Dermot Ahern (Louth, Fianna Fail)

I again thank Senators for their forbearance in allowing me to bring the Bill through the House in such an expeditious manner.

A number of Members referred to the cost of electricity. Senator Kenneally provided figures to show the cost of residential electricity in Ireland is below the EU average. The position is different for industrial users. However, with the opening of the market in 2005, large industries will have the opportunity to seek out other operators and suppliers because of increased competition. The cost of electricity is not an issue for the political system. The Houses passed legislation regarding the establishment of an office of independent regulator which determines the cost of electricity. I have no input, nor does my Department, in that area. Unfortunately, whether they are being tongue-in-cheek, displaying mere ignorance or engaging in political opportunism, some people continue to refer to the fact that Government charges are X, Y or Z. They continually refer to electricity, gas and telecommunications charges in this manner but these are all determined independently of the political process and based on criteria which allow the companies involved to invest in their infrastructures while obtaining some economic return.

People must accept that the companies in the areas to which I refer must invest in new technology and IT systems to ensure they can operate in the new open market as opposed to the closed market in which they operated heretofore. The ESB is significantly reducing its market share over time. Senator Finucane referred to the Competition Authority. However, this is one area in respect of which even those people in Europe who dictate the opening of the various markets have acknowledged that in a relatively small island market such as ours, the move towards competition in areas such as telecommunications, electricity and gas is much more difficult. It is easy to make provision on paper but it is more difficult to encourage competition in reality.

One of the reasons the Government decided to promote the construction of two 500 MW interconnectors was to sustain the security of supplies going forward but also to introduce a further element of competition to the market. As Members are aware, we have already asked the CER to gauge the degree of interest in a private sector built and operated interconnector. The CER has undertaken to run a competition in this respect and there has been some significant interest from the private sector. If there is not sufficient interest, we will then proceed to construct and operate an interconnector which would be underpinned by a guaranteed regulated revenue stream. The latter would be regulated by the CER. We hope the interconnector will be in place by 2009.

Senators Finucane, Quinn and others referred to system availability. The CER is taking specific measures to ensure the level of availability of the ESB's infrastructure reaches an acceptable level. This legislation was introduced because the ESB is investing so much money. This is also relevant in terms of the cost of electricity in this country.

In terms of network reliability, the ESB is carrying out extensive work on renewing its network. In the period 2001 to 2005, the ESB will spend €200 million in Galway, €60 million in Sligo, €130 million in Mayo, €132 million in Donegal, €40 million in Roscommon and €54 million in Westmeath on network upgrades. Members will recognise that this represents a significant level of renewal of the ESB's infrastructure.

Many Members referred to wind energy and acknowledged that it is Government policy to consider sources of renewable energy. In the immediate future, we are of the opinion that the best hope of success lies in the area of wind energy. It is true that difficulties have arisen in this area, mainly because of our success of which we are victims.

Recently, I signed a statutory instrument providing for 44 new projects, mainly wind, to join the grid and generate new energy on the system. They were included before the moratorium was put in place by the CER on the advice of the ESB national grid. The moratorium relates to the technical restriction on the grid. If a huge amount of wind energy is added in one go, as is happening, it can lead to instability on the grid. The CER, therefore, must take that into account because we do not want to have a situation, as instanced by Senator Quinn, like that of the US, Italy and the UK which suffered significant breakdown in their networks. We must proceed cautiously.

As a result of the moratorium, significant discussions, negotiations and meetings were put in place between the various interests and I understand the CER will make a substantive decision shortly on the proposals from the ESB national grid regarding new wind connection offer policy. The system operators have agreed that no new offer will be made to a wind generator until the CER decision is made.

I share the concerns of Senator Finucane on the Eirgrid situation. This has been a dogged issue over the past number of years and is one of the issues I have found most frustrating. Our policy and desire was to separate the grid transmission system from the ESB, but this is not yet in place. It is disappointing that Eirgrid is not up and running. I said recently at a joint Oireachtas committee that I am opposed to reverting Eirgrid to the ESB because that would send negative signals to an opening market. Once we can get over the significant industrial relations issues, I believe the Eirgrid model will be effective and beneficial to all the players in the market. In a market where we are endeavouring to do all we can to ensure openness, transparency and competition, it is vital that people are confident that the grid is separated from the dominant company.

Senator Burke referred to his disappointment that the AER contracts were won by the ESB. My job would not be worth two minutes if I had intervened in the provision of contracts to any of the promoters of wind energy. It is somewhat disingenuous of people to constantly criticise the Minister or come knocking on his door when they, through the media and other commentators, insist there should be no political involvement in any of these areas. Of course, when things go wrong, they come knocking on the doors of the politicians. Neither I nor my Department had hand, act or part in the giving out of the AER contracts, and I stand over that. People may be disappointed but in effect that suggests that they want one of the low-bidding operators in an open market to be excluded from a competition. In other words, they suggest we should favour those people who came in with higher bids. I do not accept that in an open market situation.

