GAS REGULATION BILL 2013
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SPEECH
BY
Mr. PAT RABBITTE, T.D.,
MINISTER FOR COMMUNICATIONS, ENERGY AND NATURAL RESOURCES
ON
SECOND STAGE READING OF THE GAS REGULATION BILL
DÁIL ÉIREANN
SEPTEMBER 2013
I am pleased to have this opportunity to present the Gas Regulation Bill 2013 for consideration by the Dáil.
This Bill will implement the Government decision of February 2012 on the sale of State assets. It will ensure the retention of the strategic gas networks in State ownership, while also facilitating the sale of Bord Gáis Éireann’s competitive energy business.
Before I turn to the detail of the proposals of the Bill, I would like to address some energy policy issues. The overriding objectives of Irish energy policy remain security of supply, competitiveness and sustainability.
Our island status, on the periphery of Europe and at the end of a gas pipeline, makes us all acutely aware of the importance of a secure gas supply. Ireland currently imports 95% of our natural gas needs, leaving us vulnerable to supply disruptions and to volatility in prices, which are determined by global markets.
I am on record on many occasions as having stated that the proposal by Shannon LNG to develop a Liquefied Natural Gas (LNG) terminal in Tarbert is welcomed by the Government. Such a facility, together with the bringing on shore of Corrib gas, would provide important security of supply for Ireland. The employment boost from the construction of the LNG plant would also be welcome.
However, we remain heavily reliant on gas supply from Great Britain and we are also heavily reliant on gas for the generation of electricity. This reliance is set to remain for some time. In this context, the Government fully recognises the strategic importance of retaining the gas network in State ownership.
The Government endorses the importance of investing in Ireland’s gas transmission infrastructure. Our reliable, modern gas system is the result of significant investment by BGÉ, a well-run and profitable State owned company that has been instrumental in the economic development of the country.
Let me turn now to the decision to sell the Bord Gáis energy business. In November 2010 the Memorandum of Understanding agreed between the then Government and the EU/IMF/ECB – the bailout Programme – committed “to setting appropriate targets for the possible privatisation of state owned assets”. The details were to be informed by the recommendations of Special Group on Public Service Numbers and Expenditure Programmes, a review then ongoing.
When the new Government probed this privatisation target at its first meeting with the Troika they – the Troika representatives – mooted a figure of five billion euro for the sale of State assets, the proceeds of which were intended to pay down debt. The figure committed to in the Programme for Government between the two parties comprising the new Government was an assets disposal programme of up to two billion euro. Initially the EU/IMF/ECB were not disposed to allow us retain any proceeds from state asset disposal, insisting that all the proceeds be used for debt reduction.
The negotiaters ultimately settled on a figure of three billion euro, after the Troika agreed that a proportion of the proceeds could go towards re-investment for job creation.
Eventually after more than six months negotiation it was agreed that 50% of the proceeds could be invested in job creation measures and the remaining 50% could be used as a backstop for securing funding for job creation, before eventually being used to retire debt.
It was also acknowledged that any programme of state asset disposals should be undertaken only when market conditions were right and when the necessary regulatory structures had been put in place to protect consumer interests.
The outcome, therefore, of the renegotiation of this aspect of the Bailout Programme is enormously significant: the quantum of state asset disposals is less, the use of the proceeds will assist economic recovery and key strategic assets such as the gas transmission and distribution systems will be retained in state ownership.
In light of this and following detailed consideration of the financial and policy issues, in February 2012 the Government agreed, inter alia, to retain the strategic gas networks in State ownership and to sell the competitive energy business of BGÉ, namely Bord Gáis Energy.
Bord Gáis Energy comprises the following businesses:
a leading energy supply business in Ireland, servicing over 700,000 customers in the gas and electricity markets,
a 445 MW gas-fired power station at Whitegate in Co. Cork,
a large scale portfolio of onshore wind assets, and
firmus energy, a growing energy supply and distribution business in Northern Ireland.
All of the businesses making up Bord Gáis Energy operate within a competitive market structure, competing against other market participants. Indeed, Bord Gáis Energy’s entry into the domestic electricity market, with its highly successful “Big Switch” campaign, had a galvanising effect on competition in the all-island energy market. I believe that the sale of Bord Gáis Energy can deliver positive outcomes for Ireland’s energy markets, for Bord Gáis Energy and its employees.
The sale process was formally launched in May last and is now well underway and expected to be concluded by the end of this year. It is important to maintain the momentum on the sale process so that proceeds can be reinvested promptly, once available, to ensure an immediate impact on the economy and jobs.
The enactment of the Gas Regulation Bill will ensure there is no unnecessary delay in the transaction process.
I now propose to outline the provisions of the Bill. For the convenience of the House, a detailed Explanatory Memorandum has been published and this provides a synopsis of the provisions contained in the Bill, which is comprised of 5 parts.
Part 1 deals with general matters. Part 2 provides for the establishment of a network subsidiary company of BGE, which will be responsible for the ownership and operation of the gas network. Part 3 deals with matters relating to the sale of the Bord Gáis Energy business. Parts 4 and 5 deal with amendments to various Acts, in order to provide for changes in BGE functions and for new shareholding and governance arrangements for BGE.
