Seanad debates

Thursday, 17 October 2013

Gas Regulation Bill 2013: Second Stage

 

Question proposed: "That the Bill be now read a Second Time."

11:40 am

Photo of Pat RabbittePat Rabbitte (Minister, Department of Communications, Energy and Natural Resources; Dublin South West, Labour)
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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.

11:50 am

Photo of Mark DalyMark Daly (Fianna Fail)
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I welcome the Minister to the House. The issue of the sale of Bord Gáis to repay our debts is disturbing when one considers that, depending on who performs the valuation, the asset is worth between €800 million and €1 billion. As the Minister knows, these figures account for approximately four weeks of borrowing. It does not seem to be a wise move, particularly given the fact that Bord Gáis contributes more than €121 million to the taxpayer in dividends. Fine Gael wanted to use the sale of State assets to raise funds. Its five-point plan claimed that the €7 billion to be raised would create 100,000 new jobs over five years under NewERA. So far, 3,800 have been created, which is slightly short.

The Labour Party general election manifesto referred to the one Ireland concept of public enterprise, determining that semi-State companies should play a full role in the recovery of the Irish economy. According to that manifesto, Labour was opposed to the short-termism of privatisation of key State assets such as Coillte and the energy networks, under which classification Bord Gáis falls.

My main concern is that we are selling an asset that is providing a dividend. While we are not replicating the mistake of selling the infrastructure as we did with the sale of Telecom Éireann, there is no clear determination of how the €1.9 billion debt held by Bord Gáis will be divided between the part that is due to be privatised and the infrastructure, which the State will retain. Will the State keep all of the debt or will it be divided equally? If one attaches debt to the part that is to be privatised, the amount gained from the sale will be severely reduced and one must wonder whether it is worth selling in the first place. All that the public purse will get amounts to one month's borrowing, approximately €1 billion. We are selling an asset that will this year produce €121 million in dividends, or more than €1 billion since its founding in the 1970s.

The Government claims that it will not carry out a fire sale. It has referred to €1.5 billion and €1 billion. Recently, Davy Stockbrokers suggested that it might only be €800 million. We are seeking a more effective energy company. As my colleague opposite, Senator Kelly, knows, Bord Gáis is investing in wind farm energy and other areas. It has also made investments in the North. We are concerned by the lack of clarity regarding the price, which is a critical issue, and the employees' future. Will employees be transferred to the privatised company under their existing terms and conditions? We are also concerned about the debt transfer. On a grander scale, the debt is why the company is being sold in the first place, yet there appears to be no clarity on this issue. These are our three main objections. Too much is unclear. With a bit of clarity, we might be able to further discussions on Committee Stage.

Photo of Tony MulcahyTony Mulcahy (Fine Gael)
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I welcome the Minister. This important legislation provides for the creation of subsidiaries of Bord Gáis, the continued State ownership of the transmission and distribution business of Bord Gáis and the sale of parts of the energy business of BGE.

As part of the terms of the November 2010 bailout package agreed between the last Fianna Fáil-led Government,-----

Photo of Tony MulcahyTony Mulcahy (Fine Gael)
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-----the IMF, the EU and the European Central Bank, there was a commitment to setting appropriate targets for the possible privatisation of State-owned assets, as Senator Daly well knows.

Photo of Mark DalyMark Daly (Fianna Fail)
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Bord Gáis was not one of them.

Photo of Tony MulcahyTony Mulcahy (Fine Gael)
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There were many others, I assure him. This is the latest addition.

Photo of Mark DalyMark Daly (Fianna Fail)
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The Senator would not want to put words in my mouth.

Photo of Tony MulcahyTony Mulcahy (Fine Gael)
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In addition, we are obliged under Directive 2009/73/EC to dispose of parts of the energy business of Bord Gáis. This is covered under the third gas directive, which was passed into law on 3 September 2009 by the last Fianna Fáil Government.

It aims to progress the liberalisation of European markets for gas and electricity. Transposition of the EU's third package of gas and electricity directives in 2009 has been slow and often achieved only through legal action by the Commission against infringement. Does the Opposition want another set of fines to be imposed on this country, similar to those imposed following the European Court of Justice ruling in 2009whichfound Ireland in breach of the water framework directive? Does it have to take a massive bailout by the EU, IMF and ECB for those now in opposition to do what has always been EU law?

The gas directive was established by the European Network of Transmission System Operators for Gas, ENTSOG. One such operator is Bord Gáis, which currently has 427,000 gas customers and 348,000 electricity domestic and commercial customers nationally. As part of this liberalisation, competition was opened up in the Irish market. This resulted in the Big Switch campaign by Bord Gáis Éireann to supply gas and electricity to the Irish consumer. Bord Gáis Éireann is a large semi-State company set up by a previous Fine Gael-Labour Party coalition Government in 1976. It is very successful, with more than 1,000 employees. In 2012, it raised €500 million in a bond issue, which makes it fully funded until 2016. It has many assets in the country, including a wind farm portfolio and a 445 MW gas-fired power station in County Cork. Additionally, as mentioned, it has distribution and energy supply businesses in Northern Ireland. Furthermore, it was the successful bidder for the new Uisce Éireann-lrish Water company.

I do not wish to rehash what the Minister has already said in his introductory speech on this Bill. I support the Government in terms of what it aims to do with the proceeds of the sale of part of Bord Gáis Éireann. This follows tough renegotiation of the original bailout agreement, which we were told by Fianna Fáil when in government could not happen. It has happened. We can now invest 50% of the money raised from the sale of some assets in job creation and the remaining 50% can be used to secure funding for this job creation. Once these jobs are created and tax revenues are flowing again we can then start to pay down that debt.

Under Part 2 of the Bill, Bord Gáis is allowed to form a new network company. However, Bord Gáis will not be allowed to transfer ownership of this company, thus keeping this important piece of infrastructure in State hands. Sections 5 to 10 deal with the number of directors to be appointed to the board. These provisions will ensure only fit persons can be appointed and that their every action will be accountable. We need full disclosure of our directors and members of staff. These are State assets that need to be exploited for the maximum benefit of the taxpayer and not run as private empires for the few. The provisions of this Bill will ensure this. I believe that we should provide for lengthy quarantine periods during which time directors and staff of semi-State bodies are prohibited from working in the private sector for companies with whom they had dealings prior to leaving the State body.

