Barry Cowen (Laois-Offaly, Fianna Fail)
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364. To ask the Minister for Communications, Energy and Natural Resources if he will explicitly seek to have greater competition in the generation sector by encouraging and facilitating more independent generating players to enter the market; and if he will make a statement on the matter. [54266/13]

Pat Rabbitte (Dublin South West, Labour)
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The regulation of the electricity and gas markets is the statutory responsibility of the Commission for Energy Regulation (CER). The Electricity Regulation Act 1999 provided for the establishment of the CER as an independent statutory regulator. Competition in electricity generation has been facilitated by European legislation and transposed into Irish law. The EU adopted its first package of legislation aimed at the liberalisation of the electricity and gas markets in 1996. This has subsequently been followed by two other packages, the most recent of which was approved in 2009. This legislation has allowed for competition in the electricity generation and in wholesale and retail supply markets.

The Single Electricity Market (SEM) is the wholesale electricity market for Ireland and Northern Ireland. The SEM came into operation on 1 November 2007 and commenced the trading of wholesale electricity in Ireland and Northern Ireland on an All-Island basis. It consists of a gross mandatory pool market, into which all electricity generated on, or imported onto, the island of Ireland must be sold, and from which all wholesale electricity for consumption on or export from the island of Ireland must be purchased. Independent analysis has indicated that the market has worked well and continues to deliver benefits to consumers through the use of efficient generation plant to meet demand across the whole island. The SEM model of setting prices in a transparent and cost reflective manner is not only assisting to promote competition and attract new investment, it has also contributed to improvements in the availability of generation plants.

The structure of the SEM has ensured that generators, including new players, have invested in the market, thus ensuring security of supply. This is evidenced by decisions to invest in the Irish electricity market by a variety of market players. Bord Gáis opened its 440 Mega Watt (MW) Whitegate power station in 2010 and ESB commissioned its 435 MW Aghada power station in the same year. The East West Electricity Interconnector (EWIC) commenced operation in 2012 with a capacity of 500 MW. Scottish and Southern Electricity (SSE) is currently constructing a 460 MW gas-fired power station at Great Island, Co. Wexford, and expect the plant to be operating from 2014. The SEM has also facilitated the connection of over 2,400 MW of renewable energy to the grid.

The SEM will continue to evolve in line with European electricity market developments, bearing in mind the primacy of the electricity customer when considering market evolution.

Barry Cowen (Laois-Offaly, Fianna Fail)
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365. To ask the Minister for Communications, Energy and Natural Resources his plans to promote smaller players in the electricity market; and if he will make a statement on the matter. [54267/13]

Pat Rabbitte (Dublin South West, Labour)
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The regulation of the electricity and gas market is the responsibility of the Commission for Energy Regulation (CER). The Electricity Regulation Act 1999 provided for the establishment of the CER as an independent statutory regulator. On 1 November 2007 the Single Electricity Market (SEM) went live, commencing the trading of wholesale electricity in Ireland and Northern Ireland on an All-Island basis. The SEM consists of a gross mandatory pool market, into which all electricity generated on or imported onto the island of Ireland must be sold, and from which all wholesale electricity for consumption or export from the island of Ireland must be purchased.

Regarding smaller players entering the electricity generation market, in order to be built and/or to operate, a generation project must hold an Authorisation to Construct or Reconstruct a Generating Station and/or a Licence to Generate Electricity. The CER is responsible for assessing and for granting or refusing to grant these licences. The conditions imposed in the Authorisation and in the Licence to Generate must be met by the generator and compliance is monitored by the CER on an ongoing basis. Under Regulation 13 of Statutory Instrument No. 60 of 2005, the CER authorises, by way of order, the construction or reconstruction of generating stations with installed capacities not exceeding 2 MW. The approval process is based on the assessment of specific information submitted by the applicant that is less than that required under the full application process and takes into account their limited size and potential impact.

I am mindful of the importance of well-functioning energy markets for business and domestic customers. The Government remains firmly committed to increasing competition as the best means of exerting downward pressure on prices in electricity and gas markets. New players have moved into electricity generation since 1996. I welcome the entry of new players and increased competition.

In the electricity supply markets, the CER has overseen the gradual liberalisation of the electricity supply market which culminated in full market opening in February 2005. The regulatory framework created the appropriate environment for competition to develop and since then competition has increased in the business and domestic markets. In 2010, the CER published its Roadmap to Deregulation, which set out the milestones for the end of price regulation. All business markets were deregulated from 1 October 2010. From April 2011, the domestic (residential) market was deregulated and so all suppliers are free to set their own tariffs. The liberalisation of the electricity supply markets has seen the entry of companies such as SSE/Airtricity, BG Energy, Vayu, Energia, Endesa, PrePay Power and Pinergy. These companies offer competition to Electric Ireland, the supply arm of the ESB.

Barry Cowen (Laois-Offaly, Fianna Fail)
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366. To ask the Minister for Communications, Energy and Natural Resources his plans to replace outdated plants that occupy valuable capacity payments; and if he will make a statement on the matter. [54268/13]

Pat Rabbitte (Dublin South West, Labour)
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Responsibility for the regulation of the retail electricity market is a matter for the Commission for Energy Regulation (CER), an independent statutory body, and is a matter in which I, as Minister, have no role of function. On 1 November 2007 the Single Electricity Market (SEM), the all-island arrangements for the trading of wholesale electricity, was implemented. The SEM is a gross mandatory pool which includes a marginal energy pricing system and an explicit Capacity Payment Mechanism (CPM). At a high level, the SEM design consists of a centralised and mandatory all-island wholesale pool (or spot) market, through which generators and suppliers trade electricity. Generators bid into this pool their own short-run costs for each half hour of the following day, which is mostly their fuel-related operating costs. Based on this set of generator costs and on customer demand for electricity, the System Marginal Price (SMP) for each half-hour trading period is determined by SEMO, using a stack of the cheapest all-island generator cost bids necessary to meet all-island demand.

The CPM is a fixed revenue mechanism which collects a pre-determined amount of money, the Annual Capacity Payment Sum (ACPS) from all suppliers and pays these funds to all available generation capacity in accordance with rules set out in the Trading and Settlement Code (TSC). The value of the Annual Capacity Payment Sum is determined by the quantity or capacity requirement, determined as the amount of capacity required to exactly meet all-island generation security standard, and a price, determined as the annualised fixed costs of a best new entrant (BNE) plant.

The SEM SMP and associated CPM does not disproportionately reward "outdated" plants. In fact, due to the structure of the SEM more expensive or inefficient generators are "out of merit" and hence they are not run and are not paid the System Marginal Price (which equates to their short run marginal cost), thus keeping customers' bills down.