Green party Minister defers electricity assets transfer

The Minister for Communications, Energy and Natural Resources, Eamon Ryan of the Green Party, has decided to defer the proposed transfer of the assets of the national electricity grid from the state-owned Electricity Supply Board (ESB) to a separate state-owned company, EirGrid. This decision will please the management of ESB and its trade unions, which had been threatening industrial action if the transfer went ahead.

Plans to transfer the assets of the Irish electricity grid from the state-owned Electricity Supply Board (ESB) to a separate state-owned company, EirGrid, have been deferred. The Minister for Communications, Energy and Natural Resources, Eamon Ryan – a member of the Green Party – has referred the issue for an independent analysis, which will form part of an overall review of the energy sector announced in mid March 2008. EirGrid, which is a stand-alone company, currently administers the assets but does not own them. Management and trade unions at ESB have always believed that transferring the assets would be wasteful, could undermine the ESB’s credit rating and could cause concerns regarding the jobs of some 700 or more network technicians.

Industrial action vote

In 2007, a majority of ESB trade unions voted to take industrial action should the company, on the minister’s instructions, move ahead with two key aspects of a March 2007 Government White Paper on sustainable energy (556Kb PDF): the transfer of ownership of the assets of the national grid to EirGrid; and the divestment or closure of four older power plants. The proposed asset transfer, however, was the critical issue for all of the trade unions – and for company management (IE0704069I).

The group of unions warned that any industrial action taken would be against the company, even though management was bound to act on the instructions of its owner, namely the government. The company was thus placed in a difficult position, as its management broadly agreed with the trade union aspiration of maintaining ESB as a ‘vertically integrated unit’ and retaining the transmission assets.

It was important for the trade unions to base any potential protest action on industrial relations grounds rather than on political grounds. They argued that, although the company was obliged to act on what the government asked it to do, such a move by management would be in breach of partnership agreements that had been in place for over a decade.

On the issue of the disposal of the older stations, ESB had already reached agreement with the regulator, the Commission for Energy Regulation (CER). When this is achieved, the result will bring the ESB’s market share below 40%, in accordance with EU regulations. The trade unions are formally opposed to this, but most industry observers believe that the issue can now be resolved as the main trade union concern was the question of ownership of the transmission assets.

Partnership approach

In making his decision, Minister Ryan stated that ‘transmission unbundling involves the resolution of complex technical, financial and operational issues at a time when both ESB and EirGrid are also faced with immediate very significant national challenges across a range of industry and business issues’. For that reason, he said, a review would provide the opportunity to carry out ‘an independent analysis (including costs, benefits and a regulatory impact assessment) of the transmission issue in the context of EU developments and the very recent all island single electricity market’.

Input to this study will be sought from the direct key stakeholders: the management and the trade unions of ESB and of EirGrid, the ESB Employee Share Ownership Plan (ESOP), CER and the Department of Finance. Minister Ryan declared that the partnership model had been ‘a successful vehicle for change and transformation of ESB, and the evolution of competition in generation and supply markets are testament to its success’.

Unite trade union regional officer Brendan Ogle welcomed Minister Ryan’s ‘determination to work in partnership with all interested groups to deliver his programme in the energy sector’.

Commentary

Essentially, the minister has decided to prioritise immediate customer-related issues and focus on progressing green energy priorities, while respecting the industrial relations partnership-based processes that were put in place after a major five-day strike in ESB in 1992. That partnership system was epitomised by two tripartite agreements, known as the Cost and Competitiveness Review (CCR) and the Programme for Competitiveness and Transformation (PACT) (IE0603029I, IE0610039I).

Doubts arose over whether the transfer would have the effect of boosting competition, which has proved to be an elusive goal in the power generation industry since the opening up of competition. Prices have tended to rise to make the market attractive for investors, with the public and industry users waiting for real competition to produce cheaper electricity.

Minister Ryan explained that, while he recognises the difficult challenges in addressing ESB’s market dominance in the generation of electricity, he believes that ‘they can be positively addressed within the company’s partnership model’.

Brian Sheehan, IRN Publishing