Businesses face hike of up to 75% in electricity bills

BUSINESSES AND industries could face increases of up to 75 per cent in electricity bills next year if power suppliers pass on the extra cost of fuel to end users.

The price of natural gas, used to generate much of the electricity used by industry, is 75–80 per cent more than it was a year ago.

Industry sources say the independent suppliers who supply most of the Republic’s businesses could be forced to pass most of these increases on to customers as fuel accounts for 80 cent of every €1 spent on generating electricity. Sources say power producers’ fuel bills may hit €250 million in 2009, almost twice what they have been.

Natural gas prices were around £0.37 a unit (known as a therm) on world markets a year ago, but broke the £1 mark last month, setting a new record. Yesterday the fuel was trading at around £0.72 a unit in London, easing some of the pressure on big consumers such as power generators.

However, industry sources say they will have to take the increased cost of the fuel into account when they begin negotiating electricity supply deals for the year ahead with customers. Power producers are able to hedge a certain amount of their costs by buying the fuel in forward markets, but they are still dealing with cost increases.

The State’s Commission for Energy Regulation (CER) recently gave the ESB permission to increase domestic electricity charges by 17.5 per cent, and is likely to grant a further hike later in the year.

Northern Ireland Electricity, a regulated utility, recently increased its charges. Yesterday, a group representing the region’s retailers said its members faced paying an extra 25–35 per cent for power over the next year.

Meanwhile, the Republic’s national electricity grid operator, Eirgrid, said yesterday that the State’s power supply system will comfortably handle the likely increase in demand this winter.

Demand for electricity normally hits a peak in the week before Christmas week and this year it is projected that 5,125 megawatts (MW) will be needed when demand hits its height, 4.5 per cent more than last year. An average-sized power plant generates 400MW.

Taking into account power plants, wind generation and supplies from the North, Eirgrid expects electricity supplies to exceed that peak in demand by just over 500MW, which the agency believes gives a safety net in the event of problems.