Introduction
A Cheann Comhairle, I move the amendment.
At the outset, I wish to state that there are elements in the Private Members Motion which have some resonance with my own thinking and I will elaborate in this regard later in my address. However, it is my fundamental position that the Motion is misguided and based on a completely false premise. It indicates an unwillingness to face reality. Effectively, the Motion asks the House to reject any sale of State assets, which is totally unrealistic given where we find ourselves, and in particular to reject the Government Decision of last week to sell a minority stake in the ESB. Clearly I cannot accept this Motion. I accordingly propose the amendment.
Leaving the ESB issue aside for the moment, it is important that the parameters for this debate be set out. The simple fact of the matter is that Ireland is currently totally dependent on the funding arrangements put in place under the EU / IMF deal to pay for its public services and to restore the banking system. This year we will borrow billions of euro to help fund social welfare payments, the health and education sectors, public service pay and pensions. All of these borrowed funds are being provided by the EU and the IMF. Ireland has no other borrowing avenues available to it.
The central point is that as of now Ireland is wholly dependent on the EU / IMF deal for funding the services to which I referred and to which I assume the Deputies opposite attach some importance. The paymasters are not making their funds available unconditionally. They rightly want to ensure that Ireland has a credible programme in place to ensure financial sustainability. The conditionality is set out in a Memorandum of Understanding (MOU) between Ireland and the Troika of EU, IMF and ECB.
The revised MOU commits the State, at the insistence of the Troika, to an ambitious programme of asset disposal. We cannot unilaterally discard this as the Motion would have us do. In terms of value, this has inevitably led to a particular focus on the State Energy Companies and especially on the ESB. My colleague, the Minister for Public Expenditure and Reform, will address the broader issues concerning the MoU with the Troika, the fiscal backdrop and the Government’s tempered and graduated approach to the consideration of any sales of state assets.
Contribution of ESB
I would like to focus my contribution on energy matters with a particular reference to the importance of the State Energy Companies. In this I accept the tenor of the motion as to the major contribution which the ESB as a State owned Energy Company has make to Irish economic and social development. It is equally correct to record that the ESB, in an increasingly competitive environment in both generation and supply, which I welcome, has been a commercial success over the years and particularly in recent years.
It is important to place these achievements and contribution of the Company on the record. The ESB has contributed close to €400million in dividends to the Exchequer in the last 4 years. This included a special dividend of €176 million on foot of its profit on divestment of some of its generation assets. There was also a customer rebate of €300million provided by the ESB to keep costs down for all customers. The ESB also pays a very substantial element of the carbon windfall levy. This levy was put in place by statute of this House in 2010, to last until the end of 2012. The special dividend and levy proceeds have been used to mitigate the electricity costs of the Large Energy Users who are so crucial to employment and exports.
Over the past decade or so the ESB has made some €10 billion in capital investment. The vast bulk of this has been in the transmission and distribution network, in particular in distribution. This follows earlier years of neglect of capital investment. This investment, funded by the Company itself, has delivered, in partnership with EirGrid as Transmission System Operator (TSO), a hugely improved network infrastructure and has been pivotal to the excellent security of electricity supply which Ireland has enjoyed in recent years. The ESB has also recently commissioned a modern gas fired generation plant in Aghada in Cork. I might also note in this regard that Bord Gais has also commissioned a similar plant in nearby Whitegate. The cumulative impact is an additional almost 1,000 MW of additional modern generating plant, put in place by profitable State Companies, at no cost to the taxpayer.
The ESB has also been to the fore in investment in renewable energy and smart technologies. It holds a strong portfolio of wind generating assets and is also involved in research in wave and tidal energy. The Company is also in the process of putting in place an extensive network to underpin the use of electric vehicles. This continues the hallmark of the ESB, evident from the initial Ardnacrusha investment in the 1920s, as being to the forefront of innovation and effective delivery.
It is also important to record the distinctive contribution which the ESB has made to our telecommunications infrastructure. Through its subsidiary ESB Telecoms, the Company has put in place an extensive fibre based backhaul broadband investment. This has provided important competition to Eircom and has facilitated the rollout of faster broadband to more places. I am aware that ESB are currently investigating the feasibility of using their extensive distribution network to facilitate a deeper penetration of fibre based broadband throughout the country.