The amendments in Parts 4 and 5 are primarily based on the need to ensure compliance with EU requirements for State-owned gas network companies.
I will now turn to the detailed provisions of the Bill. Sections 1 to 3 of the Bill contain standard provisions concerning commencements, definitions and Ministerial costs.
Sections 4 to 19 provide for the establishment of a new subsidiary of BGÉ, which will assume responsibility for the ownership and operation of the gas network business. This subsidiary will be compliant with EU requirements, and will ring-fence and protect the strategic gas network assets.
Section 4 also provides, importantly, that BGÉ cannot sell this strategic network subsidiary.
Section 5 provides for the Memorandum and Articles of Association of the networks subsidiary, which are subject to Ministerial approval.
Section 6 provides for the appointment of the Directors, subject to Ministerial approval.
Sections 7 to 11 set out standard provisions concerning the requirements for directors of the network subsidiary, including provisions regarding disqualifications and disclosure of interests by Directors, a prohibition on members of the Oireachtas or members of the European Parliament acting as Directors and a provision concerning the disclosure of confidential information by Directors or employees of the networks subsidiary.
Section 12 provides BGÉ and Gaslink to prepare a network transfer plan or plans in respect of the network subsidiary. Gaslink is the BGÉ subsidiary currently responsible for transmission operation. The transfer plan will set out those assets, licences, rights and liabilities and staff to be transferred by BGÉ to the network subsidiary.
Section 13 provides for the Minister for Communications, Energy and Natural Resources, with the consent of the Minister for Public Expenditure and Reform, to approve the network transfer plans.
Section 14 provides for a network transfer date to be set by the Minister and for notice to be published in Iris Oifigiúil. The network transfer plan will have effect from this date.
Section 15 provides that, with effect from the transfer date, the provisions of Schedules 1 and 2 apply and the network subsidiary becomes responsible for the ownership and operation of the networks system.
Section 16 provides some flexibility to the parties involved in the transfer if it is found that additional assets and so forth require to be transferred to the network subsidiary. The section provides that BGÉ and/or Gaslink may, up to one year after the transfer date, enter into a further
agreement with the networks subsidiary for the transfer of additional assets, licences, rights and liabilities and staff to the networks subsidiary. Such an agreement would require Ministerial approval.
Section 17 provides legal certainty to BGÉ and the network subsidiary that title to an asset can be proved by the issuing of a jointly agreed certificate.
Section 18 relates to the production of documents of title. It follows the provisions of section 84 of the Land and Conveyancing Reform Act 2009, but is tailored to the specific circumstances of the transfer plan between BGÉ and its subsidiary.
Section 19 provides for an Annual Report and Accounts, in which the activities of the network subsidiary must be separately identified.
Turning now to the sale of Bord Gáis Energy, Part 3 provides for the transfer of the energy business to a subsidiary, referred to in the Bill as the ‘energy company’, in order to facilitate the transaction.
These provisions of the Bill provide legal certainty as regards the assets, licences, rights, liabilities and staff to be transferred to the energy company and then sold.
Section 20 provides for the preparation by BGÉ of a transfer plan, or plans, which will set out the assets, contracts, rights and liabilities and staff to be transferred to the energy company. The plan must be approved by the Minister.
Section 21 provides for the Memorandum and Articles of Association of the energy company. It allows for Ministerial oversight of the content of the Memorandum and Articles. The Memorandum and Articles must be consistent with this Act and with the EU Gas Directive. This provision will cease to apply from the date of disposal of the energy company.
Section 22 provides for the appointment of Directors to the energy company, subject to Ministerial approval. Only employees of BGÉ shall be eligible for consideration and no remuneration will be paid to Directors. After the disposal date, Board appointments to the energy company will of course be a matter for the new owner.
Section 23 provides for the approval of a transfer plan in relation to the energy company. The plan must be approved by the Minister for Communications, Energy and Natural Resources with the consent of the Minister for Public Expenditure and Reform. It ensures that I, as Minister, must be satisfied that the plan provides only for the transfer of those assets and staff and so forth that are relevant to the energy business.
Section 24 provides for an energy company transfer date. This date will be set by me following the approval of the transfer plan. Notification of the transfer date is required to be placed in Iris Oifigiúil.
Section 25 provides that with effect from the transfer date, the provisions of Schedules 3 and 4 apply and the energy company becomes responsible for the assets, contracts, rights and liabilities transferred to it.
Section 26 provides that BGÉ may, up to the date of disposal, enter into further agreements with the energy company for the transfer of additional assets, licences, rights and liabilities and staff to the energy company. This section is intended to provide for flexibility in the event that, following the transfer date, it is found that additional assets and so forth require to be transferred. Such an agreement is subject to Ministerial approval.
Section 27 provides legal certainty to BGÉ and the energy company that title to an asset can be proved by the issuing of a jointly issued certificate.
