Pat Rabbitte (Dublin South West, Labour) | Oireachtas source

I am pleased to commence the debate in this House on the Gas Regulation Bill 2013 and thank the Leader and the House for the early scheduling of this legislation. This is not a long Bill. However, the proposals contained in it are both important and significant. It will implement the Government decision of February 2012 on the sale of State assets by ensuring the retention of the strategic gas networks in State ownership, while also facilitating the sale of Bord Gáis Éireann's, BGE, competitive energy business.

Our island status at the end of a gas pipeline makes us acutely aware of the importance of a secure gas supply. We are heavily reliant on gas supply from Great Britain and also heavily reliant on gas for the generation of electricity. This reliance is set to remain for some time. I have on previous occasions stated that the proposal by Shannon LNG to develop a liquefied natural gas, LNG, terminal in Tarbert is welcomed by the Government. Such a facility, together with the bringing on shore of Corrib gas, would provide important security of supply for Ireland. The employment boost from the construction of the LNG plant would also be welcome. In this context, the Government fully recognises the strategic importance of retaining the gas network in State ownership.

The Government has committed to retain the gas network business in State ownership as critical national infrastructure. There is no intention now or in the future to dispose of it or its assets. The Government endorses the importance of investing in Ireland's gas transmission infrastructure. It is also incumbent on us to ensure that this important business remains well-funded so that it can continue to provide dividends to the State as shareholder. We have a reliable, modern gas system which is the result of significant investment over the years by BGE. This investment was funded by a well run, profitable State-owned company that has been instrumental in the economic development of the country.

Turning to the decision to sell the BGE's energy business, the programme for Government committed to a sale of State assets in order to fund investments for jobs and growth. As part of our EU-IMF-ECB programme, the Government has also committed to an ambitious State asset disposal process. Initially the troika was not disposed to allow us retain any proceeds from State asset disposals and it insisted that all the proceeds from any such disposals be used for debt reduction. However, following lengthy and tough negotiations a satisfactory outcome was reached wherein, in return for increasing the level of ambition of our asset disposal programme to a target of €3 billion, the troika agreed that half of the proceeds from State asset disposals could be retained to fund additional employment projects of a commercial nature. It was also agreed that the other half of the proceeds, while earmarked eventually to pay down Government debt, could also be retained, and in the first instance constituted as a fund to underpin additional lending into Ireland in support of further investment in job creating initiatives. It is important to note that it was also agreed with the troika that there would be no fire sales. State assets are to be sold on acceptable terms and at a price that achieves fair value for the Exchequer. Key strategic assets, such as our electricity and gas transmission and distribution systems, will be retained in State ownership.

Following detailed consideration of the financial and policy issues, in February 2012 the Government agreed, inter alia, to retain the strategic gas networks in State ownership and to sell the competitive energy business of BGE, namely, Bord Gáis Energy. Bord Gáis Energy comprises the following businesses: leading energy supply business in Ireland, servicing over 700,000 customers in the gas and electricity markets; a 445 MW gas fired power station at Whitegate, County Cork; a large scale portfolio of onshore wind assets; and firmus energy, a growing energy supply and distribution business in Northern Ireland. All of the businesses making up Bord Gáis Energy operate within a competitive market structure competing against other market participants. Indeed, Bord Gáis Energy's entry into the domestic electricity market, with its highly successful big switch campaign, had a galvanising effect on competition in the all-island energy market. The sale of Bord Gáis Energy can deliver positive outcomes for Ireland's energy markets and for Bord Gáis Éireann and its employees.

The sale process, which was formally launched in May, is well under way. It is important to maintain the momentum on the Bord Gáis Energy sale process so that proceeds can be reinvested promptly, once available, to ensure an immediate impact on the economy and jobs. The enactment of the Gas Regulation Bill will ensure there is no unnecessary delay in the transaction process.

The Bill was broadly welcomed by the Dáil. A Government amendment was proposed and accepted on Report Stage in the Dáil. I proposed the amendment following concerns raised by Deputies on Committee Stage and in the interests of accountability and alignment with the new Dáil reform package. The reform package provides for a post legislative report, whereby a Minister will report to the relevant Oireachtas select committee within 12 months of enactment to review the functioning of an Act. The amendment agreed in committee provides that within 12 months of the commencement of Part 2 of the Act, I will arrange for a wide ranging report on the operation of the Act to be prepared and laid before each House of the Oireachtas. This amendment is to be found at section 4 of the Bill.

I now propose to briefly outline the provisions of the Bill. For the convenience of the House, a detailed explanatory memorandum has been published and this provides a synopsis of the provisions contained in the Bill which has 45 sections. Part 1 of the Bill contains four sections and provides for the Short Title of the Bill, commencement, interpretation, expenses and the laying of a once off report on the operation of the Act before each House of the Oireachtas.

