Dáil debates
Tuesday, 10 February 2009
Priority Questions
Energy Prices.
3:00 pm
Simon Coveney (Cork South Central, Fine Gael)
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Question 76: To ask the Minister for Communications, Energy and Natural Resources the way he will proceed with an energy price review through the Commission for Energy Regulation, CER; the timescale for the review announced in February 2009; and if he will make a statement on the matter. [4855/09]
Liz McManus (Wicklow, Labour)
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Question 77: To ask the Minister for Communications, Energy and Natural Resources when the energy regulator's decision to reduce the price of electricity by a two-digit number will be made; if he will ensure that a price ceiling be set rather than a price fixed; the other changes he will make to ensure that energy prices are reduced in the interests of competitiveness here and to help ameliorate fuel poverty; and if he will make a statement on the matter. [5060/09]
Eamon Ryan (Dublin South, Green Party)
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I propose to take Questions Nos. 76 and 77 together.
Encouraging a competitive energy supply is a key policy objective for the Government. Rising energy costs are a major concern for all sectors of the economy and for consumers. The regulation of ESB customer supply electricity tariffs and BGE gas tariffs is the statutory responsibility of the Commission for Energy Regulation, CER, under the Electricity Regulation Act 1999 and the Gas (Interim) Regulation Act 2002.
I welcome that the CER announced on 1 December 2008 there would be no further increase in the price of gas from January 2009 and that there would be a small average decrease from that month of just less than 1% in the price of electricity supplied by ESB Customer Supply. This decision is reflective of recent easing in international fossil fuel prices. I also welcome the substantial rebate of about €400 million being provided by ESB to all electricity customers, irrespective of their supplier, which has helped to stabilise electricity prices for 2009.
The two-phase approach to tariff regulation adopted by the CER last year resulted in price increases in the Irish market which were lower than those in some of our neighbouring markets. In Great Britain, for example, independent suppliers increased electricity tariffs by more than 26% on average, and gas tariffs by more than 40% on average in 2008, in response to increasing fossil fuel prices. By contrast, regulated tariffs in Ireland increased by an average of 17.5% in the case of electricity and 20% in the case of gas. In taking this phased approach, the CER took account of the difficult economic situation and the impact of price increases on business and consumers, including vulnerable customers.
The CER has previously demonstrated an ability to adapt its tariff regulation process in line with evolving market conditions. I note, for example, the CER decision to end tariff regulation for large electricity users in 2006, based on its conclusion that there is a sufficient level of competition in this market. The majority of large industrial and commercial electricity customers are currently supplied by independent suppliers. Many of these large industrial consumers are on fuel variation tariffs and have already experienced the benefits of falling gas prices.
The CER is required to ensure that regulated tariffs are cost reflective. However, I believe it may be possible to lower energy costs to consumers in a non-distortionary fashion, through an expedited review of tariffs. To achieve this, I have asked the energy regulator to undertake an immediate review of options to bring forward a reduction in electricity prices. As I stated in this House last week, if current trends in energy prices, particularly gas, continue, I would expect a double-digit cut in electricity and gas prices to become a reality later this year.
I also expect that, in the context of this review, the CER will advise on additional non-discriminatory and pro-competition measures that may be taken to bring about reductions in energy prices in the short-term. The ESB rebate, which I mentioned earlier, demonstrates the type of imaginative solutions that can be developed when all parties work together to ensure the best outcome for energy consumers in Ireland. I expect the timeframe for implementation of any reductions to become clearer in the coming weeks as we develop a better understanding of these potential measures. The priority for the Government is to ensure that we act swiftly in the interests of energy consumers.
Simon Coveney (Cork South Central, Fine Gael)
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I agree with the Minister that it is important the Government acts swiftly in respect of these matters. The Minister was instructed by the Taoiseach to undertake an energy price review and he is acting on that. He has raised the bar somewhat by saying he expects a double-digit energy price reduction this year. Presumably, he is talking about households. What I and others wish to hear from him today is when we will see the short-term price review he spoke of today. How long must we wait for that?