Part 3 of the Bill deals with Bord Gáis Éireann's need to prepare a transfer plan for the energy assets, licences, staff and liabilities to an energy company. As per section 19, Bord Gáis will have to include a report on the network company in it's annual report. The Bill provides for checks and balances in regard to how the various provisions therein will be overseen by the Ministers for Communications, Energy and Natural Resources, Public Expenditure and Reform and Finance and, ultimately, the Oireachtas, to whom they are all accountable.

Nothing will be sold until such time as Ministers give their approval. This will ensure that we do not sell at the worst time. Economically things are improving. No one wants a fire sale as this would not be good for the taxpayer. This will not happen. In this regard, we need only look to the privatisation of the Royal Mail, in respect of which the share price of £3.30 at the time of placement was too low. Yesterday, the share price for Royal Mail was £4.75. It must be recognisedthat when the time and the price is right we will need to be able to move quickly.There are those who say we are selling the family silverware at the wrong time for the wrong amount. However, one must at times cash in some chips to gather money to invest in other areas of wealth creation for the State. We need to ensure that the staff that transfer to the new company and those who will be part of the elements sold on are consulted. I firmly believe that the Minister will ensure that this happens.

I welcome that under Part 4 of the Bill and the amendments to the Act of 1976, employees or their trustees will own up to 5% of the capital stock in the company. This will incentivise employees, in that the better the company performs the better their return. To those who oppose some of the aims of this Bill, I point out that they have very short memories in relation to the sale of State assets given they sold off Aer Lingus in 2006, Telecom Éireann in 1999 and Irish Sugar in 1991. There is a history of Governments creating State assets, developing them and selling them off in time. I support and welcome this Bill.

To Senator Daly I say, we are where his party put us.

12:00 pm

Photo of Mark DalyMark Daly (Fianna Fail)
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I refer Senator Mulcahy to the five-point plan.

Photo of Fiach MacConghailFiach MacConghail (Independent)
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I welcome the Minister to the Seanad. On a positive note, I welcome the amendment provided for in Part 2 of this Bill in regard to the requirement on the Minister to report to a committee on progress of the legislation within 12 months of it coming into force. The Minister, Deputy Rabbitte, may be the first to have inserted such a provision into legislation. It is a very positive move. It is case of walking the walk with regard to political reform. I am encouraged by the inclusion of that provision in the Bill and compliment the Minister on doing so.

Although the debate on the abolition of the Seanad is over, it is important to note the number of additional amendments inserted into this Bill following its passage through the Dáil. The Minister has indicated that he also proposes to introduce a number of other technical amendments. As such, the Seanad provides, at worst, a nice speed bump and time for reflection for legislators, in particular Government, prior to enactment of legislation.

It is always a momentous occasion, one that unnerves me, when we discuss the sale of State assets. The ghost of the Telecom Éireann debacle is clearly on my mind. What unnerves me even more is the proposed sale of Bord Gáis Energy, which is already profitable. My colleague, Senator Marie-Louise O'Donnell, has been highly critical of the sale of the national lottery licence. Also under consideration some time ago was the sale of the profitable part of Coillte. I was proud to be publicly associated with the campaign for the retention of Coillte in State ownership. I congratulate the Minister on ensuring this is the case.

I am genuinely surprised that there has not been any major kerfuffle about this Bill in the public arena. Bord Gáis Éireann is a major energy provider, supplying gas and electricity to homes and businesses throughout the island of Ireland. As stated by the Minister, it was established in 1976 and is majority owned by the Government. It is a dual fuel all-island business that serves more than 800,000 gas and electricity customers. The Bill addresses legislative amendments to allow and facilitate the sale of Bord Gáis Energy, which is the retail arm of Bord Gáis and sells gas and electricity to all market segments and performs related activities. It is on this basis that I express anxiety about this Bill, which anxiety will, perhaps, be alleviated during the Second and Committee Stage debates.

The sale of Bord Gáis Energy forms part of the Government's State asset disposal programme and is being pursued as a commitment under the EU-IMF programme. Surely, given that Bord Gáis Energy is profitable, we could renegotiate this differently. Reports anticipate that the sale could generate in the region of €1 billion to €1.5 billion, although more recent estimates are towards the lower end of that scale. Does the Minister know the real figure? I am not against the sale of State assets generally or the sale of Bord Gáis Energy, and my anxiety may relate to my not having the expertise of other Members of this House. Surely, we can make a better financial fist of it by retaining Bord Gáis Éireann in State ownership.

I am concerned not only about the 450 employees of the company but the impact of privatisation on the consumer. In 2012, operating profits before depreciation and amortisation had increased year-on-year by 11%. The net debt of the company has also begun to decrease. Is it a coincidence that the healthy financial performance would trigger a better sale of the company? Why can it not be retained in State ownership and allowed to continue to generate profits for the State? Bord Gáis is by far the biggest player in the domestic gas market, with 66% market share. I am not sure about the long-term impact or benefit of the sale of Bord Gáis Energy on our society or economy. I am aware of the imposed agreement to sell it but, as in other cases, is there not a different argument to be made in terms of its likely benefits and returns for the economy over a longer period of time?

As far as I can discern, no consideration was given to the implications of the Bill for consumer protection, nor has a published regulatory impact analysis been provided. There is, therefore, sufficient evidence to show that Bord Gáis Energy could stay in public ownership and use its profitability to protect jobs, increase profit and offer protection and choice to commercial and residential consumers.

12:10 pm

Photo of John KellyJohn Kelly (Labour)
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I wish to share time with Senator Jimmy Harte.

I welcome the Minister to the House and support the Bill. I propose to deviate slightly in saying a few words and asking some questions. I welcomed the Corrib gas project when it commenced some years ago on the basis that it provided an opportunity for development in a rural area. Despite my best efforts and the endeavours of others, Bord Gáis has not been convinced of the case for bringing natural gas to towns such as Charlestown, Swinford, Ballaghaderreen, Castlerea, Boyle, Roscommon and Carrick-on-Shannon. Although we made a very good business case to the company, it took the view that population numbers were the issue. When we argued that Bord Gáis was overlooking the fact that Shannonside co-operative in my home town of Ballaghaderreen uses more electricity than the town of Castlebar, the company refused to accept the logic of providing natural gas to the town.

I was recently informed by business owners in Carrick-on-Shannon that a natural gas supply to the town would save businesses €7 million per annum. As the Minister is aware, businesses in rural areas are dying and need a lift. Addressing energy costs would change their financial position. While I appreciate that 50% of the revenue generated from the sale of State assets will be directed towards job creation, jobs would also be created by establishing a natural gas supply in the towns to which I referred.

