North-South pipeline body challenges gas levy plan

Plans to charge a public service levy on the gas network may have no basis in EU law, the group planning a North-South pipeline has claimed.

It is understood lawyers advising Premier Transmission, which is owned by British Gas and US group KeySpan, have suggested the EU Gas Directive underpinning regulation of the market does not authorise the introduction of such a charge on the basis outlined by the consultants to the Department of Public Enterprise.

Figures in the Department are believed to be confident such a levy will comply with the regulations. Legislation to implement such a charge would have to be passed by the EU's transport and energy directorate general.

The charge mooted by the Brattle consulting group, which is advising the Department, will be levied to ensure a uniform tariffing structure on gas networks throughout the State. This means, for example, that gas users in Galway and Dublin would pay the same tariffs. Departmental figures want to finalise details of the charge's structure soon.

Premier plans a bespoke pipeline, built according to users' demand, and claims its customers should not have to pay the levy.

Its spokesman said a report which predicted the cost of the project may exceed £500 million was incorrect. He said the project would cost £120 million sterling initially while an additional £100 million might be needed in years five to 15 of the project, depending on demand.

In critiques of the Brattle report, its lawyers are understood to have claimed the Minister for Public Enterprise, Ms O'Rourke, would exceed her powers under the 1972 European Communities Act by attempting to impose such a charge. Such charges could also be incompatible with the EU Gas Directive, they argued.

One paper said: "The Brattle group's report was prepared in the context of Ireland's obligation to implement the Gas Directive. However, the Gas Directive contains no explicit reference to a public service levy. As a result, I do not believe that, if she chooses to implement the Directive by means of secondary legislation under the European Communities Act, 1972, the Minister for Public Enterprise could impose such a charge on the natural gas operators.

"There must also be doubt as to whether the imposition of such a charge would be compatible with the Directive."

Even if it was accepted that the gas Directive permitted EU states to impose a levy, the lawyers said it was "far from clear" that the obligation proposed by Brattle satisfied the requirements of the Directive.

"The Brattle group, when making its proposal for a public service levy, explains that it is `for the purpose of funding geographic equalisation'. This is not a ground under which the imposition of an obligation is justified in accordance with Article 3 (2) of the Gas Directive."

The Labour Party has accused Premier Transmission of seeking a "discriminatory" price regime which would undermine the Government's regional development objectives.

In a statement, its public enterprise spokesman, Mr Emmet Stagg, said: "Universal pricing is in line with both national and European regional policy objectives. It enshrines the principle of equality in the provision of essential services. The introduction of competition into the gas market in Ireland cannot result in the erosion of this principle."

Premier's spokesman denied it had threatened to take the issue to the European courts, as Mr Stagg suggested.