Seán Ó Fearghaíl (Kildare South, Fianna Fail)

Tréaslaím leis an Aire agus an Aire Stáit leis an obair a rinne siad ar an Bhille seo. I welcome the opportunity to contribute to the debate on this important regulatory legislation, which will affect the provision of electricity for years to come. The Bill provides for the establishment of a single competitive wholesale electricity market on the island of Ireland.

Regulation will be carried out by a single electricity market committee, which will enable efficient decision-making on single electricity market matters. The working arrangements to be adopted by the committee, setting out how statutory functions will be exercised, will be published by the regulatory authorities in both areas, the Commission for Energy Regulation in this jurisdiction.

The single electricity market will enable efficient decision making on single electricity market matters and will set out the functions of the commission relating to the single electricity market. The establishment of a single wholesale electricity market on the island of Ireland will facilitate improved competition and investment opportunities by expanding the market. It will allow for the exploitation of efficiencies and economies of scale in areas such as generation reserves, procurement of plant and machinery and fuel usage and will introduce more transparent and equitable trading arrangements.

The development of the SEM will involve joint regulatory duties, powers and functions for the single market as well as the establishment and licensing of a single market operator. Work in preparation for this regulatory change has been under way since 1999 to enhance co-operation in the area of energy supply between North and South. This legislation amends many of the terms of the Electricity Regulation Act 1999 and this co-operation will, it is expected, take Irish energy policy forward onto a new level of service and efficiency.

In preparing this legislation the Minister and his Department, working closely with his counterpart in Northern Ireland, considered a number of options, including a no change option and the possibility of merely developing new trading arrangements. Having considered these options it was decided to adopt the single electricity market model as being the most practical option and the one most beneficial to both economies. The point has been made that the ultimate objective is to serve the customers and it appears as we move forward with this project, there may some short-term pain but we have become accustomed to doing that to gain in the long term.

It was agreed to underpin the operation of the SEM with legislation, thereby securing the necessary legal and commercial confidence for the market. The establishment of the SEM has been predicated on the delivery of maximum benefit to customers with the lowest establishment cost, with a balance between the need for secure and stable power supply and the development of a competitive market.

An all-island electricity market will have approximately 2.5 million electricity customers comprising of 1.8 million in the Republic and 700,000 in Northern Ireland. As noted by Deputy Broughan, while this is quite small in an EU context it is still a considerably larger market than the two markets operating independently and will provide an improved base for the entry of new market operators, both in generation and supply. The critical mass of this market should also serve to increase the competitive pressure on prices while providing some economies of scale for electricity users. A single market will also lead to a reduced duplication of functions, which ought to lead to significant cost savings across all sectors.

The benefits for the country, both North and South, in terms of increased market size, shared reserve costs, shared fuel diversity costs, the increased competitive dynamic, and the expected boost to investor confidence are indeed significant factors in the process. The single market will establish a mechanism that will permit the most efficient dispersal of generation facilities on the island. Transmission system operators, TSOs, dispatch independently but may take advantage of opportunities to reduce overall island system costs through trading, where available. The existing interconnector between North and South is available for third party trading and the combined effect of market and transmission system operators captures some element of efficient dispatch. It is anticipated that additional savings will be gained by a single economic dispatch.

The benefits, which can be gained from an effectively functioning single electricity market, will include energy prices set competitively, an initiative ultimately intended to benefit the end user, be that the domestic or commercial customer; increased security of supply — there has been concern in many areas across the developed world about securing ongoing supply and this is part of our initiative to address that issue; a predictable and stable trading system; shared costs of maintaining fuel diversity; more efficient generation dispatch leading to lower cost of electricity generation; a larger single wholesale market facilitating greater economies of scale and scope; and integrated system-planning leading to more robust infrastructure on the island. While there will be broad economic benefits to this adjustment it will not require any Government funding, which is to be welcomed. Few of these initiatives carry that benefit.

I note with interest that the cost benefit analysis undertaken to date would indicate that both jurisdictions would benefit almost equally, with 54% of the benefit to this side of the Border and 46% to the North, while the benefit to domestic and business users would be weighted 80-20 in their favour against those of the generators. In overall terms this should lead to some fall in end-user prices. This saving for the user will hopefully encourage greater conservation, thereby maximising the benefit of this progressive legislative move.

The consultation process has led to broad support for the change across the various sectors, including the key industrial stakeholders, IBEC here and CBI Northern Ireland. There is strong political commitment on both sides of the Border to the delivery of the single market by the target date of November 2007 and both Governments are fully committed to ensuring that the necessary legislation is enacted by April 2007 in order to allow the market proceed.

The cross-Border co-operation is very welcome and hopefully we will see similar co-operation and co-ordination of policies across the whole range of services and facilities in the future. This was alluded to by Deputy Finian McGrath in his contribution. This should mirror work already under way in the shape of Fáilte Ireland, Waterways Ireland and the increased co-operation between the health services, as recently announced by the respective Ministers. These innovations have proved to be extremely successful and have brought great benefit to both our communities. I see no reason this initiative should not do likewise.

This all forms part of the peace dividend from the ongoing work on the peace process. It is heartening that we are discussing cross-Border co-operation on the supply of electricity when not so long ago the very same supply was under the constant threat of attack and disruption. We all look forward to Dr. Paisley becoming First Minister but it will be ironic to see him operating the all-Ireland electricity generation system when in the past he and his supporters targeted power stations for some of their protests. Thankfully we have now entered into a new era of co-operation which will benefit all the people throughout the island and enable businesses to be more competitive, thereby enhancing the opportunities of attracting further inward investment, both North and South.

In the highly competitive economic climate that now exists, our small island cannot afford to do anything other than maximise any advantage we may possess and this Bill allows us to do just that. The single market offers a real opportunity to maximise market size on the island and to create economies of scale to the benefit of consumers and business on both sides of the Border. The single market will, over time, remove market distortions and minimise the wholesale cost of electricity.

This is especially fitting when considered in the context of the regional approach to the development of energy markets being pursued as part of the European Union's drive to create an EU-wide internal market in electricity and natural gas. The creation of an all-island energy market involves collaboration on issues ranging from improved interconnection, competitive markets and harmonised trading arrangements, through to generation adequacy, security of supply, sustainable energy and energy efficiency measures.

There is no doubt that there is extensive and wholehearted support for the all-island energy market as proposed. The issues involved are intricate and sometimes competing and not all the benefits will be immediately achievable. However, the long-term reward will be a market that is much better placed to meet the future energy needs of the whole island. We must also act so that policies are developed to exploit opportunities for enhancing the value of the energy industries on the island, through external links with Britain and continental Europe. The appointment of the single electricity market committee will see enhanced co-operation between the regulators on both sides of the Border.

I am pleased to have the opportunity to raise the issue which has been raised by constituents of all Members concerning the energy regulator's implementation of price increases within the sector as a whole and to which Deputy Durkan and others have alluded. Significant increases in natural gas and electricity prices were announced earlier this year on the basis of the increased price of oil on the international market, as well as other factors. Despite the fact that oil prices have subsequently fallen, no change in the price increase has been countenanced. This inflexible approach in such a critical area does not inspire public confidence in the regulator and his office and I ask the Minister to review the operation of the regulator's powers in this area.

We must continue to protect elderly people and families who in particular are exposed to these largely unnecessary price increases, which understandably leads to considerable discomfort to all those affected. I acknowledge the speedy response by the Minister for Social and Family Affairs, Deputy Brennan ——

See this speech in context