Basic Regulation
The ESB was established as a State electricity provider and regulatory body in 1927. IT had powers to licence other operators including in relation to licence generators, distributors and suppliers of electricity.
In 1999 the Commission for Electricity Regulation was established as an independent regulator of the electricity sector. Bord Gais Eireann (“BGE”), the State gas board, was also brought into regulation in 2002 and the Commission for Electricity Regulation became the Commission for Energy Regulation (“CER”) regulating both the electricity and gas sector.
Policy on energy is set by the Department of Communications, Energy and Natural Resources.
EU Liberalisation
The EU directives on liberalisation of the energy markets have been the main driver of reform in relation to energy regulation. The electricity and gas markets are now fully open to competition. EirGrid was established in 2006 independent from the ESB to own the electricity transmission system. It is licensed by the CER.
The ESB has been obliged to form a subsidiary to deal with the electricity distribution system. Responsibility for the energy policy remains with the Department. Developments in 2006 and 2007 allow for cross-border energy electricity and gas markets.
The European Union has established directives to provide for internal common rules for an internal market in electricity and gas.
Initially, the market was deregulated for large customers and they were allowed to purchase energy from independent suppliers. This freedom to choose the supplier has been gradually increased up to 2007 with full liberalisation.
Commission for Energy Regulation
The CER licence and regulates electricity and gas industries. Licences are required for most activities in the energy sector such as generation and supply of licences, retail licences. The CER is independent of the State. Its members are appointed by the minister. It is obliged to comply with certain ministerial directives in relation to certain matters.
The Department may give policy directives to the CER relating to the exercise of certain aspects of its functions. They include criteria for authorisation applications, public service obligations which must be imposed on licence holders, sustainable energy obligations and directions in respect of continuity of supply, sustainability and competitiveness.
The regulator imposes an industry funding which is weighted in accordance with the type of energy and the type and size of the undertaking involved.
Licensing
All licences to generate, distribute and supply electricity are now issued by the CER. Persons previously authorised by ESB were obliged to apply to CER on its establishment. Licences cover the following:
- generate electricity,
- supply electricity to eligible (formerly commercial only) customers,
- supply to final customers generated by the supplier or purchased wholly or partly using sustainable or alternative energy.
The criteria for determination of authorisations are set out in legislation. There are more complicated procedures in respect of larger generators.
The ESB may not build or reconstruct generating stations without a consent CER licence. In considering a licence CER considers the financial, managerial, technical resources and the ability of the generator to comply with the licence terms. Licences may be modified.
Either the holder of the licence may request modification or the CER may undertake the modification with or without consent. Certain procedures applied to the modification of a licence.
ESB power generation is undertaken by a separate company. The ESB still owns and controls most power generating plants. The CER determines the revenue it can earn and assesses the cost that may be passed on in wholesale electricity prices.
Transmission System
EirGrid is licensed as the transmission licensed operator. The distribution system license is to an ESB subsidiary. ESB networks are licensed as the owner of the system. There is an agreement in place governing relationships.
The transmission system is effectively the national grid. It is the high-voltage transmission of electricity throughout Ireland to transformer stations where the voltage is reduced and distributed to distribution networks through to individual customers. A small number of very large commercial customers are connected directly to the transmission system.
EirGrid is the independent State own body licensed by CER to own and operate the transmission grid. Strictly there are separate transmission system operator licences and asset owner licences.
Distribution Network
The distribution network is the lower voltage network delivering electricity to retail and commercial premises. This operates under a separate licence, which has been granted to ESB Networks. This licence requires that it operates separate from other ESB businesses and is operated in a subsidiary. The ESB is obliged to keep the subsidiary separate. The CER licences the subsidiary.
The CER regulates the distribution charges to users of the system. This is done every five years. The distribution system operator is regulated in relation to the amount of revenues it collects. The ESB is obliged to make a code in relation to the operation of its systems which is approved by the regulator.
The ESB is obliged to prepare a proposed system of charges for connection and use of transmission and distribution system. The ESB must enter into an agreement with any licence or authorisation holder or eligible customer. The ESB must offer to enter into an agreement with a licence holder.
The CER has the power to grant permission for construction of direct lines for transmission and distribution of electricity from licence holders to eligible customers where access is refused because of lack of capacity.
Public Services Obligation
Undertakings may be obliged to comply with public service obligations. The minister may order CER to impose PSO on licence holders in general public interest. These may relate to security, regularity price of supplies, environmental protection and use of indigenous energy sources.
The PSO levy is effectively incorporated in the cost of charges to all users. So far only the ESB has been subject to a PSO levy. There have been a number of PSO requirements. For example, in relation to the purchase of peat.
All Ireland Market
The all Ireland energy market was instituted in 2007. The CER may make regulations for the purpose of an all Ireland trading and settlement systems. Licensees may be obliged to trade through this system. Electricity generated by them above thresholds.
There are equivalent functions in Northern Ireland mirrored undertaken by the NIAER. The trading and settlement terms of the single energy market are carried out by a market operator. The market operation is carried out jointly by EirGrid in the Republic of Ireland and SO System Operator for Northern Ireland, a subsidiary of Northern Ireland electricity in Northern Ireland.
