Wednesday, 15 June 2005
Dáil Eireann Debate
235. Mr. Durkan asked the Minister for Communications, Marine and Natural Resources if, having regard to the rate of increase in the price of electricity to the consumer in the past two years, he has proposals to bring about positive changes beneficial to the market; and if he will make a statement on the matter. [20371/05]
Minister for Communications, Marine and Natural Resources (Mr. N. Dempsey): First, as regards domestic electricity prices, the Deputy will be aware I do not have any function in regard to the pricing of electricity as this falls within the remit of the Commission for Energy Regulation, CER, the independent regulator for electricity and gas.
The CER was given the responsibility for regulating tariffs under the European Communities (Internal Market in Electricity) Regulations 2000, which amended section 9 of the Electricity Regulation Act 1999.
Liberalisation of the electricity market has proceeded on a phased basis since February 2000 under the regulatory oversight of the CER, in accordance with the Electricity Regulation Act 1999. On 19 February this year the market opened fully to competition. This is over two years in advance of the July 2007 deadline set down in Electricity Directive 2003/54/EC.
All customers are now eligible to source their electricity from any licensed supplier and the entire market becomes contestable. Scope now exists for all customers, household and non-household alike, to seek out keener prices in the competitive market. The evidence of switching between suppliers shows that business customers are price and quality sensitive and having a choice of supplier is allowing them to make the decision on what best meets their needs. I welcome the fact that companies are exercising their right to choose their optimum supplier as an indication that the liberalisation of the market is working.
Over time as suppliers target the domestic market, I expect to see those benefits extended to the domestic customer. Like any newly opening market, suppliers have initially concentrated on serving larger customers — not least because the market for larger customers was opened earlier.
My objective is to have in place policies and a regulatory environment, which will deliver a competitive energy and electricity market leading to the lowest sustainable prices. I expect that the major consultancy into electricity which commenced recently and the recent publication by both regulators of the SEM, single electricity market, proposals will assist us in policy evolution towards a more competitive market.
The SEM will allow participants to buy and sell wholesale electricity across the island regardless of either the demand or supply location. It is expected that the new market will be more efficient as in general, the lowest cost generating plant on the island will be run first, leading to potentially lower electricity costs.
Over time the aim is to facilitate the development of an efficient competitive market thereby minimising the wholesale cost of electricity. This will create a more attractive location for new generation investment. Additionally, it is expected that the SEM will improve the security and reliability of electricity supplies throughout the island.
236. Mr. Durkan asked the Minister for Communications, Marine and Natural Resources his views on the extent to which energy prices have risen here with obvious negative impact on both industrial and domestic consumers; and if he will make a statement on the matter. [20372/05]
Minister for Communications, Marine and Natural Resources (Mr. N. Dempsey): Energy costs relate primarily to the market prices of fuels and the capital and operating costs of energy providers, matters in which I have no function. Costs to industry generally are a matter for my colleague, the Minister for Enterprise, Trade and Employment.
Ireland is an importer of fuels, which are traded on the international market and have encountered unprecedented levels of volatility in the past year. There is a lack of cheap indigenous resources unlike for instance in Austria, Norway or Scotland which can utilise substantial hydro-power. France, Belgium and others rely heavily on nuclear power.
The distance from fuel supply sources brings higher transportation costs which place a significant premium on prices — landed prices for natural gas in Ireland are considerably higher than those paid by our mainland European counterparts. Furthermore, the current lack of widespread electricity interconnection limits access to other competitive markets in Europe.
The following comparisons for the EU15 countries is based on the most recent data from EUROSTAT, the statistical office of the European Communities. Electricity prices, excluding VAT, to industry were 19.8% higher in Ireland than the EU average in January 2005. Fuel oil prices, excluding VAT, to industry were 8.3% lower in Ireland than the EU average in January 2005. Natural gas prices, excluding VAT, to industry were 5.9% lower in Ireland than the EU average in January 2005 for the lower consumption bands. No data for Ireland were available for higher consumptions. Automotive diesel prices, all taxes included, were 6.1% lower than the EU average in January 2005. Electricity prices, VAT included, to households were 1.4% higher in Ireland than the EU average in January 2005. Heating oil prices, VAT included, to households were 4.1% lower in Ireland than the EU average in January 2005. Natural gas prices, VAT included, to households were 16% lower in Ireland than the EU average in January 2005. Premium unleaded petrol prices, all taxes included, were 7.3% lower in Ireland than the EU average in January 2005 and were 17.4% lower than the UK during the same period.
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