Richard Boyd Barrett: Privatisation raised Ireland's power bills

Thank you. Thanks and apologies I wasn't here earlier on, but I read through your contributions but I had to speak over on the other side, and also in advance apologies because I'm also running into another committee, but thanks for your contributions and submissions. I just want to take up a point which was just made by Jonny there, and it's one that I would make fairly regularly as well, is about electricity prices in this country. We had the lowest electricity prices when the ESB had a not-for-profit mandate, and it was entirely state controlled, and at the time, I find it grimly amusing to go back and look at Eamon Ryan's comments when they changed that, because he argued that competition was going to benefit the consumer from a price point of view. You can go back and look at the quotes, it's like a small number of us said that wouldn't happen, but that was the rationale that was used to justify the change in the Irish electricity and energy market, to bring in private operators, was competition was going to help the consumer. And what actually happened is the exact opposite, exact opposite, and it happened pretty much straight away, that prices started to go up. So competition has not in any way benefited the consumer. It's done the opposite. And you look at the profits of the energy companies, they're doing nicely, very nicely. So isn't that at least part of the puzzle that needs to be addressed, is that privatisation and a sort of for-profit approach to the provision of energy for householders and so on, has failed. Sorry, if you want to direct your question, you have to direct it to somebody in the audience. Well I can see John Fitzgerald is dying to respond there, so he can... I'm looking forward to my question. I have other questions, I have other questions, but give me, leave me a bit of time. First on competition, there are three elements to the electricity prices, there's generation, and competition was introduced in 2000, and actually there was a substantial fall in the cost of generation, because the staffing levels were reduced. It is a state-owned monopoly that takes the electricity from the generator to your house. So that's the grid. And there is competition and companies going round and saying, will you buy electricity from us? That's only 10% of the cost, and I am not sure that that competition is justified. I was sympathetic to your view in 2000, that introducing competition there wasn't going to benefit the people of Ireland, but that's only 10% of the cost, where maybe it could be slightly lower. But on generation costs, there's competition, and the state-owned monopoly accounts for about 40% of the cost in getting the electricity to you. Actually, there are two monopolies, there's air grid and DSB. So you're saying maybe we shouldn't have competition in the... Competition at the consumer end, I'm not... Like, one of the problems with competition... There you go now, there's a news bite, news flash. One of the problems is, unless you change electricity supplier every year, you pay a much higher price, and I work well off and was not inclined to change. But I discovered, actually, you save a lot of money. The problem is the people who don't change are elderly, who aren't using the internet, and those on low incomes. And in Britain, this was a really big issue. Those were the people who were being ripped off by the supply companies, and there's been a debate on this. Ofgem, the regulator, unfortunately, did not say there should be a regulated price given to people who don't change, which would protect them. I think protection is needed, and I'm not sure that changing electricity every year to keep your price down is a wise way of doing it, especially when people like me can do it, and I am elderly, but elderly like myself on low incomes don't. So I think there are issues there, which you are correct to identify. Could I come in on one other point? Go on, yeah, absolutely. Thanks. I just wanted to say, so I think John's addressing the retail market, but I think we'd agree that the wholesale market is a place for competition, so I think you have to distinguish. So John addresses the grid, which is still a monopoly, then you have the wholesale market where the generators are trading each day for the price, and then that's translated to the retail market. So the retail market, you're saying now maybe not so much competition is good, but I think we all agree that the wholesale market is a place so that generators are trying to bid into the market at the cheapest price possible, because that will be passed through. I think that's where we agree that there should be competition, and there is competition right now. Now, you can argue then about in Ireland, we have the particular situation that 50% is coming from gas, and gas is setting that market price, and so it means that our market is expensive. The other thing is our monopoly part is very expensive. So it's not a solution, so I'm not sure you're showing causality here between the bits that are monopoly, for example the grid, our grid is one of the most expensive in Europe, we've had very high grid charges, and there's no competition there, so it's not the competition that causes price increases. There are particular situations in Ireland where our grid is very expensive. So you're saying ESB are profiteering then? No, not at all. The grid is very expensive in Ireland, because we have a very dispersed island situation, we're trying to reinforce it, we under-invested for years, and this is ESB Networks, which is owned by the state, it's