Gas Market
The gas market has been similarly deregulated. The CER is the independent regulator of the natural gas sector. There is a single energy market and a customer may change supplier if he wishes.
BGE is obliged to offer a direct connection to the network to customers using more than a certain amount of gas. It allows customers to source their own gas from any supplier and allow them to have it delivered through the BGE network on reasonable terms and conditions.
Licensing
In 2002 legislation broadly equivalent to that in the electricity sector was introduced. The licensing function was transferred to the CER. The CER may direct the pipeline operators to publish arrangments to facilitate connection to private pipelines. The CER has published an approved code of operations by BGE.
BGE as pipeline operator is obliged to offer to deal with certain businesses on terms and conditions set down by the CER, holder of gas licences, holder of petroleum lease licences, operators of gas-fired generation stations, final customers with consumption in excess of certain threshold.
Charges for connection to and transportation of gas to pipelines under the control of the operator is calculated in accordance with directions given by the minister or CER to enable recovery of costs directly referred to the works and reasonable rate of return on capital.
Transmission and Distribution Separation
BGE is obliged to break the link between the transmission and distribution systems. An infrastructure agreement has been put in place between BGE and subsidiary.
CER licences businesses undertaking the supply of gas, the operation of transmission and distribution systems and the storage of gas. A natural gas licence may be issued in respect of the supply to approved customers. BGE holds the gas transmission licence.
BGE owns the transport and distribution system of natural gas. It owns the interconnectors with UK system. BGE is owned by the State. BGE’s function as transmission systems operator was passed to Gas Link Independent System Operator in 2008.
Distribution pipes operate at lower pressure than the transmission network. The distribution system is owned by BGE. Flogas Eireann has certain supply rights.
The charges for connection to and use of the distribution network are designed to ensure that the fair and efficient costs in operating the system are passed on and that there is fair and non-discriminatory access. Charges are reviewed and approved by CER.
Codes
The purchase and sale of gas are operated in accordance with market rules and codes. Gas Link Independent System Operator manages the codes. The codes set out the rights and responsibilities of each party in the transportation of gas through the transmission and distribution system.
BGE assists Gas Link Independent System Operator in relation to the operation of the codes. CER regulates charges for connection to and use of the transmission network. The purpose is that only fair and nondiscriminatory costs of operating system are passed on. Fair and non-discriminatory access is to be allowed.
Retail Market
In order to promote competition in the retail gas area, the CER regulates the retail gas market. It regulates BGE supply tariffs in order to promote and develop competition. It develops market rules. Full competition is now allowed in the gas market. CER regulates BGE prices for the purpose of protecting customers to ensure they are charged only the efficient costs of supplying natural gas.
They are regulated by multi-annual price determinations. The Minister may impose public service obligations on natural gas undertakings. They may include provisions for the security of supply, public safety, regulatory price, environmental protection.
Regulation of Contractors and Safety
The CER has powers to regulate electrical contractors, gas installers if they establish standards for training and designate supervisory bodies to operate in accordance with procedures.
These bodies with CER consent general oversight registered electrical contractors and gas installers. They may inspect managers, review training, revoke and grant membership. Fees charged by the supervisory bodies must be approved by the CER.
The CER also have functions in relation to promotion and regulation of gas safety. Natural gas TSO and PSO providers may appoint a gas emergency officer with powers to enter land and take emergency steps.
Enforcement I
The CER enforces the legislation. Officers may enter premises at reasonable times for the purpose of exercising its functions. It may require members, officers and employees to produce records and documents under their control and to provide information whether oral or written as may be reasonably required. It may inspect and take copies of books, documents and records including electronic information.
The CER is entitled to determine certain disputes if they can’t be resolved otherwise. For example, in entering agreements between ESB and the distribution company disputes on terms may be referred to the CER. The CER deals with disputes regarding access to networks in the gas sector.
Enforcement II
The CER may enforce conditions on licensees by way of direction. It can apply to the High Court to secure compliance. Where the CER believes a licence holder is breaching licence it may issue a notice specifying the breach. The licence holder may make representations within 28 days.
After consideration of the representations or objections, it may give a direction to the licence holder to take the measures necessary to cease the contravention and prevent future contraventions. It may make a determination that the licence holder has committed a breach of a requirement. The CER may seek High Court Order to compel compliance.
Regulated bodies may be liable for offences if they breach certain requirements. A director, manager, secretary or another officer as well as the company itself may be guilty of an offence. It is an offence to do anything which requires licence without having a licence. Certain CER decisions may be appealed to an appeal panel. This includes an application for a licence or authorisation refusal or a decision to modify a licence.
There are restrictions and limitations on challenging decisions of the CER in Court by way of judicial review. Decisions on applications for licence or modifications of licences or decisions of appeal panels may not be in question in Court other than by way of special judicial review. The judicial review proceedings must be bought within two months. The Application may not be brought unless the High Court is first satisfied that there are substantial grounds.