Seán Fleming (Laois-Offaly, Fianna Fail)

I wish to share time with Deputy Michael Kitt.

I welcome the opportunity to speak on the Electricity Regulation (Amendment) (Carbon Revenue Levy) Bill 2010, legislation that has only recently come before us and which is moving quickly through the Oireachtas. I understand the Minister is very keen for it to be completed as soon as possible. I will make some observations on the Bill before moving to a specific issue I wish to raise that is connected with it.

The purpose of the Bill is to provide a new function for the Commissioner for Energy Regulation to collect and recover the carbon levy and to insert a new part in current legislation stating how the levy will be applied and administered by the commission. It places a requirement on relevant electricity generators to pay the levy in line with the provisions of this Bill and sets out the enforcement regime and implementation of the levy.

It is generally agreed that the Bill does not contain specific details as to how the levy will be spent. That probably will be arranged by regulation or an enabling section, allowing the Minister, with the consent of the Minister for Finance, to decide how this will be done by the Exchequer. Although we do not have those details now, on Committee Stage the Minister will be able to flesh them out. Some of the detailed implementation of that aspect of the Bill will have to be worked out after the primary legislation goes through the House.

Under an Irish implementation directive, electricity generators receive an annual allocation of carbon allowances for free. I am conscious that in debating this legislation we are talking a good deal of jargon. Some people fully understand this, others do to some extent but many people will not grasp what we are talking about tonight and it is important to recognise that. I wish to keep my language as simple and basic as possible because this language is specific to the industry.

The net effect of the single electricity market committee decision to include the full cost of carbon in the wholesale price of electricity is that the higher wholesale price leads to increased revenues for all generators in the market. The levy on those revenues will be in place until the end of 2012. I shall return to the issue of the wholesale price of electricity because I have a specific point regarding what I believe should be included in the wholesale price. I do not believe it is now included but that can be clarified by the Minister in due course.

I refer to specific sections of the Bill. It provides for the function and setting up of new powers for the commission in regard to this levy. Subsection (3) of the Bill provides that generators which are subject to the public service order obligation under current legislation are exempted from paying that levy. I shall come to that in more detail presently.

The detail of the legislation is very strong on the powers of the commission. Generators will have to make returns to the commission within ten working days following the end of each levy period. They will then get a certificate and have 15 days to pay the levy, after which conditions of licence will be granted, as specified in the legislation. There may be an issue about interest on unpaid amounts of the carbon revenue levy or late payments, and how the proceeds of the levy are to be administered by the commission. There will be a dedicated bank account, the payment is to be in a manner auditable by the Comptroller and Auditor General and the accounts will be laid before the Oireachtas each year in the annual report. That is all very good concerning getting in the income and it will be all accounted for, but it is accepted that the legislation does not go into similar detail in regard to how the particular levies as collected will be spent. That is a fair comment and further light will be cast on this matter as the legislation goes through.

For the benefit of the public, it is important to acknowledge that this is an all-Ireland project. People forget that when we go into the nitty-gritty detail of the Bill. The all-Ireland project is a joint initiative by the Commission for Energy Regulation and the Northern Ireland authority on utility regulation. The aim is to create a single market for natural gas and electricity on the island of Ireland on an all-island basis, to start it following joint meetings of our respective Ministers and the Northern Ireland Minister with regard to creating an all-Ireland energy market. In November 2007, the single electricity market went live and commenced the trading of wholesale electricity in the Republic of Ireland and Northern Ireland on an all-Ireland basis. That is a small point I wish to make in the context of the legislation.

Power companies are benefiting from the windfall at present because they are charging their customers the full cost of greenhouse gas emissions even though EU law has decreed that the generators do not have to bear this cost until 2012. The opportunity cost is included in the wholesale prices, and revenue has been raised as a result. It is important to recognise that the biggest generator of electricity in Ireland for a long period has been the ESB and it receives the majority of the carbon windfall gains. It has utilised this to reduce prices for electricity consumers, with the ESB quoting a figure in the order of €300 million passed on to its customers.

Generating stations, which are the subject of the public service order obligation, are exempt from the carbon levy. Peat generating stations, such as those owned by Tynagh Energy and Aughinish Alumina, do not earn any carbon credit windfall profits and as such will not be liable to any levy. This is logical - if the plants are not gaining the profits, they cannot be levied on such profits. It is important that the legislation exempts renewable energy generators from the levy, which would be in keeping with the spirit of the EU directive. Renewable energy does not create emissions and should not be included in this measure.

The legislation provides for proceeds to be distributed for the benefit of the Exchequer. The Minister indicated in his speech tonight that he will direct the regulator on how to disburse the proceeds in line with Government policy, and we look forward to receiving it in due course.

The wholesale price is a key factor which I would like to see taken into account. The wholesale price is not just the cost of generation at the power stations and should include the cost of transmission of the electricity to the customer. The wholesale price of any product is not the price inside the factory gate but takes into account the price which the retailer of electricity can achieve. They must bear the cost of transmission from the power plant to where it is sold.

This issue involves EirGrid, which has a 20-year plan to upgrade electricity transmission across Ireland with billions of euro in investment. It is welcome but portions of the plan will be quite controversial. EirGrid has a plan that can be distilled to the single idea of producing a phenomenal amount of renewable energy along the west coast of the country, with the erection of pylons across the country facilitating its transmission to where it is needed on the east cost. In itself, that will cause major issues for the environment and carbon footprints. I do not know if that has been taken into account.

The cost of EirGrid investment should be taken into the wholesale price of generating electricity and transmitting it to customers. The cost of production at the plants is a key cost but is not the only one; if power cannot be moved from the plant where it is generated, it cannot be passed to a customer. That should be considered.

EirGrid is embarking on a very ambitious 20-year plan to upgrade and strengthen the country's network. Detailed correspondence arrived from EirGrid today detailing the proposal for a Laois-Kilkenny electricity transmission network reinforcement scheme, which is running into much local opposition. EirGrid has indicated its wish for a major new substation in the centre of Ireland to take power from the 400 kV lines and spread it across the 110 kV lines into various other surrounding counties. The documentation deals with upgrading the Laois and Kilkenny area but the details include several other counties. EirGrid set out a document and participated in public consultation, which commenced prior to going under the critical infrastructure section of An Bord Pleanála. The documentation, however, is not a full representation of what is proposed behind the scenes.

I will refer to the issue again. I have highlighted the point and there have been public meetings. I will conclude as I have agreed to share time with Deputy Micheál Kitt.

See this speech in context