Gay Mitchell (Dublin South Central, Fine Gael)
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Question 133: To ask the Minister for Communications, Marine and Natural Resources his plans to set in place procedures to deliver the benefits of EU competition and regulatory legislation in respect of gas and electricity to the consumer; if he will introduce or amend legislation to discourage the situation whereby energy prices through competition appear to be forced upwards; and if he will make a statement on the matter. [11451/07]

Noel Dempsey (Meath, Fianna Fail)
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As stated in the Government's White Paper on Energy, Irish energy policy must be strongly focused on contributing to greater productivity, national competitiveness, a strong economy and the needs of all customers. The Government is also committed to delivery on the All-Island electricity market jointly with Northern Ireland as the logical first step towards creating regional electricity markets between the island of Ireland and Britain. Regionalisation will in due course bring benefits for consumers and for the economy.

The position in law is that sole responsibility for the regulation of electricity and gas tariffs lies with the Commission for Energy Regulation (CER), which is an independent statutory body. As Minister, I have no function in setting or regulating tariffs.

International energy prices are key drivers over which suppliers have no control as they are driven by volatile international energy markets. The Government policy is to continue to drive down those elements of energy costs which are within our control.

There is an impression that because of price rises sanctioned by the CER, regulation is having the opposite effect as to what was intended. The reality is that electricity and gas prices must be cost-reflective to underpin network investment and reflect the cost of fuel. The Government believes that as a natural monopoly, the networks should be run to minimise the price to consumers and not to maximise profits. Accordingly, the Government is directing the Regulator to revise the rate of return for distribution network charges to a risk related rate of return. The resultant savings, through reduced network tariffs, and a lower State shareholder dividend from the networks business will be passed on in full to electricity consumers. Government is adopting these positive reforms in the interests of consumers and the economy.

As regards market opening and contestability Ireland has been progressively implementing the liberalisation of the gas and electricity markets in line with EU Directives and in the context of the All-Island energy framework. The electricity market has been fully open and contestable since 2005. With regard to gas, the market is currently open for commercial competitive customers and the Irish gas market will be fully open by 1 July 2007.

In light of recent movements in international fuel prices, the CER undertook a review, in the latter part of 2006, of the costs Bord Gáis Éireann (BGÉ) and ESB would face in 2007. On 1 December 2006, as a result of the review, the CER announced its decision to direct both BGÉ and ESB to amend their prices for 2007. As a result, electricity prices increased on average by 12.6% on 1 January, rather than 19.7% as was announced on 10 October 2006 and gas prices decreased by 10% from 1 February 2007 following the increase announced on 1 October 2006. Having regard to the volatility in international fuel costs, I understand that CER is considering whether it will develop a further consultation process on fuel cost variation with interested parties in 2007.