Barry Cowen (Laois-Offaly, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

I note my disappointment that the Minister for the Environment, Climate and Communications, Deputy Eamon Ryan, is unavailable. I raised a similar issue some weeks ago and the Minister did not show up then either.

I am in receipt of an independently commissioned report and analysis of recent details and figures pertaining to the wholesale electricity market in Ireland known as the integrated single electricity market, I-SEM. The I-SEM was created to integrate the Irish-only market with European power markets, including Britain. Within that is the day-ahead market, DAM, accounting for 84% of all electricity. This is the benchmark price for Irish electricity and utilities and ultimately sets the price for residential, commercial and industrial consumers.

The report clearly shows that there has been a €250 million increase in the price of electricity for consumers in three months until the end of September because the ESB has orchestrated and extracted super-normal profits. I have no doubt that the ESB has used the shortage of generation capacity and its dominant place in the marketplace to increase tenfold the wholesale price of power, which has resulted in higher prices for consumers over and above the escalating costs applying to the rest of Europe. The time has come for the Commission for Regulation of Utilities, CRU, to carry out an investigation into how consumers in Ireland have been so severely impacted by the global rise in energy costs.

A number of factors are at play. Global gas prices have risen significantly causing energy price inflation. Ireland also has a generation supply crisis caused by the failure to plan for adequate new generation capacity. By virtue of its dominant role as a generator, the ESB has been selling into the wholesale market where all power utilities purchase their energy at ten times the normal levels applicable in 2019 and 2020. These energy utilities include Bord Gáis Energy, Electric Ireland, Energia, Flogas, Panda Power, Prepay Power and SSE Airtricity. The ESB has been using the shortage in generation capacity to extract super-normal profits causing further electricity price inflation.

As a power generator the ESB has a right to set the price it pitches to the wholesale market. However, in the absence of large-scale alternative energy generators and when, for example, wind power is not playing a significant role, the ESB demand price becomes the wholesale price and energy supply companies have no choice but to pay. The ESB has been demanding prices of up to €490 per megawatt hour when the cost of production was under €150 per megawatt hour. This has never happened before in the Irish electricity market and is only possible because of the shortage of generation and the ESB's dominant market share.

In the report, which was submitted to the CRU some weeks ago, shows that this has led to a €250 million increase in wholesale power costs in the three months to September. The cost is being passed on to all homes and businesses. Based on these three months alone, households will pay an extra €150 in this year's bills. I call on the Minister, Deputy Eamon Ryan, to order the ESB to cease price gouging in the market and instruct the regulator to commission new generation from other suppliers to ensure adequate supply and competition in the marketplace.

I had previously questioned the Minister, through a Minister of State representing him in the Dáil, about whether the ESB was using its dominance to orchestrate the current energy capacity shortage and whether a €10 million payment was made by EirGrid to ESB generation in relation to emergency generation at the ESB North Wall facility, despite the process for such provision being withdrawn following High Court proceedings against the said process. Since I raised this issue, other Deputies have also questioned who authorised this payment and where the taxpayers' €10 million is now? What has the Minister done since to get to the bottom of this matter? He stated he did not sanction the payment. Will he indicate whether he knew about it before it was made? Will he instruct EirGrid and the ESB to respond to this charge that a €10 million payment was made, which, to say the least, was way out of order? Unfortunately, it brings the whole system into disrepute.

Damien English (Meath West, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I apologise to Deputy Cowen and the Leas-Cheann Comhairle for being late. It was my fault as I understood I was due to respond to the second Topical Issue matter.

I thank Deputy Cowen for raising this important topic, which has informed a lot of discussion lately. I will take this matter on behalf of the Minister who is unable to attend tonight and sends his apologies. Some of the issues the Deputy raised go beyond the brief I received but I will bring back the Deputy's questions and try to get the answers he seeks.

The integrated single electricity market, I-SEM, is the wholesale electricity market on the island of Ireland and is jointly administered and regulated by a statutory single electricity market committee, comprising the two energy regulators and independent members. The original single electricity market was established in 2007 and is underpinned by legislation enacted in Ireland and the UK and Northern Ireland, with the original legislation enacted in 2006 with an underpinning memorandum of understanding between the Irish and UK Governments.

Operating within an overall EU framework, responsibility for the regulation of the electricity market is solely a matter for the Commission for Regulation of Utilities, the independent energy regulator. The CRU was assigned responsibility for this function following the enactment of the Electricity Regulation Act 1999, which states that the CRU shall account for the performance of its functions to a joint committee of the Oireachtas, and not to the line Minister. In 2018, the new I-SEM went live demonstrating Ireland's strong commitment to the integration of European electricity markets. The I-SEM promotes the interests of consumers by enabling greater competition through cost-reflective prices, while also securing a diverse, viable and environmentally sustainable long-term energy supply.

The most immediate factor affecting electricity prices in Ireland is the continuing upward trend in international gas prices where we are a price-taker. In Europe, wholesale natural gas prices have been on an upward curve since the second half of 2020. This feeds directly through to wholesale electricity prices as it strongly correlates with the price of gas. This increase was cited by many suppliers as one of the main reasons they increased their prices recently. The wholesale cost of generating electricity makes up approximately 40% of the final retail price.