Senator McCarthy raised the issue of the level of the company's profits. We should take pride in the fact that the ESB is such a significantly profitable company and not a company in difficulty, like some of the other semi-State companies. It has managed its position well and kept electricity prices relatively low, in comparison with other EU operators. It is up to the regulator to ensure that a company such as the ESB pays its overheads and costs and that at the same time it is able to reinvest to part-fund its extensive capital programme.

I thank Senator Kenneally for his positive remarks on the contribution of the ESB to Irish society. We often underestimate that contribution and only comment or compliment the ESB when difficult situations arise. ESB personnel are out in hail, rain or snow ensuring that every citizen has what we regard as an absolute right, electricity. I also thank the Senator for his comments on wind energy. Hopefully, the issue of the moratorium will be set right shortly.

Senator Daly mentioned the future operation of Moneypoint. As I said in my opening remarks, this is primarily an issue for the company. It is a significant decision for both those involved in Moneypoint and the nation. A suggestion was made that the station should move to gas-fired energy generation. To do that would mean that approximately 80% of all the electricity we generate would be gas-fired. Given that average gas-fired energy generation in the EU is 33%, it would create a difficulty for us to be over reliant on it. Pie charts for Ireland showing our electricity generation, compared to those for the rest of Europe, show a massive gap in the area of nuclear energy generated electricity.

Ireland has decided it is vehemently against nuclear energy. However, there are downsides to that decision. The countries of Europe which have nuclear energy have a greater diversity of sources for electricity generation and are not over reliant on one type of generation. Nuclear energy is also cheaper in some instances and has, we are told, no effect on the ozone layer. As Ireland continues to be vehemently against nuclear energy, some of the downsides are the type of generation we can operate and price. The decision on the future of Moneypoint will have to be calculated not alone from the financial aspect but also from the security of supply aspect and fuel diversity.

My Department, in conjunction with the CER, has commissioned a study on fuel diversity and the future of Moneypoint. The study is being undertaken by DKM and the ESRI and is due to be completed shortly. The ESB is also carrying out its own studies and will ultimately make a decision. Any business case submitted to the company must be predicated on the introduction of a best practice agreement at the plant. This is a prerequisite for gaining shareholder approval.

Any Minister would be concerned at the result of the ballot by the ESB group of unions on industrial action. I am heartened that it will have no effect in the immediate term and I hope there will be no disruption in the future. The Department has had a number of discussions with the group of unions over the past months. While no further meetings are planned, my officials will be available to continue discussions at any time. I should explain that these discussions took place following the submission of a claim by the unions to increase their current shareholding of 5% to almost 20%. At the same time, they were negotiating with the company on an increase in their salaries of approximately 18%. Taken together that is very significant and must be dealt with in that context. In these discussions, the ESB group of unions has yet to set out any basis for its exorbitant claim to increase the shareholding from 5% to almost 20%.

The Electricity (Miscellaneous Provisions) Bill 2004, which will be brought forward later, will deal with emissions trading, windfall gains, the regulation of the interconnector between this and our neighbouring island and policy directions to the Commission on Energy Regulation. It will also deal with an anomaly regarding the shareholding of the Minister.

The purpose of this Bill is to increase the borrowing requirement for the ESB to allow it to invest in infrastructure and avoid the type of scenario witnessed in the USA, the UK and Italy where electricity supplies were interrupted across vast areas for some considerable time because of the failure of the governments in those countries to invest and a number of other reasons to do with interconnection with other countries, which is not a problem for us. We are investing now to ensure that does not happen here. Given that investment began in 2001, the ESB was already planning major investment in infrastructure in order to ensure there are no breakages in our electricity system.

People ask why electricity prices are increasing. We cannot invest €4 billion over four years and not expect somebody to pay for it. That must be paid for and that is one of the reasons the price of electricity has increased relatively significantly in the recent past. However, our electricity prices are still floating at approximately the EU average and below the EU average for residential users. It is not envisaged that electricity prices will increase significantly in the coming years because of the level of increases over the past while. The reason for this investment and the reason we introduced the Bill is to ensure the ESB is allowed to borrow and carry on its business. It is a good business and the ESB must be complimented on its foresight in investing in the necessary infrastructure. It would bring down this House and the Dáil if the electricity went off in the future. The ESB is, in effect, investing in the future supply of electricity. I again thank Senators for their complimentary remarks on the Bill.