Seanad Éireann debate -
Thursday, 26 Oct 2023

I am very pleased to address the House on the Second Stage of the Bill. I thank Senators for the opportunity to present this Bill.

As they will be aware, the Russian invasion of Ukraine in early 2022 led to exceptionally high energy prices. The Government is aware of the resulting financial strain on households and businesses in Ireland and has introduced numerous supports for homes and businesses to offset the increase. This includes a package of once-off, cost-of-living supports worth €2.5 billion in budget 2023 with a similar package worth €2.2 billion in budget 2024.

Significant action has also been taken at EU level. Council Regulation 2022/1854 on an emergency intervention to address high energy prices came into force in October 2022 and provided for a mandatory temporary solidarity contribution on fossil fuel production and refining and a cap on market revenues of certain electricity generators that earned unexpected surplus profits due to unforeseen circumstances. The first part of the regulation, which provides for the temporary solidarity contribution has been enacted and was commenced on 2 August last and now we must implement the cap on market revenues which is also provided for in the regulation.

I would like to provide a brief overview of the most important measures the Bill addresses before discussing them in more detail. The main purpose of the Bill is to cap market revenues gained by energy companies operating within the State and provide for the redistribution of the collected funds back to consumers. It does this by implementing a cap of €120 per MWh on electricity produced from renewable sources, namely wind, solar and hydropower. In addition, a variable cap, of at least €180, is applied to coal, oil, peat and biomass fuels.

On the basis of economic appraisal conducted by my Department, I note that these cap levels strike the balance of capturing excess revenue in the sector while maintaining positive investment signals. Applications of caps below these levels may risk Ireland's success in securing the investment needed to meet our climate targets. It is important to add that the market cap will not apply to wind, hydropower or solar energy projects, which make difference payments to the public service obligation, PSO, for surplus revenues above the relevant auction strike price under the renewable electricity support, RES, scheme as these revenues are already capped. The cap on market revenues will apply for the period from December 2022 to June 2023. The Council regulation does not provide scope to extend the cap on market revenues prior to this period. In addition a recent review by the European Commission concluded that a prolongation of the market cap measures is neither indicated nor desirable.

The Bill and the EU regulation on which it is based are designed to provide assistance for final electricity customers who have experienced extremely high electricity prices. The proceeds raised by the cap will be used to support electricity customers with their electricity bills. The precise disbursement of the proceeds will be subject to a future Government decision. However, it will be taken in accordance with the requirements set out in Article 10 of the Council regulation.

The Commission for Regulation of Utilities, CRU, the independent energy regulator, is designated as the "competent authority" in the Bill, and will administer the market cap with the assistance of EirGrid, which will be the "collection agent" and will manage the collection of proceeds.

I now propose to give a more detailed overview of the Bill, which contains four Parts and 33 sections. Two Acts are referred to: the Companies Act 2014 and the Electricity Regulation Act 1999, with no amendment required to any existing legislation.

Part 1 contains standard legislative provisions that cover the Short Title, its commencement, definitions of terms used in this Bill and a standard provision enabling the expenses of the Minister to be paid out of moneys provided by the Oireachtas.

Part 2 provides for the calculation of the market cap, the return of information to the competent authority, and the payment of money that is due. I would like to describe each Chapter of this Part in detail as this is the most complex Part of the legislation. This Part is divided into 19 sections, divided into three Chapters which I will now outline.

Chapter 1 begins by describing the relevant parties who will be liable to make a payment under the Act, as well as the specific fuel sources to which the Act applies. These sections are followed by sections 8 to 10, inclusive, which provide detailed and technical information concerning the calculations required to determine the level of revenue due under the cap.

Sections 11 and 12 differentiate between the preliminary surplus revenue and adjusted surplus revenue.

The first is calculated as the monthly revenue minus the capped revenue. The second, however, the adjusted surplus revenue, takes account of various gains or losses from hedges, power purchase agreements, contracts for difference payments and monies paid to or received from traders’ hedging arrangements. This adjusted surplus revenue represents the amount for which an entity is liable to pay in respect of the market cap.