Does the Minister have the power or is he able to influence Bord Gáis Energy to the extent that the company would revisit some of the decisions it has made and consider providing natural gas to the towns to which I referred, in particular, Ballaghaderreen where the Shannonside co-operative is located. I fear that Bord Gáis Energy and EirGrid are similar companies in that they will engage in consultation processes that are little more than tick-boxing exercises and do not heed submissions. They certainly do not appear to take on board any of the submissions they receive.

We have discussed wind energy and the public consultation process in which companies in that sector engaged. Their consultation is done and dusted and deals have been made with farmers. It is too late to address the issue. Notwithstanding that, I welcome the Minister's recent statement on wind energy and I hope the wind energy companies and EirGrid will pay greater heed to people who have genuine concerns.

Photo of Jimmy HarteJimmy Harte (Labour)
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Everyone is reluctant to sell off family silver. For this reason, the sale of State assets must be done under scrutiny and with due diligence. The departure from office of the previous Administration brought to mind the last days of Saigon. The Fianna Fáil-Green Party Government acceded to every demand made by the troika because the country was in such dire straits that it not have any bargaining power. In fairness to the current Government, it put up a much better fight on the troika's demand that all proceeds from the sale of State assets be used to pay down national debt. The decision to use much of the revenue from such sales for investment and job creation purposes is an important step. This means the money from the sale of Bord Gáis Energy will not only be used to pay down debt but to create employment. It would have been a bad deal if we had been required to agree to the troika demand to use all the proceeds from the sale of assets to pay off debt. The Government has decided to use half of such proceeds for job creation purposes and the other half to be retained for future investment.

While the price paid for Bord Gáis Energy will obviously be a matter for the markets, it is important to note the economy is picking up. I learned this morning that China is to invest in five or six nuclear power stations in the United Kingdom. This indicates there is significant potential to tap investment from other countries and funds in the Irish energy market. Bord Gáis Energy will be sold at the right price and, more important, the proceeds from the sale will generate additional employment. We can discuss the rights and wrongs of selling State assets all day but this sale is taking place in the best interests of citizens. Those who are in college or school and those who are not yet born will see the benefits of this measure. I commend the Bill. As Senator Mac Conghail stated, the review of the legislation within 12 months of it entering into force will be important and I am sure the Minister will return to the House to report on progress at that point.

Photo of Sean BarrettSean Barrett (Independent)
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As always, I extend a warm welcome to the Minister who attends the House more regularly than any other senior Minister, for which I thank him.

I do not have any problems with privatisation. One does not have much choice in the matter when one reaches a debt to GDP ratio of 120%. This step had to be taken. Sometimes privatisation works out for the better, not only in terms of helping the public finances. An bord snip nua estimated that sales of assets have generated approximately €10 billion thus far, which is €10 billion less misery on days such as Tuesday last.

Some privatisation measures work out extremely well. The Dairy Disposal Company, which Mark Clinton privatised before the word "privatisation" was even invented, is now the Kerry Group, a model of entrepreneurship in the Irish economy. Aer Lingus is in much better shape than it was when it had a fraction of its current passenger numbers and approximately 7,000 staff. I do not share the nostalgia for the East German type telephone service we used to have when one had to obtain a letter from the Minister to secure a telephone.

The proposed privatisation of Bord Gáis Energy could benefit the wider economy. I note from a Forfás report of December 2011 that industrial gas prices in Ireland in the first half of 2011 were the seventh most expensive of 23 EU member states. Will the commercial impetus created by this legislation reduce gas prices? In developing the economy, we must set a target of securing a better energy performance.

A Deloitte report of 2005 estimated that the ESB had excess costs of approximately €100 million. This issue must also be tackled.

The OECD economic survey of Ireland of 2011 recommended the discontinuation of supports for offshore wave and tidal energy. Sometimes the Department appears to operate in what one would describe as almost in a Walter Mitty style economy, one in which one hears clichés such as security of supply and defending the network. Such matters must be evaluated rigorously and I have no doubt the Minister will do so. In that context, I am pleased to note the following statement in his contribution:

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.

In the Dáil on 29 November 2011 the Minister saw things somewhat differently from how he does today. He was afraid that the interconnectors would be underutilised and become a stranded asset. As he knows, Professor Colm McCarthy, our mutual friend, investigated this and found that the apparent preference of the Commission for Energy Regulation for full remuneration of the BGE interconnector assets despite the absence of any formal underwriting of interconnector II by either customers or Government, was not consistent with a cost-reducing remit for energy policy. If we retain the network in public ownership, it cannot have that kind of holy-grail-type of status. A network might be built in the wrong place or new suppliers could come on stream. The major claim by those involved in the Shannon project is that they can pick up gas internationally at a much lower price. Therefore there is a price for artificially maintaining wind energy, tidal energy and a pipeline established when a different energy market existed.

I am sceptical as to whether taking the networks into public ownership really represents an asset. As Senator Mac Conghail said, I would welcome any thoughts the Minister might have on the regulatory impact assessment of it. It would be possible to get caught with almost a CIE-type inheritance which is then protected against all developments. On the next Stage the Minister might wish to respond to that. The energy must serve the wider economy and should not be an end in itself. I am a sceptic about taking historical networks and saying they must be defended forever at the cost of the consumer. Doing so results in another sector of the economy sheltered from competition and interferes with our overall economic competitiveness.

I welcome the Minister's commitment and energy in his participation in debates in this House. I assure him of any support I can give from these benches to the development of a low-cost and effective energy sector. The privatisation will be good for the national finances and will not do any harm for competitiveness. However, some of the other policies should continually be kept under review given the concerns of Forfás and the National Competitiveness Council that we still have an excessively high-cost energy sector.

12:20 pm

Photo of Deirdre CluneDeirdre Clune (Fine Gael)
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The Bill reflects a programme for Government decision to consider putting non-strategic assets up for sale. I fully agree with the separation of the network from the energy-supply sector. I congratulate the Government on negotiating with the EU-IMF troika to ensure that 50% of the proceeds of such sales would be retained for job-creation initiatives. Following the sale of the national lottery licence, €200 million is to be ring-fenced for the national children's hospital. On Tuesday the Minister, Deputy Howlin, announced a number of capital projects to be facilitated by a further €200 million from the sale of the national lottery licence. We have seen how funding from the sale of non-strategic assets can be used to facilitate job creation and specific capital projects.

Bord Gáis Éireann is the only semi-State company with its headquarters outside Dublin. Its move to Cork has been very successful. From talking to some who were involved at the time, I know there were objections and there was a no great desire to move outside the capital and establish a headquarters in Cork. However, Bord Gáis Éireann has always maintained a strong presence in the Cork area. It has never used its Cork base as an outreach office, and has worked with local communities and supported events across the city and county.

