The Covid-19 Crisis and Irish Energy Regulation

 Alexandru Gociu, Trinity College Dublin

 

The Covid-19 crisis and the restrictive measures to contain the spread of the virus has had consequences in the field of energy law in Ireland. Irish authorities enacted very quick, efficient and well-articulated measures in order to mitigate the economic effects of the pandemic and to ensure a fast and smooth recovery. At the same time suppliers worked to provide electricity and natural gas to cover the necessary demand from customers. The energy regulatory bodies in Ireland acknowledged the unprecedented character of the Covid-19 pandemic and the difficulties posed by the remote working. In this brief contribution, a snapshot of the regulatory changes to the Irish electricity and gas sectors will be provided, and the uncertain impact of the new disconnection policy on consumers will be discussed. 

 

Defining essential energy related activities 

Statutory provisions regarding essential services were introduced in S.I. No. 121/2020 - Health Act 1947 (Section 31A -Temporary Restrictions) (Covid-19) Regulations 2020 art 4 a) and b). The statute declared that energy related activities (“electric power generation, transmission and distribution” respectively “extraction and distribution of gas”) are essential thus exempt from the freedom of movement restrictions imposed for the pandemic. Even so, the gas and electricity companies were required to identify those employees “who are essential to the provision of the service and notify them”. 

 

The RESS-1 Qualification Application Closing Date 

The Irish National Energy and Climate Plan include the Renewable Electricity Support Scheme (RESS) which is a financial support scheme targeted at renewable electricity projects. In the pandemic context the RESS-1 Qualification Application Closing Date was extended by almost a month from 2 April 2020 to Thursday 30 April 2020. Furthermore, an updated RESS 1 Auction Timetable was published on 24.04.2020.

 

The Commission for Regulation of Utilities 

The Commission for Regulation of Utilities - An Coimisiún um Rialáil Fóntas (CRU) an independent body overseeing the regulation of Ireland's electricity (Electricity Regulation Act, 1999) and natural gas sectors [Gas (Interim) (Regulation) Act, 2002] enacted in the Covid-19 context the:

 

1. Covid-19 Supply Suspension Due to Temporary Closure – “Decision Paper” in order to respond to challenges posed by the pandemic situation and the underlying restrictions for Small and Medium Enterprises (SME).

 

In Ireland network gas and electricity bills have two components: a fixed one and a variable one. The variable component is linked to the quantity of electricity or gas used by the consumer while the fixed element is due regardless of the gas or electricity used. Obviously the variable element of the bill will pose no problem for the companies affected by the Covid-19 measures but the fixed one could lead to accumulation of debt. The regulation in place before the Covid-19 Supply Suspension Due to Temporary Closure Decision Paper allowed consumers to avoid the fixed element by disconnecting from the supplier. However reconnection would be costly as it implies a reconnection tax. This would lead to accumulation of debts by small and medium businesses.

 

The problem with respect to network charges was addressed in the Decision Paper. For a business to be eligible, there are three conditions the such consumer of gas and electricity services need to fulfill: the consumer should not be an essential service provider, the consumer was in business before the 13th March 2020 and the consumer’s “premises have been closed as a result restrictions and will remain closed” until restrictions are lifted. There is yet another special requirement for electricity consumers namely the customer should be one “of the following categories DG5 or DG6” while for natural gas service the consumer should be a “NDM I&C (Non-Daily Metered Industrial & Commercial) Customer” (Covid-19 Supply Suspension Due to Temporary Closure Decision Paper pp. 11-12). The DG 5 stands for Low Voltage Non-Domestic Non-MD Customers while DG 6 for Low Voltage Non-Domestic MD Customers.

 

After a business’s application is deemed successful two consequences emerge for the restriction period: first, the consumption will be estimated to zero, and second, no energy or fixed network charges will be due. However, as the name indicates, it is only a suspension, and for energy suppliers (ESBN, EirGrid, and GNI) the loss will be recovered on the basis of adjusted tariffs. 

