Barry Cowen (Laois-Offaly, Fianna Fail)
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I thank the Ceann Comhairle's office for allowing me raise this issue. Lumcloon Energy Limited was granted planning permission three years ago for a new power station at Lumcloon, Ferbane, County Offaly. Three years later no energy has been generated.

This is because the Department of Communications, Energy and Natural Resources has yet to decide on the terms on which the plant can sell electricity to the national grid. This is delaying construction and the creation of 500 potential jobs. Permission was granted for a 350 MW station almost three years ago by An Bord Pleanála and there is already a connection to the national grid. The Department is forcing up electricity costs by as much as 15% for businesses and home owners alike by refusing to give the go-ahead for new power plants such as that in Lumcloon.

Page 4 of the SEM committee's December 2012 document on the future of the single energy market, DS3 System Services Third Consultation, calculates the savings that can be made by new system services, namely, €295 million per annum in addition to the existing €60 million for harmonised ancillary services by 2020. It adds that the benefit is derived from a reduction in total SEM production costs and dispatch balancing costs as a result of facilitating high levels of wind on the system. Lumcloon, it states, is essential to achieving this target. As the overall energy expenditure is somewhere above €2 billion annually, this €295 million saving should benefit the consumer by up to 15%. Even allowing for expenditure to incentivise new plants such as that of Lumcloon, half of the saving would wipe out the residential electricity price increase of 5.9% instigated by Electricity Ireland on 1 October last year. The increase is resulting in many families having their power cut off or relying on the Society of St. Vincent de Paul for support.

Lumcloon will be built without Exchequer or taxpayer investment. I want the Minister to explain why the Department is continuing to hold back on the project when it can act as an essential backup to the proposed wind farms in the region.

Fergus O'Dowd (Louth, Fine Gael)
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I thank the Deputy for raising this matter. I am responding on behalf of the Minister, Deputy Rabbitte.

The Minister has no actual statutory function in this matter. Responsibility for the regulation of the electricity generation market is a matter for the Commission for Energy Regulation, CER, which is an independent statutory regulator. In regard to giving the go-ahead, the Deputy may not be aware that such authorisations on licences are wholly regulatory matters and the Minister has no role of approval.

A generator connecting to the network must hold an authorisation to construct or reconstruct a generating station and a generator licence. The CER is responsible for assessing and for granting or refusing to grant these permits. The conditions imposed in the authorisation and in the licence must be met by the generator and compliance is monitored by the CER.

The CER was assigned responsibility over the regulation of the electricity sector following the enactment of the Electricity Regulation Act 1999 and subsequent legislation. The CER's responsibilities include the liberalisation of the electricity generation and retail market in order to encourage the entry of competition and new investment. Market rules were established for both a wholesale electricity market and a retail electricity market, while licensing processes and procedures have been introduced for all market participants. The electricity sector has continued to develop under the regulatory guidance of the CER.

The single electricity market, SEM, is the wholesale electricity market for the island of Ireland, regulated jointly by the CER and its counterpart in the North, the Utility Regulator. By combining what were two separate jurisdictional electricity markets, the SEM became one of the first of its kind in Europe when it went live on 1 November 2007. The SEM is designed to provide for the least costly source of electricity generation to meet customer demand at any one time across the island, while also maximising long-term sustainability and reliability.

The decision-making body which governs the market is the SEM committee, consisting of the CER, the Utility Regulator and an independent member, who also has a deputy, with each entity having one vote. The detailed rules of the SEM are set out in the trading and settlement code.

If the Deputy is concerned over the ancillary services payments and their role in the economics of new generation plant, he should note the details of capacity and ancillary services mechanisms are a matter for the SEM committee acting in consultation with EirGrid-SONI, the transmission system operators, TSOs. Again, I have no function in this matter.

The SEM committee and the TSOs on the island are currently engaged in a programme led by the TSOs called DS3 - Delivering a Secure, Sustainable Electricity System - which has the aim of ensuring that the electricity system can continue to be operated in a safe and secure manner with increasingly high levels of wind generated electricity to 2020. The system services workstream is one of a significant number of work areas examining system policies, system tools and system performance. While the Minister has no direct role in respect of DS3, he is encouraged to facilitate progress as it will facilitate increased penetration of electricity generated from renewable sources, thereby enabling Ireland to reach our mandatory renewable target by 2020.

System services are services which the TSOs will need from generators or from demand in order to be able to operate the system securely. In the context of higher levels of wind, they include more flexible and fast-acting plant. The system services workstream is currently at an important stage of consultation with external stakeholders such as Lumcloon Energy and all generators. A consultation on the TSO's views on the financial aspects was open between 19 December 2012 and 13 February 2013. EirGrid has met over 20 stakeholders since the consultation opened.

It would be highly inappropriate for the Minister to interfere with this transparent, independent regulatory process, which is being led by EirGrid-SONI and which is subject to a decision by the SEM committee. The outcome of the process will benefit all citizens. While there is no ministerial function in this process, I encourage all industry players to participate in the open and consultative regime. I impress on them the need to engage directly with the TSOs and the regulatory authorities as these bodies have the statutory responsibility in regard to this matter.

Barry Cowen (Laois-Offaly, Fianna Fail)
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Some facts need to be re-established. Permission for the plant was granted three years ago, as was the licence to generate. Permission to connect to the national grid has been granted. Funding is in place and vetting has occurred. The CER has been 11 months seeking to devise a pricing mechanism. The Minister of State may choose to hide behind the CER. I do not doubt that he is entitled to do so but I warn him against placing all his trust in this area. In saying so, I am not casting aspersions. We all know the reference I am making.

Let me pose some questions on which the Minister of State might wish to elaborate. Will subsidies continue to be paid to old power plants, some of which are over 30 years old? Will old plants be phased out? Will they be upgraded? If so, will funds be made available for this purpose rather than having the plants subsidised in the manner in which they have been subsidised to date or the manner in which they might continue to be subsidised? In whose interest is the Department acting? What has happened in this instance might serve as a microcosm indicating how big the issue might grow. It is not in the interest of home owners and businesses who are struggling to pay their electricity bills.

I hope the Department is not jeopardising targets for 2020 by failing to ensure that plants such as that in Lumcloon are completed. Will the Minister of State, on behalf of the Government, respond to my constituents who are crying out for jobs such as the ones that could be provided at the plant, bearing in mind that there has been full planning permission for three years, international investors are ready to come on board and connection offers to the electricity grid have been in place for the past 18 months? Why are the financial contracts necessary to allow construction to begin still being denied?

The regulatory system has been in place for the past ten or 12 years. Prices have not decreased. Wind energy policy is stalling if my example is anything to go by. We need a review to determine whether the system is fit for purpose, whether efficiencies are being delivered and whether there is a pricing structure that benefits the consumer.

Fergus O'Dowd (Louth, Fine Gael)
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The Minister has absolutely no function in regard to the CER. It is proper that it is totally independent of the Government. That is how it should be. Regulators must operate in an open and transparent manner. The Deputy has raised important questions and I will ask the Department to respond to him thereon. The key office he should contact in regard to the points he made is that of the regulator.