Arthur Spring (Kerry North-West Limerick, Labour)
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I thank the Minister for attending the House. With regard to the report published by the Commission for Energy Regulation on 29 June 2012, I wish specifically to highlight how it impacts on my constituency and on the Ballylongford landbank which, unbeknown to many people in the House and country, is the second deepest water port in the entirety of Europe. Unfortunately, it has been the subject of many false dawns to date. In the 1970s Aran Energy considered building an oil refinery on this piece of land. With some foresight, the State has taken a landbank of approximately 600 acres which if it existed in any other part of Europe would be the site of great industry and employment. With respect, I must state I am disappointed not so much with the findings but with how the matter has played out since 2001. In 2001 the then Minister with responsibility for enterprise decided we needed a new interconnector between Ireland and the UK with the capacity to transport 22 million cu. m of gas per day. This was built and in 2002 the regulator took control of the market.

The Department of the Taoiseach commissioned a report from the Economist Intelligence Unit in 2009. Our regulator is independent and a public agency. A table reveals a considerable variety in the legal status of European regulators and the independence of energy regulators. In Ireland and Portugal they are independent public agencies. To this end complete responsibility lies with the independent regulator who faces consequences for making judgments deemed to be inappropriate. Will the Minister highlight how he can ask the Judiciary to rule on this if needs be and how we can act within the EU Commissioner's regulations?

In 2005 the regulator decided a tariff regime was needed for external sources, because at the time 95% of our gas was coming from the State-owned interconnectors and the ring main, with 5% coming from Kinsale. The Corrib gas field was coming on stream and at the time the regulator was under no illusion about having to put a tariff in place. In 2006, Hess Engineering, along with Shannon LNG, looked at developing the Ballylongford site for the purpose of a gas LNG plant which would bring an investment of between €600 million and €1 billion to our country. This would bring foreign moneys, create jobs and provide a positive start to energy provision which would ultimately realise more jobs in Kerry Group and the Tarbert fuel station which would now become a gas generating station. This would be positive for the country and for north Kerry. It is now 2012 and the issues are still not resolved. Eleven years have passed since the first proposals were made and the timeframe now proposed for a resolution by the regulator is October 2014. This is unacceptable. It is not the kind of conduct one would expect in a commercial and viable country.

I am not happy with the conduct of the regulator. I understand the issue is highly complex but many people do not understand that. It is time the issue was brought to a conclusion. I have made recommendations to Bord Gáis Networks, to Shannon LNG and to members of the committee dealing with transport, communications and energy on the need for a special Oireachtas committee meeting to discuss whether a judicial review is warranted as a result of the tariffs being proposed. The Brattle Group, which is commissioned by governments and independent gas companies throughout the world, has referred to the situation here. It stated that in terms of process and managing legitimate expectation, the CER does not seem to have followed best practice. The CER presented four options in a July 2011 consultation paper and has rejected all of those subsequently.

Pat Rabbitte (Dublin South West, Labour)
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I thank Deputy Spring for raising this issue, in which he has shown a keen interest for some time. I welcome the opportunity to update him and Members of the House on this important issue. The matter raised relates to the decision published by the Commission for Energy Regulation on 29 June last, relating to the regulatory treatment of the BGE interconnectors and the future gas transmission tariff regime. I trust that this high level decision provides a degree of regulatory certainty that has been sought by all stakeholders, including Shannon LNG.

I have consistently welcomed the proposal by Shannon LNG to construct a LNG terminal near Ballylongford, County Kerry. Such a facility, together with the bringing onshore of Corrib gas would provide important security of gas supply for Ireland. I met the promoters of the project soon after taking office and both my Department and the Commission for Energy Regulation are in regular contact with Shannon LNG. Together with all players and potential players in Ireland's gas market, Shannon LNG has a key commercial interest in the outcome of the CER's decision on this complex regulatory question and, given the complexities, there are many differing perspectives on what the decision should be.

