Eamon Ryan (Dublin South, Green Party)

I thank Senator Brady for allowing me to speak. I am very glad to have the opportunity to set out some of the details of our energy policy and the crucial issue of pricing for householders and businesses. I want to correct what I regard as some of the misapprehensions about the competitive position of electricity prices. The opportunity afforded to me by the Seanad in this debate is very welcome.

Electricity prices for businesses and households have fallen dramatically over the past 18 months. This has delivered real savings for consumers and has pushed prices in certain key categories below the eurozone average. That is the reality and it is important we let people know it and not instil greater fear in them and generate considerable negative sentiment that is not backed up by that reality. Given the challenges we face and the need to be competitive, we need to lower prices. We need to keep them down and help out families who face real difficulties at this time. We will do that.

Let me set out the background and some of the challenges faced in this regard. The challenges arise from a lack of historical investment in infrastructure. Our prices spiked very high because, for a long period, especially through the 1990s, no price increases were granted. Demand rose as our economy grew and we had to make a very dramatic and quick catch-up investment, which in itself increased the price of electricity. There was a great increase in demand and we had to invest in our networks such that factories would not have to switch off. The main disincentive for investment would be if a company such as Intel ever had a power blackout because we did not have the network in place to deliver the electricity. That would have been the biggest killer of investment. It was crucial we invested and made up for the lack of investment that occurred throughout the 1990s. That imposed a cost, particularly in the early and middle part of the last decade.

One reason our prices were high was because we used a very high proportion of imported fossil fuels, especially gas, in electricity production. We were over-reliant on imported gas from which an excessively large proportion of our electricity was derived. We had no gas stream of our own and it was all imported. We did not have control over the price of gas and when it spiked, we were caught out along with Italy and the Netherlands. Comparable countries had a similar proportion of gas in their electricity production sources and, consequently, had similarly high prices. This is one reason our prices were high.

One reason we introduced a PSO in 2001 was that we recognised we had to move away from over-reliance on a single fossil fuel. We had to have diversity of supply for security and pricing reasons and to ensure we would not be caught out when, as the International Agency Energy stated, fossil fuel prices started to rise, as they were expected to do. We also have an issue by dint of our geography in the sense that this is a small island with many power stations which tend to be less economic. This, unfortunately, helps to push up prices. We also have a different geographic structure from neighbouring European countries with which we must compete. While Holland, Denmark and other countries have dense population structures, we have the exact opposite. Some 40% of houses here are one-off houses in the country and attaching wires to them is expensive. On the distribution network, the average length to a home in the United Kingdom is 25 m. In Ireland, it is 75 m and we all have to pay for the extra 50 m of wire and cable. A number of factors are driving up prices which we have to take into account. However, there are also a number of factors now driving prices down. We should be honest in politics and recognise this rather than engage in point-scoring all the time.

One of the benefits in recent years has been the move to having a single electricity market on the island, North and South, an historic development. Its achievement was a huge engineering feat and is helping to bring prices down. We have a bigger market and do not now have to have two spinning reserves, North and South.

We have also succeeded in bringing about competition. We deregulate not for some ideological reason or free market ideology but because competition works. We have significant companies involved in the electricity market, including the ESB, Bord Gáis, Endesa which has invested massively in this country in recent years, Scottish and Southern Electricity and Veridian. These large companies with international expertise are competing for Irish customers. This, too, has helped to bring down prices and overcome some of the disadvantages I outlined. We have also, using these market mechanisms, seen significant new investment and are beginning to have larger more modern and economic power stations, two of which were opened this year in Cork. These are the plants that will produce a more competitive supply. This has all happened in recent years because of the good policy set out in the White Paper and recent Government papers. Endesa has brought a large amount of money into the economy.

We recognised a year and a half ago that, owing to our overdependence on fossil fuels, the fact that our networks had increased prices and that we were in an economic crisis, we had to bring down prices. With the regulator and in a proper fashion so as not to disrupt a regulated market, which allowed the continuation of an all-Ireland approach, we brought down prices for large energy users by up to 45%. These are price reductions that have occurred in the past two years and improved our competitiveness. More than €500 million was taken from the ESB and used to achieve lower prices for other consumers. That is the reality of what happened as a result of Government action and it has had a beneficial effect. Two or three years ago the head of Intel was screaming that prices here were too high. He recently acknowledged that something has been done and that it was starting to work. Therefore, let us not scare the people at a time when they are scared enough. Let us acknowledge that certain things have been done which help to achieve competition.