The Government believes that competition is a critical means of exerting downward pressure on electricity prices and also towards ensuring diversity of energy supply to reduce our exposure to high and volatile external energy prices. Additionally, our heavy dependence on gas in the electricity mix underlines the need to maintain the focus on the limited controllable cost factors. Among the actions being taken are to increase the penetration of indigenous secure renewables in the Irish electricity system and to promote energy efficiency.

The Deputy will note that the CRU is accountable to a joint committee of the Oireachtas and not necessarily to the Government or the Minister for the performance of its functions.

The CRU met the Oireachtas committee most recently on 5 October and there are channels where these issues can be raised directly with it.

On security of supply, the CRU has statutory responsibility, under SI 60 of 2005, to monitor and take measures necessary to ensure the security of electricity supply in Ireland, which I believe is the concern of the Deputy. The CRU is assisted in its statutory role by EirGrid, the electricity transmission system operator. EirGrid monitors security of supply and reports to the CRU on future projections of electricity supply and demand. This is set out in EirGrid’s annual generation capacity statement, the most recent version of which was published in September. The capacity remuneration mechanism, CRM, is a measure designed to complement energy-only payments in wholesale electricity markets. The purpose of a CRM is to ensure long-term security of supply by ensuring that investors can recover their long-run marginal costs. This is particularly important in isolated island systems with high volumes of intermittent generation such as Ireland’s all-island single electricity market, SEM. The running of the CRM is solely a matter for EirGrid and the SEM committee as auctions were conducted by the transmission system operator, TSO, which is EirGrid in this case, according to the auction design and overall regulatory supervision of the SEM committee. There is no ministerial function regarding the auctions apart from securing state aid approval for the capacity mechanism which was obtained in 2017.

Barry Cowen (Laois-Offaly, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

I thank the Minister of State. I do not, nor does anybody else, expect the Minister, Deputy Ryan, to be able to change international gas prices. We have a right to expect, however, a competitive, efficient and well-served wholesale market. I contend that successive failures by the Department, EirGrid and the CRU have resulted in the present situation where we have too little generation capacity to meet our needs. The ESB, because of that failure, is now the dominant entity and market power which has shown itself only too willing to use that power to extract super-normal profits from Irish consumers.

We heard ten, 12 or 14 years ago a Financial Regulator tell the Government and State that the banks were well-capitalised and that there was nothing to fear or worry about and that it was removed from the workings of Government in its duty to enact Government policy. Here we have a Minister within a Government which sees this crisis for what it is head-on, knows the impact and the effect it is having, knows the failures that there have been to date to allow a situation to evolve, and then says that it absolves itself from any remedies that may be necessary. I have highlighted issues which are serious, worrying and need to be addressed. I would expect that the Minister with responsibility in this Government on behalf of us all would ensure that the ESB, EirGrid and the CRU live up to the expectations and policy commitments that are contained in the programme for Government on one side, and the responsibilities of the Department on the other, to ensure that the best interests of the public are adhered to.

Damien English (Meath West, Fine Gael)
Link to this: Individually | In context | Oireachtas source

Deputy Cowen raises a fair point in what has happened previously in other markets, and he has named the financial one. The Minister, Deputy Ryan, is looking closely at and is following this and I will certainly bring back to the Minister the Deputy’s concerns. It is right that we interrogate the data and try to get behind what these high prices are about as well as focusing on the importance of the security of supply.

One of the issues in respect of the ESB is that a new T-4 capacity auction was held in April 2009 with successful new projects required to be delivered in the 2022-23 capacity year. New projects that are awarded capacity contracts are required under the rules of the capacity markets to report on and demonstrate the progress of their projects between contract award and project delivery with specific milestones that must be reached within specific timeframes. Five of the new projects that the ESB won contracts for in that 2009 T-4 auction, consisting of 461 MW of new capacity, failed to demonstrate progression in line with the required timeframes and, as a result, these contracts were terminated. This was announced on 11 January this year. It is understood that the ESB considered that it could not deliver projects that had secured capacity contracts within the requirements and timeframe of the market period 2022-23 and therefore had to withdraw. As this contract for ESB generation was for the period 2022-23, its absence is not the reason for the current tightness in the electricity security of supply which is due to the unavailability of existing conventional generating power plants due to a mix of planned outages, maintenance and forced outages, as well as a growing electricity demand.

On the penalty, the ESB was required to pay a charge following termination of its capacity contracts for 2022-23. The associated notices were published at notice 1 and notice 2. The total amount of the termination charges was €4.1 million and the amount of capacity that was terminated was 461 MW. The application of termination charges is required under the capacity market code and the schedule of termination charges to apply in any given auction is set by the single electricity market committee. However, the charges were invoiced and collected by EirGrid and the System Operator for Northern Ireland, SONI, in their role as administrators of the capacity market code.

On the issue of Moneypoint, the termination of the 461 MW of new capacity that was awarded to the ESB was not due to the 2021-23-----

Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source

I apologise to the Minister of State but we must conclude there.

Damien English (Meath West, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I will send a note to the Deputy with further information on this issue.