The decision on the regulatory treatment of the gas interconnectors is by law a matter for the Commission for Energy Regulation under the Gas (Interim) (Regulation) Act 2002. The regulator, as the independent energy regulator, has a remit to protect energy consumers, ensure security of supply and support competitiveness. It also has a duty to ensure that new sources of gas for the Irish market do not result in unwarranted increases in the price of gas to business and domestic consumers. Over the past number of months, the CER has been engaged in an extensive consultation process on the matter and has had considerable interaction with Shannon LNG as well as with all key stakeholders. The publication by the CER, on 17 February last, of a proposed decision paper for consultation was followed by the assessment of stakeholder submissions by the CER and meetings with several individual stakeholders, including Shannon LNG.

The CER's high level decision, published on 29 June, concludes that the current gas transmission entry tariff regime must be reformed in the light of new sources of gas, such as Corrib and Shannon LNG, coming on stream. The interconnector entry tariff plays a crucial role in determining Irish gas wholesale prices for all customers. Without reform of the system, the reduced flows of gas through the interconnectors due to new sources of gas coming on stream could lead to significant increases in the per unit interconnector tariff. In turn, this would push up prices for gas consumers in Ireland. The decision commits the CER to the setting of tariffs at each entry point. Tariffs will be set separately on the basis of forward looking long run marginal cost, LRMC, considerations. The new tariff regime is expected to come into effect in October 2014.

The CER has decided that a network tariffs liaison group, involving stakeholders, will be established. The purpose of the group will be to inform the regulator's future decisions on the methodology for setting the LRMC tariffs for each entry point. Following a decision by the regulator on the methodology to apply, the CER will then issue a direction to Gaslink to effect these reforms. I very much hope that all stakeholders, including Shannon LNG, will continue to work with the CER on this issue.

Arthur Spring (Kerry North-West Limerick, Labour)
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This matter must be resolved. To put it in context, under the strategic infrastructural planning rules in this country, in 2006 Shannon LNG achieved planning permission within six months. However, it took the regulator 18 months to analyse that decision and now it seems that it will be 2014 before any project gets off the ground. There is no certainty surrounding this and for anybody considering making a substantial investment of between €600 million and €1 billion the figures must be provided with regard to the proposed tariff. Any business plan must be able to be promoted so that a decision can be made on whether it will go ahead. The liaison group should be set up immediately and should be required to resolve the matter within the next six months. Then Hess and LNG can commit or not to tendering for the project.

A report of The Economist intelligence unit produced for the Department of the Taoiseach in 2009 stated that evidence that energy prices in Ireland are high by international standards raises potential questions about the effectiveness of the regulatory regime in the absence of some alternative explanation for such high prices and that the regulator's job is not to set artificially low prices but to ensure that the customers are not paying for more or less than they would in competitive markets. It is high time we took a look at how our system works and separated how Bord Gáis networks work and how private investors can consider creating jobs and reducing the price of energy, ultimately creating competitiveness for the consumer and for the national well-being. Some 65% of the electricity that is created in this country is from gas. I welcome better sources, but the process is too slow. Action by the regulator since 2002 is unacceptable and the regulatory system needs to be improved to that end.

Pat Rabbitte (Dublin South West, Labour)
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As a matter of coincidence, the International Energy Agency published its review today of the effectiveness, efficiency and competitiveness of the Irish energy sector. The executive director from Paris was here to launch that document and the conclusions of the review find the work of the Irish regulator praiseworthy.

I accept the point made by Deputy Spring and inform him that within days the letters will issue to ensure that the network tariffs liaison group will be set up to commence the process. It is a matter for others as to how quickly they will respond to that. I am, to some extent, in the dark in that since the regulator made its decision on 29 June, I have not had any response from the company. Neither has the regulator had a response, to my knowledge. I hope that is a good sign and I also hope the company is engaging with the decision. I am disappointed to hear Deputy Spring say that he thinks the decision will not bring the necessary regulatory certainty. Getting the decision had been delayed by actions of the company, in terms of making complaints to Europe. Nonetheless, the regulator published its decision on 29 June, with the purpose of giving regulatory certainty. I take some hope from the fact that the company has not made any reaction to me or the regulator that it will engage in private with the regulator in terms of assessing what precisely are the implications of what is, as Deputy Spring said, a highly complex area.