The Minister outlined the various Bord Gáis Éireann businesses, including its supply business, the power station at Whitegate, onshore wind assets and energy supply and distribution business in Northern Ireland. One third of households and many commercial premises, including schools, hospitals and industries, rely on gas for heating. We have a mix of coal, oil and gas-powered plants. For many people gas is preferable from a cost point of view. It also has lower carbon emissions - 40% to 50% less than coal or peat, and 25% less than diesel. From that point of view it is a very important fuel.

Gas infrastructure meets some of the best international standards, which is a tribute to the success of Bord Gáis Éireann. The interconnector linking Scotland to Ireland, the pipeline to the west, the Galway-Mayo pipeline, and the North-South pipeline all have the potential to build up a distribution network around those gas lines. Senator Kelly spoke about the potential to develop the gas network to other towns and cities. In 2011 the Western Development Commission produced a report indicating that extending the gas network to 11 towns in the north west could result in an annual saving of €20.6 million in fuel costs that region. There is potential to extend the low-pressure network beyond the main pipeline routes.

It is very important to bring the Corrib gas field on stream and the Shannon LNG plant is strategically important. We also need to consider storage facilities. We have only one facility off the south coast with a capacity of 3.5% of our needs. However, other countries in Europe have storage facilities with capacities of 20% of their needs. Does it make sense for a country at the end of a pipeline not to have additional storage capacity?

I may get a further opportunity to contribute on Committee Stage. The Bill is an important step forward in identifying what is strategically needed.

Photo of Fidelma Healy EamesFidelma Healy Eames (Fine Gael)
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I welcome the Minister and thank him for introducing the Gas Regulation Bill in this House. It is encouraging that the Bill proposes to sell Bord Gáis Éireann's supply business while retaining the network. That is a wise move by the Government and shows we learned much from the experience with Aer Lingus of the strategic ownership of the terminal versus selling the business.

I understand the Bord Gáis Éireann has completed a feasibility study to bring gas to Ballinasloe, Claregalway, Craughwell, Galway city, Gort, Headford, Loughrea and Oranmore in the proximity of the Mayo-Galway pipeline. I live in Oranmore and checked out where this is going. It is going part of the way up the Maree Road in Oranmore and stopping there. In addition, the proposal leaves out Clarinbridge. While this may seem very parochial, these homes are paying the same property taxes and development charges. I ask the Minister to ensure that the area is fully covered. It will be very valuable for any home that can have it, as it results in an annual saving of about €485 per house. We know it is much cleaner than oil and is better for the environment.

Shop Street, the main shopping street in Galway city will not be connected even though the network will serve Galway city. I ask the Minister to investigate those anomalies. Why would the gas network line not finish out complete areas?

Sometimes people feel hard done by and issues like this point to that. It is almost like discrimination or apartheid halfway down a road. I put it to the Minister that it is a big deal to sell off what some call the family silver. Therefore, when we do it, let us do it right and let us be fair to all the people in an area. For example, in the west coast of Galway, to which I have referred, considerable areas are being covered and that is welcome but other areas are being left out. What is the Government policy? Why is that happening?

I thank the Minister.

12:30 pm

Photo of Denis O'DonovanDenis O'Donovan (Fianna Fail)
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For the record, Senator Ó Clochartaigh was kind and indulgent enough to allow Senator Healy Eames to go ahead of him. You have five minutes, Senator Ó Clochartaigh.

Photo of Trevor Ó ClochartaighTrevor Ó Clochartaigh (Sinn Fein)
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Cuirim fáilte roimh an Aire. Cuireann sá alltacht orm go bhfuil Aire de chuid an Lucht Oibre ag tabhairt Bille den chineál seo os ár gcomhair - go bhfuiltear ag díol chomhlacht Stáit atá ag déanamh brabaigh ag am a dteastaíonn infheistiú sa Stát seo. It is not without irony that the Gas Regulation Bill is being introduced by a Labour Party Minister. A little over one year ago at a Labour Party conference the members gave a resounding message to their party leadership to the effect that they would not accept the sale of State assets. Yet we find ourselves in 2013 with a Labour Party Minister introducing a Bill to sell off Bord Gáis Energy.

The troika promotion of privatisation is clearly an ideological approach that benefits a small group of transnational corporations. Its insistence on entrenching neoliberalism is also profoundly anti-democratic. The sale of Bord Gáis Energy forms another part in the long list of attacks on public goods.

Bord Gáis Energy is a dual fuel all island business which serves more than 825,000 customers with gas and electricity North and South. Bord Gáis Energy is by any standards a successful company. In 2012 it had a gross operating profit of €79.4 million compared it to €44.3 million in 2011. It is by far the biggest player in the domestic gas market at present with a 60.97% market share in June 2013. Why is the Government selling off such a successful company? Bord Gáis Energy is hardly a millstone around the neck of taxpayers; in fact it is returning a profit to the State. Thus, the sale of Bord Gáis Energy can only be described as an ideological move, one fuelled by the austerity agenda of the Troika. Reports anticipate that the sale of Bord Gáis Energy could raise between €1 billion and €1.5 billion. However, recent estimates have predicted the price to be at the lower end of that scale. Half the proceeds will be available to fund employment-enhancing projects of a commercial nature with the other half destined to pay down debt.

The Minister has given assurances that jobs at Bord Gáis Energy will be protected. However, under a policy of deregulation and privatisation jobs are never as secure as they are under State control. Can the Minister guarantee that the current employees of Bord Gáis Energy will have their jobs and livelihoods protected? In the greater scheme of things, Ireland is a small country. Bord Gáis Energy currently controls 60.97% of the domestic gas market and a significant portion of the electricity market. The sale of Bord Gáis Energy to a private operator will likely be handing a monopoly into private hands, especially in respect of the gas market.

The sale of Bord Gáis Energy also has a direct impact on an important debate that is taking place in Ireland at the moment. Bord Gáis Energy is involved in the development of wind energy projects. Sinn Féin fully supports the idea of wind energy development. However, we prefer the Scottish model. Ireland has a target of 20% renewable energy production by 2020 and we have consistently called for a national strategy to be laid out for this target to be reached. The matter has been debated in the House many times. What we are seeing is a proliferation of wind farms being developed but questions are being raised about the related planning processes and there is no national strategy on the development of wind energy. It is like bolting the stable door after the horse has bolted.

