Dáil Éireann - Volume 620 - 30 May, 2006

Written Answers. - Electricity Generation.

Mr. Timmins asked the Minister for Communications, Marine and Natural Resources his plans to cease the public service obligation [1168] charge on ESB bills; and if he will make a statement on the matter. [20766/06]

  Mr. N. Dempsey: The opening of the electricity market to competition has meant that, in order to create a level playing field between all market participants, the Government’s public service requirements need to be transparently identified and costed. ESB has in the past been obliged to provide these services.

In pursuance of key energy policy objectives of security of supply, fuel diversity, environmental protection and the use of indigenous energy sources, the Government has identified certain public services that it requires ESB, in its function as Public Electricity Supplier, to continue to provide in a liberalised market. These public services relate to the provision of peat-fired generation, renewable/alternative generation and peaking capacity, for reasons of security of supply and environmental protection, in accordance with Article 3(2) of the EU Electricity Directive, and Section 39 of the Electricity Regulation Act, 1999.

In providing these public services, ESB incurs extra-competitive costs given that, unlike gas, both peat and, as yet, renewable energy sources are not competitive forms of electricity generation. Therefore, these additional costs over and above the costs of a best new entrant are recouped by way of a levy on all electricity customers.

The Commission for Energy Regulation (CER) is the independent statutory body that regulates the Irish electricity and gas markets. It calculates the PSO levy, with the sanction of the European Commission, on an annual basis. The levy compensates ESB solely for the additional costs it incurs when complying with the Order.

All monies collected under the PSO levy go to achieving the objectives of the PSO; the main objectives being to ensure reasonable self-sufficiency in electricity generation capacity by utilising peat as a primary fuel source, to promote renewable energy sources to help protect the environment and to cover the cost of generation capacity that is needed to ensure that customers’ demand can be met in times of peak demand.

To achieve these objectives the projects that have been supported by the PSO to date are:

• Alternative Energy Requirement (AER) contracted projects,

• ESB Power Generation peat stations,

• Edenderry Power Limited’s peat plant,

• Peaking plant.

Section 39(6) of the Electricity Regulation Act 1999 requires that the additional costs incurred in providing these public services must be recovered in respect of a specified number of years. Therefore in the case of each public service obligation, [1169] a definitive timeframe for its continuance is set out in the legislation. The public service relating to the provision of renewable/alternative generation, for example, is based on legally binding contracts of 15 years duration between the generators and the ESB.

Therefore, while the amount of the public service obligation charge may vary from time to time, the cessation of the public service obligations can only occur in the event of a change in policy direction on the provision of the public services detailed. This is neither warranted nor envisaged for the foreseeable future.

Mr. Broughan asked the Minister for Communications, Marine and Natural Resources the stage which the plan to develop an east west Interconnector is at; if a decision been taken on whether it will be developed on a regulated or hybrid regulated or merchant basis; if there are plans to develop a further north south or east west interconnector; and if he will make a statement on the matter. [20653/06]

  Mr. N. Dempsey: The small size of the Irish electricity market underlines the need for greater interconnection as a means of enhancing security of supply, promoting competition and integrating the Irish electricity market into the wider European market. In this context, the East-West electricity interconnector project is a key priority for the Government.

I will be bringing the matter to Government in the coming weeks for final decision as to the mechanism to secure East-West interconnection in terms of financing and developer selection, informed by the advice of the Commission for Energy Regulation. Decisions are needed now in order to ensure that the target date of no later than 2012 for operation of the interconnector is met.

In this context, the Deputy will have noted that the second stage of the Energy (Miscellaneous Provisions Bill) 2006 concluded in the House last week. The Bill provides the necessary legislative powers for the CER, with my consent, to secure the construction of an interconnector by means of competitive tender, authorisation process, or inclusion in the development plans of the transmission system operator. The Bill further provides for the possibility that costs related to the interconnector can be recouped through the transmission use of system charge.

As regards North-South interconnection, both Governments today jointly endorsed the project underway by the Transmission System Operators for the construction of a second electricity interconnector. The new interconnector, which will more than double the current cross-border electricity trading capacity, is scheduled to be operational by 2012 or sooner. The additional [1170] East/West and North/South interconnectors will substantially augment system security and reliability and facilitate more competition. The North/South interconnector development will also critically underpin the all-island single electricity market.