ESB ASKED TO EXPLAIN ITS ACTIONS OVER SUPPLY DEAL
Board was f ined €4m for breaking contract it won in low offer, then tripled re-auction price
THE ESB tripled its prices after initially entering a bargainbasement bid to obtain a multimillion power-supply contract that it later reneged on, it has been claimed.
The country’s leading electricity supplier won the contract with a much lower bid for the deal than rival suppliers which – unlike the ESB – had already secured planning permission to build the new power plants to provide extra electricity.
These revelations come as energy firms are continuing to hike up their prices and the country faces the grim prospect of possible power blackouts this winter.
On foot of the claims, Fianna Fáil’s Senator Timmy Dooley is to demand that the ESB appear before the Oireachtas Joint Committee on Environment and Climate Action to explain how it was able to win a contract by under-bidding rivals with a price which it openly admitted to the regulator was not, in fact, realistic.
The Co. Clare based politician explained: ‘Because of information that has been made available to me I expect the ESB will want to explain their situation before the Joint Oireachtas on Climate Change and the Environment.
‘From figures provided to me, it seems that while the ESB had to pay a penalty for non-delivery, at the end of the day, they did substantially better commercially by not delivering on these contracts, paying a €4m penalty, forcing the regulator to hold auctions in 2021 whereby they were successful at a much higher price.
‘The penalty of €4m imposed for non-delivery of their original obligations seems to pale in significance to the scale of the price achieved by ESB in subsequent auctions.
‘So one has to wonder if there was a strategic reason for the ESB to bid so low in
the early auctions at a time when it seems they were not ready to deliver on capacity,’ he added.
The background to the controversy dates back to 2018, when Eirgrid – the State agency for ensuring there is enough electricity – held auctions so that rival firms could bid to provide energy starting from October 2022.
The ESB then put in a bid price of €46,150 per megawatt of power, even though it previously told those involved in organising the auctions that €138,450 per megawatt price ‘would be too tight’ for a new entrant to deliver.
Nevertheless, the ESB’s €46,150 bid rate was accepted and they emerged with a ten-year contract worth €188m, to provide 408MW of energy a year.
In order to be in a position to meet this contract the ESB then proposed building three new plants and also installing new equipment in two separate locations at its existing North Wall plant.
However, one of the conditions of the contract that was awarded to the ESB was that the company should have planning permission for its new power plants secured by November 2020.
However, the ESB failed to meet this deadline and looked for a six month extension. This was granted but the ESB then failed to meet this second deadline and a request for yet another extension was denied.
Meanwhile, the company that was due to supply the new equipment for the ESB’s two new remodelled plants at North Wall in Dublin, could not guarantee their machinery would meet EU emissions standards stipulated in the contract, for which the ESB and all firms had submitted bids.
As a result of their failure to secure planning permission in time, the ESB were fined for reneging on a contract. However, it submitted a bid in the follow-up auctions and this time their price had tripled from €46,150 per megawatt to €146,920.
‘One has to wonder if this was an ESB strategy’
This bid was successful even though it was triple what the company had first bid.
Last night, Senator Dooley said: ‘I have known the reputation of the ESB to be one of high standards and great strength and I am at a loss to understand how they entered into an agreement to deliver something and yet failed to do so.
‘So I can see how some people are rightfully asking the question as to
how or why this happened?’ the Senator asked.
He added: ‘By bidding with such a low price, they effectively blocked others who had put in bids based on a more realistic price and were ready to go.
‘Because the ESB bid was so low in 2018/2019 auctions, others would have been pushed out.
‘But yet the ESB came in at the higher end at the next auctions for
capacity so one would have to wonder if this was a commercial strategy
‘Other projects were ready but did not win’
to disadvantage competitors who were further ahead in their planning process.
‘Companies were allowed to put in bids in 2018/2019 even though they did not have planning permission or connections to the grid. If they were obliged to have planning permission and connections to the grid, we would not be in the situation we are in because it has been asserted to me that there were projects ready to go back then which would have provided up to 800 MW of capacity.
These projects were shovelready but they did not win the tender,’ Senator Dooley added.
In response to MoS queries, a Commission for Regulation of Utilities (CRU) spokesman confirmed it had previously received ‘a number of complaints in relation to a market participant’, adding: ‘The Regulatory Authorities are investigating these complaints. While this process is
ongoing, in the interests of preserving the integrity of the process and the confidentiality of the complainants and the market participant, the CRU is unable to comment further at this point in time. If breaches of market or competition rules are established, appropriate actions will be taken as set out in the licence terms and conditions for generators.’