Chapter 2 details the returns which are required to be provided as well as giving the competent authority the power to request such information if it is not forthcoming. The returns must contain all relevant information, such as the type and number of fuel sources used, allowable costs of production, market revenue and the level of cap. They must also contain the relevant person’s assessment of both preliminary surplus revenue and adjusted surplus revenue, as well as any other relevant information regarding hedging arrangements or other documents which may be prescribed. This chapter concludes with section 19, which describes the appeals process and provides for the making of an appeal against a determination of the competent authority in the High Court.

Chapter 3 details the payment of due funds, additional charges for late payments and the fact that interest will apply to these outstanding funds, which is provided for in sections 20 and 22, respectively. The final two sections of Part 2 outline the requirement to maintain adequate records relating to the making of a return and state that failure to do this is an offence. Section 24 provides that the competent authority may enter and inspect premises as required to confirm that returns provided are accurate, a task in which the Garda can provide assistance, if such is required.

Part 3 outlines the market cap fund, which will be where all amounts paid under Chapter 3 above are deposited. The first section describes the establishment of the fund and the second, section 26, details the accounting obligations and provides that the National Treasury Management Agency may perform this function. It concludes, in section 26(6), with a provision that the Minister is required to provide copies of the accounts to the Houses of the Oireachtas. The final two sections of this Part, sections 27 and 28, detail the use of funds raised. These can be used to set up schemes which fulfil the criteria set out in article 10 of the Council regulation which requires they benefit final electricity consumers. The fund may also be used for refunding overpayments to energy producers, intermediaries and traders if required.

The final Part of this Bill, Part 4, distinguishes the offences and penalties which apply for providing false or misleading information to the collection agent or the competent authority. It also distinguishes offences, outlined in section 30, relating to: failure to make a return within the specified period; failure to maintain correct records; obstruction of an inspection; and breaching a provision of a scheme outlined in section 28. The subsequent section, section 31, outlines how the competent authority can carry out prosecutions in this regard and section 32 states that an organisation can be held liable for an offence committed by a member of that organisation. The final section of Part 4, which concerns information sharing, outlines that both the competent authority and the collection agent can share information, including names, data on market participation, commercial information and technical information concerning system connectivity. All information sharing shall be subject to GDPR. I have outlined the main provisions of the Bill and provided additional detail on the sections. I hope this will be of assistance to Senators.

One other element I want to share is to flag in advance an amendment we may bring in on Committee Stage. We are doing this for the avoidance of doubt with regard to a technical issue and we are examining the possibility of making a minor amendment. Our assessment is that these amendments may be needed to prevent the unintended double counting of moneys owed to the market cap fund. This issue only recently came to light during the consultation process the CRU has carried out with the industry. The industry has also described these issues in various submissions made to the Department in recent weeks. We are working with officials from the Office of the Parliamentary Counsel to include these amendments. We hope to introduce them before Committee Stage in the Seanad. This shows the benefit of the Seanad in us being able to continue to adjust and approve legislation as it goes through the legislative process.

I look forward to hearing the contributions of Senators and hopefully getting the Bill passed quickly. It is in the interests of Irish householders in these difficult times to be able to raise revenues from the surface profits in the energy sector. In this case that is primarily wind. That helps to reduce bills for everyone.

Gabhaim míle buíochas le the Acting Chairperson for allowing me to come out here to contribute. I was supposed to be in the Chair so I appreciate that and once I am finished here I will allow her to go down to her seat because I am sure she will have something to say about this Bill.

I welcome the Minister to the Chamber and I acknowledge that he makes many visits here. It is nice to see a Minister coming to the Seanad. Fianna Fáil welcomes this debate and we are supporting the Bill as part of the Government. There is no need to outline again to Members what the illegal raid on Ukraine by Russia has done to the world. It has disrupted the supply of energy to the EU and that was all part of the Russian plan. This has resulted in unprecedented price hikes across the energy sector.

In October 2022, a Council regulation set out an emergency intervention in the energy markets to tackle this price rise. The regulation allows, among other measures, for the establishment of a mandatory temporary solidarity contribution from EU companies with activities in the crude petroleum, natural gas, coal and refinery sectors to contribute to the affordability of energy for households and companies. The Minister has done a good job at explaining the Bill and its sections. I have details on all of those sections but I do not intend to go through all of that again because it will be a repeat of what has been said already.

