Pat Rabbitte (Dublin South West, Labour)

I thank Deputy Spring for raising this issue, in which he has shown a keen interest for some time. I welcome the opportunity to update him and Members of the House on this important issue. The matter raised relates to the decision published by the Commission for Energy Regulation on 29 June last, relating to the regulatory treatment of the BGE interconnectors and the future gas transmission tariff regime. I trust that this high level decision provides a degree of regulatory certainty that has been sought by all stakeholders, including Shannon LNG.

I have consistently welcomed the proposal by Shannon LNG to construct a LNG terminal near Ballylongford, County Kerry. Such a facility, together with the bringing onshore of Corrib gas would provide important security of gas supply for Ireland. I met the promoters of the project soon after taking office and both my Department and the Commission for Energy Regulation are in regular contact with Shannon LNG. Together with all players and potential players in Ireland's gas market, Shannon LNG has a key commercial interest in the outcome of the CER's decision on this complex regulatory question and, given the complexities, there are many differing perspectives on what the decision should be.

The decision on the regulatory treatment of the gas interconnectors is by law a matter for the Commission for Energy Regulation under the Gas (Interim) (Regulation) Act 2002. The regulator, as the independent energy regulator, has a remit to protect energy consumers, ensure security of supply and support competitiveness. It also has a duty to ensure that new sources of gas for the Irish market do not result in unwarranted increases in the price of gas to business and domestic consumers. Over the past number of months, the CER has been engaged in an extensive consultation process on the matter and has had considerable interaction with Shannon LNG as well as with all key stakeholders. The publication by the CER, on 17 February last, of a proposed decision paper for consultation was followed by the assessment of stakeholder submissions by the CER and meetings with several individual stakeholders, including Shannon LNG.

The CER's high level decision, published on 29 June, concludes that the current gas transmission entry tariff regime must be reformed in the light of new sources of gas, such as Corrib and Shannon LNG, coming on stream. The interconnector entry tariff plays a crucial role in determining Irish gas wholesale prices for all customers. Without reform of the system, the reduced flows of gas through the interconnectors due to new sources of gas coming on stream could lead to significant increases in the per unit interconnector tariff. In turn, this would push up prices for gas consumers in Ireland. The decision commits the CER to the setting of tariffs at each entry point. Tariffs will be set separately on the basis of forward looking long run marginal cost, LRMC, considerations. The new tariff regime is expected to come into effect in October 2014.

The CER has decided that a network tariffs liaison group, involving stakeholders, will be established. The purpose of the group will be to inform the regulator's future decisions on the methodology for setting the LRMC tariffs for each entry point. Following a decision by the regulator on the methodology to apply, the CER will then issue a direction to Gaslink to effect these reforms. I very much hope that all stakeholders, including Shannon LNG, will continue to work with the CER on this issue.

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