Ossian Smyth (Dún Laoghaire, Green Party) | Oireachtas source

I move amendment No. 1:

To delete all words after “Dáil Éireann” and substitute the following: “notes that:

— the Government is acutely aware of the recent energy price increases and their impact on households;

— electricity and gas retail price rises, both in Ireland and across Europe, are predominantly related to current international wholesale gas price increases which are in turn reflective of market developments, and these international factors may moderate after this winter;

— Ireland faces particular challenges in this regard as we are a price taker on international markets and that Irish electricity and gas prices have historically been higher than other European Union (EU) countries due to long-standing drivers such as geographical isolation, dispersed population, fossil fuel dependency and small market scale;

— the long-standing policy of successive Governments has been that competitive energy markets result in greater choice for consumers and businesses, in terms of suppliers, products and prices;

— electricity and gas retail markets in Ireland operate within a European regulatory regime wherein electricity and gas markets are competitive;

— operating within this overall EU framework, responsibility for the regulation of the electricity and gas markets is a matter for the Commission for Regulation of Utilities (CRU), which was assigned responsibility for the regulation of the Irish electricity and gas markets following the enactment of the Electricity Regulation Act 1999;

— as part of its statutory role, the CRU also has consumer protection functions, including the monitoring of energy retail markets to ensure that competition continues to develop for the benefit of the consumer;

— under the CRU’s consumer protection functions it has provided for priority and vulnerable customers in the various Codes of Practice in the CRU’s Electricity and Gas Suppliers’ Handbook; and

— the CRU is accountable for the performance of its functions, including on consumer protection, to a Joint Committee of the Oireachtas;

further notes that:

— carbon pricing is an essential element of any credible plan to decarbonise the economy; and

— greenhouse gas emissions from electricity and heat generation, energy-intensive industry sectors and commercial aviation within the European Economic Area are priced through the EU’s Emissions Trading System; and

affirms:

— that the best long-term approach for Ireland to insulate consumers from volatility on international wholesale energy markets is to invest in energy efficiency, renewable energy and expand interconnection with European and neighbouring markets to deepen the internal market and competition;

— that the Government is committed to supporting households with their energy costs through energy efficiency measures, with a total retrofit budget in excess of €280 million;

— that over three-quarters of this retrofit budget is targeted at either local authority housing or low-income private households through the Sustainable Energy Authority of Ireland’s energy poverty retrofit schemes;

— that the Government’s ‘Project Ireland 2040 – National Development Plan 2021-2030’ provides for an expanded investment well in excess of a billion euro in retrofit between now and 2025;

— that additionally the Government is committed to ringfencing all additional carbon tax revenue as follows:

— approximately one third will be spent on targeted social welfare and other initiatives to prevent fuel poverty and to ensure a just transition;

— just over half will be spent on socially progressive residential retrofitting programmes; and

— the remainder will be spent on incentives for farmers to farm in a greener and more sustainable way;

— that the Government will provide additional social welfare support in the Budget to protect the most vulnerable against fuel price increases;

— that the following social welfare measures can help to alleviate fuel poverty:

— the Fuel Allowance is a payment of €28 per week for 28 weeks (a total of €784 each year) from October to April, to over 370,000 low income households, at an estimated cost of €300 million in 2021;

— the Household Benefits Package, which consists of a set of allowances which help with the costs of running a household, includes allowances towards covering electricity or gas costs and recipients are paid €35 per month;

— under the Supplementary Welfare Allowance scheme a special heating supplement may be paid to assist people in certain circumstances, and exceptional needs payments may be made to help meet an essential, once-off cost which an applicant is unable to meet from his/her own resources; and

— the Living Alone Allowance, which is targeted at recipients of certain social welfare allowances who live alone and often have significantly higher heating costs, is paid at a rate of €19 per week in addition to a primary social welfare payment such as the State pension;

— that, in the long-term, competition between suppliers is an important means of exerting downward pressure on electricity prices; and

— its commitment to a review of the implementation of the Strategy to Combat Energy Poverty (2016) due to be completed by the end of the year.”

