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Energy regulator’s tariff plan ‘most irregular’

A lawyer at leading law firm Arthur Cox has described a proposal to make large users of energy pay more in order to ensure an adequate supply of power this winter as “most irregular”.

The State’s regulator, the Commission for the Regulation of Utilities (CRU), last week published proposals on changes to electricity tariffs for the year beginning 1 October.

The proposals include four new tariffs, three of which will apply to extra-large energy users (XLEUs).

The regulator, in its paper, described the risk to the security of supply of electricity over the coming years as “significant”.

It attributed this to the closure of large electricity-generation units, the failure of contracted generation capacity to deliver, an accelerated degradation of the existing fleet as it responds to intermittent wind generation, and significant demand growth across some sectors of the economy.

Emergency measures

Under the Electricity and Turf (Amendment) Act 2022, network operator EirGrid can, using State funds, acquire electricity-generation facilities to ensure security of supply.

The new tariffs raise €100 million of the €478 million that the regulator estimates will be needed to cover the costs of these emergency measures.

They include tariffs on XLEUs who significantly increase their demand compared with the previous 12 months, a ‘decarbonisation tariff’ on those who consume electricity during periods of low wind, and a tariff on XLEUs who consume electricity during system alerts.

In addition, a ‘peak’ tariff on consumption from 5pm to 7pm each day would apply to all electricity customers.

In a note on the firm’s website, Arthur Cox's Katrina Donnelly states that, while the policy intention of the CRU in placing the bulk of these charges on large energy users is clear, “the proposal to do so through use of system charges is questionable”.

Short time-frame

The Arthur Cox lawyer points out that the use of system charges is approved by the CRU, and levied under sections 35 and 36 of the Electricity Regulation Act 1999.

“They reflect the reasonably incurred costs related to the transmission and distribution systems, together with a reasonable rate of return on the capital represented by such costs.

“However, it is clear from the consultation paper that the costs proposed to be recovered are not related to the transmission and distribution systems, but rather to securing electricity supply by provision of emergency generation,” Donnelly says.

She adds that, under the 1999 act, costs associated with securing electricity supply may be recovered under section 39 (Public Service Obligations), and not sections 35 and 36.

“It is, therefore, not clear whether it is within the power of the CRU to seek to recover these costs through use of system charges,” the lawyer states.

She stresses that, under EU rules, market participants have a right to obtain access to the transmission and distribution networks on “objective, transparent and non-discriminatory terms”.

The CRU is asking for submissions on the proposals by 1 September, which the Arthur Cox lawyer describes as “an unusually short time-frame”.