Written answers

Wednesday, 20 October 2010

Department of Communications, Energy and Natural Resources

Energy Prices

9:00 pm

Photo of Kieran O'DonnellKieran O'Donnell (Limerick East, Fine Gael)
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Question 69: To ask the Minister for Communications, Energy and Natural Resources his views on energy prices here as commented on by Government agencies such as the National Competitiveness Council, Forfás and the chief executive officer of the Industrial Development Authority; the measures he is taking to make them more competitive in the short to medium term; and if he will make a statement on the matter. [37812/10]

Photo of Eamon RyanEamon 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 higher energy costs over recent years, by comparison with EU average prices, have been 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 energy supply which had become a major concern for both indigenous and Foreign Direct Investment Companies.

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 enactment of the Electricity Regulation (Carbon Revenue Levy) Act by the Oireachtas. The Levy is directed at electricity generators in relation to a significant portion of the carbon windfall gains that they are currently receiving. Receipts from the Carbon Revenue Levy will fund the continuation of the large energy user rebate from Oct 1st 2010. The Levy will remain in place until the end of 2012.

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 ended price regulation for ESB in this market segment. As a result, ESB are 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.

Taken together, these measures, along with falling natural gas prices on the global market, have already had a significant impact on Ireland's international energy competitiveness over the last two years. This is acknowledged by the Agencies referred to by the Deputy as well as industry itself. 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 are paying a higher Public Service Obligation (PSO) Levy since 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 target. In the longer term, delivering on the 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.

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