Employers group Ibec has said a number of its members have questioned whether the energy regulator has the legal authority to impose security of supply costs on electricity users through network tariffs, rather than through a Public Service Obligation (PSO) Levy.
The Commission for the Regulation of Utilities (CRU) recently announced plans to impose a series of new tariffs on certain users in an effort to reduce demand during peak hours over the coming winter period.
The CRU said such steps are necessary in order to reduce the risk of an imbalance between supply and demand in the electricity market over the coming winter, due to rising demand and a possibly shortfall in energy capacity.
In its response to the CRU's consultation paper on the proposals, Ibec flagged the move could prompt legal action.
"If there is any perception of CRU acting ultra vires, it presents a significant risk of Judicial Review proceedings being taken, in turn leading to lengthy delays in implementation of tariff measures needed to fund the required investment," wrote Neil Walker, head of infrastructure, energy and environment at Ibec.
The business group also said other members have questioned whether the timescale for implementation is even possible to deliver without significant risks to them.
"Energy suppliers in particular are concerned that a manual workaround would be necessary, leading to a high risk of billing errors," said Mr Walker.
"There could also be adverse billing and cash flow implications, potentially resulting in acute liquidity problems," he added.
Ibec said it "leans toward the view that" a chronic lack of investment in new generation arising from systemic issues in the design of the capacity market, rather than recent growth in demand from extra-large energy users, is the cause of the challenges.
"For that reason, we are concerned at the absence of a transparent methodology to justify the recovery of more than €70m of EirGrid's expected €478m Security of Supply costs through tariffs applicable exclusively to a cohort of just 22 sites," Mr Walker wrote.
"We also remain unconvinced about the wisdom of seeking to recover the full €478m of additional security-related costs in a single tariff year, given that the assets may well be needed for longer than one year," he added.
Instead it suggests that it would be feasible for EirGrid to smooth the recovery of upfront costs from users over a longer period.
Ibec proposes a withdrawal of the plan to impose so-called "block", system alert and decarbonisation tariffs on extra-large energy users, as it claims they do not constitute a sound basis either for "temporary or enduring funding of emergency generation, or for more enduring arrangements."
"Given questions over the legal basis of the proposed measures, and the absence of any regulatory impact analysis, Ibec recommends that these aspects of the proposals should be withdrawn, and that a more considered consultation should be launched in early 2023," said Mr Walker.
It also points out that measures targeted specifically at dissuading data centres from investing in new equipment that would lead to extra peak demand ignore the likelihood that some of these investments have already been contractually committed.
The body warns that such proposals could also have unintended consequences and that block tariffs would lead to a discriminatory charging system that favours incumbents, something that may prove legally difficult.
It also says it doubts whether a system alert tariff will materially contribute to system security.
While regarding the proposal for a decarbonisation tariff, Ibec says it does not believe it would contribute significantly, if at all, to greenhouse gas emission reductions among extra large electricity users.
"It is not realistic to expect these sites to reduce their offtake whenever the contribution from wind and solar is below a specified level, which is thousands of hours every year," the letter states.
Meanwhile, in its submission, Chambers Ireland said certain elements of the proposals would affect a limited number of firms, typically data centres and large pharma plants.
"The broader business community is extremely concerned about the balance of the increases which are going to affect businesses across all sectors to a significant degree," it said.
It also said it is likely that the expected increased cost of supply which is being charged to the commercial sector will be larger than has been projected.
It also described the short timeline for the consultation as "extremely unfortunate" and said it will be detrimental to the policy achieving generalised support within the business community.
"The limited engagement by the Regulator with a wider group of business representatives has hurt the business community's awareness and understanding of the policy," it stated.
"The short lead time from opening of the consultation to the implementation is likely to provoke greater resistance within the commercial sector, and speaks to an unpreparedness – or a lack of contingency planning – on the part of the regulator, and undermines the commission's credibility."
The submission also said there is a widespread believe that the "systemic weakness" of the all-island electricity network is a consequence of poor policies and planning by multiple agents within the system, including the regulator, government, officials, and semi-states.
It added that the current 'blame game' is not useful given that all players have made strategic errors.
"It is however the wider society, and the business community in particular, that is likely to bear the consequences of these errors," it claimed.
