilities given to it by the Oireachtas under the Electricity Regulation Act 1999, various other amending legislation in 2002 and all other statutory instruments introduced in recent years.

The reality is that the Minister does not have a function regarding electricity and gas pricing. If the Oireachtas decides otherwise, so be it but I have not heard many calls in our committee to reverse that decision.

The CER is given responsibility for regulating ESB's public electricity supply tariffs under the Electricity Regulation Act 1999. Prior to CER regulation, the ESB, by custom and practice, sought Government approval before increasing its tariffs.

Confusion may exist about the relationship between the opening of the electricity market and the rebalancing of tariffs. Tariffs rose by only 3.5% in nominal terms between 1986 and 2001 compared to 52.5% inflation in the same period. That led eventually to generation costs being under-recovered and grid investment was postponed.

The Government has undertaken a major investment programme on the electricity transmission and distribution systems to create the environment for additional generation capacity to meet increasing demand. In this regard, it is worth noting that energy infrastructure is currently paid for by the users and not the State as is the case, for example, in regard to roads and water.

The multi-billion euro infrastructure investment programme represents a trebling of the investment in the transmission system and a doubling in the distribution system in the period 2001-05 compared with previous years.

The CER reviews ESB costs when assessing ESB applications for changes to its tariff prices. As part of this process, the CER also operates a consultation process. Regarding Bord Gáis Éireann's natural gas tariffs, which are also regulated by the CER since 2002, it is important to keep in mind that natural gas is traded worldwide and prices are determined by supply and demand.

Until 2002, natural gas tariffs had effectively remained unchanged in Ireland since the mid-1990s, despite a steep rise in the cost of natural gas during that period. The price freeze was based on favourable long-term contracts negotiated by Bord Gáis Éireann with suppliers and, as these have gradually run out, the price increases have come on-stream to ensure that BGE's supply costs are realistically reflected in the prices being charged. We owe a great debt of gratitude to the management and the board of Bord Gáis Éireann for being able to keep those prices and for putting in place long-term contracts with suppliers over many years.

I remind the Deputies that the challenge Ireland faces in managing increasing energy costs are not unique. The European Union Green Paper, A European Strategy for Sustainable, Competitive and Secure Energy, notes that oil and gas prices are rising and have nearly doubled in the EU over the past two years, with electricity prices following. It is important to note that two years ago the price of a barrel of oil was $35. It went to a high of $78 and is back to $60 today. OPEC said today it would reduce the supply by 1.2 million barrels a day to keep the prices as high as possible.

The EU Green Paper points to greater energy efficiency and innovation as the means by which member states may realistically address rising energy costs. In this context, I heartily commend the Government for its initiatives on both of these fronts, exemplified by the recent launch of the energy efficiency Power of One campaign and of the new Charles Parsons Energy Research Awards. I commend the Minister for his Power of One initiative. I encourage every citizen in the State to take notice of that programme and to be energy effective and efficient. No Deputy is happy with the CER approved price increases, despite the fact that we are essentially price takers in this market.

The Government's approach on energy policy is to be commended. It is dealing with issues such as security of supply, energy pricing, fuel diversity, the environment, renewable sources of energy, infrastructure development and the all-island energy agenda. Sterling work is being done and must be recognised. I am disappointed that the Members on the opposite side of the House do not recognise that.

The introduction of the single electricity market, SEM, has the potential to drive cost efficiency in the electricity industry which in turn can lead to consequential improvements to the national and international competitiveness of the wider industrial and commercial sectors of the economy. I commend the Government for its planned contribution of €12.7 million to the completion of the gas network in Northern Ireland in recognition that cross-Border gas infrastructure is an essential part of the agreed North-South aspiration of an integrated all-Ireland energy market. I am pleased to note that the Government's decision to pursue east-west electricity interconnection will afford Ireland direct and secure access to the United Kingdom energy markets and onwards to the EU mainland market.

My committee's energy report published last June contained 38 recommendations, following 18 days of hearings, and a detailed road map to energy policy development. I thank my colleague on the opposite bench, Deputy Durkan, and Deputy Broughan for their valuable contribution to those 38 recommendations. I am pleased to note, and I hope I have been reading the same Green Paper as Deputy Durkan, that the Green Paper absorbed many of the committee's recommendations and informed much of the Government's thinking on the new policy.

See this speech in context