Bernard Durkan (Kildare North, Fine Gael)
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Question 75: To ask the Minister for Communications, Marine and Natural Resources if, arising from his proposals as set out in the Government's White Paper on energy with particular reference to the ESB, the national grid or other electricity producers, it is intended to purchase or lease the network from the ESB; if he has had discussions on the potential cost; if he has quantified the extent to which the proposals as set out might impact on electricity prices; his views on the various alternative structures for the generation and transmission of power in the future; the extent to which comparisons have been made with a view to determining the best possible option to ensure stability of the grid, security of supply and consumer benefits; and if he will make a statement on the matter. [11766/07]

Tommy Broughan (Dublin North East, Labour)
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Question 76: To ask the Minister for Communications, Marine and Natural Resources if he will report on his policy to remove the transmission network from the ESB; if he will bring forward legislation to divest ownership of the ESB transmission network to EirGrid; his proposed timeframe for carrying out this action; the way he will guarantee the objective of achieving lower prices for consumers through breaking up the ESB; his views on whether the splitting of the ESB is unnecessary for generating competition; his further views on whether splitting the ESB will endanger the long-term energy security of people here; and if he will make a statement on the matter. [11533/07]

Eamon Ryan (Dublin South, Green Party)
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Question 77: To ask the Minister for Communications, Marine and Natural Resources the mechanism he will use to arrange for the transfer of the transmission grid assets to EirGrid; and the tripartite agreements that may have been in place between the Government, the ESB and the ESB unions regarding the future ownership of such assets. [11757/07]

Noel Dempsey (Meath, Fianna Fail)
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I propose to take Questions Nos. 75 to 77, inclusive, together.

The White Paper on energy policy explicitly confirms the Government's position that the electricity and gas networks, as strategic national assets, will remain in State ownership and will never be privatised. As the networks are strategic national assets and will never be privatised, the Government has decided to transfer ownership of the transmission assets from ESB to EirGrid by the end of 2008.

High oil and gas prices worldwide are a reality with which Ireland, as price taker, has to contend. Approximately 70% of the costs of generating electricity here are driven by international trends, our location and transportation costs. However, the remaining 30% of costs are a result of domestically controllable factors and are high by international standards. The transfer of the transmission grid ownership from the ESB group to EirGrid is a key component of the Government's objective policy to deliver healthy competition and consumer choice in the electricity market. More competition in power generation and supply is needed in the interests of business and the consumer.

Quantification of the benefits of the Government's policy actions in terms of electricity prices for consumers will be a matter for the Commission for Energy Regulation, CER, in its annual price review but it is quite clear that transparency regarding access to the grid and transmission assets will attract more players into the market and help stimulate competition.

The existing structure splits transmission operation and ownership between ESB and EirGrid. This is complex and cumbersome and adds to costs. Furthermore, the ownership of the transmission grid by ESB, as the large incumbent power company, competing with Viridian, Airtricity and others, is a deterrent to existing and new private sector players.

The current arrangement also creates additional overheads and transaction costs; duplication of activities, skills and resources; the risk of blurred accountability; and more complex regulation than would otherwise be needed. The combining of ownership and control and operation of the transmission system in EirGrid is logical. Experience across Europe shows that where there is ownership and control over the assets, the system can be operated transparently and effectively, instilling full confidence in market players.

The proposal to transfer ownership of the transmission network to EirGrid will bring Ireland into line with other EU member states. It is proportionate and in line with views expressed by many in recent years, most recently in the consultation on the Green Paper on energy. The Competition Authority, the CER, the National Competitiveness Council, Forfás, IDA and others have called for it and it is also consistent with the analysis in the Deloitte & Touche report. The proposal is in keeping with the European Commission's recent Communication, An Energy Policy for Europe, which cites effective unbundling as crucial for greater competition and security of supply.

A strong and independent EirGrid will play a critical role in facilitating market liberalisation, supporting the development of effective competition in the electricity market, reducing energy costs and optimising investment. The ESB group in its new form will remain a strong, commercially viable and fully integrated entity after the transmission asset ownership moves to EirGrid. The ESB will be even better positioned to deliver on its mandate for the distribution network and to take on new competitors in power generation and supply on a level playing field.

