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Electricity (Single Wholesale Market) (Northern Ireland) Order 2007

I am most grateful for the contributions to this debate and have taken to heart what the noble Lord, Lord Trimble said. When I read the Merits Committee report and I looked at the notes on my speech, I thought that I understood the term ““Ireland””. There are some words I have not used in the past 18 months. In fact, today is the first time I have ever uttered the term ““British Isles””; it was in my notes, it was in my speech and I referred particularly to France, which is a much wider issue. Some terminology is sensitive and modified; the noble Lord, Lord Trimble, is quite right about the modification and that people have not always caught up with it. However, in describing the geography in layman’s terms, I make no bones about referring to an all-Ireland electricity market. It is an easy way to describe what we are talking about. On the island of Ireland there will be one market, with shortages in some areas. It makes common sense and business sense to know that if you turn on the switch, the lights come on wherever you may live—whether it is a rural or urban area, north or south. It is a complex issue although the principle is easily understood and, I hope, quite straightforward. The noble Baroness, Lady Harris, asked about distortions in the tax. The difference in tax and revenue regimes may impact on the type and magnitude of the generation between Northern Ireland and Ireland. We believe that there will be minimal distortion in wholesale prices and therefore to consumers. As I emphasised when I started, it is difficult to explain the concept, but this is about the wholesale market for electricity on the island of Ireland. There is a slight difference in the retail market. Both economies have grown in the past decade—if I refer to the north and south, then we know what we are talking about. Energy consumption is rising. I understand that 10 years ago, no electricity flowed across the border. The network interconnection allows a more efficient use of power generation, and I understand that today, some 10 per cent of Ireland’s energy consumption is imported through Northern Ireland from Scotland, as the noble Lord observed. The second north-south main electricity interconnector is due to be completed no later than 2012, and that will double the transmission capacity, increase trading opportunities and improve stability of supply. The trading with Great Britain will continue across the Moyle interconnector. The Republic of Ireland’s planned east-west interconnector will further enhance the security of supply and competition as well as a future integration of the Republic of Ireland into a wider British Isles market. It makes sense for everybody. Electricity price is a contentious issue, as more than one colleague mentioned. I understand that. The legacy costs associated with the long-term generation contracts put in place at privatisation are the main reason why Northern Ireland electricity prices have generally been higher than those in Great Britain. In fact, even following the recent round of tariff increases, domestic tariffs in Northern Ireland are lower than in the Republic. I will come to some figures and percentages in a moment. The noble Baroness asked about the impact on the renewables obligation legislation. The department in Northern Ireland is committed to ensuring the continued and effective operation of the Northern Ireland renewables obligation within the new single electricity market arrangements. The introduction of the single market does have implications for both jurisdictions, including the possible impact on the renewables obligation. It is a complex area and the subject of ongoing work between the authorities in both jurisdictions. The differential in certain costs will lead to some retail differences. This goes back to the point I was making: this is a wholesale issue and there are cost differentials between the north and the south which will lead to retail price differences. What I can say is that citizens and taxpayers living in Northern Ireland will not be subsidising the republic. In other words, we believe that both jurisdictions will enjoy mutual benefits from the market, but it will not operate as a subsidy. On the long-term contracts between the generators, the existing contracts will need to be amended to facilitate the introduction of the single electricity market. It is anticipated that the existing commitments under the contracts will be unaffected. The single electricity market will create competitive conditions which would allow the regulator to cancel these contracts after 2010 if that was in the best interests of the consumer. Regarding prices, here I enter a caveat: this is the wholesale electricity market, not the retail one. We believe there should be downward pressure on wholesale costs that ultimately will be passed through to retail prices. On current wholesale price projections, electricity prices on average could rise in 2008 by 0.9 per cent in Northern Ireland and by up to 3 per cent in the Republic of Ireland. There is an advantage to the north in this, but there is a historical reason for it. As I have said, I understand that the condition of the transmission system is quite different in the jurisdictions and much more investment needs to be made in the Republic of Ireland, given what has happened in Northern Ireland over recent years. However, the point to make here is that Northern Ireland consumers will not end up paying for the modernisation of the Irish electricity system. While there are mutual benefits, there has to be fairness as well. The last point responds to the final question put to me by the noble Lord, Lord Glentoran. It shocked me somewhat when he referred to this as being ““political posturing””. Given the fact that I have the background to this in my own notes, this process was started off by the Northern Ireland Assembly. Indeed, I think that the noble Lord, Lord Trimble, can confirm that. So it is hardly political posturing on the part of the Government or anyone else when, as is the case for so many of the changes and reforms taking place in Northern Ireland today, the genesis for them can be traced to the early days of the Assembly. Local politicians who had a grip on the situation were asking, ““How are we going to run the show? What do we need to change in the future? We need reviews, discussions and consultations on many issues””. This is just one of those and it has come to fruition. However, it is by nature incredibly complicated. I hope that I have responded to all of the questions put to me, but if I have not I shall certainly come back in writing. However, we should try to get as much done in Grand Committee as possible. Given that there have been no interruptions, I commend the order. On Question, Motion agreed to.