1. Presentation to Oireachtas Committee on Communications, Marine and Natural Resources by Harry McCracken Group MD Viridian Power & Energy David de Casseres MD Power Generation 22 September 2004

3. Goals for the New Market in Ireland  Security of supply  Competitive prices  Benefits all customers  Environmentally sustainable  Encourages all-island market integration Any new market arrangement should be tested for how well it delivers against these goals.

4. What Has Been Achieved So Far?  3 new high-efficiency power plants  Competitive market introduced for all non-domestic customers  Wholesale market change under discussion  All-island market agenda much more prominent

5. Why an All-Island Market? An all-island market encourages:  Competition  Economies of scale  Sharing of strategic costs; and  Greater security

6. What is Driving Tariff Increases 1.International fuel price escalation 2.Network capital investment programmes 3.Emissions costs 4.The Single Market Directive

7. How Can Prices be the Lowest Possible?  Higher generating plant efficiency and availability  Competition on cost of new generating plant  Competition in operating existing plants  Competition between suppliers (retailers)  Tight regulation of the costs of network infrastructure

8. Competition Experience  Prices are lower in competitive markets  11 million electricity customers (out of 26m) have changed supplier in GB  8 million gas customers (out of 20m) have changed supplier in GB In the Republic of Ireland some 40,000 customers have changed supplier

9. Dealing with Barriers to Competition  New investors need to see a level playing field.  New investors will also be reluctant to enter the market if there is a dominant player  Curtailing dominant behaviour via regulation is a poor substitute  In our view the competitive market can work only in a limited manner as long as the vast majority of the generating plant is owned and operated by a single player.

10. Improved Infrastructure  Transfer capability on the existing North/South interconnector is restricted, especially for transfers fromSouth to North  A second interconnector has been studied and costed  The benefits to the island as a whole from the existing interconnector from NI to Scotland, and the proposed interconnector between RoI and Wales, will not be fully realised without further North/South investment.

11. Next Steps in Meeting the Goals  A simple wholesale market for trading electricity which spans the entire island  Increased interconnection which can provide competitive pressure from neighboring markets  Removal of any barriers to effective competition

12. Conclusions 1. Keep the all-island market design simple and low cost 2. Deal with barriers to effective competition 3. Invest in infrastructure

13. All-island Long Term Objective “ By the end of the decade we should expect to see an an all-island competitive electricity market where legacy costs have largely disappeared, where the generating plant mix is much more efficient and environmentally sustainable, and where customers are able to exercise real choice in their selection of supplier.”