Joe Carey (Clare, Fine Gael)
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Question 1527: To ask the Minister for Communications, Energy and Natural Resources the steps he will take to reduce electricity prices, in view of the fact that electricity prices here remain above the European average which is having a negative effect on our cost competitiveness and ultimately the cost of our products; and if he will make a statement on the matter. [31772/10]

Eamon Ryan (Dublin South, Green Party)
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The Government recognises that the cost of energy in Ireland is a 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 recent higher energy costs, by comparison with EU average prices, were primarily due to significant dependence on volatile imported fossil fuels, particularly gas, as well as 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, particularly in view of the difficult economic conditions, 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 rebates totalling €567m. In July 2009 the Government agreed that these rebates would continue for large energy users at the same level until October 2010 and would then be phased out over the following two-year period. The Carbon Revenue Levy commenced on July 1st 2010, after the passage of the Electricity Regulation (Carbon Revenue Levy) Act through the Oireachtas. This Act levies electricity generators to capture a significant portion of the carbon windfall gains that they are currently receiving. Receipts from the Carbon Revenue Levy will fund the large energy user rebate from Oct 1st 2010. For small to medium business users, the Commission for Energy Regulation (CER) reduced regulated ESB prices twice in 2009, by an average of 10% from May 1st and a further 5.5% from October 1st 2009.

Business customers can also avail of the competitive benefits of value and choice by shopping around for alternative suppliers. Competition in the business electricity market has developed to such an extent that the CER has recently decided to end price regulation for ESB in this market segment, with effect from October 1st next. As a result, ESB will be free to compete against the independent electricity suppliers for these customers.

The CER is also close to completion of its 5-year review of electricity network expenditure. This review proposes measures to ensure that ESB and EirGrid make greater efficiencies in operational and capital expenditure, thus minimising costs for consumers. In line with Government policy, this review also includes some re-balancing of network tariffs in the interests of mitigating energy costs for business.

Taken together, these measures, along with falling natural gas prices, have already had a significant impact on Ireland's international competitiveness over the last two years. The latest comparative statistics available from the Sustainable Energy Authority of Ireland (SEAI) show that in general, Irish electricity prices in 2009 fell at a faster rate than in the rest of the EU, moving Ireland significantly closer to the EU average. Prices for the majority of business consumption bands are within 6% of the EU average. While EU comparison figures are not yet available for the first half of 2010, the SEAI data shows further significant reductions in Irish electricity prices in this period. Prices for the large business categories have reduced on a cumulative basis by some 34% — 44% in the 18 months to June 2010.

All customers will pay a higher Public Service Obligation (PSO) Levy from October 1st 2010. The PSO Levy is necessary to support the continued contribution of peat-generated electricity to security of supply and to deliver on the Government's 40% renewable electricity target, which also reflects Ireland's legally binding EU renewables obligations. In the longer term, delivering on our renewables targets will reduce Ireland's exposure to high and volatile external fossil fuel prices. Even in the short term, PSO supported wind generation can help reduce wholesale electricity prices at times of high wind by displacing higher cost fossil fuel generators.

The Government also remains firmly committed to increasing competition as the best means of exerting downward pressure on electricity prices. Significant progress has been made to date, most notably with the all-island Single Electricity Market now in its 3rd year of successful operation, the sale of ESB generation capacity, the entry of new players into both the generation and supply markets and new generation capacity coming on-stream in the Irish market.