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Speech by Minister Denis Naughten TD at The OECD Review of CRU Launch Driving Performance at Ireland’s Commission for the Regulation of Utilities

The O'Callaghan Mont Clare Hotel,

Wednesday, 21st February 2018

 

Introduction

Good morning ladies and gentlemen.

 

Thank you for inviting me here today. Some of you may recall that I spoke at the event when the review process was started back in December 2016. So I would first like to congratulate the OECD, CRU and all stakeholders for bringing this ambitious, and in-depth, review to its fruitful and speedy conclusion.

 

Before speaking directly to the review, I would mention two contemporary developments that have enormous bearing on our energy sector and its regulation.

 

BREXIT

Last Tuesday the Government published an independent study, which Copenhagen Economics were commissioned to undertake, examining the impact of Brexit on Ireland's trade and economy, and in parallel with this event here today, we are hosting a major conference in Croke Park  at which Copenhagen Economics is presenting the detail of its findings.

 

The study examines the implications and quantifies the impact of possible new barriers to trade which might emerge as a result of Brexit, which is hugely important for the energy sector. While the economic implications of Brexit are immense, the Government is already taking steps to ensure that the impact of Brexit is minimised. The study is there to guide us and help us to prevent the worst from happening.

 

The information will help to inform our negotiating position, together with our ongoing domestic response to Brexit, which has been evolving since the UK vote and will continue to evolve in the times ahead. Specifically in the case of energy, I have met a number of times with my UK counterparts, my Department has published its analysis and priorities in relation to the energy sector and I have held open discussions with communities and business interests.

 

Project Ireland 2040

On Friday last the Government launched   Project Ireland 2040, setting a very ambitious programme for climate action. In the case of Climate and Energy, expenditure of €21.8bn is envisaged over the period to 2027. €14.2bn of this will be commercial and private sector investments overseen by the Commission for the Regulation of Utilities, including:

 

  • reconfiguration of power generation away from coal and peat,
  • enhanced interconnection of our electricity system underpinning secure supply, competitive electricity prices, and the facilitation of increased intermittent renewable generation,
  • up to 4,500MW of additional renewable electricity coming on to the grid, and
  • smart meters installed by 2024.

 

There will also be ongoing investment in gas infrastructure and reinforcement of the power grid. It is clear from this that the energy sector will have a central role in realising the Government's long-term vision for a low-carbon and climate-resilient society, consistent with secure energy supplies and competitive prices.

 

OECD Review

Returning to today's event, which presents me with an appropriate opportunity to set out progress on the Energy White Paper regulatory actions. Before I do that, I wish to make two important points, first about consultation in climate change policy, and second about the wider role of regulation in energy policy. 

 

 At the COP23 Climate Change Conference in Bonn, last November, I spoke about Ireland's ambition to continue to take meaningful action on climate change. As the Minister for Climate Action, I am determined to show that Ireland can make material progress in addressing climate change, while supporting Ireland's economy. 

 

However, climate policy must be developed through consultation and engagement. We need citizens, and business leaders, including all of you here today, to actively participate in the development of climate policy in Ireland.

 

I would hope that your own interest is wider than just regulatory reform. I therefore ask, that on leaving here today, you all reflect on the wider questions around climate change and what you can contribute to climate policy.

 

The second point is about the role of regulation in energy policy. We must always critically question ourselves about the purpose of regulation, and how it serves our citizens and consumers. The Green and White Papers stated that a high standard of regulation helps to bring about the delivery of our energy policy objectives, including climate action and sustainability.

 

Stable certain regulation helps foster a climate for investment and keep the cost of capital for investors as low as possible. 

 

We made that essential connection between stability, cost of funds and the beneficial impact on consumer prices in the Green Paper. Ongoing stable regulation is good for industry, but also delivers tangible cost benefits for the energy consumer.

 

OECD Review – Next Steps

Turning to the review, I would like to welcome Nick Malyshev, from the OECD, and his colleagues Anna Pietikainen and Shelly Hsieh.

I strongly commend CRU's openness in initiating this important and robust review by an external body. I very much appreciate that an organisation of the international calibre of the OECD has carried out this review.

