A separation of powers for lower electricity bills
IN the same week that the European Central Bank (ECB) said Ireland was losing its competitiveness faster than any other country in the eurzone, our own Government decided to shelve a measure, which more than almost any other, would has benefited the competitiveness of the Irish economy. We pay more for our electricity than most of our European neighbours.
Then again, when it comes to introducing competitiveness into the electricity market we have been behind most of our European neighbours. This is why last year the then Minister for Natural Resources, Noel Dempsey, took on the issue and, having consulted far and wide, made two bold moves. The first was to require the ESB to divest itself of some of its power stations in order to give a foothold to competitors.
The second was to require the ESB to pass on the electricity network to EirGrid. Although the move made obvious sense for Ireland, the very idea of handing over a €1bn asset was resisted strenuously by ESB and trade unions, some of whom are not only of the militant variety, but have their hands on the Irish power switch.
It took great political courage for Mr Dempsey to face down the unions and do the right thing. Last Thursday Eamon Ryan, Mr Dempsey's successor, reversed that move and, to the sound of champagne corks popping in ESB trade union offices across the country, announced that he would appoint a review body to look at the decision. No timetable was given for the review body, which means Mr Ryan can long-finger any decision indefinitely.
So who might chair this review body? How about European Competition Commissioner Neelie Kroes. We can get an idea of her views from a recent speech where she said that legal unbundling, such as it exists in Ireland where the assets remain with the ESB but are managed externally, leads to a "constant conflict of interest". She said that in such a situation, the network owner "does not invest in interconnection capacity and in network capacity at the levels that it could".
By contrast she advocates the ownership separation introduced by Mr Dempsey but shelved by Mr Ryan.
She said it "leads to effective separation once and for all, of the electricity and gas networks from the commercial activities elsewhere in the energy value chain".
Ms Kroes is not the only one who thinks ownership separation is a good idea. Perhaps a few bods from the EU Commission itself would help the review body. According to the Commission, "any solution short of full ownership bundling will simply consign us to trying to treat the problems of the current model. If we are serious about delivering more secure and cheaper energy to Europe's consumers, full ownership unbundling is the most simple and effective way forward".
Who else might be trusted with driving energy competition? How about our own Competition Authority. Its view is that that the best solution is the "transfer of ownership of the transmission assets to EirGrid along with a strengthening of its position". Deloitte was called on to look at this for the Government and recommended ownership separation.
And if the minister still needs to fill a few places on the review body he might look at Forfas, the Government's pre-eminent policy think tank. It has said that "the critical issues that must be addressed in the (energy) White Paper are: Separating ownership of the transmission network from the ESB Group (but retaining it in State ownership) as recommended by the Deloitte analysis to promote competition and investment for new entrants". Then there's the OECD which has this to say: "Divestiture, that is, separation of ownership of generation from transmission, is the only form of separation that eliminates incentives to discriminate."
With all of these bodies lined it one direction it is difficult to see the need for a think tank. I mean, aside from separating the Irish public interest from the narrow material interest of the ESB and its trade unions, what is there left to think about?
- Tom McEnaney