 

This scheme appears to be an overall good solution for targeted businesses as they do not accumulate debt, and it is also advantageous for suppliers too as they will recover their loss from subsequent years’ tariffs “through the established regulatory processes”. However, the fairness of this solution is debatable in relation to the rest of the customers who will effectively cover the losses for the energy companies even if they have not benefited from the scheme. Thus, the regulation, in its present form, by not specifying which classes of consumers will be susceptible to increased tariffs, could create a burden on the majority of customers, who will pay more in the future. It is important to highlight is that as for now it is unknown to what extent the tariffs will be increased; to what extent the increase will burden different categories of customers and for how long the increased tariffs will be maintained. It is submitted that in order to cover the losses for energy companies, a limited and controlled increase in tariffs for the Small and Medium Enterprises (SME) who benefited from the scheme would be a proper solution.

 

The Supply Suspension Due to Temporary Closure was not very popular at the beginning as, according to the CRU, of 07 June 2020, from the total of approximately 199 000 eligible electricity customers approximately only 8 000 and from the total of approximately 27,000 eligible gas customers approximately only 2 000 decided to participate in the scheme. As a consequence, the CRU stimulated participation by requesting supply companies to actively “engage” with eligible customers in order to increase the number to participants in the scheme. The Supply Suspension Due to Temporary Closure ended on 31 July 2020.

 

2. COVID-19: Technical Questions and Answers for the Energy Markets Queries List Number 1published by CRU on 07 April 2020 was a collection of questions and the solutions offered and in order to inform the industry stakeholders on the technical challenges related to Ireland’s electricity and gas markets during the pandemic.

 

3. COVID-19: Technical Questions and Answers for the Energy Markets Queries List Number 2 was published in less than a month (on 01.05.2020) by CRU as after the publication of the first list more issues arose. The two Technical Questions papers are very informative and prone to answer as much as possible without focusing on specific entities. 

 

4. Regarding domestic customers the CRU increased the emergency credit for gas prepayment meters from €10 to €100. The target group was the category of consumers using prepayment (PAYG) meters who were not able, given the pandemic restrictions, to purchase credit at an outlet. The extra amount of money is expected to be paid back later. Electricity Pay-As-You-Go customers with small amount of money on their accounts were offered a €10 emergency credit. This amount will be paid back by being deducted from the next top up. Furthermore the CRU established a moratorium on 16 March 2020 regarding disconnections of domestic customers for not paying their bills. The moratorium was prolonged until 29 June 2020 but the CRU promised action to protect customers if the situation will impose such measures. 

 

 

The Irish solutions in the EU context

The challenges posed by the Covid-19 pandemic and the restrictions enacted for containing it generated an efficient response by the Irish regulators, especially analyzed in the light of recommendation paper Impact of Covid 19 on Customers and Society - Recommendations from the European Power Sector published by Eurelectric which represents the interests of the electricity industry in Europe. The paper emphasizes three important principles which were applied in Ireland: the collaboration between the industry and the governments, the postponement of payments for customers affected by the pandemic and the application of no disconnection policy. At the same time, Eurogas, which is an association “representing the European gas wholesale, retail and distribution sectors towards the EU institutions”, stressed also the importance of protecting vulnerable customers and published on its Knowledge Centre a list with all the EU countries and the measures they take in order to mitigate the Covid-19 crisis. 

 

Nonetheless, the Covid-19 related measures were articulated at a short notice as the pandemic was an expected circumstance, impossible to predict. In the following months the economic evolution will show to what extent the Irish approach in the field of energy related emergency measures was a success story or a lesson for the future.

 

Alexandru Gociu is a PhD candidate in the School of Law, Trinity College Dublin.

 

Suggested citation: Alexandru Gociu, ‘The Covid-19 Crisis and Irish Energy Regulation’ COVID-19 Law and Human Rights Observatory Blog (4 November 2020) https://tcdlaw.blogspot.com/2020/11/the-covid-19-crisis-and-irish-energy.html