Section 28 relates to the production of documents of title following the provisions of Section 84 of the Land and Conveyancing Reform Act 2009, but tailored to the specific circumstances of the transfer plan between BGÉ and the energy company.
Finally in this part, Section 29 provides that BGÉ may dispose of an energy company, subject to the approval of the Minister given with the consent of the Minister for Public Expenditure and Reform.
The amendments in Part 4 of the Bill, at Sections 30 to 38 inclusive, provide for a range of amendments to the Gas Act 1976.
As I have already said, this Bill underpins the State’s continued ownership of BGÉ’s strategic gas transmission, distribution and interconnector assets, by implementing certain EU requirements for a State owned gas networks company.
The majority of the amendments in this Part of the Bill arise as a consequence of the requirement to provide for the designation of a majority-shareholding Minister to whom will be transferred the majority of capital stock in BGÉ. It is proposed in Section 30 that the Government may, by Order, designate such a Minister.
A minority stockholding will be retained by me as Minister for Communications, Energy and Natural Resources and by the Minister for Public Expenditure and Reform.
It may be useful to provide some background as to the rationale for this new shareholding structure and the powers that may be exercised by the majority-shareholding Minister.
The designation of a new Minister as majority shareholder is proposed because the current shareholding arrangements are not compliant with EU Gas Market Directive 2009/73/EC. This Directive requires significant restructuring of gas transmission operators throughout Europe, in line with one of three unbundling options.
Unbundling is intended to create a level playing field for gas suppliers and to enhance competition and transparency in the gas market by removing the ability or incentive for monopoly gas transmission companies to discriminate in favour of related gas suppliers.
Under the Directive, the unbundling option which allows for the sale by BGÉ of its energy business and for the retention of the networks business in State ownership, is the Full Ownership Unbundling option, which Ireland is accordingly obliged to transpose and implement.
Essentially, the Full Ownership Unbundling rules require a separation of ownership and control as between energy producers, on the one hand, and network transmission businesses, on the other. I as Minister for Communications, Energy and Natural Resources and my colleague the Minister for Public Expenditure and Reform are shareholders in State companies which are active in power generation and electricity and gas supply, such as ESB and Bord na Móna. Under the Directive, therefore, neither of us may retain a decisive or controlling role in relation to Bord Gáis Éireann’s network business – which, as I have stressed, will remain in State ownership.
The amendments to the Gas Act 1976 that are proposed in sections 30 to 38 relate to the powers of Ministers in regard to the activities of BGÉ.
They provide for capital stock in BGÉ held by Ministers, the revised functions of BGÉ taking account of the fact that BGÉ will no longer be engaged in electricity or gas supply and the Ministerial powers for conferring additional functions on BGÉ.
The amendments also relate to the procedures for BGÉ to enter into capital commitments relating to networks, Ministerial powers in regard to directions as regards financial objectives of BGÉ, provision in regard to Annual Accounts, staff and superannuation and appointments to the Board of BGÉ.
I would emphasise that the consenting provisions in Sections 30 to 38 and throughout the Bill ensure that the current role of each Minister on the corporate governance and policy framework will be fully taken into account while also ensuring that legal obligations under the Directive are met.
Sections 39 and 40 relate to the transfer to the majority-shareholding Minister of certain capital stock issued to BGÉ and to the functions of the majority-shareholding Minister in relation to the network company.
Sections 41 and 42 provide for technical amendments to relevant Acts to ensure that BGÉ may not engage in any business activity relating to energy supply or generation, which would contravene the Full Ownership Unbundling requirements.
Section 43 is a technical amendment. Section 44 amends Section 16 of the Water Services Act 2013 to disapply, as regards Irish Water a BGÉ subsidiary, the obligations of this Bill which require the Board to obtain the approval of the majority-shareholding Minister in regard to all capital commitments.
The Minister for Environment, Community and Local Government will remain the key consenting Minister in respect of Irish Water matters.
As I’ve mentioned, the Schedules provide for the detailed operation of the two transfer plans under this Bill.
I would ask the House to note that I intend to bring a number of amendments at Committee Stage, primarily to clarify certain matters, to facilitate the sale of the Bord Gáis Energy assets and business and to ensure maximum returns to the Exchequer from this sale.
I have earlier set out the Government’s overriding objectives as regards Irish energy policy as being security of supply, competitiveness and sustainability. These objectives align well with the proposals in the Bill to create a strong State-owned Networks Company within the BGÉ group.
I look forward to early consideration of the Bill at
Committee Stage. I would ask the members of the Select Committee to table their proposed amendments as quickly as possible to allow full and fair consideration to be given to them. I will of course carefully consider all amendments tabled by Deputies.
I look forward to working constructively with Deputies and to an informed and meaningful debate. The input from Deputies from all sides of the House will help in advancing the measures proposed in the Bill.
In conclusion, I believe this Bill delivers on the Government Decision of February 2012 to sell the Bord Gáis Energy Business, while retaining the strategic gas network in State ownership. It is also an important measure in delivering on the commitment in the Programme for Government to fund investments for jobs and growth.
I commend the Gas Regulation Bill 2013 to the House.