Brian O'Shea (Waterford, Labour)
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Question 40: To ask the Minister for Communications, Energy and Natural Resources the measures he will take to ensure Ireland's cost of energy is tackled in view of concerns expressed by the commercial sector about the high cost of energy here and his failure to tackle this cost for business; and if he will make a statement on the matter. [35529/09]

Eamon Ryan (Dublin South, Green Party)
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The Government recognises that the cost of energy in Ireland is a serious competitiveness issue facing the enterprise sector during this difficult period for the economy. The provision of secure, sustainable and competitive energy supplies is critical for the economy. Ireland's high energy costs, by comparison with much of Europe, are primarily due to significant dependence on volatile imported fossil fuels, particularly gas, as well a requirement for very significant investment in energy infrastructure, following two decades of under-investment in the networks. The under-investment in networks and power generation posed real risks to security of supply which had become a major concern for enterprise.

Recognising the concerns of indigenous business and the inward investment community, the Government has put in place a number of measures to mitigate the cost of energy for business. All electricity users benefitted in 2009 from direct subsidies totalling €567m. These were made up of an ESB rebate to consumers of €315m, a repayment of certain Public Service Obligation (PSO) levies of €87m and the deferral of some network revenues until after October 2009. In July the Government agreed that these subsidies will continue for large energy users at their current level until October 2010 and will then be phased out over the following two year period. In some cases this will see businesses paying up to 40% less for electricity compared with what they were paying in 2008.

In addition, arising from their review earlier this year of prices, the Commission for Energy Regulation (CER) lowered electricity prices for all customers by 10% and gas tariffs by an average of 12% for domestic and SME gas customers from May 1st 2009. The CER's most recent pricing decision approved an average decrease in gas tariffs of 9.8% with effect from 1 October 2009. The decrease was made possible by the downward shift in recent months in wholesale gas prices. Small to Medium businesses will also see further reductions in their electricity bills of 5.5% from this month as the new CER tariff decisions come into effect and deliver further benefits to business.

The CER has also recently announced that the PSO Levy will be zero for 2009/2010. The PSO is the mechanism through which we support the security of our energy supplies and the development of wind and peat power in Ireland. A zero PSO means that we are lessening our dependence upon fossil fuels without burdening business or electricity consumers with any additional costs. The level of capacity payments, that compensate electricity generators for their long run costs, will also be 15% lower in 2010 compared with 2009. This represents a direct saving to all electricity consumers in 2010. Taken together, these actions will benefit all businesses, including both large energy users and SMEs, by significantly reducing the level of energy costs they would otherwise face in 2009/10.

Working with the CER, my Department is also investigating the scope for further permanent structural changes to our electricity markets that will benefit business. These changes include some re-balancing of network tariffs, as well as recovering carbon windfall gains from electricity generators. The CER is also about to commence work on a 5-year review of network expenditure. The review is designed to ensure that ESB, EirGrid and BGE make even greater efficiencies in operational and capital expenditure, thus driving down costs to all consumers. CER will ensure that this review is rigorous in the interests notably of mitigating energy costs for business.

The Government remains firmly committed to increasing competition as the best means of exerting downward pressure on electricity prices, and also towards ensuring diversity of energy supply to reduce our exposure to high and volatile external energy prices. Significant progress has been made to date, most notably with the all-island Single Electricity Market now in place, the sale of ESB generation capacity, entry of new players and new generation capacity coming on-stream in the Irish market.