Thursday, 9 November 2023
Energy (Windfall Gains in the Energy Sector) (Cap on Market Revenues) Bill 2023: Committee and Remaining Stages
The amendments in this group are minor technical amendments which have been identified to provide greater clarity and reduce uncertainty for stakeholders and for affected parties. Amendments Nos. 1, 3 and 15 result in moving the definition of "affiliated person" from section 14 of the Bill to section 1.
There is also additional text provided, which results in a more comprehensive definition and provides greater clarity.
Amendment No. 2 is a clarification that export only suppliers are a particular case of generator and not all de minimisunits fit within that definition. It also makes the distinction that they are not an intermediary or a trader. The amendment will reduce confusion for stakeholders.
Amendment No. 9 provides a more appropriate unit of measure and provides greater clarity to companies that would be providing data on their activities in return.
Amendment No. 17 will improve clarity for the competent authority and reduce time and resources, processing returns.
I move amendment No. 4:
In page 9, between lines 19 and 20, to insert the following:
“Reporting on the use of proceeds from the cap on market revenues
6. The Minister shall, within six months of the passing of this Act, prepare and lay before the Houses of the Oireachtas a report on the application of, including the use of the proceeds from, the cap on market revenues.”.
This amendment is fairly straightforward. It calls on the Minister within six months of the passing of the legislation to prepare and lay before the Dáil a report on the application of, including the use of the proceeds from the cap on market revenues. That will be a report on the implementation of the scheme with particular reference to the use of the proceeds. It is a very simple measure and I hope that the Minister will support it.
I thank the Senators for tabling the amendment. The proceeds from the cap on market revenues will be retained by the Commission for Regulation of Utilities, CRU, or they will be retained by EIrGrid on its behalf and they will be used to support final electricity customers. This is in line with article 10 of the relevant regulation. Since the regulation is in force, the proceeds must be distributed in accordance with the regulation.
Regarding reporting on the cap and market revenues and the proceeds gained, reporting obligations are provided for in the section 26(6). This states that both the audited accounts and the report of the Comptroller and Auditor General will be laid before each House of the Oireachtas by the Minister for Environment, Climate and Communications once they are received from the collection agent, which is EirGrid in this case. For that reason, I think we are already covered for this section and I do not propose to accept the amendment.
I move amendment No. 5:
In page 9, between lines 19 and 20, to insert the following:
“Reporting on the application of the cap on market revenues across Member States within the European Union
6. The Minister shall, within six months of the passing of this Act, prepare and lay before the Houses of the Oireachtas a report on the application of the cap on market revenues in Ireland in comparison with the application of the cap on market revenues in all other Member States within the European Union.”
This amendment is related. It is crucial for us to serve as a valuable and significant gauge, taking into account the experiences and applications in Ireland in comparison to other nations. We have discussed the intricacies of how this programme should be structured but regarding the chosen design implementation it is essential that we can later assess and compare the experiences of its introduction with those of other EU member states. The thinking behind this proposal is that we are learning from what we did well and what other member states have done well.
Yes, it would be good to have a report on this. In fact, the European Commission has already commissioned a review of the market cap measures in other European jurisdictions. The view of the Government is that a duplication of that effort in this regard would be unnecessary. However, I am happy to share the contents of that report with Senators if they wish to read it. I do not propose to accept the amendment.
I move amendment No. 6:
In page 11, to delete lines 10 to 13 and substitute the following:“(a) €100 per megawatt hour for electricity produced from the source referred to in paragraph(a), (b)or (g)insection 7,
(b) €120 per megawatt hour for electricity produced from the source referred to in paragraph (d)of section7,
(c) €180 per megawatt hour for electricity produced from the source referred to in paragraph(c), (f), or(h)of section 7, and”.
The rationale behind this amendment is to facilitate a reduction in the cap on wind and solar energy from €120 per megawatt hour to €100 per megawatt hour. On examining the cap relating to the REFIT scheme, we find that the point of profitability for wind and solar is well below €120. We believe there is room for further adjustment, while simultaneously signalling and safeguarding the future viability of the sector. It is worth noting that the French Government has also set a threshold of €100 in respect of wind, solar and nuclear energy. That is the reasoning behind our amendment. There is room for more substantial change, so the amendment will push the boundaries, increasing returns for the Irish taxpayer. These could then be utilised to support people during the winter and beyond.