I very much welcome the Review's findings, which found that the CRU is acknowledged across government, parliament and industry as a technically capable and professional regulator. This is a reputation it enjoys both at domestic and EU level and with me as Minister.

 

I also note that the OECD assures us that CRU oversees fully competitive electricity and gas markets in Ireland as well as the all-island single electricity market.

 

The Review draws upon recent improvements, made by the OECD, to best practice standards for regulatory governance. I especially welcome the OECD's focus on leadership, strategic planning and openness in the regulatory process.

 

I am confident that the implementation of the review's findings will allow CRU to continue to operate at the cutting edge of regulatory practice in the regulation of electricity and gas markets.

 

I note that CRU will be developing its next Strategic Plan by continuing to provide a risk based approach to enforcement.  This will protect consumers better and serve the market generally. I particularly welcome, given the importance I personally attach to engagement with the public that CRU will accompany this with a comprehensive communications strategy.   The recent CRU initiative to include public/consumer impact statements in publications is a positive step in this regard.

 

I commend the OECD recommendation which proposes more structured participation with the Committee, as it proposes a practical basis for even more effective engagement with CRU on regulatory accountability.

 

Such public discussion at the Committee will build on, and deepen, existing accountability mechanisms and provide more transparency in the regulatory process. 

 

Ultimately this will improve public knowledge and understanding of what CRU does, particularly, I would hope, its work on consumer protection.

 

I am aware that the Committee has met CRU in the last year and would encourage Oireachtas colleagues to grasp this opportunity to further develop their valuable accountability role.

 

Last, but not least, the OECD review will feed into, and inform, the commitment in the 2015 White Paper for an overall review of the legislative framework for the regulation of electricity and natural gas markets. But first, I would like to turn to progress made on regulatory legislation since I last spoke to you at the regulatory seminar in 2016.

Consolidation of the Electricity Regulation Act

Reference to my Oireachtas colleagues a moment ago reminds me of the useful contributions of various Deputies and Senators during the passage of the Energy Act 2016.  

I know they were fully committed to carrying out their legislative scrutiny and drafting roles. However, navigating the legislation was excessively challenging and time consuming for them. The corpus of legislation has expanded significantly over the last 17 years. It is not user friendly for Oireachtas members, consumers or any other interested parties.  

In response to members showing me how the legislation made their jobs unnecessarily difficult, I initiated a programme of work to consolidate the Electricity Regulation Act 1999 and its amending legislation. This work was led by the Law Reform Commission with Departmental Officials closely involved. 

I am pleased to announce that the work was successfully completed last November and the Consolidated Act is now available on the Department's website. 

I am also pleased to announce that most of the Energy Act 2016 was commenced last year and is being implemented by CRU.

We arrived at this stage with a challenging programme of work in energy regulation. While I believe we can be very proud of where we have taken the programme, in order to deliver on the White Paper commitment, further review is necessary to identify the options for legislative re-structuring. This process will necessarily take a number of years.

In addition, there are other developments arising in parallel which will have a bearing on the process. This includes the need for transposition, in due course, of the EU's sizeable Clean Energy Package. The recommendations arising from the forthcoming IEA Country Review of Ireland could also be relevant. Transposition, in particular, will involve much change to the legislation the White Paper committed to reviewing.
 
Therefore, to progress the White Paper commitment, while also meeting the EU's requirements, the Department will engage in dialogue with industry and other interested parties. This phase of the multi year review will seek to consider further the optimal approach to, and timelines for, the process.  It will also look at options for the structure of any new legislative framework. 

We all should be contributors, deciders, implementers and change makers, not passive observers. So, again, I encourage you all to participate in the next phase of the process.

3.       Conclusion

In conclusion, I would again like to thank Nick Malyshev and his colleagues for coming here today and the OECD generally for having committed its considerable expertise to the review. 

I would also like to thank CRU for inviting me here today.

I very much welcome the findings of the OECD review. I look forward to their implementation and working on how best to act on the recommendations within my areas of responsibility.

Finally, I would like to thank you all for joining us in what is a milestone event, launching the first OECD peer review of an Irish regulator. Let us pay it the ultimate compliment of seeing how we can best implement it in the interests of consumers. 

Thank you. 

ENDS.

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