Scrutiny tightens on Coalition as public set for more energy price hikes

The surge in energy prices driven by the war in Ukraine is hammering consumers, with steep price hikes by Bord Gáis an indication of even more pain coming the way of Irish households. But can anything be done about the crisis, or does it simply advertise how much we are at the mercy of global markets?

Coalition figures point to interventions stretching back to the budget as evidence they are trying to shield consumers. It is true that hundreds of millions have been spent on this. However, as utility companies come to the end of hedging contracts which had locked in lower fuel costs, more price rises are expected.

The only way consumers will have reduced bills will be if the Government intervenes further through VAT release or rebate

The Government was warned this week that higher prices are expected to last into 2023, exposing households to bigger bills next winter – something market veterans agree on.

John Mullins, former chief executive of Bord Gáis – and also a trustee of the Fine Gael party – is pessimistic: "I don't see the prices dropping ahead of next winter, you'll get some reprieve in summer, but the prices for winter are pretty much set at this stage." The Bord Gáis move is evidence of a wider truth facing other utilities, he says, who will have to follow suit.

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The Coalition has few options, Mullins argues. “There’s no good news in any of this, frankly, and the only way consumers will have reduced bills will be if the Government intervenes further through VAT release or rebate.”

Budget time

Action on VAT is the great white hope in Government Buildings at the moment. A European Commission options paper may clear the way for a cut without affecting Ireland's wider arrangements on derogations but the pressure is unlikely to dissipate simply.

If regulation is done right, price will be right and I don't believe regulation has been sufficient to ensure the price is right

Price hikes will doubtlessly bring more scrutiny on carbon tax increases due in May – and while the Green Party will not tolerate any deviation from that path, it may emerge as a bone of contention at budget time. The Greens have the backing of the other Coalition leaders, and the programme for government, and privately argue the focus on the issue is deeply misleading – but that won't make it less of a hot political topic.

The Opposition has ideas – but they largely focus on market reforms that could ease the impact or benefit consumers in the long run, rather than silver bullets that could alleviate the pressure.

Market structure

Sinn Féin Senator Lynn Boylan, the party's climate justice spokeswoman, says it is exacerbated by existing weaknesses in the electricity market structure. She points to "default tariffs", which users switch to after a certain period of time, and which are capped in the UK, but not here. This, she says, exposes people who will not or cannot switch providers to higher rates. "It's a hands-off approach that's not being taken in other jurisdictions."

Jennifer Whitmore, the Social Democrats climate spokeswoman, says the fuel allowance should be index-linked to inflation and change in real time, as opposed to being decided on budget day, and called for a moratorium on disconnections.

However, both are hedged on a full energy price cap, as was recently put in place in the UK – something the Rural Independents are now seeking.

The rather limp response from the Commission for the Regulation of Utilities has sparked a backlash on the backbenches. Former minister for agriculture and Offaly TD Barry Cowen – a long-time critic of the structure of Ireland's energy market – wants the National Competitiveness Council and the Competition and Consumer Protection Commission to examine the issue.

“If regulation is done right, price will be right and I don’t believe regulation has been sufficient to ensure the price is right.”

As high energy prices continue to grind, the Government can count on further scrutiny.