Business Irish

Tuesday 20 February 2018

Energy regulator 'powerless' to punish firms in breach

Gas Networks Ireland (GNI)
Gas Networks Ireland (GNI)
Paul Melia

Paul Melia

THE Energy Regulator is to seek powers to impose sanctions and financial penalties on companies found to have breached their operating licences.

The move comes after it found that State-owned Gas Networks Ireland (GNI), which is controlled by Irish Water's parent company Ervia, had breached licensing conditions by allowing cost overruns on a pipeline project in Limerick to be allocated to a separate project built in Northern Ireland.

The additional costs for the pipeline were paid by customers. The Northern Irish regulator intends to fine the company £500,000, saying the breach had "damaged the interests of consumers" which were forced to pay higher gas bills "than should have been the case".

But the Commission for Energy Regulation (CER) here says it does not have the powers to impose sanctions or penalties.

In September and October 2014, the CER and the Utility Regulator for Northern Ireland (UREGNI) received an email from a former employee of Bord Gais Eireann (re-named GNI) alleging an "act of serious financial impropriety".

The whistleblower alleged that cost overruns totalling €200,000 on the Barnakyle to Coonagh West gas pipeline in Limerick, which was built between 2002 and 2003, were subsequently paid to the contractor by allocating the overrun to another project.

The CER contacted Ervia and the Department of Communications, Energy and Natural Resources (DCENR), and Ervia engaged KPMG to conduct an inquiry. It confirmed that the overrun had occurred, and that it was "agreed that the overrun balance would be paid through future projects on which the contractor was appointed".

Ervia and GNI accepted the report, and said the incident was a "clear breach" of its values. "The company deeply regrets and apologises for this misallocation of costs," it said last night.

The CER then launched its own investigation into the so-called 'Project South', and noted that any overruns should have been submitted to the board for approval, which had not happened. The systems in place at the time to prevent such payments did not work, and it added that no employee benefited.

In its report, the CER investigation team recommended that the CER "engage" with the department to seek powers to impose sanctions. "It is the view of the investigation team that the CER does not have sufficient vires (powers) to impose appropriate sanctions or financial penalties on regulated entities," it said.

In a statement to the Irish Independent, the CER said while the Energy Bill 2016 included some additional powers, they were not as "wide ranging" as those enjoyed by the Northern Ireland regulator.

"The CER will be further engaging with the department to ensure that the regulatory powers ... are sufficient and that they evolve in line with the growth of the energy sector," it said.

The CER is also planning to conduct a random audit of capital projects undertaken by GNI between 2002 and 2007 to determine if there were other breaches. The costs will be paid by the company.

Irish Independent

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