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4 January 2007 Edition

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Energy supply: Strange things happening in electricity industry

BRENDAN OGLE

BRENDAN OGLE

Vested interests seek break-up of ESB

 

BY BRENDAN OGLE

 

Price increases that dwarf inflation are being described as good news on the nebulous basis that they could have been worse. Viridian who supply electricity in the North, and some in the South, have been bought by an investment bank from Bahrain and ESB, who have supplied reliable and (until recently) keenly priced electricity in the South for 70 years is hoping to give away power stations, land banks and market share to competitors!

Once upon a time consumers in the Republic of Ireland enjoyed electricity prices that were among the lowest in the EU. There was security of supply and a growing market. The ESB, 95% state and 5% employee owned, performed a key strategic function in ensuring and underpinning our electricity needs and did so superbly. This semi-state was, and is, no ‘basket case’ company like CIE or the former Aer Lingus. No rescue package or massive taxpayer handouts are needed to keep this company healthy and secure. In fact ESB has been making record profits and returning large dividends to its owners, including the Irish taxpayer, who receives 33% of ESB profits, circa €100m, this year. This is good. This is as it should be.

And what does a successful profitable company do in a growing market? Well it invests and grows, right? Wrong!  ESB management has agreed with the Electricity Regulator (CER) to close or divest 1,300 MW of existing power by 2010. That’s 1/3 or their market share or three to four large power stations. They will give the sites of former ESB power stations nationwide to competitors with easy access to the national grid and easy profits. That’s another 1,300 MW of profit-making power for Viridian and other ESB competitors.

Neither is this madness an isolated madness. No, since the initiation of an imposed regulated market and the creation of the CER it has ever been thus. It’s ideology you see. You read much criticism of ‘ideology’ in the media. Usually the media decry any effort to increase, or even maintain, enterprises in state ownership as ‘ideological’. Or workers in health, education, transport or energy are routinely lambasted as ‘ideologues’ if they stand up for themselves and threaten or engage in industrial action. But ideology comes in all shapes and sizes and what is occurring in our energy sector is ideologically driven madness that is damaging consumers, threatening electricity supplies into the future, and undermining the health of a key state owned company against the national interest. All in the name of the sacred cow of our time – competition.

The pursuit of competition in the energy sector is what is driving electricity prices up to unsustainable levels and forcing agreements such as this most recent one between ESB and CER. The ideologues in the Progressive Democrats and their fellow travellers on the right of Fianna Fáil (and yes Pat Rabbitte and Fine Gael too if they ever get a chance) want their friends in big business to get a leg up the competition ladder at the expense of ESB and consumers.

We currently have an open market in electricity generation in the North and South and in 2007 we will have an open All Ireland market. If Viridian wish to build power stations they can as can anybody else who wishes to enter the market on an equal playing field. But that is not enough for some generators. They don’t want an equal playing field where they can compete with ESB. They want free access to sites and grid access. They want the CER to increase electricity prices so their profit levels grow. They want ESB to give them ESB market share. They want the strongest player to leave the pitch. In effect, they want subvention. And ESB and CER are in the business of giving it to them. And the craziest bit of it all is that ESB are blamed. The media talk not about ‘electricity’ prices but about ‘ESB’ prices and the company that has served Irish consumers so well for 70 years, that brought rural electrification to the country, that invests in skilled staff, that had those staff out in storms last weekend and every weekend there are storms keeping the lights on, is lazily described in the national media as a ‘monolith’. You could be forgiven for thinking that there is no competition at all. So much so in fact that the CER boasts that ESB’s market share will be 40% by 2010.

The modern world demands competition. It is deemed necessary in the public interest. But in this case competition has been supplanted by regulation. That regulation damages consumers in their pockets – just look at your electricity bill the next time you get it. And it disadvantages the ESB. Eight of the twelve board members of ESB are government appointed. Little wonder then that government policy in relation to disadvantaging the company finds willing ears on the board. And agreements such as the recent one between CER and ESB find little criticism in a media busy duping the public in the interests of competitors whilst their pockets are being picked for an ideological experiment that may well have disastrous consequences. 

Even this skewing of the market is not enough for some. There are those who want ESB broken up – like Aer Lingus – and atomised. They spend millions of the profits they derive from hard-pressed Irish consumers lobbying for such advantage, whispering into the open ears of their friends in government. And they might get it – although they shouldn’t be surprised if the ATGWU have something to say about it first.

In the meantime Irish consumers need not worry. After all, if it all goes wrong and the company that has supplied electricity to Ireland’s consumers for generations founders, you, the citizenry of Ireland can rest assured that investment bankers in Bahrain have your best interests at heart!

 

• Brendan Ogle is a Regional Industrial Organiser for the Amalgamated Transport & General Workers’ Union.

 

 

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