The provisions of this Bill are important, and as the Minister said, it is important to get this enacted quickly. I look at the key elements of implementing the cap and the importance of same. As well as that, tests must be applied to check if windfall gains are being passed on to the final energy consumers. That is important. It is fair to say that the huge shock we all got in our private homes, businesses and sports facilities with the price hike in electricity shook us all up in a number of ways. A large amount of money was taken out of people's budgets, and only for the Government's intervention they would not have been able to keep their bills paid. There is no doubt about that and those measures were welcome. The new measures in budget 2024 are also very welcome to people and people are telling me that. The rise in prices brought a shock to us all.

I mention the importance of reliability and I know this is something the Minister and his officials are switched on to because it is most important for communities and businesses. It is good that a number of suppliers have announced price reductions of between 9% and 30%, and customers can hopefully expect to see this reflected in retail bills for both households and businesses over the coming months. The most immediate factor affecting Irish electricity prices is high international gas prices, as the Minister knows, which have risen and remained high since the second half of 2020. We acknowledge that electricity prices in Ireland are higher than in many other European countries. Retail prices are influenced by a number of factors, including wholesale energy prices and supplier hedging. In Ireland, our location as an isolated island, our low density and widely dispersed population, and our reliance on fossil fuel are also key factors.

Wholesale prices reached peak levels in August of last year, when wholesale gas prices were 706% higher than in January 2021, while wholesale electricity prices increased by a whopping 463%. Due to high storage levels, warmer winter conditions and efforts to reduce demand across Europe, wholesale gas prices have fallen significantly and are now well below the peak values of 2022. However, wholesale prices remain significantly higher than pre-pandemic levels. Based on an estimated annual bill, retail gas and electricity prices were 138% higher for gas and 98% higher for electricity in January 2023 versus January 2021. I know the Minister wrote to the CRU requesting that a review of the pricing and hedging strategies be carried out to ascertain if there have been any market failures, particularly in the case of vulnerable customers.

I am very glad to know the report is due to be published in the coming weeks, if I am not mistaken. The CRU has committed to continuing its monitoring of the situation.

Customers who are struggling with their bills are strongly encouraged to engage with suppliers, and I make this point to people I meet who speak about high electricity bills. I advise them to engage. A lot can be achieved by those worried about their electricity bills if they engage with suppliers. Suppliers will not disconnect customers that continue to engage with them. Suppliers also have additional customer support in place, including hardship funds. The Minister recently called a meeting with the heads of energy suppliers who confirmed that the support would continue throughout the winter of 2023 and 2024.

As the Minister said, it is important to pass this Bill as quickly as possible. I am sure there will be other points of view and other amendments that we need to deal with, but it is a very good move and would be welcomed by most people. Sometimes people might ask why it takes so long, but when we consider the level of engagement required with other Departments and the Attorney General, sometimes there is a lot of ground that needs to be covered which even we politicians do not understand. It is not just a matter of having decided a few months ago to bring this in. It takes months and months, as most of us know, to bring forward Bills, get them right and to add amendments if they are needed.

I am hopeful the Bill will be passed quickly. It will provide great reassurance to the public because we all accept that, despite the support from Government, the cost of electricity for domestic and business consumers is extraordinarily high. If our economy is to continue to thrive, we need to ensure our supply is secure and that the price is as affordable as it can be.

I will be brief because this is a straightforward Bill initiated by the European Union. The Russian invasion of Ukraine was where the issue with electricity prices started. In the early days of 2022, we did not know how long the war in Ukraine or the fluctuation in energy prices was going to last. What was clear within the first six months of the war was the huge profits that energy companies were making off people. Substantial profits were made, rather than profits that were normal in that type of economic market. They were above the usual levels of profit. That was profiteering off a war on the European Continent. There was a lot of debate around that time about whether a price cap could be introduced and how it would be implemented. I am glad that the European Union decided to take the initiative for all member states to introduce a price cap throughout the European Union. That is one of the directives we have to introduce.

