Noel Harrington (Cork South West, Fine Gael)
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Question 154: To ask the Minister for Communications, Energy and Natural Resources if it was a direct instruction from the European Commission Directorate-General for Competition to allow AER VI projects to terminate early, or his interpretation of a REFIT clause; and if he will make a statement on the matter. [6099/12]

Noel Harrington (Cork South West, Fine Gael)
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Question 155: To ask the Minister for Communications, Energy and Natural Resources if there are specific rules or regulations which prevent him reclaiming for the public service obligation fund the 35% bonus payments from early terminating AER VI contracts; and if he will make a statement on the matter. [6100/12]

Pat Rabbitte (Dublin South West, Labour)
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I propose to take Questions Nos. 154 and 155 together.

The Alternative Energy Requirement (AER) was a series of 6 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 all introduced prior to full electricity market liberalisation.

At the time that State Aid clearance was being sought from the European Commission for REFIT 1 in 2007, DG Competition inserted a clause in the terms and conditions of the scheme that generators were free to leave the scheme and join the open market, either by agreement with their supply company or in the event of disagreement, by serving 12 months notice. 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 required 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), subject to adequate protection being provided to ESB Customer Supply, and that ESB should terminate its AER PPAs with any AER Generator who requests such termination as soon as is reasonably practicable after the AER Generator notifies to ESB Customer Supply its intention to exit the AER programme; or, where ESB is the Intermediary of the relevant AER Generator under the Trading and Settlement Code, on the expiry of the minimum period prescribed under the Code in respect of revocation by the AER Generator of ESB's authority to act in that capacity; or 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.

Accordingly, under these provisions, an 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.

The AER VI competition included a provision whereby an applicant could opt for an accelerated payment in the first seven and a half years in the scheme, where the price applicable could be increased by 35% during that period and decreased by 35% in the following seven and a half years. This was a feature of the competition.

DG Competition, in insisting on an exit clause from REFIT, was seeking to ensure not to impose on renewable generation a requirement to participate in a scheme, when the renewable generators considered that they were capable of participating in the open market without further support.

The Department, in applying this condition to AER, did so in a similar spirit. The AER VI projects that wish to leave may do so without condition, if they consider that they can now compete in the open market. No conditions were applied that would seek to retain the AER VI projects in the scheme beyond when they considered they could compete in the open market. An attempt to retrospectively reclaim payments from the PSO would most likely result in renewable generators remaining in the scheme, rather than competing in the open market and this was considered contrary to the policy DG Competition was trying to encourage.