We believe it is imperative that State and semi-state companies play a major role in the development of wind energy projects. What we have seen far too much of in Ireland is private companies taking the lead on the development of wind energy projects without proper planning or consultation with the local community. Local communities in Connemara are absolutely up at arms. They are trying to raise questions about the way some planning applications were granted. They are being given the run-around completely by the local authorities on the issues. They are angry at the way this is being done. There is a sense among people that local authorities, the Government and these private operators worked in cahoots to hoodwink the local communities in the development of wind farm projects which they do not want in their communities in the way they are being developed.

If Bord Gáis Energy is to be sold it would remove the option of such initiatives being taken through that semi-state company. The Sinn Féin pre-budget submission outlined several proposals on how to deal adequately with semi-state companies. We want to see NewERA replaced with a semi-state strategy group. The group would report directly to an Taoiseach and would be responsible for delivering a strategic job creation and training project. We believe that all annual dividends paid to the State by commercial semi-state companies should be reinvested into employment activation and training measures as identified by the semi-state strategy group and signed off by an Taoiseach. All salaries of chief executives of semi-state companies should be capped at €100,000, saving €3 million. The Fine Gael and Labour Party Government must take full responsibility for this sale of Bord Gáis Energy.

Since the Minister is in the House it would be remiss of me if I did not ask him to comment on the recent activities relating to the Corrib pipeline and the fact that the associated licence has been quashed. The local community has raised serious issues over the years on how some of those planning applications have been granted. We do not find the relevant detail in the judicial review challenge. When issuing the revised licence. the Environmental Protection Agency failed to carry out an environmental impact assessment in accordance with the requirements of various EU directives, including the habitats directive. Does the Minister have full confidence in the planning process in regard to the likes of the Corrib pipeline but also in regard to the planning of wind farms? I realise the environmental impact assessment issue has been raised with regard to the development of many wind farms throughout the State. Serious questions must be asked about the way the planning process has allowed these energy projects to go forward. I believe it is better to use the natural resources of the country for the good of all the people in the country and that they should be developed through the State arms.

Photo of Rónán MullenRónán Mullen (Independent)
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Cuirim fáilte roimh an Aire. I am concerned that this is an ill-conceived Bill proposing to sell the competitive energy business that is Bord Gáis Energy to the highest bidder. I note the Minister's reassurances, sincerely given no doubt, that we are retaining the strategic gas networks. However, I wonder at the same time whether we are not trading certainty for risk in this situation with a strategic asset.

Currently, Bord Gáis Energy has an estimated value of between €1 billion and 1.5 billion. The Bill provides for the retention in State ownership of strategic gas networks but would allow for the sale of the company. As we know, this is as a result of the November 2010 agreement with the Troika. There is no binding provision in the bailout agreement with the troika stipulating that State assets should be sold at an undervalue or sold at a time when there is no robust demand from the market. We are concerned rightly about any firesale, although the Minister reassures us this is not the case. The Minister has informed the House that a new subsidiary of Bord Gáis Éireann would be established to own and operate the gas network business and that this would ring-fence and protect strategic gas network assets, something to which I will return.

I understand there are only two suitors left the bidding process or in contention for the semi-state firm, a consortium led by Viridian and a British power firm, Centrica. Original estimates circulated by market watchers for the value of Bord Gáis Energy pegged it as €1.4 billion, including debt. Last week, it was reported that Centrica had bid less than €1 billion with the Viridian-led group offering more than €1 billion. Considering that the offers appear to be far lower than anticipated, I have a real concern that the Government might move to sell Bord Gáis Energy with less debt and thereby leave some of the significant debt on the network side of the business. I call on the Minister to reassure the House that this will not be the case. Why might that happen? It would be to increase the sale price of the company.

It has also been reported that Bord Gáis Energy would face an immediate break-up under plans being advanced by Viridian. The Northern Irish power company has assembled a consortium of financial investors to mount the €1 billion bid and the plans would involve each member taking over a distinct part of the business. There is a tangled web of financial arrangements which involves several companies. Among these are Macquarie, an Australian investment bank and corporate financial adviser, which is expected to take over the substantial development plan for wind farm assets; Allianz Capital Partners, part of a giant German insurance company, which would take over the operation of the wind farms; and Hermes GPE, another partner in the consortium, lined up to take over Firmus Energy, Bord Gáis Energy's Northern Ireland natural gas supply company.

Viridian would then take over the retail gas supply business, the largest in the country, thereby giving it increased market share in the Irish market, as it already operates the Energia business here. I ask the Minister whether consideration has been given to whether any competition or market distortion issues could be created by such a sale. The other leading bidder, Centrica, is understood to have launched its bid with the Canadian renewable energy group, Brookfield, and that strategy also might result in Bord Gáis Energy being carved up, with Brookfield taking over the wind energy assets and Centrica holding onto the retail business. The point I am getting at concerns what I believe could be a dismal picture, with various investors looking to turn a quick buck, garner profit and perhaps exit the market while losing the company with debt. This was Ireland's previous experience with Eircom when that company was passed from one international investor to another with every penny being squeezed from it and debt being loaded onto its balance sheet. In the meantime, as a result of all that, Ireland has one of the worst broadband networks in the developed world as no investor is capable of investing into the physical infrastructure that is necessary.

Furthermore, the undershooting of the expected €1.5 billion price for the sale of Bord Gáis Energy will have a significant impact on Ireland's budgetary position. What do the expensive Canadian bankers, RBC Capital Markets and NewERA, which are handling the sale process for the State, have to say about that? I am asking whether this is the right time for this sale or whether consideration has been given to postponing such a sale into the future. While one has heard the phrase "selling the family silver" many times, it seems this is a case of selling the family boiler. Although one is being assured that Ireland gets to keep the pipes and the wall of the house, I wonder whether one is dealing with phoney economics in this regard. The concern to which I referred earlier that the debt might be retained at the network end of the business arises from my fear that the Government will do whatever it deems necessary to increase the sale price. However, retaining the debt in the new network business would lead to the question as to what the State and the consumer would be left with after the sale process. Were the boiler to be sold and all the debt from the boiler put onto the pipes, the consumer would end up being obliged to pay for the pleasure of helping the bidders buy a company with no debt.

