Joe McHugh (Donegal North East, Fine Gael)
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Question 328: To ask the Minister for Communications, Energy and Natural Resources the position regarding engagement by his Department or agencies under his remit with a proposed infrastructural connection (details supplied) between two metropolitan centres in the north west; if there is up-to-date information on the impact that such a connection would have on energy prices for consumers; and if he will make a statement on the matter. [24866/11]

Pat Rabbitte (Dublin South West, Labour)
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I have no direct statutory function in relation to the connection of towns to the gas network. Infrastructural connections which extend the natural gas network are a matter for the Commission for Energy Regulation (CER) and the companies involved in gas transmission and distribution, principally Gaslink and Bord Gais Networks (BGN). Under the Gas (Interim) (Regulation) Act 2002, the CER, which is a statutory independent body, has been charged with all aspects of the assessment and licensing of prospective operators who wish to develop and/or operate a gas distribution system within the State. The CER must be satisfied that a proposal to extend the network is an economic proposition before it will grant consent for it, as otherwise uneconomic projects will increase costs for all energy consumers.

In 2006 the CER directed BGN to implement a new Connections Policy Document, allowing for the appraisal of connecting new towns in relative proximity to the gas network, either on their own or as part of a regional group of towns. This Connections Policy was adopted in April 2006 and updated in June 2008.

Having regard to the new policy, BGN carried out a comprehensive review of towns being considered for connection to the national gas network. The review was carried out in three Phases. During 2008 and 2009, BGN, on behalf of Gaslink, examined the potential connection of 39 towns throughout the country, in a study known as New Towns Analysis Phase III. The results of this examination were reviewed and subsequently approved by the CER in April 2010. As part of this analysis, the connection of six towns in the North West to the natural gas network was examined (Ballyshannon, Bundoran, Donegal Town, Lifford, Letterkenny and Sligo Town). The report considered the connection of these towns under three different potential routes. In all cases, the results of the analysis showed that none of the six towns were economically viable for connection to the gas network.

The CER's decision not to proceed with connecting certain towns in this regard followed a detailed economic analysis based upon criteria outlined in the Connections Policy. In light of the general economic downturn and evidence from previous phases, the CER required a more prudent application of the Connections Policy than in previous phases, particularly relating to underlying assumptions.

At an earlier stage in 2001, the Government had at the time approved in principle the extension of the gas network to Letterkenny from the proposed Belfast Derry pipeline. It was also agreed that a formal detailed proposal for extending the network, with full costings, should be submitted to it before any formal decision was made to commit Exchequer funding for the project. In July 2004 the Department, commissioned the feasibility study, which was undertaken by Fingleton McAdam Consultants. It concluded that the pipeline proposal was not viable in economic terms and could require up to 100% subvention. On foot of that study, the Minister decided to carry out a full Cost Benefit Analysis and DKM Economic Consultants Ltd was commissioned to undertake this work. The report was completed in March 2005. The report concluded that the pipeline would require 100% subvention of the capital costs and would also require an annual subvention to offset the operational costs of the pipeline.

While the project could have attracted a contribution towards the construction phase under the InterReg III Programme, in the light of the conclusions of both the feasibility study and the cost benefit analysis that the extension was not viable either in financial or economic terms, the Special European Union Projects Body decided in June 2005 to re-allocate the relevant envelope of funding to other infrastructural projects located in the border region. Against this backdrop, the Minister decided not to progress this project by means of using significant Exchequer funds and advised Government accordingly in June 2005.