I will respond immediately to Deputy Barry's question about increases in carbon tax and where that money should go. It is Government policy that the revenue from any increase in carbon tax should be ring-fenced and should go directly towards alleviating any negative effects on people who cannot afford the increases in the price of energy. This means that half of all the increases in carbon taxes should go towards retrofitting and energy efficiency for homes, a third goes towards increases in welfare and the remainder goes towards increasing the incomes of people in farming, and that is right. It is also Government policy that the distribution and transmission of electricity should remain in State hands. It is a natural monopoly. There is major investment, operation and activity on the part of State-owned companies in the generation of electricity in Ireland. Approximately 40% of electricity produced here is generated by State-owned companies.

I thank Deputies for raising these important matters and for allowing us time to discuss them today. Clearly, the current situation, whereby we are witnessing significant increases in international gas prices and their knock-on effects in the Irish market, is a matter of serious concern to the Government. The Government fully accepts that recent electricity and gas price increases will make it difficult for consumers to meet their bills, especially in the current economic climate. In speaking to the Government's amendment to the motion, I will deal with substantive elements of Government policy and household supports for energy costs. First I will set out the global developments that have affected Irish energy prices. I will then set out for Deputies the functions of the independent regulator, the Commission for Regulation of Utilities, CRU, in respect of these matters, including its highly relevant activities in consumer protection and monitoring competition. Finally, I will set out for Deputies the amendment I have tabled to the motion.

As part of describing our amendment, I will outline what the Government is doing to provide significant supports for household energy costs in terms of both energy efficiency and welfare supports. It is important to recognise that these price increases are not Government or even regulatory decisions. This is because price regulation ended many years ago. Suppliers compete with one another on prices and set their own prices accordingly, as one would expect.

I will outline what has been happening with world energy prices. Increases in wholesale energy prices, following rises in international gas prices, have been the principal driver of these increases. These increases have been felt across Europe; they are not just an Irish phenomenon. These prices reflect the costs suppliers face, including wholesale gas costs. The most immediate factor affecting electricity prices in Ireland is the upward trend in international gas prices. In Europe, wholesale natural gas prices have been on an upward curve since the second half of 2020. This feeds directly through to retail electricity prices as the wholesale price of electricity correlates strongly with the price of gas. Various commentators, including the International Energy Agency, have stated that both demand and supply factors have contributed to a tightening of the European gas market. Such factors include increased demand due to post-Covid recovery, supply constraints in Europe and increased demand in Asia. European gas reserves are low. What was used during winter 2020 was not replenished during the summer months. The ongoing need to replenish these reserves means higher gas imports. This has fostered competition between Europe and Asia for supplies and, thus, a further increase in gas prices. As previously stated, all European markets are experiencing these price increases. Deputies will further appreciate that we face additional costs due to our geographical location, our fossil fuel dependency, the small scale of the Irish market, our low population density and exchange rate fluctuations.

I now turn to the regulatory role of the CRU. Deputies should be aware that the CRU, the independent energy regulator, has a wide range of economic and customer protection responsibilities in this area. As part of its statutory code, the CRU has consumer protection functions and monitors energy retail markets to ensure that competition continues to develop to benefit the consumer. The CRU also oversees non-price aspects of competition and has taken and continues to take steps to increase transparency and consumer engagement in retail markets. This includes, for example, developing various codes of practice and setting out customers' rights found in the suppliers' handbook. Additionally, the CRU certifies price comparison websites, leads the smart metering roll-out and participates in initiatives such as the supplier-led voluntary energy engage code, whereby suppliers will not disconnect a customer who is engaging with them. I note that the CRU recently appeared before the Oireachtas joint committee to which it is accountable.

