Noel Coonan (Tipperary North, Fine Gael)
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Question 94: To ask the Minister for Communications, Energy and Natural Resources if the Commission for Energy Regulation is considering removing the regulated tariff formula pricing structure which allowed for competition in the gas market; his views on whether this will halt competition, choice and service in this sector for consumers and small medium enterprises; his further views on whether that regulated tariff formula is of more importance due to the current economic climate; and if he will make a statement on the matter. [3895/10]

Eamon Ryan (Dublin South, Green Party)
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The regulation of charges in the natural gas market, including tariffs to final customers, is the statutory responsibility of the Commission for Energy Regulation, CER, under the Gas (Interim) Regulation Act 2002.

The gas market has been fully opened up to competition since July 2007. Experience in other markets has shown that there is a time lag between full market opening and the emergence of fully viable competition. The small size of the Irish retail gas market adds to the challenge.

The current regime of regulation in the upper end segment of the Industrial and Commercial sector is known as the Regulated Tariff Formula regime. The Regulated Tariff Formula took effect in 2003 for gas customers consuming from 188,000 to 9 million therms per annum. Prior to its introduction in April 2003, Regulated Tariff Formula eligible customers could choose from a range of Bord Gáis Energy published tariffs. The Regulated Tariff Formula regime introduced a price regulation formula reflective of monthly wholesale prices and the cost of delivering gas to the customer's premises.

This regime was introduced as an interim measure in 2003 to encourage competition in this sector at a time when Bord Gáis Energy Supply, BGES, had 100% of the market of this sector. BGES now has approximately 41% of this sector.

I am advised by the CER that it launched a review of the Regulated Tariff Formula last October. This review is in line with the commitment by the CER that it would keep the case for retaining or removing the Regulated Tariff Formula regime under regular review. The CER has indicated that it considers the time may now be right to remove the RTF regime. The decision process involves a consultation process on the potential of the regime. The consultation is ongoing.

The continued entry of new suppliers into the gas market, with Phoenix and ESBIE being the most recent entrants, demonstrates that regulatory policy to underpin the growth of competition in gas supply has paid dividends for consumers. The decision now to be made by CER following the consultation process is whether competition has now taken sufficient hold for the Regulated Tariff Formula to be removed in the interests of business customers. I have no doubt that in reaching a balanced and evidence based decision CER will take due account of all the perspectives on the matter including the views of all suppliers and of the business customers themselves.

Noel Coonan (Tipperary North, Fine Gael)
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I thank the Minister for his reply. I asked whether it was his opinion that this is the wrong time to remove the Regulated Tariff Formula in view of the fact that competition is so vital in the economy. I do not accept his claim that it is the responsibility of CER. I can recall the Minister coming into this House during the past 12 months when he used considerable influence to reduce the price of natural gas which had declined on the wholesale market. Also by his appointment of the new regulator, the Minister is, in effect, in charge of CER. It is important to know what is his policy. Does the Minister agree that the removal of RTF at that stage would not be beneficial for the consumer and small industries as there would no longer be a transparent pricing system for gas which could lead to a dominant position for Bord Gáis which could stifle competition?

Eamon Ryan (Dublin South, Green Party)
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My direction is that we achieve a competitive clean and secure energy supply and keep money in this country rather than have it go abroad as much as possible. In the gas area, the RTF applies for about 246 customers. These are some of the larger industrial customers, companies that are in a competitive challenge, exporting companies to the UK and others. For them it is important that the regulator gets the price right. There are real benefits from introducing competition from having it deregulated in that one can have a downward price pressure for such customers. However, it is not certain. One has to ensure there is not a dominant position that one does not end up giving short term gains and seeing a long term loss. It is the regulator's job to assess, to listen to different views and come to a conclusion. I am confident in its ability to take on that task and to make the necessary change. The RTF has been in place for a number of years. It was always seen as being a temporary measure and was not meant to be a permanent mechanism. It is a temporary measure until there is a sufficient level of competition to open it up. That would bring prices down. The policy is working and I believe the CER will continue to make it work.

Noel Coonan (Tipperary North, Fine Gael)
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Will the Minister agree that the Regulated Tariff Formula has been very effective when compared to the light touch regulatory system in the banks and in Eircom which has virtually brought this area to its knees and that it is important at this stage in our development, in view of the pressure being experienced by the economy and competitiveness and reducing prices? His initial intervention nine months ago had the effect of reducing gas prices significantly but they are still 13% above the European norm. We do not want the energy sector to become like the banks because of what happened through the regulatory regime. Will the Minister acknowledge that the RTF is worth is holding on to for that reason alone? It provides security and competition in the industry.

Eamon Ryan (Dublin South, Green Party)
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I do not know about Fine Gael's position but I believe competition helps to drive down prices and I have seen it work. Therefore, my general instinct, where possible, is to let competition work in the public interest. Ultimately it is for the CER to decide when to turn to such a competitive unregulated market. We are moving on that. We need also to move in the area of electricity, in the last band that is competitive. We are doing it on a steady basis in the gas market and that is appropriate but it is up to the CER to make the final call as to exactly when. The general policy of using competition to bring prices down is something of which I am proud and support.