Security of Energy Supply
The delivery of key energy infrastructure, gas and electricity, is critical to enable us to tackle our reliance on a single source of gas supply and limited electricity interconnection. Energy projects of national importance are absolutely vital to ensure secure supplies of energy.
The importance of the electricity and gas infrastructure and supply chain to economic and social development cannot be emphasised strongly enough. It is encapsulated in the often quoted expression of “keeping the lights on”. Electricity and gas are the lifeblood of economic production whether in the high tech ICT sector, the employment intensive services sector and indigenous sectors such as farming. They are also fundamental to key social services.
Because Ireland has such a reliable and modern electricity and gas infrastructure we almost take it for granted. We must however always remember that the creation of modern and reliable energy network systems did not happen by accident. It arose from extensive and well executed investment by State owned companies, notably the ESB and Bord Gais, and now more recently by EirGrid.
The Government fully endorses the strategic national importance of investing in Ireland’s electricity transmission infrastructure. EirGrid’s national grid development strategy “GRID 25” is of key importance. Development of the high voltage electricity grid is critical to economic recovery, security of supply, competitiveness and the realisation of our renewable electricity targets, as well as regional balance in our recovery
There is no doubt that Eirgrid’s strong professional independent management and operation of the transmission network, as well as good regulation, has further contributed to our excellent networks infrastructure and its reliability. It has also assisted in the introduction of strong competition in the generation and supply business. In turn, strong competition in generation, underpinned by the SEM, exerts downward pressure on wholesale prices, which is good for competiveness.
Another key project, EriGrid’s East West electricity interconnector between Ireland and the UK will be completed by the end of next year.
It has been argued elsewhere that the severe step down in economic activity ought to result in the reining in of investment in this area. It is true that the contraction of the economy has been dramatic but energy investment is for the long term. Therefore, the current economic downturn does not in any way diminish the need to complete the Grid 25 Strategy and other necessary investments whilst extracting best value in the new environment.
Broadband
I reject the assertion in the Motion that Ireland is three to five years behind competitor countries in terms of rolling out high speed broadband. International comparisons of retail broadband services are conducted periodically. The ComReg statistical report for end 2010 noted the latest OECD broadband data ranked Ireland 13th of 19 EU states surveyed for fixed line broadband penetration per 100 inhabitants. Indeed, Ireland ranked 3rd of 18 EU states surveyed for wireless broadband penetration per 100 inhabitants. Our leadership position on wireless and mobile broadband is an example of how the market has responded to demand for broadband from people in sparsely populated rural areas.
A wider report on broadband services in 72 countries published in 2010 by the University of Oxford and the University of Oviedo, Spain, concluded that the broadband services currently available in Ireland are capable of meeting the requirements of today’s broadband applications and overall, in terms of broadband quality and penetration, ranks Ireland 13th of the 72 countries studied.
The fact is that Ireland has made significant progress on broadband penetration, speeds and competition. Commercial operators have been investing steadily in rolling out critical communications infrastructure in Ireland over the last number of years. That investment has been of the order of €400 to €500 million per annum.
In terms of next generation broadband, speeds of up to 100mbps are already available to half a million households and industry investment is set to continue in the upgrading of services available. The Government is fully committed to supporting and driving the accelerated roll out of high speed broadband. Under the NewERA proposals in the Programme for Government, there is a commitment to co-invest with the private sector and commercial Semi State sector to accelerate the roll-out of high-speed broadband. This means higher speeds, to more places, quicker. Last week, I convened the latest meeting of the Next Generation Broadband Task Force. Its purpose is to report on the optimal policy framework and to identify a roadmap for the speedy delivery of high speed broadband availability throughout Ireland. The NGB Taskforce will report by year end and it is my intention to quickly proceed to implementation.
The State has also invested, where the commercial sector has not delivered. Initiatives such as the Metropolitan Area Networks, the National Broadband Scheme and major international interconnectivity projects are delivering important infrastructure and services to areas of Ireland which could not be served commercially. As a result of the combined efforts of Government and the private sector, a basic broadband service will be available to all citizens across Ireland ahead of the EU target date of 2013.
