WE ARE ALL glad not to be waking up this morning to the power cuts that had been threatened by strike action in the ESB. One week on from the Labour Relations Committee resolution, it is interesting to consider who were the real winners and losers in the dispute. We will only know the answer to that question next February when the annual accounts for the ESB are published.
If the auditors KPMG insist on the company setting aside some €300 million to cover future pension liabilities, then the common view that the company caved in will be confirmed. If,on the other hand, the balance sheet of the company remains largely unchanged, then the unions will have pushed things to the brink just for a change of wording around a rather technical accounting practise issue. The promised negotiations in the event of a future deficit, were on the table in the first place.
I hope it ends up with the company not having to put more money aside to cover the accounting risk. If it does have to do so, then the real losers will be the hundreds of young electrical engineers and technician across the country who will be deprived of vital new job opportunities. Those new jobs would disappear because the only way the company could raise the necessary money would be to cut back various capital projects which should be the source of that employment. The unions would have real questions to answer about whether they have prioritised older and more established members at the expense of the young graduates or trainees.
What is the Government hoping for?
The Government is keeping quiet on the issue, which makes me think it is rooting for a no-cost solution for the company. The reason it would want that is it has already done real damage to the company’s investment plans by demanding a half a billion cash dividend from the ESB, which no one was planning for.
It has pedalled the false line that it was forced to do so by the Troika agreement, but that is not true. It could reverse its own dividend decision tomorrow, and if I was in the unions that is where I would be looking to put some pressure, so that the long term future of the company – and thus its pensions – are assured.
The key to this dispute was whether the company would be able to pay those pension contributions in 10 or 20 years’ time. It would be a bitter irony if the dispute ended up delivering an outcome which make the company weaker and less able to meet those commitments.
The old electricity model is dying
The unions are no longer dealing with the same state-owned monopoly of the 1970s or 1980s; that old electricity model is now dying right across Europe. An energy transition is happening as power moves from old base load fossil fuel plants to new distributed renewable generation systems. In five years time, how many customers will want to buy electricity from the ESB at 16 cent for each kilo watt hour when the same power could come from a solar panel at two thirds the price?
The best way for the ESB to secure its future is to invest in the growing energy services area and become a leader in home energy management systems, electric vehicles and flexible generation. In a more integrated regional electricity market, the company is also going to have to expand into the UK and use the expertise it develops here to gain a competitive advantage there. That strategy is going to be undermined if capital spending is cut. The company will still be able to manage on a day-to-day basis but its future prospects will start to look more and more uncertain; investors will start to lose faith in the company and its borrowing costs will start to rise.
My guess is that the auditors will not force the company to make an extra provision in its accounts. Brendan Ogle has said that the issue is a matter between the company and KPMG. That makes sense. We need to get away from the idea that their has to be winners and losers in the first place.
Eamon Ryan is the leader of the Green Party. You can follow him on Twitter at@EamonRyan.
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