ECONOMIC DEVELOPMENT FORUM

 

Meeting of the Infrastructure Sub-Group

held at 10.30pm on Thursday 10th May 2007

in Clarence Court

 

Present:

Jim McCusker (Chairman)

 

Mike Brennan

 

Bryan Gregory

 

Peter McNaney

 

Doreen Brown

 

 

Apologies:

Janice Treacy
  John Gilliland
   
In attendance: Iain Osborne

 

Des Armstrong

 

1.0       Apologies

 

1.1               Apologies were received from John Gilliland and Janice Treacy.

 

2.0              Minutes of previous meeting

 

2.1               The minutes of the previous meeting were agreed.

 

3.0       Matters Arising

 

3.1               It was agreed that John Cole from DHSSPS Estates should be invited to a future meeting.

 

3.2               Members were aware of continuing concerns relating to the Planning system.  There was a need for an independent review of the process to identify scope for improvement.

 

4.0               Utility Regulator/Energy Matters

 

4.1       Iain Osborne, the Chief Executive of Northern Ireland for Utility Regulation, was welcomed to the meeting.  He made a presentation to the Sub-Group on the role of the Utility Regulator, and specific issues relating to Energy.

 

4.2               The role of the Regulator now covered electricity, gas and water, with the latter having been added on 1 April 2007.  The Regulator’s set of duties did not fully match the state of the debate on energy and water issues.

 

4.3               The creation of a single wholesale energy market, with all generators obliged to sell into a pool, across the island of Ireland would create the right context for investment decisions, producing savings from more efficient operation although this would be somewhat limited until a further inter-connector came into operation in 2012 (if not sooner).  The short-term benefits would be comparatively minor but £100m of benefit could be expected over 10 years.

 

4.4               There would be detailed market monitoring, and a series of market plans and control measures.  A joint regulatory structure would give extensive oversight of the whole market.

 

4.5               The lack of unbundling was an issue in the European market, and the case for unbundling was unanswerable.  The Regulator would be aiming to deal with the dominance issue, and to attract new entrants into the network by ensuring fair treatment.

 

4.6               Agreement had been reached on the basis of cost recovery by gas undertakings.  This would help to stabilise charges and give a platform for greater competition and expansion.

 

4.7               Members discussed the tension between energy use and sustainability and the limited market in renewable energy supplies.  Introducing competition was a key task but, because of scale, Northern Ireland could not afford the high level of investment required.  The cost of green fuel was higher in the short-term but could position Northern Ireland well 10-15 years out.  Efforts were being made to establish a level playing field but there were tricky technical and economic issues in making the grid available, eg, to wind farms.  However, the remit of the Regulator did not allow for the promotion of one form of generation over another.

 

4.8               Members discussed the model of NI Energy Holdings.  The Regulator’s view was that mutualisation had advantages but lost the discipline of shareholders could be a disadvantage.  Only time would tell if the governance model was appropriate.

 

4.9               Members considered issues relating to the cost of carbon and the impact for the future.  The first phase of the EU carbon trading scheme had not delivered what had been hoped for.  Caps needed to be set at a level which would provide a strong incentive for reducing the carbon impact.  It was reported that new guidance was expected from DEFRA, with new figures for the cost of carbon.

 

5.0               Construction sector capacity

 

5.1               The further report, updating progress against the action plan designed to address issues relating to private sector capacity, was not yet available from OFMDFM.

 

6.0       Economic appraisal and procurement issues

 

6.1               Des Armstrong spoke about recent developments in relation to public procurement.  Public procurement policy was overseen by the Procurement Board.  The Central Procurement Directorate was responsible for bringing forward best practice and ensuring that it was embedded, with all spend channelled through Centres of Procurement Expertise.

 

6.2               The scale of construction procurement was rising, with PE in ISNI increasing from £670m per annum to £1.2bn in the current year.  Studies had been carried out of private and public sector capacity, and action areas had been identified.

 

6.3               The development of ISNI2, covering social, economic and environmental development, would be identifying 23 investment streams, each linked to an Accounting Officer.  The focus would be on carefully monitored delivery.

 

6.4               The construction industry was of key importance to Northern Ireland, employing 70000 – 75000 workers.  The industry was developing, moving from a fragmented approach to entering partnering arrangements taking on longer term contracts.

 

6.5               All Departments had signed up to the Achieving Excellence in Construction standards, and all contractors were required to have best practice systems in place, thus enabling procurement to affect other issues.

 

6.6               Quality and price were the key determinants in awarding contracts.  A target price was set and contractors could then seek to maximise profits by being innovative.

 

6.7               The construction industry now employed significant numbers of migrant workers.  This could leave ISNI vulnerable, depending on the other areas of demand for this labour in other regions of the UK and in other parts of the world.

 

6.8               An important consideration was how we could better train our Northern Ireland workforce, and use ISNI to facilitate this.  There was a need to link with DEL, eg, for apprenticeship arrangements – something which should be done in consultation with the industry.

 

7.0       Report to EDF

 

7.1       A report would be drafted for the June EDF Plenary.

 

8.0       Date of next meeting

 

8.1       A further meeting would be held before the EDF Plenary in September.