Subvention for large energy users introduced after 2008 crash was renewed every year despite charging error - committee hears

The controversial rebalancing subvention for 1,000 large energy users (LEUs) including multinational corporations introduced after the 2008 financial crash was renewed every year for 12 years after cursory reviews, the all-party Environment and Climate Action Committee was told.

Representatives of Commission for Regulation of Utilities (CRU) and ESB Networks outlined on Tuesday how during the second year of its operation, an adjustment was made to a financial model operated by the electricity distributor, which meant LEUs got a percentage share instead of a fixed amount. The subvention was designed to ease high electricity prices for big employers but penalised domestic consumers.

The subvention agreed by government, put in place by CRU and applied by ESB Networks was meant to be limited to €50 million but ended up costing €101 million as “more than the amount approved in the CRU decision was passed to LEU customers” and to €300 in total extra charges was applied to 2 million domestic users.

After hearing details of how the error was made, Deputy Paul Murphy of People Before Profit-Solidarity said the subvention was supposed to be a “shock doctoring” measure but was made permanent with expectation it would continue indefinitely.

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Minister of State at the Department of Environment, Climate and Communications Ossian Smyth defended the government decision but criticised lack of effective reviews of its operation.

“[It] was made at a time when the then global financial crisis and domestic banking crisis were both starting to take effect and competitiveness of large Irish firms, together with the employment implications, were a serious policy issue. It was made to help safeguard jobs in some of Ireland’s most-critical and export-orientated industries, at a time when unemployment was rising at a fast rate.”

LEUs then were mainly in the pharmaceutical and tech sectors, he said. “While today when people hear large energy user they may automatically jump to data centres, this was not the case back in 2009 ... These companies represented jobs in our communities at a time when they were few and far between.”

“While the Government decision outlined that €50 million was to be rebalanced in favour of LEUs, it was for the regulator to determine how this would be implemented,” Mr Smyth said. This was “a request” to the CRU, an independent body, and not an instruction.

ESB Networks managing director Nicholas Tarrant said tariffs are submitted to CRU each year for approval, but there was an error in the calculation process relating to the subvention made by ESB Networks, for which he apologised.

Senator Lynn Boylan (SF) believed the CRU and the Department should also apologise. She questioned why the subvention was not audited regularly. “Why was it continued after the financial crisis had ended?”

CRU commissioner Aoife MacEvilly said it was not stepping away from its responsibilities and had taken a decision every year to continue it. “The government took a policy decision, and we implemented it,” she added.

CRU chairman Jim Gannon said the regulator had asked ESB Networks to review its governance on tariffs while CRU’s internal annual review mechanism has been enhanced. Before the recent energy crisis it had signalled it would review the LEU arrangements. “In preparation for this review, ESB Networks became aware, and notified the CRU, of an error in implementing the rebalancing arrangements.”

He confirmed domestic and small business users would be refunded “immediately and in full” and increased charges for LEUs over three years would add up to a 25 per cent increase in their distribution charges.

Fine Gael TD Richard Bruton said the tariff adjustment was “a bit strange” when it was clear a fixed amount was involved, but the subvention was understandable, given 200,000 people were unemployed.

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