CER tells Bord Gais to drop pricing method

The Commission for Energy Regulation (CER) has requested Bord Gáis to drop its current method of calculating gas prices for 230 large commercial users.

Since April 2003, Bord Gáis has allowed eligible gas customers to determine gas costs on a forward-looking basis for up to 12 months ahead. Essentially, Bord Gáis establishes the future market price of gas for each month and then averages these out over a 12-month period.

In this way, a customer's typical monthly bill consists of an average price each month multiplied by volume - depending on useage.

However, a CER document warns that this system may be unclear to customers and may act as "a barrier to competition".

"The effect of averaging is contrary to the aim of introducing market reflective pricing into the sector," warns a CER document.

The CER has requested Bord Gáis to adopt a different system, where averaging the price over the duration of a contract is no longer allowed.

The CER declined to go into detail about the likely benefit of the change for customers. It says all customers of Bord Gáis Energy Supply, the unit that deals with large corporate accounts, must be issued revised quotations with immediate effect.

The CER has asked Bord Gáis to drop the current system because there is a possibility customers are not attuned to market prices, which vary throughout the year. For example, summer prices are generally lower than winter prices when demand is higher.

The CER document explains that some customers may have lost out because of the system.

"For example, a 12-month fixed price customer with a high summer load who exceeds their estimated volume will pay more than the average price during the summer months because of the impact of winter prices in raising the average. In this case, Bord Gáis may recover additional revenue from that customer than originally estimated."

However, the document concedes that the opposite is also true; that customers with high winter loads may pay less to Bord Gáis than originally estimated. Bord Gáis is understood to believe that one should balance out the other.

Asked for a comment last night, Bord Gáis said it had "a neutral stance on the proposal".

Vayu, the private gas company that is seeking to enter the market, criticised the previous scheme and its policing.

Vayu will be writing to the CER shortly calling on it to investigate the possibility of anomalies within other Bord Gáis tariffs. These would be the transportation and distribution tariffs, said the company's chief executive, Mr Tony Ennis.