Household bills to soar further as companies warn of ‘entire market malfunction’

Household energy bills could climb as high as €6,000 a year, internal Government documents show as energy companies are privately warning the Coalition the costs they are facing could “cause the entire energy market to malfunction”.

Cabinet was warned this week that while energy prices have already doubled since mid-2021, to a level of some €4,000 a year, further increases are likely early next year.

One senior Government source said the projections were “off the Richter scale” and could see energy bills resemble mortgage repayments.

A memo for Ministers outlined that: “If the wholesale price of gas remains at the elevated levels expected for the coming months, further retail price increases can be expected with a typical household potentially paying circa €6,000 for gas and electricity annually. The timing of these increases is unknown but could be early in the new year.”

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The dire warnings will increase pressure on the Government to support households with a massive budgetary intervention of one-off measures running to what Tánaiste Leo Varadkar described on Friday as “several billion”.

Cabinet was also warned that the record price of gas was also pressuring energy companies due to the collateral payments they have to front to trade on wholesale markets. This was reinforced in a private letter sent by the utility company Energia to senior Ministers in August, seeking talks with the Government on “appropriate measures” to support the sector in light of new financial risks.

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Energia has told the Government the sector is facing huge new costs arising from the need to provide “massive advance collateral payments” to purchase gas.

In the letter, seen by The Irish Times, the company warns that “Ireland should prepare for the possibility that collateral asks become too much for Irish energy companies and threaten security of supply”.

The increasing burden of cost, the company warned, “has the potential to cause the entire Irish energy market to malfunction, giving rise to significant adverse economic and social effects, unless appropriate measures are implemented urgently and in a collaborative and co-ordinated manner”.

While it does not explicitly say financial supports are needed, it points out that a number of European countries have implemented aid for energy companies “where additional collateral requirements would overburden the company”.

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“We encourage the Government to engage urgently with energy companies to address the potential issue,” it wrote.

Asked for comment, the company confirmed it had written to the Government “in relation to matters and issues of concern for the energy industry, and for all energy customers in Ireland, which are also being experienced throughout Europe”.

A Government spokeswoman declined to discuss private correspondence but said the wider issue of liquidity was discussed on Friday at a meeting of EU energy ministers. “It is being looked at further at a pan-European level over the coming week.”