Government body couldn’t get bids for electricity tender amid volatile prices

The Government body responsible for arranging power supply for State agencies could not even get companies to bid to provide electricity because of “extreme volatility” in energy prices last year.

The Office of Government Procurement (OGP) tried to run a second tender competition, even making changes to the contract to encourage a “more positive market response”, but could still find nobody willing to make an offer.

The contract, which had an estimated value of €80 million, was advertised last September but by the time it was due to close in October, it had no bidders.

An earlier tender competition had also failed after only one company expressed an interest in supplying power to a range of State agencies.

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The OGP warned Government bodies, including An Garda, the Defence Forces and the Irish Prison Service, they needed to prepare themselves for price rises of above 300 per cent, according to records released under Freedom of Information.

In an update, they said suppliers in Ireland were no longer bidding for large commercial contracts, whether it was in the public or private sector.

“The market in Ireland does not have normal levels of liquidity due to very high levels of risk, underwriting challenges and price volatility,” said the advisory last November.

In a later update that month, the OGP explained how the latest tender competition had failed despite “intense engagement” with suppliers and the changes to make the contract more attractive.

It said that public bodies would remain on fixed contract rates until the end of November, but that after that, they would move on to standard electricity prices.

The letter said: “Currently both the standard pricing and wholesale products are competitive, all be it very inflated compared to current contract rates.”

The OGP said it would need to carry out broader market research, and see what was happening in other countries before it could look at running another competition for supplying energy.

Another advisory from September explained how the procurement office had traditionally tried to put in place three-year contracts for the supply of electricity.

However, it planned to try a shorter 18-month deal to reduce “exposure”.

“After the market consultation, we are of the view that the shorter contract term is the most prudent approach in these uncertain times,” it said.

It said public bodies could expect energy bills to rise by as much as 378 per cent but that prices were still moving “quite dramatically” on a daily and sometimes hourly basis.

The update also explained how the level of uncertainty in markets meant they now had “hours rather than days” to consider and accept offers for energy supply.

A statement from the OGP said: “Prior to the war in Europe, the supply and pricing of electricity and natural gas was stable allowing for longer term contacts and greater price certainty.

“Recent events have made the supply and pricing for electricity and natural gas violate and uncertain. OGP continues to monitor the market dynamics to determine the timing of competitions and the duration of supply contracts to ensure that the public sector continues to obtain value for money.”