Part 2 of the Bill provides for the establishment of a gas network subsidiary of BGE. This company will have responsibility for the ownership and operation of the gas network business. The subsidiary will be compliant with EU requirements and will ring-fence and protect the strategic gas network assets. This Part of the Bill contains provisions concerning the memorandum and articles of association of the company, the appointment of directors and the drafting and approval of network transfer plans. The transfer plans will specify the assets, liabilities and staff to be transferred by BGE to the network subsidiary. There is also a provision that information on the activities of the network subsidiary must be separately identified in the BGE annual report and accounts. Section 5 provides that BGE cannot sell this strategic network subsidiary.

Part 3 of the Bill deals with the sale of Bord Gáis Energy. The provisions in this Part provide for the transfer of the energy business to an energy company or companies for the purpose of facilitating the transaction. These provisions provide legal certainty as regards the assets, licences, rights, liabilities and staff to be transferred to the energy company and subsequently sold. As in the case of the establishment of the networks company, there are provisions in Part 3 relating to the preparation by BGE of a transfer plan, or plans, which will set out the assets, contracts, rights and liabilities and staff to be transferred to the energy company. As Minister with responsibility for approval of the plan, I must be satisfied that the plan provides only for the transfer of those assets and staff that are relevant to the energy business. Provision is also made for the drawing up of a memorandum and articles of association of the energy company and for ministerial oversight of their content. The memorandum and articles must be consistent with this Act and with the EU gas directive. This provision will cease to apply from the date of disposal of the energy company.

Other provisions relate to the appointment of directors to the energy company. After the disposal date, board appointments to the energy company become a matter for the new owner. Provision is also made for an energy company transfer date. This date will be set by the Minister for Communications, Energy and Natural Resources following the approval of the transfer plan. Notification of the transfer date is required to be placed in Iris Oifigiúil.

With effect from the transfer date, the specific provisions of Schedules 3 and 4 to the Bill apply and the energy company becomes responsible for the assets, contracts, rights and liabilities transferred to it. A provision is also included that Bord Gáis Éireann, BGE, may, up to the date of disposal, enter into further agreements with the energy company for the transfer of additional assets, licences, rights, liabilities and staff to the energy company. This section is intended to provide for flexibility in the event that, following the transfer date, it is found that additional assets and so forth need to be transferred. Such an agreement is subject to ministerial approval. It is worth highlighting that the Bill provides that disposal of an energy company by BGE is subject to my approval as Minister, given with the consent of the Minister for Public Expenditure and Reform.

The amendments in Part 4 provide for a range of amendments to gas legislation. Aside from providing background to the House in regard to the designation of a majority shareholding Minister to whom will be transferred the majority shareholding in BGE, I do not propose to go into detail on the various amendments to legislation unless the House wishes to pursue a particular point. Explanations are provided in the explanatory memorandum accompanying the Bill.

The designation of the majority shareholding Minister in BGE is proposed on the basis that the current shareholding arrangements are not compliant with EU gas market Directive 2009/73/EC. The directive requires significant restructuring of European gas transmission operators in line with one of three unbundling options. Unbundling is intended to create a level playing field for gas suppliers and enhance competition and transparency in the gas market by removing the ability or incentive for monopoly gas transmission companies to discriminate in favour of related gas suppliers.

In determining the optimum unbundling model for BGE in line with the directive, the independent transmission operator, ITO, option was initially adopted with a view to BGE retaining both the energy and networks businesses within State ownership. However, under the directive, the only unbundling option which allows for the sale by BGE of the energy business and the retention of the networks business in State ownership is the full ownership unbundling option, which Ireland is obliged to transpose and implement.

The full ownership unbundling rules mean that, as shareholders in other State companies that are active in power generation or electricity and gas supply, such as ESB and Bord na Móna, neither the Minister for Communications, Energy and Natural Resources nor the Minister for Public Expenditure and Reform may retain a decisive or controlling role in the BGE network business. Consequently, the amendments to the Gas Act 1976 in this Part of the Bill relate to the powers of Ministers in regard to the activities of BGE. The Bill also includes technical amendments to other legislation to ensure that BGE may not engage in any business activity relating to energy supply or generation that would contravene the full ownership unbundling requirements.

I ask the House to note that I am considering further amendments to the Bill to be introduced on Committee Stage, primarily to clarify certain matters, including pension matters, to facilitate the sale of the Bord Gáis Energy assets and business and to ensure maximum returns to the Exchequer from this sale. I look forward to early consideration of the Bill on Committee Stage. I ask Senators to table their proposed amendments as early as possible to allow full and fair consideration to be given to them. I will consider all amendments tabled by Senators and I look forward to a constructive and meaningful debate.