Noel Dempsey (Meath, Fianna Fail)

I propose to take Questions Nos. 75 to 77, inclusive, together.

The White Paper on energy policy explicitly confirms the Government's position that the electricity and gas networks, as strategic national assets, will remain in State ownership and will never be privatised. As the networks are strategic national assets and will never be privatised, the Government has decided to transfer ownership of the transmission assets from ESB to EirGrid by the end of 2008.

High oil and gas prices worldwide are a reality with which Ireland, as price taker, has to contend. Approximately 70% of the costs of generating electricity here are driven by international trends, our location and transportation costs. However, the remaining 30% of costs are a result of domestically controllable factors and are high by international standards. The transfer of the transmission grid ownership from the ESB group to EirGrid is a key component of the Government's objective policy to deliver healthy competition and consumer choice in the electricity market. More competition in power generation and supply is needed in the interests of business and the consumer.

Quantification of the benefits of the Government's policy actions in terms of electricity prices for consumers will be a matter for the Commission for Energy Regulation, CER, in its annual price review but it is quite clear that transparency regarding access to the grid and transmission assets will attract more players into the market and help stimulate competition.

The existing structure splits transmission operation and ownership between ESB and EirGrid. This is complex and cumbersome and adds to costs. Furthermore, the ownership of the transmission grid by ESB, as the large incumbent power company, competing with Viridian, Airtricity and others, is a deterrent to existing and new private sector players.

The current arrangement also creates additional overheads and transaction costs; duplication of activities, skills and resources; the risk of blurred accountability; and more complex regulation than would otherwise be needed. The combining of ownership and control and operation of the transmission system in EirGrid is logical. Experience across Europe shows that where there is ownership and control over the assets, the system can be operated transparently and effectively, instilling full confidence in market players.

The proposal to transfer ownership of the transmission network to EirGrid will bring Ireland into line with other EU member states. It is proportionate and in line with views expressed by many in recent years, most recently in the consultation on the Green Paper on energy. The Competition Authority, the CER, the National Competitiveness Council, Forfás, IDA and others have called for it and it is also consistent with the analysis in the Deloitte & Touche report. The proposal is in keeping with the European Commission's recent Communication, An Energy Policy for Europe, which cites effective unbundling as crucial for greater competition and security of supply.

A strong and independent EirGrid will play a critical role in facilitating market liberalisation, supporting the development of effective competition in the electricity market, reducing energy costs and optimising investment. The ESB group in its new form will remain a strong, commercially viable and fully integrated entity after the transmission asset ownership moves to EirGrid. The ESB will be even better positioned to deliver on its mandate for the distribution network and to take on new competitors in power generation and supply on a level playing field.

ESB International will be strongly growing its UK, European and international business and the ESB group will continue to compete successfully with Viridian, Airtricity and other independent operators in power generation and electricity supply in the all-island electricity market.

It is my view that amendments to existing legislation will be required to provide for, inter alia, EirGrid's ownership of the transmission infrastructure, increasing its borrowing limit and other consequential amendments. The advice of the Attorney General on the precise parameters of the legislation required will determine its scope. Any transactional cost inherent in the transfer process will not result in greater costs to the consumer. The Deloitte & Touche analysis considered that the transfer of the transmission asset ownership function should not have a material cost attached.

I have had initial discussions with the chief executive of the ESB and the chairperson and chief executive of EirGrid on taking the implementation process forward. I have also had initial discussions with the ESB group of unions. The representatives expressed their serious concerns on behalf of their members about the decision and other aspects of the White Paper. I listened to their concerns and confirmed my commitment to continuing the process of full engagement with the group on all of the issues inherent in the implementation of Government policy on the electricity sector.

In the context of the fledgling competitive market at the time, the tripartite agreement of February 2000 between the then Minister and the ESB's management and unions laid the grounds for the establishment of EirGrid as an independent transmission system operator, sought to address the ESB's dominance and paved the way for liberalisation of the market and the development of competition. Seven years on, a great deal has been achieved, but more remains to be done. The Government intends to build on this process with a view to completing delivery of a fully competitive electricity market.

The Government will work with ESB and EirGrid management and unions, as well as the ESB ESOT as a minority shareholder in the ESB group, to ensure satisfactory outcomes that address legitimate concerns in the process of achieving the transfer of transmission asset ownership to EirGrid by the end of 2008.

Regarding Deputy Broughan's question, the White Paper contains a number of proposals to ensure the long-term security of supply, including delivery of the North-South and east-west interconnectors, the establishment of the single electricity market, ongoing major capital investment in the transmission and distribution networks, a grid development strategy for 2025, priority to ensuring improvements in plant generation adequacy and realising the potential for distributed electricity generation.

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