I am pleased to see today that all of the funds we will raise from this tax will go to protecting vulnerable customers in this country and investment in renewable energy. Investment in renewable energy will continue to strengthen our energy security and move the island of Ireland away from dependence on fossil fuels and the risk posed by any sort of regional wars. Unfortunately, in the next decade regional wars will become more of a common feature around the globe in terms of international relations. It is important that the money raised from this measure is used for that purpose.

The Minister said between €250 million and €400 million will go back into renewable energy projects. As he said, it is important that those savings are passed on to vulnerable customers, in particular people who are experiencing energy poverty. I want to commend some of the budgetary aspects the Government has introduced in the past year. Most notable are the energy credits last year and this year, which have gone a long way to providing financial security for people, in particular the business scheme which was the largest budgetary amount last year at over €1 billion. Businesses were able to claim up to 40%, 50% or 60% of their schemes back.

I have been very clear that when we are speaking about the cost of living crisis which is mixed in with the war in Europe, we as a Government are not able to protect everybody from absolutely every price increase or volatility and it would be wrong to say that we could. We have been able to lessen the burden as much as possible and provide a safety net so that the increases affect people in the most minimal way possible. I believe we have done that.

That is what I see in my constituency office in Dundalk with people I deal with every day of the week. I can see how those measures have benefited people. I have the same view on this Bill. The money raised from these measures is going to go back into helping people with further financial supports. At the same time we will invest in our economic future in terms of renewable energy and ensuring we have the proper level of energy security that we need to try to negate any future conflicts that may arise throughout the next decade in terms of Ireland's energy supply.

I am glad to see the Bill come before the Seanad today. It is something I support. The sooner it is passed, and we can get the cap in place and start getting money back into communities on the island of Ireland, the better.

I thank the Minister for coming to the House to take this Bill, which is welcome, today. I do not need to tell him that in addition to the once-off energy payments we are making, there is a fundamental need for a change in our energy sector due to what we have seen in terms of the inflationary impact of the war in Ukraine and gas prices in the past year.

Elevated gas prices have resulted in a stark increase in revenues from the electricity market, which has left more and more families and households crippled by the rising cost of energy. That is already devastating during a cost of living crisis. We need fundamental reform to properly address this energy crisis, not just once-off payments. Yesterday, one of the Minister's colleagues, Deputy Brian Leddin, had an interesting briefing from Wind Energy Ireland on the decarbonisation of the Irish market and the huge opportunity this provides for us in terms of the decarbonisation of our electricity grid. That is where the central focus needs to be. The proposed new planning Bill will help in this regard and we need to make sure we have a planning system that is fit for large-scale decarbonisation.

Another area we have welcomed is investment in solar energy generation and the SEAI grants that have been made available which have allowed more people to install solar panels in their households. From a green perspective, Senator Pauline O'Reilly spoke about solar panels in schools. Further investment in this area needs to continue.

We need to ensure that the most cost-effective solutions for people heating their homes coincide with green solutions. It is clear that we have the potential in Ireland to combat this energy crisis and we welcome new renewable ways to heat our homes and combat energy poverty. The ideas, technology and potential are there and we need focus from Government, along with prioritisation and political will. There is clearly an appetite across the public and political parties for a shift to greener energy and we need to scale up and have the State leading the action.

We need to begin to look at things like district heating, rather than individual retrofits of housing stock. We need local area retrofitting, rather than retrofitting individual houses. We need to make sure that those most at risk this winter and into the future have access to adequate energy and decarbonised heating in their homes. A targeted approach is needed to ensure that low income households who are at most risk of energy poverty get the support they need.

One example would be expanding the warmer homes scheme to include houses built in 2011, like the SEAI, rather than those built in 2006. They are the most vulnerable people. Older and newer houses that can avail of the warmer home scheme are not included, unlike those that qualify for SEAI grants. We need to introduce a targeted retrofit programme for rental accommodation to ensure that renters, who are some of the more vulnerable in our society and live in some of the most insecure housing, are not left behind when it comes to energy poverty.