Bord Gáis will launch a new product next week, supplying electricity to homes for prices that are 10% to 14% cheaper than those the ESB currently charges. How can that be? If that is the case — it is — does the Minister agree the regulated price for households is too high? Can we expect a double-digit reduction in the regulated price for households to feature in the short-term review he mentioned today?
Concerning the broader review of energy price regulation, can we expect the double-digit reduction in energy prices for the commercial-industrial sector? That sector is not subject to direct price regulation but is subject to the influence of regulation in terms of the regulated price set by the CER for both networks and supply. Both are services supplied by the ESB.
Eamon Ryan (Dublin South, Green Party)
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I confirm that what we are talking about, primarily, is the household sector. As I said earlier, unlike householders, since 2006 the large business consumers have operated in an unregulated market. Because of the nature of the contracts they have, these sectors are already seeing a double-digit reduction in prices, arising in particular from lower international gas prices. The immediate timeframe set out is for the regulator — who was asked to see whether that expected reduction can be brought forward — to come to Government within three or four weeks with a range of different options.
I refer to the debate we had here last week during Private Members' time. There are a number of options in this regard, each of which might have advantages and disadvantages. In my contribution I set out the disadvantage of a unilateral reduction from the ESB because of the effect it would have on competition. I also mentioned the disadvantage of repeating the generous act the ESB undertook last year in forgoing €300 million in its revenue stream and a further €100 million this year from the sale to Endesa. To transfer that across the market is not a satisfactory outcome because it could endanger some of the investments we want the ESB to make.
My preferred option, if it is possible in a non-distortionary manner that does not affect competition and investment plans, which is important, is to see whether the regulator can bring forward such reductions from the October date we expected. I was looking at the gas prices again this morning. If one looks forward for the next six months or year — and most of the contracts are done forward — the price of gas is sufficiently low for us to confidently expect a double digit price reduction. The exact month in which it occurs must be advised by the regulator. That is the timeframe within which we are working.
Bord Gáis must announce its plans. I will not pre-empt——
Simon Coveney (Cork South Central, Fine Gael)
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In which month can people expect a response from the Minister on whether electricity prices will be reduced?
Eamon Ryan (Dublin South, Green Party)
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First I want the regulator, in discussion with all the players, to come forward with options. I will not pre-empt that task it has been set.
Simon Coveney (Cork South Central, Fine Gael)
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I am asking for a timeframe.
Eamon Ryan (Dublin South, Green Party)
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The timeframe for that work is the next three to four weeks. The regulator will return to the Government with those options and we will make a call on it.
Liz McManus (Wicklow, Labour)
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Does the Minister accept that his desultory approach to this is insufficient to the task? People's incomes are plummeting and their utility bills are soaring. I do not know how insulated the Minister is from the realities of life but I will give a couple of quick examples in case he is not aware. Sheila's bill was €250, now it is €323. Brendan runs a business. In 2002 the bill was €800. The equivalent bill now is over €3,000. Seán's bill was between €600 and €800; he was away for Christmas, yet his latest bill was €1,250. Eileen had no Christmas tree, yet her ESB bill went up by €25. That is what people live with. For the Minister to attend the House and refer to a range of options is an inadequate response to the daily experiences encountered by people.
When can people expect the two-digit reduction the Minister has promised Will he ensure there is a price ceiling rather than a fixed price to allow, at long last, for some good value for people who struggle with their bills? For too long we have seen competitiveness sacrificed on the altar of competition. Does the Minister recognise we have to open it up in a way that meets the needs of consumers? What will the Minister do to assist businesses that cannot compete?
We have one of the highest levels of energy bills in Europe and we are operating in an incredibly difficult economic climate. Does this not require urgency on the Minister's part to deal with this issue once and for all?
Simon Coveney (Cork South Central, Fine Gael)
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He is doing nothing about it.
Eamon Ryan (Dublin South, Green Party)
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At the centre of our energy policy is the interest of Irish householders and businesses, to ensure we can give them a secure, competitive and clean electricity supply. The policies we are following will do exactly that. We are not following competitive policies for the sake of some ideological reason but from the clear understanding that the introduction, particularly in recent weeks, of very large international utilities into this market will be the most important factor in continually driving down prices for the Irish householder and business community over the next year, five years and ten years. That will deliver them lower prices.
