Simon Coveney (Cork South Central, Fine Gael)

I welcome this legislation and recognise the work that has been done in the Department to produce the Bill as a Bill in its own right. It is important to give credit where it is due and I suspect there has been significant work in the Department over the past ten days or so to put this Bill in place. It is far more satisfactory to deal with the issue of the levy by way of a Bill. A Bill is more comprehensive and is preferable to an amendment to the bio-fuels legislation that passed through the House last week. I know producing a Bill meant there was a short delay and involved significant work and inconvenience for the Department, but the net result is that we will have sounder legislation that is separate from the bio-fuels legislation. In fact, we were not able to introduce an amendment on Committee Stage of that legislation because it was not directly related to bio-fuels.

I would like to signal some of the issues I suggest the Minister might try to take on board on Committee Stage. The Fine Gael Party intends to facilitate the passage of this legislation through the House, but hopes to make some helpful suggestions to help the Minister achieve his aims. We have been calling for this change for some time. I recognise this issue was not as easy to deal with as I outlined two years ago and that the Office of the Attorney General had to deal with some detailed legal issues. However, despite the fact the ESB has made a significant gesture and given a rebate to energy users, it is worth mentioning that because of the two-year delay, we have missed an opportunity and have not been able to recoup to the State the unearned profits made by all the non-ESB companies on the back of energy users. We should have been able to recoup and recycle that money back into either reducing energy costs or providing alternative energy conservation schemes.

How will this legislation impact on the all-island market? Generators in Northern Ireland will not be subject to this legislation, but they operate in competition with generators in the Republic because of our single all-island electricity market. Will the Minister explain how the legislation will impact on the relationship between generators North and South of the Border in the area of competitiveness? Has the North a similar regime to ours whereby it gives generators free carbon allowances or provides 90% of the allowances they use for free?

On the issue of the 65%, the Minister has been quite conservative. He said the Government recognises the fact there are unearned profits, but it only intends to take back 65% of the value of the emissions the generators emitted during each quarter. I can understand it cannot be 100%, because generators only get only from 85% to 90% of the allowances they need. Therefore some percentage must be discounted. However, I do not agree with a part of the Minister's speech in this regard. He said:

It also should be noted that some electricity generators claim that they already use some of their gains from the carbon windfall to offer lower electricity prices to their customers via their supply arms. Allowing generators to retain a portion of their windfall gains ensures that we do not entirely eliminate the scope for generators to pass carbon windfall gains on to consumers through their supply arms if they so wish.

This is what we are trying to get away from. We are trying to get away from the idea that we should allow the generators themselves to decide how unearned profits are disbursed. It should be the Minister who decides whether that money is rebated to customers or used to reduce the cost of network charges. Therefore, we need to know the exact amount of unearned profits and to maximise the take back to the State of those profits before we decide how to rebate customers, reduce prices or offer alternatives.

It is not acceptable to state that we suspect energy generators are keeping their prices down because they have the cushion of unearned profits. Either we are recouping what is unearned or we are not. If customers are obliged to pay for the carbon element to which the electricity they are using gave rise when it was generated, then the State should take back as much of this money as possible and decide, in a responsible way, how best to provide people with a rebate. I understand from where the 65% comes but I am of the view that it can be revised upwards slightly.

The carbon revenue levy will not apply to energy generators that are subject to a PSO. I am aware that the Minister has some concerns in this area in respect of peat. Essentially, the carbon revenue levy is not going to be applied in respect of the dirtiest fuel we have which is responsible for emitting the most carbon per kilowatt hour. I ask that the Department reconsider the position in this regard. The Department's current rationale appears to be that this is power generation which is partially sponsored by a public service obligation for which everyone must pay and that if the cost of producing power from peat is going to be increased by adding a carbon revenue levy, well then the PSO will have to be increased in order to meet the cost. On the basis of the rationale to which I refer, the question then arises as to what is the point in doing it.

Would it not be more honest to inform people that the PSO will have to be increased because there is a cost for carbon which somebody must pay? Once the Bill is transparent in respect of how that money should be paid and as long as the unearned profit is recouped and paid back to people in a sensible way, then the rationale that is applied in respect of coal, gas and oil should also be applied to peat, even if this means the PSO must be slightly higher. We could show the increase on people's bills and expose the fact that producing energy by using certain fuels is expensive, rather than trying to hide the figure by incorporating within the PSO a windfall levy for which consumers are paying. Essentially, the latter involves hiding the truth. If other carbon-based fuels are subject to the PSO, then peat should also be subject to it.

There are a number of sensitive aspects to the debate on generating electricity from peat. There are people in my party who live in constituencies where large numbers of people are employed in peat-powered generating stations. For social, local and economic reasons, those stations must be kept intact. We need to phase out the use of peat over time while ensuring that people remain in employment during this process. We must even try to increase the level of employment by introducing more sustainable biomass products to replace peat.

