Dáil debates

Wednesday, 10 November 2021

Rising Costs and Supply Security for Fuel and Energy: Motion [Private Members]

 

10:22 am

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

I move amendment No. 1:

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

“notes:

— the increase in energy costs and their impact on households and businesses;

— that the increases in wholesale and retail energy prices in Ireland and across Europe are predominantly related to international wholesale gas prices;

— 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 other European Union (EU) countries due to long standing drivers such as geographical isolation, dispersed population, fossil fuel dependency and small market scale;

— that the Commission for Regulation of Utilities (CRU), which has statutory responsibility for security of electricity supply, published an information note on 29th September setting out the programme of actions being progressed to deliver secure supplies of electricity;

— that the Department of the Environment, Climate and Communications is carrying out a review of the security of energy supply of Ireland’s electricity and natural gas systems which is focussing on the period to 2030 in the context of ensuring a sustainable pathway to net zero emissions by 2050;

— that, while national average diesel prices have increased significantly since the start of the year, there are schemes in place, such as the Diesel Rebate Scheme, to partially insulate licenced haulage and bus sectors from such increases;

— that businesses that are registered for VAT may deduct the VAT charged to them on the purchase of business inputs such as road diesel and other motoring costs; and

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

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 budget of approximately €300 million in 2022;

— that of this amount, €194 million 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 recently published National Retrofit Plan provides for an unprecedented level of State investment in retrofit of €8 billion between now and 2030;

— that Ireland has already put in place several of the measures proposed by the European Commission toolbox, including investment in energy efficiency measures and renewable energy measures;

— the targeted welfare supports in Budget 2022, including increases in the Fuel Allowance, Qualified Child payment, Living Alone Allowance and Working Family Payment, amounting to €146 million on a full year basis with a substantial proportion of this funded through the carbon tax; these measures are in addition to adjustments to basic welfare and pension rates; adjustments to income tax bands have also been introduced primarily to cater for the cost of living increases driven, in part, by energy prices;

— a suite of customer protection measures overseen by the regulator, the CRU;

— that further analyses and assessments of the current energy prices spike are underway by the European Commission, in particular studies on the functioning of the gas and electricity markets and the EU Emissions Trading System market;

— that Ireland will engage further on these matters with our European partners at the Energy Council and the European Council in December on the basis of the assessments currently being carried out under the auspices of the European Commission;

— that Ireland continues to support the current electricity market design and views the European Green Deal and the Fit for 55 package as the long-term solution to energy price rises;

— that additionally the Government is committed to ringfencing all additional carbon tax revenue, estimated at €9.5 billion, 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 a socially progressive residential retrofitting programme; and

— the remainder will be spent on incentives for farmers to farm in a greener and more sustainable way; — the Government’s commitment to review the implementation of the Strategy to Combat Energy Poverty (2016) by early next year;

— that the Energy Efficiency Obligation Scheme proved to be hugely successful between 2014 and 2020 and supported energy efficiency actions in more than 300,000 homes and 3,000 businesses; the new scheme to operate from January 2022 will more closely align with policy objectives, particularly in the residential sector including energy poverty; and

— that continuing gas exploration would be inconsistent with the Government’s ambition to decarbonise the economy by 2050.”

I thank Deputies for raising this important matters and for allowing time to discuss them today. Clearly, the current situation, where we are witnessing significant increases in international gas prices with their knock-on effects in the Irish market, is a matter of serious concern for the Government and our EU colleagues. The Government fully accepts that recent energy price rises, including electricity, gas and other fuels, will not be welcomed in light of the current economic environment. In speaking on our amending motion, I will deal with substantive elements of Government policy and household supports for energy costs.

I will first set out the global market developments that have affected Irish energy prices, after which I will set out for Deputies the functions of the independent regulator, the Commission for Regulation of Utilities, CRU, in these matters, including its highly relevant activities in consumer protection monitoring competition and ensuring security of supply. Finally, I will set out for the House the amendment I have tabled.

As part of describing our amendment, I will outline what the Government is doing in providing significant supports for household energy costs both in terms of energy efficiency and welfare supports. It is important to recognise that these price increases are not Government or even regulatory decisions. Price regulation ended many years ago and suppliers compete with each other on prices and set their own prices accordingly, as one would expect in a competitive, commercial, liberalised market.

I will first outline then for the House what has happened to prices in the market. Increases to wholesale energy prices following rises in international gas prices have been the principal driver of these increases. These have been impacting across Europe and are not just an Irish phenomenon. These prices reflect the cost that suppliers face, including in particular wholesale gas prices. The most immediate factor affecting electricity prices in Ireland is the upward trend in international gas prices. In Europe, wholesale and 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 the various demand and supply factors have contributed to a tightening of the European gas market. Such factors include a lingering 2022-21 winter, post-Covid recovery, supply constraints in Europe and increased demand in Asia. European gas reserves during 2021 started out low and what was used during winter 2020 was not replenished in the summer months. The ongoing need to replenish these reserves means higher gas imports. This has fostered competition between Europe and Asia for supplies, thus further increasing gas prices.

Geopolitical tensions over gas infrastructure have resulted in significantly lower gas supplies from Russia to Europe than last year. As this is a Europe-wide phenomenon, an extraordinary meeting of the EU energy Council was held on 26 October 2021, having being tasked by the European Council meeting of 21 and 22 October to take forward discussions on the increase in energy prices and discuss possible mitigation measures at both national and EU level. Energy ministers agreed to take stock of energy prices and progress made on the implementation of the measures contained in the European Commission’s toolbox, Tackling Rising Energy Prices: A Toolbox for Action and Support. This was for early December. The next energy Council meeting on 3 December will prepare the ground for the December European Council meeting at which EU leaders will return to the issue of energy prices.