ESB International will be strongly growing its UK, European and international business and the ESB group will continue to compete successfully with Viridian, Airtricity and other independent operators in power generation and electricity supply in the all-island electricity market.

It is my view that amendments to existing legislation will be required to provide for, inter alia, EirGrid's ownership of the transmission infrastructure, increasing its borrowing limit and other consequential amendments. The advice of the Attorney General on the precise parameters of the legislation required will determine its scope. Any transactional cost inherent in the transfer process will not result in greater costs to the consumer. The Deloitte & Touche analysis considered that the transfer of the transmission asset ownership function should not have a material cost attached.

I have had initial discussions with the chief executive of the ESB and the chairperson and chief executive of EirGrid on taking the implementation process forward. I have also had initial discussions with the ESB group of unions. The representatives expressed their serious concerns on behalf of their members about the decision and other aspects of the White Paper. I listened to their concerns and confirmed my commitment to continuing the process of full engagement with the group on all of the issues inherent in the implementation of Government policy on the electricity sector.

In the context of the fledgling competitive market at the time, the tripartite agreement of February 2000 between the then Minister and the ESB's management and unions laid the grounds for the establishment of EirGrid as an independent transmission system operator, sought to address the ESB's dominance and paved the way for liberalisation of the market and the development of competition. Seven years on, a great deal has been achieved, but more remains to be done. The Government intends to build on this process with a view to completing delivery of a fully competitive electricity market.

The Government will work with ESB and EirGrid management and unions, as well as the ESB ESOT as a minority shareholder in the ESB group, to ensure satisfactory outcomes that address legitimate concerns in the process of achieving the transfer of transmission asset ownership to EirGrid by the end of 2008.

Regarding Deputy Broughan's question, the White Paper contains a number of proposals to ensure the long-term security of supply, including delivery of the North-South and east-west interconnectors, the establishment of the single electricity market, ongoing major capital investment in the transmission and distribution networks, a grid development strategy for 2025, priority to ensuring improvements in plant generation adequacy and realising the potential for distributed electricity generation.

Bernard Durkan (Kildare North, Fine Gael)
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In the Minister's reply, he did not refer specifically to whether he, his Department or the Government intend to privatise the generating capacity of the ESB. Has he discussed that matter with the ESB and its group of unions? In his discussions with them, to what extent has he discussed the grid's stability in the context of the separation announced in the White Paper, given that the ESB will be solely concerned with generation and EirGrid with transmission? Has he investigated the degree to which EirGrid's transmission capacity must be enhanced, does that enhancement entail interconnectors and what agreement has been reached regarding the interconnectors?

In the context of the discussions, has the Minister examined the potential electricity generating strength of the various contributors to EirGrid? Has he and his Department measured their strength to ensure the guaranteed security and stability of the grid? Has he or his Department identified the full extent of the consumer benefit likely to flow? Regarding the transfer of assets to EirGrid, has full and final agreement been reached with the ESB in respect of any transfer of money that might be deemed to be required or is it a paper transfer?

Noel Dempsey (Meath, Fianna Fail)
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There is no question of privatisation of the ESB's assets, as is made clear in two, if not three, different places in the White Paper. As far as we are concerned, it is not an issue. It is explicitly stated that privatisation of the ESB or its assets is not on the Government's agenda. We are discussing a transfer of assets from a State company to a semi-State company. EirGrid is the transmission operator, but it will also become the transmission owner. The ESB will remain in the generation and distribution business, namely, it will distribute electricity to domestic and industrial premises. There is no proposed change in that respect.

Some months ago, the Government agreed that the east-west interconnector will be owned by EirGrid, which will be the first piece of hardware in the electricity market not owned by the ESB. With the exception of transmission lines, the North-South interconnector will be owned by the ESB because it connects to the grid internally across the Border.

Regarding the agreements reached, the White Paper was published two weeks ago and, for a variety of reasons, the meetings in question only took place yesterday. As such, we are at the preliminary stages of discussions with the ESB. We met the ESB, its group of unions and EirGrid yesterday and discussed the implementation of the decisions in the White Paper. The timescale goes to the end of 2008 to enable us to work out the various details of the transfer of assets and how it will operate. Legislation will also be necessary.