This Bill sets a cap on the market revenues of people generating electricity. It states that we are setting that at €120 per megawatt hour or 12 cent per kilowatt hour as a unit. What Senator Boylan is proposing is that we reduce the amount involved from €120 to €100. The path we are trying to tread here and the balance we are trying to strike is between making sure that we take a fair amount of money away from the electricity generators, in other words, removing money that they earned unfairly from the market during the time of the Ukraine war, and transfer it back to customer. At the same time, however, we want to ensure that we do not take so much money back from them that it will mean nobody will invest in the electricity generation market in Ireland. This is a real concern. Every few months we hold an auction in which electricity generation companies are invited to come to Ireland to build wind and solar farms and to see if they want to take part in building within the Irish market. We are competing with the other European countries and we have to make sure that we do not set a price that is so high that at the next auction we will end up with nobody wanting to build a wind or solar farm here because the signal that we have given to the market is that companies will not be able to make any profit at all. We have to maintain a balance between the two.
We had an auction recently that was oversubscribed; it could have been more oversubscribed. At that time, Deputy O'Rourke of Sinn Féin complained that the market conditions were not attractive enough for energy companies to come to Ireland and invest here. We are complying with Article 8(2)(c) of the EU Council regulation with the €120 cap. That is to maintain positive investment signals. We want to ensure that Ireland remains an attractive location for climate investment in order for Ireland to secure the investment required in renewable projects to meet our climate targets. The price cap of €120 per megawatt hour is in line with the contracted strike prices under the renewable energy support scheme. This demonstrates that a double-sided contract for difference which involves payback when market prices exceed €120 per megawatt hour does not hinder investment in wind generation. Coal, oil, peat and biomass by comparison will experience no increase in unexpected revenue due to the variable cap proposed by the Department. The variable cap contained in Article 8(2)(c) will allow for cost recovery to operate the generation units, and there will be a maximum margin limit based on the historical average margin received from 2018 to 2021. Following detailed discussion with a number of stakeholders, the Department is satisfied that the best available data was used to define windfall gains, and set an appropriate level of cap. It is for that reason that I do not propose to accept the amendment.
I take on board what the Minister of State is saying. In reference to Deputy O'Rourke saying that the market conditions are not favourable in the context of enticing renewable energy companies to invest here, we all know that the reasons do not relate to the price for the auctions; it is the fact that it takes too long to get projects through our planning system. We need An Bord Pleanála and the environmental NGOs that have to make submissions to the planning process to be resourced. We know that the delays in grid connections are also cited as a problem. We need to fix things within our renewable energy market. As I said, the French Government does not have any concerns about attracting renewable energy to France on the basis of the €100 per megawatt hour cap. We could use it to maximise the amount of money that we are recovering from these very profitable businesses and that could be used to help struggling households. I do not accept that €100 is not a fair cap.
I move amendment No. 7:
In page 12, lines 1 and 2, to delete “1 December 2022 and ending on 30 June 2023” and substitute “1 July 2022 and ending on 31 December 2024”.
For Sinn Féín, probably the most objectionable part of this legislation is the limitation of the cap to the period from 1 December 2022 to 30 June 2023. It specifically catches the seven-month timeframe during which there was a notable surge in wholesale gas and electricity prices resulting in substantial profits for renewable energy companies, especially in the latter part of last summer. Some countries have retroactively extended similar schemes further back so that they capture the really excessive profits that were being made. Since the deadline of 30 June has already passed, this measure is inherently retrospective. I propose including those excessively high profits from last summer by extending the scheme back to 1 July 2022. Additionally, following the precedent set by other EU member states, we could consider extending it on the other end to 31 December 2024, although our primary focus is more on capturing those excessive profits that were made in 2022. As I said, it is already a retrospective scheme. There is nothing preventing us from doing that. I would like to hear the Minister of State's justification as to why we are excluding the time period where the really excessive profits were being made.
