Seanad debates

Thursday, 7 October 2010

10:30 am

Photo of Brian Ó DomhnaillBrian Ó Domhnaill (Fianna Fail)
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I wish to raise with the Minister of State the electricity charges being imposed on the business sector, in particular small and medium sized enterprises and the affect these are having in terms of not aiding these businesses to become more competitive.

I would like first to focus on general electricity charges and the disconnection by the ESB of customers who are unable to pay their electricity bills, which is happening not alone in the business sector but in the domestic sector. It is disgraceful that this is happening throughout the country. I know of a number of families in my constituency who, through no fault of their own, were unable to pay their bills resulting in their electricity being disconnected and their having to pay a reconnection fee. I will give an example of another domestic connection in respect of which the ESB issued an invoice. While this issue is not directly connected to the motion I have tabled I would like to mention it. The cost of a 15 MW domestic connection is approximately €2,200. It is wholly unreasonable in the current climate that the ESB, a semi-State company, is asking individuals who are struggling to obtain mortgages to build or purchase homes to pay €2,200 towards the cost of providing a connection to their homes.

I will provide some background in terms of where the ESB is coming from. The ESB, a semi-State company, should be providing incentives to the business sector which is trying to create jobs and to help turn around our economy. The ESB, not necessarily the Government, should be providing this incentive to the SME sector in which many of our population are employed. I ask that the Government negotiate with the ESB to try to devise a scheme to reduce electricity tariffs for small and medium-sized enterprises for at least 24 months or until the worst of the recession is over. A similar scheme operates in parts of eastern Europe. I understand the provision of direct State subsidies requires EU approval. State aid rules, however, provide some latitude for member states which wish to seek a derogation and provide a subsidy for the electricity supplier where a reduced level of electricity supply is provided for the SME sector. Certain member states are providing such a service and development agencies in some of eastern European countries are targeting Irish SMEs, with a view to persuading them to move to eastern Europe on the basis that they would have free electricity for a two year period.

We must improve business competitiveness by addressing the high and sometimes unbearable energy costs for small and medium-sized enterprises. The ESB is a semi-State company which makes massive profits. Its chief executive officer earned in the region of €600,000 last year. We must ensure some of the company's profits are redistributed to SMEs by reducing the cost of electricity to the sector.

As a corollary to this, the fees the ESB charges for domestic connections must also be addressed. While the two issues I raise are not directly connected, they are a cause of concern to many citizens. I appreciate the Minister of State may not be able to provide a conclusive response but hope the matter will be considered and, at a minimum, the Minister for Communications, Energy and Natural Resources, Deputy Ryan, will meet the CEO of the ESB to discuss establishing a mechanism to provide support for the SME sector. The sector consists of local businesses which provide jobs and the State's tax base. I hope these steps will be taken. I ask the Minister of State to convey my comments to the Minister at an early date.

Photo of Seán HaugheySeán Haughey (Minister of State, Department of Education and Science; Minister of State, Department of Enterprise, Trade and Employment; Dublin North Central, Fianna Fail)
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I welcome the opportunity to address the issue of electricity prices for business and outline the steps the Minister for Communications, Energy and Natural Resources, Deputy Ryan, and the Government are taking to ensure Ireland's competitiveness.

Since last Friday price regulation has been removed from the entire business section of the electricity market and the ESB is now free to compete on price with the alternative suppliers in the business market. The Government introduced competition into the electricity market to benefit consumers and this competition is working. Many suppliers now offer a range of competitive products to business and the prices paid by business for electricity reflect this competition. In the past 18 months electricity prices for small businesses have fallen by between 10% and 12%, while prices for medium-sized businesses have fallen by more than 20%.

More Government involvement in the electricity market, in keeping with the Senator's call, would be a retrograde step, as it would shatter the confidence of those electricity suppliers which have entered the market on the basis of a stable and credible regulator regime. If the suppliers in question were driven out of the market, it would lead to higher electricity costs for all. Rather than seeking this end, Senators should encourage businesses which are concerned about the price they are paying for electricity to take positive steps to reduce their energy bills. Even today, after the focus on electricity prices in the past two years, more than 50% of small and medium enterprises have not yet switched their electricity supplier. Any business consumer who picks up the telephone and calls an alternative supplier can benefit substantially, regardless of his or her circumstances. Switching is quick, easy and capable of delivering real and significant savings.

Businesses can also save money on their electricity bills by taking advantage of a wide range of Government supported energy efficiency programmes. More than €90 million has been allocated to the Sustainable Energy Authority of Ireland in 2010 for the expansion of its energy efficiency schemes. The SEAI offers grants supporting energy efficiency retrofit measures in buildings and business operations. Free energy management, mentoring, training, advice and other support services are also available to any business willing to show a commitment to becoming more energy efficient. More than 1,600 businesses have availed of this programme which is available to many more companies. Every business with which the SEAI has worked has identified immediate savings, typically greater than 10% of costs. Total business cost savings from the programme already amount to close to €60 million per annum, thus avoiding CO2 emissions of more than 300,000 tonnes.

In addition, the accelerated capital allowance scheme, an energy efficiency tax incentive, was introduced in budget 2008 to encourage companies to purchase the most energy efficient plant, machinery and equipment for use within their business. The scheme was expanded in budget 2009 to cover 29 technologies and 5,500 individual eligible products. A further expansion in 2010 has resulted in the number of technologies covered being increased to more than 40. Accordingly, companies can write off the full capital cost of energy efficient equipment in the year of purchase. This encourages them to invest in products that meet the highest energy efficiency standards, saving them money and helping to lower our carbon emissions.

The Government has implemented measures that will deliver lower electricity costs to businesses and has done so in a transparent and credible manner that will maintain confidence in the electricity sector and regulatory regime. Key to these steps was the creation of a competitive market and facilitating the entry to the market of new players. The market is now delivering real benefits through lower electricity prices for business that are broadly competitive with those of our neighbours. For competition to be fully successful, businesses must be proactive in seeking out and availing of the best deals. Rather than calling for more State intervention and regulation, we should instead help the Government to educate these businesses on the savings available to them.

Photo of Brian Ó DomhnaillBrian Ó Domhnaill (Fianna Fail)
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The Minister of State spoke about the assistance available to a number of companies. In my experience, this assistance is not available to the small and medium-sized business sector because many of the companies I have in mind are not large enough to avail of some of the incentives available for the use of green technologies. Although the all-Ireland electricity market has resulted in reduced energy prices, the ESB recently increased the price of electricity by 5% across the board. The other players in the market offer a service similar to that provided by the ESB, albeit at a slightly lower rate. As a State company, the ESB should discuss with the Department of Communications, Energy and Natural Resources the possibility of introducing measures to assist the SME sector. While the other energy providers could then follow suit, any such development would need to be initiated by the Department. In 2003-04 one of the State agencies, Údarás na Gaeltachta, made a submission to the Government seeking to have a proposal submitted to the European Commission. I ask the Minister of State to convey my request to the Minister.

Photo of Seán HaugheySeán Haughey (Minister of State, Department of Education and Science; Minister of State, Department of Enterprise, Trade and Employment; Dublin North Central, Fianna Fail)
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I will do so.