On the broader question of why we are doing this, the thrust of numerous aspects of the White Paper is to introduce healthy and new competition to the market, which will have an effect on prices and will directly benefit the consumer, whether domestic or industrial. This matter relates to providing healthy competition in the market, making the economy more competitive and addressing concerns, not least of which are those of the unions. Last week or the previous week, a union issued a publication on what it perceived to be a lack of competition in the market. ICTU had a major concern in this regard and had the matter included in the Towards 2016 document.

We are addressing the need to make the economy more competitive to ensure we do not lose jobs as a result of high energy prices. The overall package in the White Paper, not just the transfer of transmission assets, is designed to make the economy more competitive and to benefit the consumer.

Tommy Broughan (Dublin North East, Labour)
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The ESB debt is approximately €2 billion. I remember when the Minister's predecessor, the Minister for Foreign Affairs, Deputy Dermot Ahern, told the House excitedly of the ESB's negotiation of favourable loan terms in New York to address a large tranche of the debt. What will happen to the debt and the ESB's financial controls if the Minister proceeds with his policy of removing an asset worth at least €1 billion? Must there be a major renegotiation of the debt and will the ESB's credit standing be damaged?

The Minister said he met representatives of the ATGWU, SIPTU, UCATT and Amicus this morning to start discussing this policy with them. What will happen to the workforce? How many workers are involved? I understand that approximately 700 workers are directly involved in the transmission sector but the Minister has contradicted that number which was given to me by senior ESB management on the day on which he presented the White Paper to them in the Royal Irish Academy. What will be the fate of those workers in relation to the employee share ownership trust?

I was present in the Department of the Taoiseach last October when the Minister published the Green Paper on Energy Policy. On that occasion he said quite categorically that any break-up of the ESB would lead to higher prices and could cause long-term damage to the security of Irish energy supplies. What has changed in the last four or five months to cause him to change his mind?

Energy prices have skyrocketed since 2000, during the term of office of this Administration.

Bernard Durkan (Kildare North, Fine Gael)
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Hear, hear.

Tommy Broughan (Dublin North East, Labour)
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The price of electricity has increased by well over 60%. What benefits have accrued to the people to date as a result of the Minister's handling of deregulation? Why should we be happy with the prospect of breaking up the ESB company, or atomising it, as the Minister said?

Why has the Minister produced a policy on the transmission network, rather than the distribution network? What will happen to the distribution network? The Minister's White Paper states it will have to be priced in a cost-neutral way that will have a major impact on the finances of the ESB. This sector can be compared to the communications sector — the transmission network is like the backhaul and the distribution network the local loop. Does the Minister accept that if he proceeds with this policy, it will be completely crazy from every point of view?

The Minister referred to the report produced by the ATGWU and Mr. Brendan Ogle which states clearly that the ESB's labour costs have decreased over the last five years from 22% to less than 16%. The report points out that these costs are in the middle rank of such costs in the 15 pre-2004 EU member states. Labour costs are higher in Belgium, Austria, Luxembourg, Germany and the United Kingdom. Given that the United Kingdom — the only country said to have a fully liberalised market — has higher labour costs than Ireland, what is the point of all of this?

The Labour Party is bitterly opposed to this proposal which will lead to the privatisation of the ESB which the Minister is utterly determined to facilitate. This measure is the Trojan horse that will allow the ESB to be smashed up. We will no longer have energy security as a result of the break-up. Ireland will be deemed to comprise the north-west electricity market. The native company will have approximately 7% of market share. For that reason the Minister should not have proceeded with this process.

I will conclude by reminding the Minister of the dangerous situation that recently developed in Germany and Italy. The actions of a person working on a pylon in Germany caused a black-out in northern Italy for between 24 and 36 hours. If the Minister proceeds in this manner, he will leave us in a similar position. It will be another one of his very bad legacies. We will continue to oppose this proposal vigorously.

Noel Dempsey (Meath, Fianna Fail)
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The transfer of the ESB transmission asset will also involve the transfer of a portion of the debt. Obviously, the level of debt that will be transferred has yet to be worked out.

Tommy Broughan (Dublin North East, Labour)
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EirGrid is a totally new company.

Noel Dempsey (Meath, Fianna Fail)
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There will be no negative effect on the ESB's overall creditworthiness. The spin that came from somewhere last night appeared in the newspapers this morning.

