10% fall in gas prices to benefit users from October

Consumers are set to benefit from a 10 per cent fall in natural gas prices in October, State company Bord Gáis Éireann (BGÉ) pledged yesterday.

BGÉ intends cutting the price it charges householders by 10 per cent at the beginning of October, the point at which winter demand starts to kick in, following a fall in the wholesale cost of the fuel in recent months.

The State-owned company increased its charges by 10 per cent in February after wholesale prices rose last year as a result of volatility in the UK and international markets.

The board's chief executive, Gerry Walsh, said yesterday that the issue was compounded for the company by the fact that a number of long-term contracts it had with wholesalers, which were priced at 1999/2000 levels, ran out during the year.

Prices have since fallen, and Mr Walsh said that it intends passing this on to consumers in October. He said there was no point in passing on the cuts during the summer when there was no demand for the fuel.

The State's Commission for Energy Regulation (CER) requires BGÉ to operate within a 1.3 per cent margin.

Wholesale market volatility also hit profits at the company last year. It reported an 8 per cent fall in pre-tax profits for 2006 to €99 million from €108 million the year before. However, turnover grew 29 per cent over the same period, to €1.1 billion from €857 million in 2005.

During the year, BGÉ recruited over 38,000 new domestic customers. This was largely on the back of the housing boom in the Republic.

Mr Walsh said the company expects this figure will fall slightly this year. "Our anticipation is that new connections in 2007 will be 34,000, based on our own knowledge and what's on our order book."

Gas sales accounted for the bulk of its turnover at €710 million, an increase of 29 per cent on 2005. Electricity supply was up 25 per cent at €202 million and transportation (that is, distributing other suppliers' gas through its networks) was up 44 per cent at €157 million.

BGÉ plans to build a 450mw electricity generating plant at Whitegate in Cork harbour. Mr Walsh said this will be up and running in 2010. The company already supplies about 200mw to industrial and commercial customers and wants to expand this and move into the domestic market.

However, he stressed that it can do neither of these things without building its own generating plant. Currently it is buying electricity at wholesale prices from the ESB and Viridian.

The company's energy supply division is also looking at developing a new pricing mechanism for about 1,700 small and medium-sized businesses which want their monthly charges linked with wholesale price movements.

The companies have complained that they do not benefit from price cuts as they happen on international markets and also say the system treats increases on those markets inefficiently, as they can end up paying for them several months afterwards.