I reaffirm that the Government welcomes the European Commission’s toolbox and the Commission’s ongoing work. The Government is carefully monitoring the situation and already has many of the measures in place that were proposed by the Commission, including, for example, energy efficiency measures, targeted welfare supports, which were set out in budget 2022, and a suite of customer protection measures, which are overseen by the regulator, the CRU. Ireland continues to support the current electricity market design and views the European Green Deal and Fit for 55 package as the solution to sudden energy price rises rather than the problem. This view is shared by other member states, including Austria, Denmark, Germany, Estonia, Finland, Luxembourg, Latvia and the Netherlands. Together with Ireland, these member states signed a joint statement affirming their commitment to the Fit for 55 and the current market design as part of the energy Council's deliberations on the matter.

I turn to the regulatory role of the CRU in these matters. Deputies should be aware that the Commission for Regulation of Utilities is the independent energy regulator and has a wide range of economic and customer protection responsibilities in this area and also in respect of security of supply. As part of its statutory role, the CRU has consumer protection functions and it monitors energy retail markets to ensure that competition continues to develop for the benefit of the consumer. The CRU also oversees non-price aspects of competition 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 which are to be found in a 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 under which suppliers will not disconnect a customer who is engaging with them. I note the CRU recently appeared before the Joint Committee on Environment and Climate Action to which it is accountable.

The Government amendment to the motion acknowledges that international energy prices have been increasing and that these increases are having a knock-on impact on households. The amendment also asks that Dáil Éireann notes 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 been historically higher than those of 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, invest in energy efficiency and renewable energy, expand interconnection with Europe and the neighbouring markets and deepen the internal market in energy. The amendment reaffirms that the Government is committed to supporting households with their energy costs through energy efficiency measures and the solar photovoltaic scheme with a total budget of approximately €300 million in 2022. Of this amount, €194 million is targeted at either local authority housing or low-income private households through the Sustainable Energy Authority of Ireland, SEAI, energy poverty retrofit schemes. Furthermore, the recently published national retrofit plan provides for an unprecedented level of State investment in the retrofit, comprising €8 billion between now and 2030.

The amendment reaffirms that Ireland welcomes the European Commission’s toolbox and is carefully monitoring the situation. Ireland already has in place many of the measures proposed by the Commission, including energy efficiency measures, targeted welfare supports, which were set out in the budget, and a suite of customer protection measures overseen by the CRU.

The amendment notes that further analysis and assessments of the current energy prices spike are under way by the European Commission and, in particular, studies on the functioning of the gas and electricity markets and the EU emissions trading system, ETS, market. A preliminary report by the EU Agency for the Cooperation of Energy Regulators, known as ACER, will shed light on the situation in the electricity market. The first preliminary assessment by the European Securities and Markets Authority, ESMA, in mid-November will give member states greater clarity on the integrity of the European carbon market.

This market analysis will provide input for further deliberation and possible further action when the matter is addressed further by the Energy Council and the European Council in December.

The amendment affirms that Ireland continues to support the current electricity market design and views the European Green Deal and the Fit for 55 package as the solution to sudden energy price rises, rather than the problem. The view is shared by other member states. Together with Ireland, these member states signed a joint statement affirming their commitment to the Fit for 55 package. The amendment also notes that Ireland will engage further on these matters with our European partners at the Energy Council and the Council of Ministers in December on the basis of the assessments currently being carried out under the auspices of the European Commission.

I now wish to highlight the parts of the amendment that deal with the extensive Government supports in place. Deputies will be aware that the amendment to the motions affirms that the Government provided additional social welfare supports in the budget to protect the most vulnerable against fuel price increases and that the following social welfare measures can help to alleviate fuel poverty. The fuel allowance, which is a payment of €33 per week for 28 weeks from October to April, is made to over 370,000 low-income households. It was increased by €5 a week in budget 2022 and the increase applied from midnight on 12 October 2021. Increases to the qualified child payment, the living alone allowance, the income threshold for the working family payment and the pension were also announced. The total cost of these interventions is projected to be €146 million in 2022. They will be funded by additional carbon tax funds, through the €105 million that has been allocated to the Department of Social Protection, with the remaining €41 million cost to be met by the Exchequer.

These measures are in addition to adjustments to basic welfare and pension rates. Adjustments to income tax bands have also been introduced, primarily to cater for the cost of living increases driven in part by energy prices. The household benefits package, which consists of a set of allowances which help with the cost of running a household, include allowances towards covering electricity or gas costs. Recipients are paid €35 a month.

Under the supplementary welfare allowance scheme, a special heating supplement may be paid to assist people in certain circumstances. Exceptional needs payments can be made to help meet essential one-off costs where an applicant is unable to meet them from his or her own resources. The living alone allowance, which is targeted at recipients of certain social welfare payments who live alone and often have significantly higher heating costs, is paid at a rate of €19 per week, in addition to primary social welfare payments, such as the State pension.

The Government is committed to ring-fencing all additional carbon tax revenue as follows. Around one third will be spent on social welfare, around a half will be spent on retrofitting and the remainder will go to helping farmers with greener schemes. The Government also reaffirms its commitment to review the implementation of the 2016 strategy to combat energy poverty by early next year.

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