Bernard Durkan (Kildare North, Fine Gael)
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Spin is not rare nowadays.

Noel Dempsey (Meath, Fianna Fail)
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Those who are opposed to this measure, as well as other proposals in the Green Paper which will reduce costs, benefit consumers and make the economy much more competitive, are engaging in scaremongering. A portion of the debt will be transferred with the asset.

I had a discussion with the unions yesterday about the number of workers who would be affected by this change. Over the last eight or ten years the ESB has done a number of good things, one of which has been to ensure practically all of its workers are multi-skilled — they can work on the distribution and transmission lines. I do not accept the figure of between 700 and 800 workers cited in some quarters. It is certainly not the figure from which the Commission for Energy Regulation operates when working out the costings for price increases in the electricity market. I do not accept that there are 700——

Tommy Broughan (Dublin North East, Labour)
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The chief executive of the ESB has mentioned that number.

Noel Dempsey (Meath, Fianna Fail)
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Perhaps the chief executive should mention that number publicly so it can be properly dealt with. I will not accept a third-hand version of what the chief executive is supposed to have said. Rather than getting Deputy Broughan to quote such a figure, he should say it himself.

Tommy Broughan (Dublin North East, Labour)
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He is an outstanding public servant.

Noel Dempsey (Meath, Fianna Fail)
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He is an absolutely outstanding chief executive.

Bernard Durkan (Kildare North, Fine Gael)
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Hear, hear.

Tommy Broughan (Dublin North East, Labour)
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Yes, but the Minister does not believe what he is saying about his own company.

Noel Dempsey (Meath, Fianna Fail)
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When I spoke to the unions yesterday, they suggested that between 700 and 800 people were working on the transmission system. When I challenged and queried that figure, it was changed. There is no way that between 700 and 800 employees are working full-time on the transmission asset.

Tommy Broughan (Dublin North East, Labour)
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How many people are working in the distribution sector?

Noel Dempsey (Meath, Fianna Fail)
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Some 3,500 people are working on the transmission and distribution systems in the ESB. There are 6,500 km of transmission lines, the big lines supported by pylons. They do not break down as often as the 156,000 km of distribution lines. The Deputy can do his own mathematics. If 700 or 800 people were working solely on the transmission lines, ten or 15 times more workers would be required to look after the distribution lines. That estimate is based on a comparison of the number of kilometres of lines in each case.

The Deputy also asked me about the statement I made after I was asked a specific question on the proposal in the Deloitte & Touche report for the atomisation of the company. If he looks up the word "atomisation" in the dictionary, he will find that it means breaking something up into small little parts. The question I was asked related to the proposal in the Deloitte & Touche report to transfer the transmission and distribution assets and to divide the supply network into three separate units.

Tommy Broughan (Dublin North East, Labour)
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The Minister said he was opposed to any break-up.

Noel Dempsey (Meath, Fianna Fail)
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I said quite explicitly that I would not proceed in such a manner. I said the Government believed the ESB should remain as a strong company and continue to be a national champion in this area. I said we were not in favour of atomisation.

Tommy Broughan (Dublin North East, Labour)
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The Minister was tying its hands behind its back.

Noel Dempsey (Meath, Fianna Fail)
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I said we would not support it.

Tommy Broughan (Dublin North East, Labour)
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The Minister was putting a blindfold on it.

Noel Dempsey (Meath, Fianna Fail)
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The Deputy also asked about the reduced rate of return in respect of the distribution lines, or the lines which extend into our houses and businesses, etc. The Government has taken the view that this sector is a natural monopoly — there is no competition in this area — therefore, there is no need to treat it in the normal commercial way. We have decided that the charges we impose on the distribution lines should be risk-related. Enough income should accrue from the distribution lines to meet capital costs, pay for maintenance and fund future investment, with a slight margin. When the risk-related rate of return is applied, it will have a direct effect on the cost of electricity to consumers. That is why the policy is being pursued. We might have taken another view of the matter if there was competition in the distribution lines. The Deputy also asked about privatisation and whether there was a plan for this. There is no plan for privatisation.

Tommy Broughan (Dublin North East, Labour)
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This Government privatised Aer Lingus.

