Liz McManus (Wicklow, Labour)

I welcome the Bill and the fact that a common sense approach has been taken by the Minister following a certain amount of pressure and protest from the party Whips on this side of the House. I was extremely concerned at the idea that a couple of amendments tacked onto the bio-fuels Bill would somehow suffice. That we now have a pristine Bill with an impressive title, namely, the Electricity Regulation (Amendment) (Carbon Revenue Levy) Bill 2010 is welcome. It is appropriate that we take this approach when it comes to legislative changes and that the Minister desists from trying to have a portmanteau approach to legislation which includes a bit of this and that. I am sure that may be a better use of time within the Department but it is not good legislation in terms of outcome. I regret democratic accountability tends to be a little slower but is the better fort at the end. I thank the Minister's officials for taking the time to brief me on the arcane workings of the Irish electricity market. The extent of expertise within the Department is reassuring in terms of what is a complex area. While currently this is a particularly complex area it will in 2012 become less complicated.

The Bill addresses an issue which has been raised many times in terms of windfall profits that exist in the market and need to be captured in some way. This legislation is the way the Minister has chosen to address the issue. I have some concerns about the Bill. The Minister has stated on a number of occasions that the funds will be used to relieve the high cost of electricity to large electricity users. However, there is not one mention in the Bill of small, big or large users. What we have is a mechanism whereby money is collected through the CER and put into an account along with what is left over from the dividend money. It will be the responsibility of the Minister of the day, with the sanction of the Minister for Finance, to decide how that money is disposed of.

It is worth setting the context of electricity prices in regard to which there are concerns. The recently published Sustainability Energy Ireland report states there has been some improvement in terms of price, which is extremely welcome. However, we have not reached a point where we can say that the price of electricity is not an issue, particularly when compared to other countries. We are still above the European average. Electricity prices for medium to large business consumers are 4% to 6% above the EU average. This group of customers accounts for approximately 53% of the market. That is a matter of great concern when one considers the economic situation in which we find ourselves and how important it is for us to be competitive. The price of electricity to the average consumer is approximately 7% above the EU average, which is not any source of comfort for us. There is a real danger that this type of measure to alleviate the burden on the larger user does not address the issues around cost.

The Minister made the point that generators have been provided with free carbon credits and that they were able to earn a monetary return on those credits, which led to excess windfall profits. He has also stated that the Bill seeks to remove these gains. The Minister indicated that it is estimated that €75 million per annum will accrue. That there is this pot of money is not disputed. It is interesting to see how significant it could be. In Britain, it is estimated to be as much as €15 billion. Obviously, this depends on the price of carbon. It is an important element when one considers that even in the couple of years prior to the changes a significant amount of money will accrue.

I am concerned that this legislation could be subject to legal challenge. I hope the Minister makes every effort to ensure this does not happen. Given we have only two to two and a half years during which this new regime will apply it would be problematic if much of that time was spent in the courts. An issue not yet mentioned by other speakers and on which I would like clarification because it comes up quite often is that according to the Government's own guidelines a regulatory impact assessment on this proposal should have been prepared and published. I am not aware of any such assessment. The eGovernment website states this is a requirement but it has not happened in this instance. Perhaps the Minister will clarify the matter when replying, maybe I am missing something. This is an issue that has been raised and not dealt with by the Minister.

Section 40 of the Bill proposes that the money go into a separate account and be disposed of by the Minister for Communications, Energy and Natural Resources with the consent of the Minister for Finance. There is no requirement other than public good to do anything specific. There is no commitment for example to assist carbon efficiency, fuel poverty, to enable better energy conservation or to assist the large energy user. This money could disappear into the maw of the Department of Finance. At a time when the public finances are under chronic pressure I wonder how secure are the commitments the Minister is making.

Will the Minister indicate if he has the sanction of the Minister for Finance for what he is planning? I would much prefer if a regulatory regime, even by way of secondary legislation, was part of this legislation to ensure that what the Minister said will happen will transpire to be the case. We will argue that on Committee Stage but in the meantime he might indicate if he has the sanction of the Minister for Finance for what he is planning. If this is vague and not pinned down, I am sure extreme pressure will be brought to bear to use that money for a different purpose. This is a lacuna in the legislation.

The Minister made an appointment to the CER some time ago, which was not publicly advertised, in the way I presumed it would have been. This is a fairly high paid job and the appointment was made by way of a telephone call and a cosy chat. That is no reflection on the person who was chosen for the position but it is not the way an appointment of such seriousness should be made by a Minister, regardless of the good intentions he or she may have. There was nothing legally wrong with what the Minister did. That is why I am concerned about a situation that could arise where nothing is stated in this respect in the Bill. In this instance, the Minister has said a good deal, but the Bill is silent. It is an anomaly that needs to be addressed.

I am raising issues not because I do not want to support the Minister or the measures but because I envisage that it is not political opposition but a legal challenge that is the biggest threat that will arise in regard to this Bill. The Bill needs to be robust and that is the reason I am raising questions. There is the issue of a regulatory impact analysis. Some generators are exempt from the levy such as peat burning plants owned by State companies, namely, the ESB and Bord na Móna, and the privately owned Tynagh Energy and Aughinish Alumina. The Minister has explained the reason for this and it makes sense. I listened to what Deputy Coveney said about this and he also made sense. It is not a central issue, although I would have thought it was a green issue.

Complaints have been made that this legislation is unfair and will militate against certain generators. While a certain number of issues will always arise that do not have a sound basis, they still have to be examined. For example, there is matter of the competitive disadvantage this measure will create in an all-island market where generators in Northern Ireland will not be governed by this regime. The ESB has a plant in Northern Ireland and it will be exempt because the same regime will not be in place there.