I now turn to the Government's amendment to the motion. The amendment acknowledges that international energy prices have been increasing and that these increases are having knock-on impacts on households. The amendment also asks that Dáil Éireann note that Ireland faces particular challenges in this regard as we are a price taker on international markets and that Irish electricity and gas prices have historically been higher than those in other EU countries due to long-standing drivers such as geographical isolation, dispersed population, fossil fuel dependency and small market scale. The amendment upholds the Government's conviction that the best long-term approach for Ireland is to insulate consumers from volatility on international wholesale energy markets, to invest in energy efficiency and renewable energy, to expand interconnection with Europe and neighbouring markets and to deepen the internal market in energy. The amendment notes that carbon pricing is an essential element of any credible plan to decarbonise the economy and, furthermore, the Government's increasing ambition for renewable electricity to reach at least 70% by 2030 and the commitment to a greenhouse gas emissions reduction of 51% by the end of the decade.

I wish to highlight the parts of the amendment which deal with the extensive Government supports that are in place. The amendment affirms the Government's support for energy efficiency, where supports are considerable, with a total retrofit budget of €280 million. This funding will mean that more households will be able to receive free energy efficiency upgrades, making their homes warmer, healthier and cheaper to run, in line with the programme for Government. The amendment states that the Government's commitment, via its Project 2040 national development plan, provides for an expanded investment in retrofitting of well in excess of €1 billion between now and 2025. The amendment upholds support for a deepening competition between suppliers as an important means of exerting downward pressure on electricity prices. Customers can and should ensure that they are availing of the best offer available in the market by switching supplier or renegotiating with their existing supplier.

The amendment further affirms the Government's continuing commitment to protect the most vulnerable through extensive supports for household energy costs via welfare schemes and the commitment to review the implementation of the strategy to combat energy poverty by the end of the year. The fuel allowance is just one of a range of income supports paid by the Department of Social Protection. Those supports include general social welfare schemes, the living alone increases to support those living alone and at a higher risk of poverty and the household benefits package.

On 27 September, the Minister for Social Protection announced the start of the national fuel scheme for the 2021-22 season. A budget of €292 million has been set aside for the upcoming season to pay an estimated 370,000 households. The fuel allowance is available to long-term social welfare recipients and amounts to a payment of €28 per week for 28 weeks, a total of €784 each year from October to April. In launching the winter fuel allowance on 26 September, the Minister for Social Protection noted that heating costs are a concern for many, that households have seen their bills increase and that this will be an important factor as budget 2022 negotiations continue.

The household benefits package consists of a set of allowances which help with the costs of running a household. It includes allowances towards covering electricity or gas costs. Recipients, the majority of whom are pensioners, are paid €35 per month. The Department of Social Protection will spend approximately €195 million this year on the household benefits package for more than 470,000 customers. Targeted supports are also provided under the supplementary welfare allowance scheme, exceptional needs payments and urgent needs payments. These may be made to help meet an essential one-off cost which an applicant is unable to meet out of his or her own resources.

All the funds raised by increases in the carbon tax have been ring-fenced to protect those most exposed to higher fuel and energy costs and they will be allocated as follows: one third to ensure the increase in carbon tax is progressive, through targeted social welfare and other increases to prevent fuel poverty and to ensure a just transition; one half to fund a socially progressive national retrofitting programme targeting all homes but with a particular emphasis on the midlands region and on social and low-income tenancies; and the remainder to allocate funding to a rural environment protection scheme, REPS, 2 programme to encourage and incentivise farmers to farm in a greener and more sustainable way.

Finally, and importantly, the amendment further commits that the Government will provide additional social welfare supports in the budget to protect the most vulnerable against fuel price increases.

The Government is acutely aware of the financial challenges faced by households due to these price rises and is serious about providing practical supports. As I have highlighted, government has long provided and will continue to provide practical supports for those struggling with their energy costs. The Government continues to allocate significant funding to these practical supports via the welfare system, energy efficiency grants and retrofitting.

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