Higher energy costs could affect business, Kenny

Fine Gael leader Enda Kenny warned that the escalating cost of energy could force companies out of the Republic.

"I wish to bring to the Taoiseach's attention a letter I received from an employer of 1,000 people," said Mr Kenny.

"The point was made that the pricing model for electricity is out of kilter with reality and that since 2001, the energy regulator has granted cumulative price increases of 100 per cent in electricity and 170 per cent in gas."

He said the question was asked how the electricity pricing regime could be correct when the company involved had signed a 12-month oil contract at 22 per cent below the price of oil six weeks ago.

"The global price of oil is dropping, and in this country ESB and gas charges are rising through the roof," Mr Kenny added.

"The point is made by this employer that the only way of dealing with this is to move out of the country. That is a very serious matter.

"What will the Taoiseach and his Government, who set policy in this area, do about it?"

Taoiseach Bertie Ahern said that the prices which came into force on October 1st, including the 33.8 per cent, would be fixed for one year until September 30th 2007. "The Commission for Energy Regulation, the CER, will review prices again during the summer of next year for the gas year starting on October 1st, 2007," he added.

"Under the Gas (Interim) (Regulation) Act 2002, the responsibility for the regulation of tariffs is delegated to the CER, which has the responsibility for ensuring market stability, encouraging new market entrants and ensuring tariffs are cost-effective and do not discriminate unfairly between licensed operators in the State sector, such as ESB or Bord Gáis, and those in the private sector."

Mr Ahern said that following a long price freeze from the mid-1980s onwards, Bord Gáis had been able to sustain relatively low prices, in part due to favourable long-term hedging contracts, resulting in a very low average cost of gas relative to price.

The effect of the proposed increases of 33.8 per cent on the CPI figures was 0.164 per cent. "I do not think increases in gas prices of that order will drive anyone out of the country."

Mr Ahern said that the proposed increases in gas tariffs and electricity prices were practically the same.

"Some of the largest suppliers in the UK have also faced significant price increases."