Competition and Electricity Price
Reverting to energy issues, one of the fundamental objectives of energy policy is competitiveness of energy supply for the economy and society.
Irish electricity prices were for many years above the EU average. This was primarily due to our high dependence on imported fossil fuels, particularly gas.
The Government remains firmly committed to increasing competition as the best means of exerting ongoing downward pressure on gas and electricity prices. Moving to greater use of renewables will also reduce the impact of sudden surges in international gas prices on Irish prices. While other measures to mitigate the cost of energy have been put in place in recent years, the drive for more, and better, competition in electricity and gas markets has had significant effects. Customers are availing of the benefits of value and choice by shopping around for alternative suppliers.
Analysis by the SEAI of official Eurostat electricity and gas prices show continued convergence in Irish electricity and gas prices towards the EU average in the two years to end 2010. This is a very welcome development.
However, in recent months, global wholesale gas prices have been trending significantly upwards. This has implications for both our electricity and gas prices in view of our high dependence on gas for power generation. Again this reinforces the arguments for continued investment in the electricity transmission infrastructure, to achieve greater security and energy diversity, in particular through renewables.
I must emphasise that the days of an ESB monopoly in the power generation and electricity supply sectors are long gone. There is strong competition in the power generation, due to the All Island Single Electricity Market (SEM),underpinned by effective regulation and the independent Transmission System Operators, North and South. There is ever more vigorous competition in the electricity supply sector. This is to be welcomed. Greater competition is good for the consumer and for competitiveness.
I do of course accept that the ESB must be constantly vigilant in the promotion of cost efficiency in everything they do. I acknowledge the fact that the ESB has achieved what they have over the last decade whilst implementing a significant reduction in numbers employed. I also very much welcome the recent and groundbreaking deal agreed between the Company and the unions on pensions. This will have major long term benefits for the Company. The focus on cost containment must, however, continue to be relentless. Therefore, I welcome the current negotiations between the Company and unions which are aimed at securing the delivery of the Performance Improvement Programme of €280million per annum by 2015.
Structure of ESB
The networks remain in ESB ownership and this was recently confirmed by a Government decision taken in the context of the transposition of the EU 3rd Directive on Energy Liberalisation. Under this arrangement, EirGrid continues to be the Transmission System Operator as an independent State Company. In this sense, the ESB remains a vertically integrated energy utility, but with a strong and independent Transmission System Operator, and it is in this format that a minority stake in the Company will be offered. The inclusion of these regulated network assets, north and south, in the minority offering should increase the attractiveness of the stake.
Conclusion
The importance of the electricity and gas sectors to economic and social development place the sectors in a unique position in the context of public policy and the national interest. It is my view that, given the importance of the sector to the very economic and social functioning of the State, that the State must continue to have a strong and direct presence in generation, networks and supply. This must be done in a way that protects overall economic competitiveness and does not deter private sector involvement in generation and supply.
I do not, however, wish to see a scenario where Ireland would be unduly dependent on foreign owned energy companies in a situation where Ireland would be a small component of a larger European market. This approach does not preclude extracting value from the strong and profitable State Companies that we have built. The process of extracting such value and indeed implementation of any other structural change within the State energy sector must however meet the simple test that they are in the public interest in its widest sense.
I am strongly of the view that the sale of a minority stake in the ESB can be structured in a way that passes this test. As Deputies are aware, a group co-chaired by my Department and the Department of Public Expenditure and Reform has been mandated by Government to report back by end November as to the best approach to the proposed sale of a minority stake. Subject to a positive decision by Government after consideration of the report of this Group, I would envisage the specific transaction being progressed through 2012.
It is incorrect to assert that the decision to sell a minority stake will inevitably lead to the State losing its majority ownership. I have already stated, and the amendment emphasises, that the State will continue to have a strong majority shareholding in the ESB. This will ensure that the Company, whilst continuing to have a strong commercial focus and remaining profitmaking, will retain the key role it has in electricity market. It will be the task of the Group which I referred to above to assess the level of stake that might be offered taking account of energy policy parameters, including regulation, and of course the objective of maximizing yield. The overall objective is a transaction that produces a compatible minority partner for the ESB.
I commend the amendment to the House.
ENDS.