The energy crisis is going to affect everybody but, like the housing crisis, it affects some people an awful a lot more than others. We cannot make the same mistakes that we have made with the housing crisis and allow certain sectors of society to fall behind.

They need our full support and this can come in the form of targeted supports, energy decarbonisation, electrifying our system and retrofitting our housing stock.

I am grateful to address this long-awaited legislation today. The prolonged delay has been very disconcerting, particularly against the backdrop of our persistent cost-of-living crisis. As other Senators said, energy prices in Ireland rank among the highest in Europe, with households facing an average bill of more than €2,000 annually, and little respite in sight. Shockingly, one in three Irish people grapple with energy poverty, a situation that is astounding in a thriving economy.

In 2023, the Society of St. Vincent de Paul reported a staggering 50% surge in requests for energy-related assistance, underscoring the dire circumstances that people are facing. Regrettably, Ireland's living standards continue to lag behind other European nations, a trend that has persisted for nearly a decade since the Fine Gael assumed power. Today, we find ourselves in the lower half of the European league table. The pressing question is how we can reverse this trend when the Government repeatedly delays the necessary actions to provide relief to our households. These are not mere statistics; they are a stark portrayal of millions of ordinary families struggling to cope with exorbitant energy bills, soaring living costs and escalating mortgage payments and rents.

The European Union introduced this regulation as an emergency measure, agreed upon in October last year. It should have been promptly implemented yet, 12 months later, it still has not been implemented. The Government's approach to this legislation hardly reflects the urgency of an emergency. The first draft of the Bill emerged in March, with pre-legislative scrutiny completed in May. However, just before the summer recess, the Minister made the unexpected announcement that he was going to split the Bill, leaving us with a weakened temporary solidarity contribution scheme. The legislation to cap market revenues, which could have addressed excessive profits in 2022, only emerged at the end of August. The Government defends these delays by citing the complexity of the legislation. Are we to believe that the other 20 European countries that proceeded swiftly were able to manage it while Fine Gael, Fianna Fáil, and the Green Party seemed to lag behind? Whether due to negligence or incompetence, the Government seems dispassionate about the plight of ordinary families.

Shockingly, the legislation falls short of addressing the peak profits from 2022, leaving these exorbitant earnings untouched. These are the profits to which Senator McGahon referred. They were made amid a devastating war, an unprecedented global pandemic and a severe cost-of-living crisis. The Government's claim that it cannot introduce retrospective measures is unsubstantiated. This measure is already retrospective since it is now October and the legislation will apply from December 2022 to June of this year. Other EU countries, such as Greece, France, and Belgium, have successfully applied it retrospectively. There are more equitable and effective approaches to address this issue, as other EU members have demonstrated.

To exacerbate the situation, the delays in implementation mean that we are on the verge of losing almost €2 billion in potential revenue, which could have been instrumental in alleviating the burden of soaring energy costs for families. This loss is even more frustrating considering that these figures do not factor in the potential revenue from extending the measure beyond June, as many other EU states have done. Furthermore, the Bill offers no clear guidance on how this revenue will be used, raising concerns about whether it will be directed toward the intended relief for struggling households and businesses. Corporations should not be permitted to excessively profit from the difficulties faced by ordinary people. The Government must be held accountable for this shortcoming.

We are on the brink of losing almost €2 billion in prospective revenue. This revenue could have been directed towards alleviating the escalating costs of energy for families. The initial estimate when this was floated stood at €1.9 billion. This has now dwindled to a range of between €280 million and €600 million. What compounds this frustration is the fact that these figures do not encompass the potential revenue that could be accrued by extending the measure beyond June. As I have said, this has been adopted by several other EU member states.

Ireland continues to grapple with high energy prices, with a rate of decrease significantly slower than the rest of the eurozone. The Government's assertion of being bound by regulation is hard to swallow. The European Commission, representatives of which came before the Oireachtas joint committee, explicitly stated that member states have flexibility in implementing the windfall measure, as has been demonstrated by other EU countries.