While the Minister should reassure Members this will not happen, were it to do so it would raise the question as to whether we ever learn from our mistakes. One cannot sell what is a strategic asset to venture capitalists and international financial vultures, to be frank, if so doing departs from investing in Ireland's future and instead focuses on their profitability. That would be a short-sighted way to go about trying to create a cost-effective energy market. When one considers that energy prices here for consumers and small businesses are among the highest in Europe, one must ask how much higher they will be after profiteers get their hands on Bord Gáis Energy. More than €1 billion has been invested by Bord Gáis in energy projects in Ireland, which is to be welcomed. However, rather than a long-term investment in Ireland's energy security, I am worried that we are giving in to bidders that seek to create a quick buck. In such a case, who is left? The squeezed customer, perhaps unaware of the financial wizardry being proposed, could be left with higher bills to pay off debt on investments while at the same time profits flow out of Ireland. Has an analysis of the possible impact of this process on energy and gas bills been carried out by the Minister? I certainly intend to write to the Commission for Energy Regulation to ask that this sale be forestalled until such an impact analysis has been undertaken into costs for the consumer.

Finally, what will happen to the employees who have worked in Bord Gáis to build up the company? It certainly is not true to suggest they all will become wealthy shareholders because the employee share option scheme closed in 2008 and therefore, most current employees do not qualify. I am concerned that despite the Minister's best intentions, this could be a fire sale of a strategic State asset with little thought given to how it will affect the energy market, employees of the company or customers. The leading bidders have stated they wish to break up the company post sale, which appears to be a matter of concern. Will, as I outlined earlier, this valuable asset be broken up and asset stripped? That certainly would be greatly to be regretted but I would be grateful for the Minister's views on what will happen in respect of the debt on the company and who will be left with it.

12:40 pm

Photo of Paschal MooneyPaschal Mooney (Fianna Fail)
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I welcome the Minister to the House and will cut to the chase regarding representations that have been made by me and many others in the north west on the extension of the gas network into Sligo town and of which the Minister will be aware. I understand the response has not been favourable because it has been pointed out there must be a large manufacturing or commercial entity operating in Sligo to provide critical mass. This particular argument has been disputed by Sligo Chamber of Commerce, representing all the businesses in the Sligo area, and I concur with that view because the lack of availability of a sufficient energy resource will act as a disincentive to companies, and larger companies in particular, locating in the north west. As someone who comes from the west of Ireland, the Minister will be aware one is fighting an uphill battle anyway to attract inward investment into the north west or the west because of their geographical location, peripherality and some misconceptions that these are isolated parts of the country, which of course is completely untrue because of infrastructural developments over the past decade or decade and a half.

As the Minister himself pointed out in his opening remarks, our island status makes us acutely aware of the importance of a secure gas supply. Are there implications in the future for the commercial extraction of gas under the fracking process? If this happens on the Minister's watch, which apparently will be the case, he undoubtedly will be under enormous pressure to facilitate possible drilling in the Bundoran Basin in the north west, particularly were the Northern side to proceed with drilling, although the position on what will happen there remains uncertain. The Minister might have a view on this issue. For example, will the commercial company that will take over and be running the new gas landscape in Ireland have a role in that regard? Will it be given carte blanche to seek out exploratory potential in the Irish context? This naturally is an issue that is of particular concern.

Another aspect in which I am interested pertains to the Minister's statement, "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." He went on to state, "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". Can the Minister point out what is the Government's view as to what are projects of a commercial nature? Is there any sort of plan B in this regard? My initial reaction would have been that all the money should have gone towards debt reduction as the entire purpose of the fiscal policy of the Government is to try to reduce the debt. The Minister is aware that as a result of the most recent budget and its recent predecessors, people are suffering. While I do not wish to go down the road of trying to open up the budget debate, it is because of the large debt overhang that many decisions on fiscal policy that are being taken by the present Administration are hurting people severely and will continue to so do in the coming years. Consequently, I would have thought the Government would have been tempted not to choose the option of arguing with the troika about the disposal of the assets but to seek to reduce the national debt. After all, €3 billion is a fair whack of money and to put it in context, that is what is being taken out of the economy this year.

While I am loth to go down the road of talking about the previous Government's activities, I recall that in 2006, a budget surplus in excess of €3 billion was recorded and the then Minister for Finance, Brian Cowen, put more than €2 billion of that surplus into reducing the national debt. This sometimes is long forgotten but it was at a time when there was so much largesse around that another Minister for Finance might have decided to have spent the money, rather than reducing the national debt. It was in this context that I was curious to ascertain what informed the Government in this regard, particularly as it has not outlined or been specific about how it will spend the money on what it referred to as "additional employment projects of a commercial nature".

Photo of Denis O'DonovanDenis O'Donovan (Fianna Fail)
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I invite the Minister to respond.

12:50 pm

Photo of Pat RabbittePat Rabbitte (Minister, Department of Communications, Energy and Natural Resources; Dublin South West, Labour)
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I thank all of the Senators who thoughtfully contributed to the Bill. However, a great deal of the debate has focused on two or three key areas.

I shall commence by responding to Senator Daly. He is not the only Member of the House to question whether, as he put it, this is a wise move and said he finds it disturbing. The truth is that I probably would not have brought the Bill before the House were it not for the extraordinary circumstances in which the country finds itself. Senator Mulcahy traced its origins in terms of the strictures by the troika and so on. In reply to Senator Mooney, I do not think it so much about the contribution that it makes to writing down debt that was in their minds. Rather, it is a standard precept where the IMF, but in this case it was the ECB and the EU, intrude into a country and they insist on that country making a contribution. I recall meeting my opposite number from Greece, it may have been during the Irish Presidency, and she said that her country did not have the extraordinary figure of €50 billion required in terms of the disposal of state assets and to do so it would need to sell islands. I do not think the process from the sale would make a great contribution to writing down debt. Senator Mooney's colleague, Senator Daly, reckons from what he has seen in the public domain, that it would only pay back four weeks of the debt. I do not think that is the motivation behind the initiative. The motivation is that the troika insisted, in the bailout programme in 2010, that we would embark on a programme to dispose of State assets. I traced the events in the other House so there is no point going back over them. When the new Government first met the troika, the latter put a figure of €5 billion on the measure plus a requirement that the sum would go towards writing down debt.

The ensuing negotiations lasted more than six months and the troika eventually conceded that the figure would be €3 billion with 50% of that sum being made available for reinvestment purposes in, as Senator Mooney observed, projects of commercial value. By that I think the troika meant that there must be a manifest commercial return and the projects must be worthwhile in terms of contributing to economic activity and generating employment. There is an arrangement for the remaining 50% that will, ultimately, go towards writing down debt but can be used for approved projects, in the first instance.