The cap on market revenues will operate from 1 December 2022 until 30 June 2023. That is set out in the EU regulation, which states that a set of measures will be "urgent, temporary and exceptional". The regulation does not provide for the cap to extend to periods after this period. The Department received legal advice with regard to applying the cap beyond December 2022. This advised that where the State departs from the regulation, those aspects will be more vulnerable to legal challenge on the grounds of retrospectivity and interference with constitutional rights, such as property rights. The European Commission decided not to extend the cap on market revenues, citing concerns for regulatory uncertainty, concerns about incentives for new investment, concerns about high administration costs and reduced production by generators, and potential interference with electricity market design. In the context of the amendment, Ireland will not be extending the cap on market revenues as a national measure.
This set of amendments features minor changes of a technical nature that which my Department, with the assistance of the CRU has assessed are necessary to prevent the over-recovery of funds due to the unintended double-counting of moneys owed to the market cap fund. The issue of over-recovery only recently came to light during the consultation process the CRU carried out with industry. The amendments solve the problem in the methodology which resulted in double-counting. They are also drafted to ensure compliance with Article 6(3) of the Council regulation (EU) 2022/1854 and to prevent any circumvention by companies on their obligations to comply with the measure.
Given the short time period between the planned completion of the Bill through the Oireachtas and the requirement for there to be sufficient time for relevant parties to make returns and payments, it is prudent to amend the dates in these amendments by one calendar month respectively. These amendments should therefore also reduce the risk of future challenge.
I move amendment No. 20:
In page 29, lines 17 to 19, to delete all words from and including “prescribe” in line 17 down to and including “with,” in line 19 and substitute the following: “prescribe a scheme for the due disbursement of amounts from the Fund for the purposes of lowering the electricity purchase costs to final domestic electricity customers, in accordance with”.
I thank all Deputies and Senators for their work in passing this Bill. I particularly want to thank the officials in the Department of the Environment, Climate and Communications for the work they put in to carry this out. This Bill takes excessive money that was earned by electricity generators during a time of war and transfers it to electricity consumers who are finding it hard to pay their bills. It will be done in a targeted manner.
This windfall gains Bill is brilliant. It is easy for people to ask for what should be done but to actually put it into action is far more effective. We have all heard about the windfalls made by the big electricity suppliers or creators. This Bill is brilliant for two very simple reasons, the first of which is that it now puts a cap on what they can charge. We did not have that before and we saw that the charges were exorbitant. That will not happen again thanks to this Bill. Second, it creates a fund from the profits they made, which will go back to the people on the ground who were paying those bills. That is it in simple terms. It is a huge win for the people that we will no longer be able to get completely ripped off by big suppliers because we now have caps. The profit the companies made in the past year and a half courtesy of all their customers will now be able to go back into people's pockets. I thank the Minister, Deputy Ryan, the Minister of State, Deputy Smyth, and all the staff in his Department. This does not happen overnight. It is easy to ask for these things, but it takes time, effort and work and we must recognise that. This is a big win for the Government and for the Minister and Minister of State.
I will not delay proceedings. I want to look at it from a different angle. I know, as do Senators Carrigy and Garvey and people on the Government side, from talking to the public that people were saying this would never happen and it is almost there. It is very important we get that message across. This is really good for the consumer, whether we are talking about a commercial perspective or the domestic perspective. It just shows that when everybody works together - officials, Ministers, coalition governments or whatever - we can do this type of thing. It is an idea I certainly will sell. It is of huge advantage and benefit to the public. Many people said this would not happen; it is now happening right before our eyes. There are one or two little things to get done, but we hope they will be done. It is in everybody's interest to get this over the line now as quickly as possible.
I concur with the sentiments of both Senators Garvey and Murphy in congratulating the Minister, Deputy Ryan, and the Minister of State, Deputy Smyth, with regard to putting this in place. As has been said, people said this would not happen; it is now happening.It is important to acknowledge the significant funding the Government has put aside over the last 12 to 15 months, from the energy credits for everybody, to the targeted measures - particularly in the Department of Social Protection - on extra fuel allowances. There have been hundreds of millions in taxpayers' money put there for those most at need. Now, going forward, when this is fully in place, we will see the energy companies funding those targeted measures the Government has put in place for those who really need it the most. I congratulate both the Minister of State, Deputy Smyth and the Minister, Deputy Ryan for their work on this, and their officials in the Department.