Noel Harrington (Cork South West, Fine Gael)
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Question 503: To ask the Minister for Communications, Energy and Natural Resources if he will provide more detail on his decision to allow AER VI projects to terminate their 15 year power purchase agreements after the seven and a half years of bonus payments when those companies who eagerly and willingly entered a binding 15 year AER VI power purchase agreement and will have received millions of euro through the 35% front loading mechanism from the PSO fund will now be allowed to terminate their contracts when they should be contributing millions of euro to the PSO fund; if he believes this AER VI decision will deprive electricity consumers of the millions of euro when these contracted companies should be contributing to the PSO fund during the seven and a half year clawback period thus increasing the PSO levy burden on consumers; if he will confirm and clarify if it is the European Commission or him that decided to allow AER VI contracts to be terminated without any repayment to the PSO fund of the 35% bonus; and if he will make a statement on the matter. [1488/12]

Pat Rabbitte (Dublin South West, Labour)
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The Alternative Energy Requirement (AER) was a series of competitive tender schemes to support new renewable generation that were run from the mid 1990s to the mid 2000s. AER was subsequently replaced by the feed in tariff scheme known as REFIT. The AER schemes were designed and put in place prior to the electricity market becoming fully open to competition.

At the time that State Aid clearance was being sought from the European Commission for the original REFIT scheme in 2007, DG Competition itself inserted a clause in the terms and conditions of the scheme that generators were free to leave the scheme either by agreement with their supply company or in the event of disagreement, by serving 12 months notice and join the open market. Any generator that voluntarily leaves a support scheme in respect of a particular project will not be eligible to re-enter the support scheme at any later date in respect of that project.

It was also concluded by my Department that the concerns expressed by the European Commission about a continuing intervention in the market to deliver a public policy for any period longer than the participating generator requires in REFIT should also be applied on a similar basis to the AER programme.

As a result, my Department informed ESB Customer Supply (as the sole contracting party to the AER contracts) that nothing in the AER rules should be interpreted to preclude an undertaking from exiting an AER Power Purchase Agreement (PPA) within a period not exceeding 12 months from the receipt of notification from an AER generator of its decision to terminate an AER PPA, whichever event occurs first. If a generator opts to leave the AER scheme under this process, they are not allowed re-enter the scheme.

The electricity wholesale market has proved to be very volatile in recent years, with wholesale prices going from an average of over €120 per MW hour to just over €40 per MW hour following the general economic problems experienced. While the wholesale prices have increased since then, they are still below the high levels seen in 2008. Accordingly, under these provisions, AER VI contracted renewable generators are allowed to leave their 15 year PPA contracts at any time subject to notification periods not exceeding 12 months.