I cannot get into the business of commenting on what is in the public domain in newspapers. The information did not come from me and it did not come from my Department. This arrangement is being handled at an arms length from me and I would have thought that I need not explain to the House why that is the case. I really cannot go there but can reassure Senators that the notion of Bord Gáis Energy being sold off at a bargain basement price, or anything like it, will not happen. It has not happened in the case of Irish Life. Was Irish Life not pulled back from the market because the price at the time was deemed not adequate? There is no intention on the part of the Government to engage in a fire sale in this instance. There are good reasons for the way that the matter is being handled. Lord knows, sufficient funding has been made available to experts working on all sides in order to guide the sale properly.

I have not heard Senator Mullen verge into economics before and I am a bit surprised that he was so revolted by what he called the machinations and financial wizardry of the vultures out there. We live in a market economy and these guys are not in it in order to bestow some munificence on Ireland. I hope they are in it to run a profitable company that will generate employment in this country. Let us remember that Senator Clune made reference to the history of the company and so on. The company has a proud history and a proud record and it will continue to grow and thrive. It will do so because, apart from the retention of the networks and the crucial transmission system, this company will also administer the evolution of Irish Water. In fact the company will have more employees than it has ever had under its direction. The company has laid out, engineering wise, technical wise, managerial wise and financial wise, a most impressive programme for the evolution of Irish Water. I can tell Senators Mullen, Ó Clochartaigh and others who asked me that 464 people, or something like that number, work in the energy business but their jobs are assured. There are 450 people currently employed in the Bord Gáis Energy business and they will transfer to the energy company.

I think the following distinction is important regarding comparisons with previous privatisations. Apart from the fact that the sale has been forced on us, it is still not like the privatisation of Irish Sugar and the lamentable negotiations that followed in terms of the sugar quota and all of that. It is also not like the privatisation of Telecom Éireann. However, I do not challenge what Senators have said about the experience that we were left with as a result of selling it lock, stock and barrel. Indeed, I remember the robust exchanges between myself and the then Minister and distinguished former Leader of this House. At the time I accused her of walking up and down Moore Street like Molly Malone selling shares in Telecom Éireann.

Photo of Fiach MacConghailFiach MacConghail (Independent)
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Is there a tune to that?

Photo of John KellyJohn Kelly (Labour)
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There is song that goes with it.

Photo of Pat RabbittePat Rabbitte (Minister, Department of Communications, Energy and Natural Resources; Dublin South West, Labour)
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I do not want to follow her example myself.

Photo of Paschal MooneyPaschal Mooney (Fianna Fail)
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A lot of people made a lot of money from those shares.

Photo of Pat RabbittePat Rabbitte (Minister, Department of Communications, Energy and Natural Resources; Dublin South West, Labour)
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They did. That is right. Unfortunately the country suffered because the investment that might have come, in terms of broadband infrastructure over the intervening years, did not happen.

Photo of Paschal MooneyPaschal Mooney (Fianna Fail)
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That is true.

Photo of Pat RabbittePat Rabbitte (Minister, Department of Communications, Energy and Natural Resources; Dublin South West, Labour)
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Unfortunately the company was asset stripped which was a great pity. The company has now made a tremendous revival and is engaged on a very significant programme in the economy regarding the roll-out of fibre, an immensely valuable initiative.

Senator Mullen is fair to question whether we have learned anything from the past. I think that we have learned the merit of retaining networks in State ownership.

I shall comment on some of the other contributions. Senator Mac Conghail raised a number of questions that, as he said, were provoked by the ghost of Telecom Éireann. There is no point in my coming to the House and seeking to nuance what we are doing. We are doing what we are doing because we do not have any choice. I would like the Members of the House to tell me what they would sell. If they accept that there is a stricture on us to come up with a quantum, as a result of the disposal of State assets, I urge them to tell me what they would sell. To be honest, the State portfolio is much exaggerated. A great deal of what is left in State ownership does not amount to a hill of beans in the context of, as Senator Daly said, the scale of the debt. If we are obliged to make a contribution, where do we make it? It seems to me that this arrangement has a very good chance of producing a win-win for Ireland Incorporated.

I cannot imagine why a company would want to buy into the energy sector here and not seek to gain market share, run a profitable company and employ more people. Meanwhile, we have a very technically professional networks company that will, as a separate subsidiary, oversee and supervise the evolution of Irish Water which will employ a great many more people than in the energy business of Bord Gáis Éireann. In that sense, one is looking at something which is not damaging to the country's public interest and has the prospect of growth and development in the future. The more competition we have in the energy market, the better.

Senator Barrett raises a more difficult question about the remuneration of the gas pipeline. That is a more difficult question because it fundamentally questions the regulatory model we have. Everybody understands why we should have the interconnector. As a somewhat remote western island, we are at the end of the pipeline and security of supply must be my first consideration. We saw the pipeline turned off in the recent past, so we must have an interconnector. If we must have an interconnector, we must have some model to remunerate the investment which went into creating it and, therefore, we must ensure all players are treated equally.

Maybe, with the wisdom of hindsight, there are Members of the House who hold a point of view which says that in good times, the State should have paid for it and not engaged in the structuring done in terms of the remuneration of the pipeline and the arrangement with Bord Gáis. Maybe, with the benefit of hindsight, there is some validity in making that point but the fact is that we now have to remunerate it. Whether it is gas from the Corrib field coming ashore or LNG coming into Tarbert, we must ensure they are all treated equally.

Senator Barrett will have the opportunity to read a High Court judgment on this in the not too distant future and he may want to re-engage with me. We may have different views at that time because there is a challenge in the High Court and I expect that, within the next four to six weeks, we will have a decision and the court will rule. We will deal with that when it happens.

One of the things of which I am proud is that there is a new east-west interconnector between Ireland and Wales for electricity supply to this island, which is a very positive development. The whole thrust of European policy is towards integration. Integration initially will be a matter for this island, the neighbouring island and France. Again, the hope is that it would put downward pressure on prices and would guarantee security of supply in times of difficulty or interruptions for whatever reason. The interconnector is a very important limb of it.

I knew Senator Ó Clochartaigh before he became a Member of the House, and I regret he is not present in the Chamber. He is a particularly intelligent Member of the House for whom I have a lot of regard, but whoever wrote his script is living in cloud cuckoo land. He ranted on about neoliberalism and the fact this is being sold only for reasons of ideological motivation, but I am afraid that is not the case. I wish it were that it only had to do with ideology. Ideological motivation has nothing to do with this. It is the pragmatics of the only people in the world prepared to lend us money saying that if they are going to do so, we must comply with the following strictures and that if we do not, they will not sign the cheque. There is no other ideological motivation behind it.