The Government needs to take more substantial action to address the turmoil in the energy markets, instead of making hollow promises and leaving ordinary people to bear the brunt. It is as plain as day that the Government has never been wholeheartedly supportive of a windfall tax. Its primary focus has consistently been on safeguarding the profits of powerful energy companies, often at the expense of ordinary workers and families.

Despite growing concerns about anticompetitive practices and profiteering in the energy market, the Government has failed to equip the Commission for Regulation of Utilities to be an effective regulator and give it the teeth that it requires. Our energy system is in disarray, marked by increased coal consumption, a sharp decline in renewable energy, and the looming threat of power shortages. The expansion of data centres has gone unchecked, and we have seen three more getting planning permission in north County Dublin. Even if they do have purchase power agreements this means that renewable energy is not available to households so they can benefit from its lower cost. It means that companies such as Amazon Web Services benefit from cheaper renewable energy while households will be required to fall back on expensive fossil fuel energy instead.

We look forward to engaging on the Bill. I did not pick up, because I was in the Chair, on what the Minister said about the proposed amendment he will table in the Seanad. It does not appear to be in the copy of the speech I have. If we could get a copy of the amendment, it would be very helpful for those of us who want to engage on the Bill.

We intend to introduce an amendment to deal with a matter of double counting. I do not have the text of it yet. I wanted to flag it in advance. I thank Senators for contributing and I will make some points in response.

To respond to Senator Boylan, no one has a monopoly on concern about householders. The Government has just as much concern about trying to keep bills down and help our people. We are all elected to these two Houses. We all have an interest in looking after householders. This is why we are introducing the Bill on a windfall tax. If the Senator cares to study all of the various European countries with regard to their solidarity contribution, which is the windfall tax on fossil fuel companies, and their windfall gains, she will see we have the highest rate compared to any other country. We are going after windfall more than anyone else. This is the truth. This is why I am proud that the Bill has been introduced.

With regard to the timing, we were going to introduce a single Bill but it was appropriate to break it into two. There is nothing in it that will reduce or in any way diminish our ability to raise revenue to help households. The fact it is coming after the period the EU designated for when the windfall tax should apply will not in any way restrict us in being able to use the money to benefit Irish householders.

This is complex. I was the Minister with responsibility for energy when we introduced the all-island electricity market. I recall being in the office, which is across Merrion Square from here, where we were designing and developing it. It was in a very large Georgian room, not quite as large as this one but very big. The entire wall was covered in algorithms outlining how the market mechanisms would work. Legislating to interfere in this, and to track, follow and find the supernova profits that arose because of the exceptional high gas prices, is complex. This is why it was right to take time and get it right to make sure it is not disputed or stuck in the courts. I commend officials from the Department on their work in this regard. It is important that we get the legislation right.

I agree with the various comments from Senators that our future will be in the development of renewable power, including wind, solar, geothermal, biomass and hydro power.

The presentation the wind industry made to the joint committee yesterday referred to delays. I agree with the commentary that our planning system needs to work quicker to be able to deliver that potential. It is absolutely true. That is why we will be introducing legislation in the Dáil first and then the Seanad to try to streamline and improve our planning process while still retaining the right to access justice on the planning side. We need to do that to speed up the delivery of the renewable power that will run our country into the future.

This Bill strikes the right balance. It will take the profits from the wind industry primarily. The high price of gas is being used as a weapon of war by the Russians. It is appropriate to go after that so the industry has a social licence to have the support of the Irish people. That is why we are doing this. As I said, no party in this House has anything but the Irish people’s future prosperity and interests at heart. This mechanism will help us to revert money to people. The exact spending mechanism is something we are considering further. We are looking at various options for using the revenue raised to support Irish households. We will come back to the House on that but, first and foremost, we have to get the Bill passed. I look forward to Committee Stage.

In the Public Gallery, as guests of Deputy Grealish, we have students from Claregalway. I am a Roscommon man so I know them well. They are very welcome. We are just about to finish proceedings for the weekend and a little Hallowe'en break. I hope they enjoy their stay around the Houses and I thank them for coming to the Seanad. I was going to say there will be no homework next week but that will not work because it is the mid-term break. I thank Ms Bridget Doody and the other staff of the Houses.

When is it proposed to sit again?