Electricity market deregulation a step closer

THE ENERGY regulator will deregulate the domestic electricity market when ESB’s market share falls to 60 per cent, it said yesterday.

In a report published yesterday, the Commission for Energy Regulation (CER) said ESB would also have to commit to a plan to rebrand its supply business before the market would be deregulated, allowing ESB to compete with independent suppliers.

The CER said ESB would also have to commit to a plan to rebrand its retail business before the market would be deregulated. At present the CER sets prices for ESB, and competitors are allowed to undercut these charges.

The supplier currently has about 77 per cent of the domestic market, with independent suppliers such as Airtricity and Bord Gáis making up the rest. Up to 500,000 people have switched supplier since rivals entered the market.

If the current rate of movement continues, deregulation could take place by early next year, CER chairman Michael Tutty said.

Business markets, where ESB has a market share of less than 50 per cent, are set to be deregulated by October 1st.

However, the regulator warned that it would not mean that energy prices would fall dramatically immediately afterwards. “It won’t magically reduce electricity prices,” said commissioner Dermot Nolan. “But it should lower prices over time.”

ESB welcomed the news, saying it was a “significant milestone” in developing a competitive electricity market, and would be a positive step for customers. However, it refused to comment on possible future pricing, and said it would be complex to rebrand the supply business.

“Changing a long-established brand is a challenging and complex undertaking that requires careful planning and implementation in order to avoid customer confusion and uncertainty.”

Mr Nolan said the regulator would continue to monitor the market for anti-competitive practices, and would move to deal with any such moves.

Bord Gáis Energy said it felt it was too soon to deregulate the market.

“ESB has 77 per cent share of the market, and it’s still totally dominant in that sector,” the firm’s head of regulation, Padraig Fleming, said.

“It effectively controls the market for the production of electricity, with over 50 per cent of the power generation capacity and 60 per cent of the electricity energy revenues that flow through the market. By any standard that’s a hugely dominant position. It’s amazing that CER is even considering stepping away from regulating such a dominant operator in a crucial industry to the economy and the consumer.”

Mr Nolan defended the decision to remove regulation from the market. “Regulation is not perfect; it is a blunt instrument. “Generally, everyone agrees that effective competition is better for consumers.”

The move was welcomed by Minister for Energy Eamon Ryan, who described it as “an important step” in developing a fully competitive electricity market in Ireland.

Employers’ group Ibec welcomed the imminent deregulation for business electricity customers but said the market would still need “a regime of monitoring”.