This is a crucial investment and development we must support and see through. We must not turn it upside-down by completely getting rid of a regulatory system that is in place and acts as a crucial piece of infrastructure in an electricity market.
Simon Coveney (Cork South Central, Fine Gael)
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Nobody is suggesting that.
Eamon Ryan (Dublin South, Green Party)
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This is my point and we are doing that. The process of examining the options is the correct choice. One should not rush into this like a headless chicken, slashing and demanding change. One should work through how to proceed in a way which maintains the various objectives and brings down prices consistently. A short-term decision could, in the long run, lead to higher electricity prices, which would be against the interests of Irish householders. That is why one is better to let the regulator work with the various companies involved in the area to come back with options from which the Government can make the call. That is our central policy objective and is the right approach in this area. It will bring down electricity prices. We know that is coming from the price of the raw materials. A proper, regulated and competitive market is the best way to extract every last cent of price reduction we can from the sector rather than making an initial decision that misses that opportunity.
Simon Coveney (Cork South Central, Fine Gael)
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Today the Minister said he will try to do something for householders who have high electricity bills but will invite options in three or four weeks' time. He is doing nothing for the businesses of the country which are overcharged for electricity. As a result, Ireland is an uncompetitive destination in terms of energy cost competitiveness. The Minister says he will continue as normal and we will stick with the energy regulation plan that has been there for the last ten years. No electricity cost adjustments will be made in response to a recession or as part of an economic recovery plan.
Liz McManus (Wicklow, Labour)
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In these very bleak times the Taoiseach announced he would deal with energy prices and that the Minister would have an extraordinary review with the regulator. That means the Minister must show results. What he said today clearly indicates he is still stuck in a rut. He has not altered his position in the face of the economic climate and the personal difficulties people have, which should give him the sense of urgency that is required. When will people, at a time when they desperately need it, benefit from the two-digit price reduction the Minister and his Taoiseach have promised on behalf of the Government?
Eamon Ryan (Dublin South, Green Party)
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The energy policy we are following is the right policy to reduce prices and I will stick to that policy because it will deliver for the public.
Simon Coveney (Cork South Central, Fine Gael)
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By 2015 or 2020. That will do much for the recession.
Eamon Ryan (Dublin South, Green Party)
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It is the correct policy for us to build additional power plants in Cork, which the ESB and Bord Gáis are building. It is the correct policy for us to see companies such as Endesa spending €800 million developing existing plants so we can get them on stream.
Eamon Ryan (Dublin South, Green Party)
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That will bring down prices.
Simon Coveney (Cork South Central, Fine Gael)
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It is a pricing problem.
Eamon Ryan (Dublin South, Green Party)
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The Deputies must understand the fundamental reasons why we have had high prices and recognise the policies we are pursuing are addressing that fundamental reason. That will be the best guarantee for the public that prices will be reduced.
Liz McManus (Wicklow, Labour)
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I want to know what the Minister is doing for people now.
Simon Coveney (Cork South Central, Fine Gael)
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He did not even know when the ESB decided to spend an extra €20 million on salaries. He did not know it was happening until he read it in the newspaper. That is how on top of his brief he is.
Eamon Ryan (Dublin South, Green Party)
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The second main reason we have high prices is our dependence on fossil fuels. The consistent determination by my Department, the Government and I to switch away from that reliance will be the second best guarantee that prices will be reduced. The crucial third part of energy policy that one sticks to and gets right is having a fair and competitive regulatory system that will deliver lower prices.
Simon Coveney (Cork South Central, Fine Gael)
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Stick to the script.
Liz McManus (Wicklow, Labour)
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The time for preaching is over. It is time for the Minister to do the business to keep people in business. If he does the business, people will stay in business.
Eamon Ryan (Dublin South, Green Party)
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I am confident that because we are following such a course, because international prices are reducing, we will see lower prices. That will be done in the proper fashion.
Simon Coveney (Cork South Central, Fine Gael)
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The Minister did not even keep an eye on salaries at the ESB. That shows the extent to which he is on top of his brief.