There is nothing I can say to my colleagues in Sinn Féin, and I had this debate in the other House. When I set out the elements of the strategy on wind energy and policy statements, they just ignored them and continued to assert there is no policy. I have no idea what Senator Ó Clochartaigh means when he says Sinn Féin is in favour of wind energy along the lines of the Scottish model. I would like to hear what he means and maybe I can meet him half-way.

Capping the salaries of chief executives of State companies at €100,000 may be good populist politics but it is not part of the real world and is not something I can contemplate. The last thing we want in the running of State companies, which are crucial in a number of areas, is people who are not up to doing the job and of competing with the best.

1:00 pm

Photo of Rónán MullenRónán Mullen (Independent)
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Could we could cap it at a ministerial salary level?

Photo of Pat RabbittePat Rabbitte (Minister, Department of Communications, Energy and Natural Resources; Dublin South West, Labour)
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I think we have done that. They are capped at the Taoiseach's salary of €200,000, but his salary nowadays is €100,000 less than what it was when his predecessor was in office.

I refer to Senator Ó Clochartaigh's query about the Corrib gasfield. The company will have to make a new application to the Environmental Protection Agency for an integrated pollution prevention control licence. Neither side sees much of an issue in this and the EPA has put up its hands, so to speak. However, it will not help in meeting the deadline. It was hoped 12 months ago that gas would begin to come ashore at the end of 2014, but I do not see that happening. This will mean it will go into 2015 and, as some Members said, that is to be regretted in the sense that the Corrib field at peak will guarantee 60% of our need. That is a very valuable contribution. Realistically, we are talking about it going into 2015. Again, Senator Ó Clochartaigh is a bit of a Tadhg an dá thaobh on this issue. He is taking both sides of the road with him on it. It would help me if he told me whether he was in favour of the bloody thing coming ashore. There is no point carping about what is or is not going on. The State has bent over backwards to deal with issues raised. In terms of the national interest, the sooner the gas comes ashore, the better.

That connects into the point my colleague, Senator Kelly, raised about gas supply. This is always an issue and I know what he is talking about in the context of the report of the Western Development Commission and the contribution the network could make if it were extended to certain towns.

Senator Kelly will know it is not entirely separate from the Corrib issue. The fact that the transmission line was constructed from Galway to the Corrib has enabled adjacent towns to be linked up.

I understand why public representatives representing their own area would want to have the option of gas but there is a regulatory model that judges whether a particular application passes an economic viability test. That is a dynamic phenomenon that changes according to the circumstances in the given town. In Macroom and Nenagh, for example, it was reviewed on the basis of additional information made available. Senator Kelly raises the point of Shannonside and the particular situation regarding Ballaghaderreen. Ballaghaderreen is not one of the adjacent towns in terms of the pipeline but it does have a significant employer, Shannonside, which is located in Roscommon, not in Mayo; it is on the road out. However, I am all the more favourably disposed towards it for that.

Arrabawn in Nenagh was a major factor, as I understand it, in the review of the decision in respect of Nenagh. Nenagh and Macroom are now being connected. There is nothing that prevents a town like Ballaghaderreen re-entering its case but there is an economic viability test in that where it is estimated that the effect of the construction of the pipeline to a more distant town or urban location would result in the prices increasing generally to consumers of gas, that is not permitted. That is the situation we would have to confront there but it seems to me that in the constant review that goes on, there is a serious case to be made there.

I accept the argument being advanced by Senator Kelly that in terms of savings it could mean a great deal to business in a given town. Senator Mooney raises the same point about Sligo. In terms of economic activity and savings to companies generating employment, there is no doubt but that the extension of the network would be very helpful.

1:10 pm

Photo of Paschal MooneyPaschal Mooney (Fianna Fail)
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Is that a "Yes"?

Photo of Pat RabbittePat Rabbitte (Minister, Department of Communications, Energy and Natural Resources; Dublin South West, Labour)
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It is "Yes I will try" because I am persuaded of the value of an argument where it concerns that economic viability. I presume it is the location of Sligo vis-à-vis the network because one presumes that a town of the density of Sligo ought to be economically-----

Photo of Paschal MooneyPaschal Mooney (Fianna Fail)
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They argued that there needed to be a major utility there. There appears to be puncture holes in that argument looking at Sligo's industrial infrastructure as it stands.

Photo of Pat RabbittePat Rabbitte (Minister, Department of Communications, Energy and Natural Resources; Dublin South West, Labour)
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That is a factor in the economic assessment that is done.

I do not know whose questions I have failed to answer. I will have to go down with Senator Healy Eames and go up this boreen with her to establish where the gas has stopped in the middle of the road. I did not know about that.

Photo of Mark DalyMark Daly (Fianna Fail)
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It is a great offer.

Photo of Pat RabbittePat Rabbitte (Minister, Department of Communications, Energy and Natural Resources; Dublin South West, Labour)
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It is the kind of offer a man should not refuse, and I will-----

Photo of Paschal MooneyPaschal Mooney (Fianna Fail)
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Like the famous dog, the Minister will go a little bit of the road with her.

Photo of Pat RabbittePat Rabbitte (Minister, Department of Communications, Energy and Natural Resources; Dublin South West, Labour)
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As the Minister, Deputy Noonan, says, like Cathy Barry's dog, I will go a bit of the road with her.

Photo of Pat RabbittePat Rabbitte (Minister, Department of Communications, Energy and Natural Resources; Dublin South West, Labour)
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As I said, everybody wants access to the grid but there are sound economic reasons it can be difficult in some cases.

I thank Senators who have contributed to the Second Stage debate on the legislation. As I told the House, I will be bringing forward a few amendments, some of them technical but one or two of them important, and I look forward to Committee Stage in the House.

Question put:

The Seanad divided: Tá, 26; Níl, 14.

Tellers: Tá, Senators Aideen Hayden and Michael Mullins; Níl, Senators Mark Daly and Paschal Mooney.

Question declared.

1:20 pm

Photo of Paddy BurkePaddy Burke (Cathaoirleach of Seanad; Fine Gael)
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When is it proposed to take Committee Stage?

Photo of Maurice CumminsMaurice Cummins (Fine Gael)
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Next Tuesday.

Committee Stage ordered for Tuesday, 22 October 2013.

Photo of Paddy BurkePaddy Burke (Cathaoirleach of Seanad; Fine Gael)
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When is it proposed to sit again?

Photo of Maurice CumminsMaurice Cummins (Fine Gael)
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At 2.30 p.m. on Tuesday next.