not ESB, the commercial entity, and Air Grid, which is also owned by the state, which owns the transmission network. It's very expensive to run, and we're going to have to invest more in them. But sure, although I would suggest that the removal of the not-for-profit mandate, which ESB had contributed to that, because ESB might be state-owned, it's not just about state ownership, it's about what's the dynamic in the market. Well, ESB Networks and Air Grid have a not-for-profit mandate, so everything that's earned there they have to re-put back into the grid. So there is a not-for-profit mandate. Well then why would all the profits are they making, is it so expensive then? Well there's different parts of the company, so ESB Commercial is allowed to earn profits, ESB Networks puts it back in, and they don't earn any profits. Air Grid and Air... But why is it so expensive then? It's very expensive, well we could do a whole session on our electricity system. There's multiple reasons why it's expensive, as I mentioned, the grid costs are expensive because our grid is very dispersed. We have one-off houses all around the country, we have little wires going to every single one of them, compared to a very concentrated population in Europe, for example. We've also got a lot of our fuel is gas, gas is the most expensive fuel, yes that's what we're using, so that'll bring up the price as well. So there's a lot of reasons, plus we have to invest now into renewables, we have to invest into offshore renewables, and a lot of that renewable is not being used properly. Can I just ask you quickly, in the time that's available to me, offshore renewables, almost all, almost all, of the proposed wind farms are not going to be owned by the state. So there's absolutely no requirement on the companies that are going to develop those farms to do anything to improve the situation for the consumer here, because they're just private companies, commercially driven, and they're not even based in this country, most of them. So is that not folly in terms of developing our renewable resources? And in contrast, would things like the state, for example, because I agree with you, by the way, on your point about going around and asking people if they want their homes insulated and the state just doing it for free would be a huge saving, I absolutely agree that should happen, and we've argued that for some time, but wouldn't an extension of that be everybody should get free solar panels, in precisely the places you're talking about? If the cost of electricity, because of the dispersed nature of households and the rural parts of the country and so on, is adding to the cost, wouldn't a way to address that, as well as things like insulation of homes, be to give everybody the means to generate electricity like on the spot? So I agree with you that solar PV I think is something that we should be investing in. It's not going to help with heating next winter, though, so I think these are bundles of measures that we need to put in place, but I agree with you that we should have solar a lot more houses around the country, and especially because people in Ireland do live in so many houses rather than apartments, we are well suited, we also have driveways for EVs, so I think the long-term vision has to be that you see a rural household with all these things in them. The question is how do we make sure they get there? The other question you had about the offshore... If we're going to do it on scale fast, where it's going to make an impact, doesn't the state have to do it up front, I mean in reality, and then look at how it's going to pay for it? Well, yeah, probably the state will have to do a lot of it, I think, yeah, but there is a benefit to the person who has the house, so you have to think about, you know, is it fair as well? Is there a fairness issue here? You can't give everybody a free whatever, so, you know, and the person who has an insulated house or has a solar PV, their house is worth more, they're the ones who benefit in terms of cheaper heating, so there has to be a balance there. If I could just come back to the offshore wind, most countries in the world that have offshore wind, and we're talking about Northern Europe, Scotland, they've been brilliant, they've developed it much faster than us, they are private companies, they're making profit, the reason we have to develop it is because we have the greatest resource in the world, offshore wind, private will do it faster, look, we're stuck where we are because the state has not developed the infrastructure to allow companies to go and develop offshore, that's the reality of it, the planning regulation, the ports, everything is behind. So I think we have to, we should be, of course the private companies should be going for it, but the state has to really get the act together to get going a bit faster in terms of accelerating what needs to happen, the planning, companies are putting in 2000 page planning applications, they only get an answer one year afterwards and they have to do another whole year of putting in their revised planning application, this is going on years, so that's where, and the reason we need offshore wind is because it will bring our electricity wholesale prices down, they use less wind. I'm for offshore wind, although I'm not for putting it on sandbanks that are environmentally sensitive, I think it's, by and large that's not happening in the rest of Europe, they're pushing them out further, they're not putting them on sandbanks where they're destroying biodiversity in the name of climate action, but I'll just say that, that's maybe a