Noel Dempsey (Meath, Fianna Fail)
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Some people would like it to be privatised and some would benefit greatly from it but it is not and will not be on the agenda.

Tommy Broughan (Dublin North East, Labour)
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Will it be in the manifesto?

Eamon Ryan (Dublin South, Green Party)
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Given that we all agree Eirgrid should be independent, ownership of the assets should lie with an independent Eirgrid company. This will be a job for the next Government to implement because I cannot imagine the legislation will be passed before the election. Does the Minister's Department have a timetable in mind? What was the nature of the tripartite agreement entered into in 2000? Was it binding, with a timetable? The Minister used the tried and trusted "a lot done, more to do" phrase in this regard. What commitment was given to the union with regard to ownership of assets?

The Minister stated the North-South interconnector would remain in ownership of the ESB unless it was a transmission connection. I presumed any interconnection between North and South would be a transmission asset. I do not understand how it could be considered part of the distribution system.

I am uncertain about the proposal for a risk related rate of return with regard to the distribution network. Assuming it is a stable, conservative business area, my vision of a green energy future requires a radical change in the distribution system with development of microgeneration, a distributed grid, smart net metering and a range of connection options for renewable suppliers. This requires a flexible, modern, risk-taking distribution network. It does not make sense to hamstring a company in terms of development of a distribution network because this is the area in which we need most change and innovation.

Can the Minister give an explanation of the future of the ESB? I understand how the management and board of the ESB were confused. Privatisation was on the cards in the time of the Minister's predecessor, Deputy Dermot Ahern. A number of parties considered it as a lucrative option and clear signals to this effect were given to management of the company. This has since been scotched and rightly so.

The Minister referred to the task of developing and expanding overseas and mentioned examples in the UK. The Government scuppered one of the best investment opportunities, the Polish expansion.

Tommy Broughan (Dublin North East, Labour)
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Hear, hear. It was Charlie McCreevy.

Eamon Ryan (Dublin South, Green Party)
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The Government sent mixed messages by advocating overseas expansion but scuppering the best opportunity. The White Paper refers to the need to develop a renewable future but the ESB has done nothing in this regard and has blocked others by, for example, supporting the wind energy moratorium.

I agree with the Deloitte & Touche report in respect of development of the generation business and the separation of the transmission grid. This is a good framework for the future. I do not know the Minister's plans for the ESB. My vision is to turn it into the green energy company of Ireland and direct the company towards that future. Can the Minister provide a synopsis of the business plan of the ESB?

Noel Dempsey (Meath, Fianna Fail)
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The timetable for the legislation is until the end of 2008. The transfer will take place by then and the legislation will fit within that timetable. The tripartite agreement was made in 2000 for a five year framework. It was designed to protect the ESB from competition as we opened and liberalised the markets. The Government was committed to a strong ESB, as it is now.

Regarding the risk-related rate of return, a North-South grid study will take into account the work necessary, including microgeneration, to increase the amount of renewables and reach our ambitious targets in that area. When completed, we will have a complete picture of what is needed for the transmission system to cater for renewables until 2020 and 2030 on an all-island basis. The risk-related rate of return means that if money is spent, repayments and interest will be included in the price. The regulator can give 3.2%-6.8% return on the distribution assets. The risk-related rate of return would be at the lower end of that because giving a profit adds to the cost. The cost of renewables and work needed on the grid would be returned in the risk related rate of return.

This and previous Governments are committed to the ESB. As part of the tripartite agreement Synergen was set up, along with new stations in Lanesborough and Shannonbridge. Investment in Coolkeeragh was encouraged and the repowering of Moneypoint and Aghada. Major investment was made in Spain, the investment was recouped and the ESB owns half of the power station. All of this was approved by Government and the one deal that was not approved was one in which the ESB did not follow the correct procedures. Instead, it presented a fait accompli to the Government.

Tommy Broughan (Dublin North East, Labour)
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That is not true. The Minister should withdraw that comment. Charlie McCreevy had a bee in his bonnet about this.

Noel Dempsey (Meath, Fianna Fail)
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Regarding the future of the ESB, the Government believes the company should be strong, robust and viable operating in the home market. It should also be strong enough to operate in a competitive foreign market.

Tommy Broughan (Dublin North East, Labour)
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The Government gutted it.