I want to echo what has been stated about Endesa Ireland. In its submission it states:

As part of the Asset Strategy Agreement between the ESB and CER, ESB divested 1,068 MW of generation plant that were purchased by Endesa. As part of the package, Endesa purchased the ... [allowances] allocated to these stations and the rights to future ... [allowances], which we valued at the 2008 spot price. Since 2008, the value of ... [these allowances] has fallen, meaning that Endesa has suffered a loss relating to the ... [allowances] rather than the windfall profits enjoyed by all the other generation companies in Ireland.

Endesa's existing units are older, inefficient and are not scheduled to run in the market. They are only used to provide critical support to the grid and it believes that only generators that are included in the market schedule should be included in the levy. It would be useful if the Minister were to provide some comfort in regard to an issue that is having an effect and about which a number of Deputies have expressed concern.

The semi-State sector is dealing with this levy in its own way and it will be able to accommodate it but there are concerns about its impact in the private sector, namely that it will discourage efficient plants and will result in increased emissions. If it were to be the case, and I hope it will not be, that higher electricity prices and higher emissions resulted from the introduction of this legislation, we would all be extremely disappointed. Therefore, we must make sure that will not be the case.

To make certain presumptions about generators without having evidence one way or the other raises questions. If it transpires that the presumptions were wrong, we will end up with either higher prices or higher emissions. Private sector operators have said that some generators at least are recycling the windfall back to their customers in the form of discounts. Their concern is that this will end up being a discount that will be taken from their customers, which tend to be small and medium-sized enterprises, and given to the large energy users. It seems extraordinary that there is no way for that to be assessed and analysed in some limited way to ascertain whether that is the case. Viridian is a front-runner in arguing its case. In its submission to the Department it states:

The measure cannot have the effect of reducing electricity prices to consumers. On the contrary, it is almost certain to increase costs for consumers to the extent that the Levy is passed through wholesale or retail tariffs. Suggestions that the Levy might subsequently be rebated to certain consumers are misplaced. It is not permitted under the Bill and, more importantly, it is open to the same criticism that forced the European Commission to reject part of the national allocation plan for the Netherlands. Put simply, it unduly favours those singled out to get the rebates, has negative environmental effects and it is likely to distort competition. The best possible outcome for consumers is that they will be no worse off and even that outcome is most unlikely.

As a consequence, competitiveness of Irish business is likely to be harmed. Furthermore, the disproportionate impact on Viridian, as a private investor in the Irish market, sends an adverse signal to potential inward investment.

Proposals of a similar kind have encountered difficulty in other EU Member States. The Spanish Government abandoned a similar measure in July 2009 and litigation connected with the period when the measure applied is ongoing in the Spanish Courts. A similar measure was recently proposed and abandoned in the Walloon region of Belgium. In Germany, where we understand that connected litigation has been successful, the Government abandoned measures in December 2007.

Any Regulatory Impact Analysis ... of the impact on generators and/or the price of electricity to consumers would have revealed several fundamental issues with the measure. No RIA has been carried out, whether for this measure or previously, and the measure suffers from this missing analysis.

I have not had a chance to consider the European context. I am merely referring to cases and situations covered in Viridian's submission. I presume that this issue has not foundered in other countries where similar attempts were made by governments because if it has foundered, we need to take account of that experience. It might be useful if the Minister were to comment on that point in terms of what has happened elsewhere.

Some informal meetings were held with some generators and the Department and even the Minister, consequent on the paper that was produced in July 2009 which generated a certain amount of interest. However, that is not equivalent to a form of consultation, which I would have thought was a requirement and certainly a way of pre-empting any difficulties that might arise subsequently.

The general point about the windfall tax is indisputable. I do not believe anybody in the House will create difficulties in that regard.

What is done with the money is open to question. Measures that would ensure greater energy efficiency or deal with fuel poverty, for example, might have been something a Green Party Minister would promote. However, the Minister has chosen instead to reduce the cost for the large energy or electricity user. Whatever he does about that needs to be regulated and the regulations must be provided for in this legislation which will last for only two years, in any case. There may be other ways to deal with this but we can talk about that on Committee Stage.

The fact that sizeable money, some €300 million, was found as a sweetener when the ESB made its case for a price reduction to ensure it was accepted was a great relief to customers. However, I have concerns. One does not relate directly to this Bill but I wish to raise it. It is a small matter but seems to me to indicate an approach by the CER that goes outside its brief. The commission is pulling weight in a way I find not to be in the interests of the consumer. The recommendation of the CER is that the ESB price controls will go when they hit 60% of the domestic sector market. I welcome that. It is a good sign and a good move forward. Let us see what happens. However, tagged on to that recommendation, the CER stated the ESB must take its brand name off the retail part of its business. The officials who came before the Oireachtas committee said they, too, were not happy with the requirement and I got the impression the measure would not go ahead. However, what the CER is saying, in essence, is that if the ESB does not take its name from the retail part of its business, the commission will make the mark at 50% which would slow the chance of having either a price reduction or the freedom from controls that is sought by the ESB.

It may seem like a small point but I do not believe any interest is served in taking away a brand name people know and trust. The semi-State companies in this country developed in times when we were extremely restricted in what we could do. The private sector did not deliver through the period from the 1930s to the 1960s and the semi-State companies were the pioneers that showed what could be done. Those were flagship industries, whether the ESB, Bord na Móna, or whatever. The idea that older people, in particular, can no longer have their ESB account because the CER decides the company must get rid of that name and call itself something else oversteps the mark. I do not believe it is the business of an energy regulator to determine a brand name, quite apart from the cost involved which would be phenomenal. It is not in the interest of consumers for the CER to determine the tried and trusted brand name which is available to people, or to take it out simply at the stroke of the regulator's pen. The regulator should be more concerned about prices and less about brand names.

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