longer debate, but the, what would your view be on free public transport, we would be big proponents of that, we want to get people out of the cars, reduce fossil fuel use, that we need to take bold action on the question of public transport, what would you say, obviously free and frequent, it has to be better public transport, a lot more investment in it generally, but that you also remove the financial obstacles. The green government in Germany tried that in Berlin and in Germany, and the problem was that you had a load of people who didn't need to travel, who were travelling in Russia and you couldn't get on the public transport, and how do you finance it in the end? People didn't switch going to work from a car to public transport because it was free. The main thing which affects people's decision is, is it faster? I would agree with John, I think the first thing you do is improve the service, the location, the quality, and we see that, I can't remember the name of the book, the rural transport system that's come in, the little busses that are going round, you see people, there's great take up of them, there's so many parts of the country where we don't have public transport, I think that's where you invest first. Rural link. Rural link, thank you. I'm from rural. If you don't have any public transport, then it doesn't matter whether it's free or not, the fact that we don't have rail, we don't have light rail in any city but Dublin, there's a lot we can do and I would focus on doing that, and that kind of comes into short term, long term measures. Put your money into the long term ones that will provide benefit and try and get it done a little bit faster. I mean I agree we need to massively ramp up the quality and access to public transport in rural areas and other places, so I agree with that, although I'm also for making it free personally. But last thing, my clock is doing well here, I don't know how I still have a minute left. They're trying to stop me getting on the clock. Yeah, well it still says 59 there, so I'll take the time. One other question is, you know, this debate that there is about targeted and universal and so on, now I'm for both, but do you have a concern, because I do, often when, because I think the general consensus for most is, oh let's go for the targeted, the universal is benefiting the rich. Now, I personally think capture the rich with taxes on their wealth, because to be honest I don't think they're too bothered one way or the other whether they get an electricity credit, the rich, myself, but I think it's easy administratively to give it out that way, that's my feeling, and capture it on taxes on wealth rather than worry about it. But if you just do the targeted ones, you end up means testing things and you end up with cliff edges, right, and one of the things that absolutely infuriates people are they're just over the threshold for eligibility, and they're not rich, right, they're just not eligible for social welfare, they're not eligible for social housing, and they're not eligible for this, that or the other, but they're not rich by any means at all, and they always lose out with targeted, or exclusively targeted, right, have you anything to say on that point? Can we keep it short, because you'll have to get in a good ten minutes to end it all. Thank you, Chair. So who wants to answer that one? Just to mention that policies need to be distinguished between short run and long run, so that's very important, even targeted policies need to be in that dimension. What we are trying to say is that there are households that need the help now, so prioritisation is one issue here, but there are households that also need the help, and you need to decide what kind of combination of policies you need to implement. One of them is through the welfare system, do it immediately, and the other is through demand flexibility, and given we hear also that the demand response is very flat, and it's very flat because people don't have they're not empowered to reduce their own consumption, so you need to talk about technologies to empower these households, so the policy has to be a combination of these short run and long run policies, and in that way you will reach the most vulnerable, but also the ones that are near poor, let's just say, and normally could be excluded from the current benefits that they are there. Thank you. Thank you very much. Do you want to come in? I'll just come in quickly on the cliff edges, that happens extremely often when you're trying to calibrate any policy. You mentioned a couple of them, social housing thresholds, the social welfare supports, etc. What I'd argue is actually, if you have good research that you can look at the type of households you're trying to target, and the measure you're trying to target with, you can try and understand, using kind of distributional research, how many households will fall when you move, say, for example, an income threshold, you'll see how many households are either side of that, so good targeting can be brought on by good research, which gives you the information to be able to pick those thresholds in a more informed manner than you would in other ways. A good example of that is when the central bank first brought in their macroprudential regulations, they had a huge amount of distributional research around where they were going to set the caps and the targets that came from the microdata, so that's a way to try and help understand are there cliff edges and how many people are falling on those levels, and can you shift those levels to try and eliminate that or reduce it. Thank you. Thank you.