Peat-powered generating stations are not going to disappear anytime soon. However, we must be honest with consumers and inform them as to what they are paying, why they are paying it and indicate on what the different charges on their bills are spent. I understand the new calculations to be introduced in the summer will mean that the PSO will increase to a significant degree. Regardless of whether it is this new PSO, the carbon revenue levy or a carbon-related element of one's energy bill - which the Government is going to recoup and actually spend in a way that will lead to price reductions - people must be provided with information in respect of what they are paying.

I wish to raise a rather controversial issue. Even though the principle relating to the recoupment of unearned profits is correct, there is something wrong with the fact that the energy generators who produce the most power generally operate the most efficient and modern plants and thereby cause the fewest emissions. The Viridian plant at Huntstown, the newly opened ESB plant in Cork harbour and the new Bord Gáis plant in the same location are the most efficient plants in the country in terms of emissions. One would like to believe that if we can get the infrastructure right in the Cork area, we can ensure that the most efficient plants are those which are producing the most power. This will mean that they will be charged most in respect of the windfall levy because they will be selling the most power onto the system. That is fine.

Let us consider the position with regard to our dirtiest plants. Moneypoint, which uses coal, is one of the dirtiest plants in the country. Moneypoint has not been used as much in the past 12 months as might have been the case because a number of gas-powered stations have competed successfully with it. As a result, the plant does not pay as much of a windfall levy because it is not producing as much power as heretofore. However, there are still carbon allowances attached to Moneypoint that were granted on foot of its producing power at a level that was calculated on the position in a base year. Should we not be recouping windfall profits that are made on the back of trading carbon allowances that are unused but that are given free of charge in the first instance? Does not this argument have as much merit as recouping carbon charges which are paid for by the customer but which are given free of charge to the generator?

Viridian is particularly concerned with regard to this matter. It is of the view that it is being hammered with carbon charges because, as a result of its modern plant, it can produce power efficiently, cost effectively and with relatively low emissions. What about the plants that are only producing power 20% or 40% of the time? They will have excess allowances available to them which they will be able to trade. Will the profits or windfall gains made from trading allowances which were provided free of charge but which remain unused also be recouped? Perhaps there is not a market for the ESB to trade unused carbon credits. If there is such a market, however, I do not understand why the Government should give something away for nothing and then not recoup the windfall gains that are made as a result. If the principle of recouping unearned profits for which consumers have paid holds sway, then the windfall gains to which I refer should also be recouped.

I accept that my argument in respect of this matter was somewhat long-winded in nature. I hope, however, the Minister understands the point I am making. Ultimately, we want to ensure that we incentivise the most effective, modern and cleanest power plants.

My next point relates to how the levy will be disbursed. The Bill is not as precise in this regard as was the briefing we received during the face-to-face discussion in which we previously engaged on this matter. I understand that the Minister intends to raise approximately €6 million to €7 million per month through the levy and will try to provide a rebate for large energy users by reducing the network charges relating to them. This will be similar to what the ESB has done in respect of the €300 million to which the Minister referred earlier.

I have a difficulty in respect of this matter. The first thing we must do is ensure that the charges that will be imposed will be as competitive as should be the case. In other words, we should not subsidise a system that is already overly expensive. The regulator, by means of a direction from the Minister's office, must ensure that we have the most efficient networks and grid business possible and that charges will be no higher than is necessary. It is only when that stage is reached that we should introduce a rebate to reduce costs even further. What we should not do is reduce costs from a level that is already too high.

The question many people would ask about the €300 million that was supposedly given back by the ESB is whether it is being taken away from a network charge that was already too high. I hope the Minister will consider that issue.

There is no requirement in the Bill that the proceeds of the carbon revenue levy be recycled into energy. That is left to a decision of the Minister with the prior consent of the Minister for Finance. Under subsection 40M(3), as inserted by section 3, the funds in the account "shall be paid into or disposed of for the benefit of the Exchequer in such manner as the Minister may direct following consultation with the Minister for Finance". In other words, money is going into the Exchequer and there will be a negotiation between the Minister, Deputy Ryan, and the Minister for Finance as to how it is spent. That is very different from what the Minister said in his speech. I welcome his undertaking to bring energy prices down for large energy users and perhaps look at using some of the money for other energy programmes.

However, that is not what is in the legislation. I would generally be slow to prescribe in legislation how money is spent because that is bad practice. A future Minister must have the flexibility to decide how revenues are spent; that is the job of a Minister. However, this legislation will apply only for a temporary period, between now and the end of 2012, so there are only another two and a half years to go before it becomes irrelevant. In that context, the Bill should prescribe in a more definite way how, in the next two and a half years, the €200 million or €300 million we raise through the carbon levy is spent in order to bring energy prices down to a level that will make us more competitive. I am anxious to see an amendment in this area so it is not simply the case that the moneys raised will go into the Exchequer and be allocated on the basis of a political decision. I am largely in agreement with the Minister on how it should be spent, but that should be prescribed in the Bill. If this legislation were to apply for the next ten or 20 years, it would be a different case entirely.

I propose to share the remainder of my time with Deputy Deenihan.

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