Households face €165 hike in annual gas bill by autumn

MORE THAN 500,000 households face an average natural gas price increase of €165 a year, or €13.75 a month, from September.

The State's Commission for Energy Regulation (CER) yesterday said it was proposing to allow Bord Gáis to increase charges for domestic gas supplies by 20 per cent.

The news follows an announcement earlier this month that electricity prices are set to rise by 17.5 per cent on the back of increased fossil fuel costs.

The increase will apply from September. The commission warned it could have to apply a further increase of the same scale from next January if world natural gas prices continued to increase.

More than 500,000 households that use natural gas for heating and cooking, and an estimated 1,700 small businesses, will be hit when the price goes up.

The average domestic bill for gas runs at around €822 a year. A 20 per cent increase will add €165 to this, or €13.75 a month.

Earlier this year, State-owned Bord Gáis, which supplies the fuel to the Republic's domestic users and small businesses, warned that the increasing cost of gas on world markets would force it to seek a price rise in the region of 19 per cent from the regulator.

The CER sets the price at which Bord Gáis can sell gas. The regulator takes submissions from the company and other interested parties, and takes movement in world prices into account before making a decision. Gas prices track oil on world markets, and have risen by as much as 70 per cent this year, driving up costs for Bord Gáis.

Most experts believe prices will continue to rise in the long-term, as demand for energy is increasing. Bord Gáis buys most of its gas from British and Norwegian producers who operate in the North Sea.

Shell and Statoil are scheduled to begin producing gas from the Corrib field off the west coast in 2009. Bord Gáis has said this does not mean the gas will be cheaper, as the fuel will still be sold at world prices. However, it will guarantee that Ireland has enough gas to cover its demands for the succeeding 10 years.

Electricity generating plants are amongst the biggest users of natural gas in the country. A number of new gas-fired stations, including two planned by the ESB and Bord Gáis, are set to come on line over the next three years.

Earlier this month, the CER said it would allow the ESB to increase its charges to the Republic's 1.7 million householders by 17.5 per cent in the autumn.

The regulator has also said that it could have to allow a second increase in electricity prices later this year. However, the ESB has set aside €300 million to offset the impact of the second price rise, and there is a possibility that it will not be necessary.

The increases are designed to allow the utility companies to cover their costs and make a surplus for reinvestment to keep operations up to date.