Electricity price rises strongly criticised

Electricity price rises sanctioned by the energy regulator, Mr Tom Reeves, were strongly criticised yesterday by consumer and business interests.

Mr Reeves increased tariffs by an average of 9.85 per cent, about twice the inflation rate. It follows an average increase of 8.6 per cent last October, the first since 1993.

Householders will bear the brunt of the rise when the new tariffs are introduced next January. Domestic tariffs will rise by 13.25 per cent while those paid by business users will rise between 3.56 per cent and 8.42 per cent.

The Consumers Association said the domestic price rise would come as an "overpowering blow" when reflected in electricity bills from next February. Its chief executive, Mr Dermot Jewell, said: "The absence of competition makes this kick in the teeth a painful one. There is no option to shop around here."

Domestic tariffs rose by 8.9 per cent in last year's round of increases. The ESB said the latest increase would bring the average domestic bill to €101.57 every two months and claimed the rise would bring Irish electricity prices to the European average.

With the new review following steep increases in health insurance, hospital and college registration fees, Mr Reeves justified the increases in domestic prices by stating that householders have been cross-subsidised for years by business users of electricity.

His office said: "The process of moving towards truly cost-reflective tariffs began last year and this latest increase for domestic customers means they are now closer to reflecting their true cost."

The regulator said the increase would add 0.2 of a percentage point in a full year to the inflation rate, which is the highest in the euro zone.

The latest rise will come almost three years after the introduction of competition in the market for business users. In theory, competition should reduce prices.

The price charged to the largest industrial users will rise by 4.2 per cent; they rose 14 per cent last year.

Bills for small and medium-sized businesses will rise 8.42 per cent after increasing by 13 per cent last year. Small shop-owners will face an increase of 3.86 per cent - their tariffs rose 3 per cent in the last round.

Mr Reeves said the "main drivers" of the latest increase were the need for a big investment in the electricity network and increases in unit costs incurred by the ESB.

Wages paid by the company have increased by 21 per cent and it has commenced a €2.5 billion project to improve its infrastructure. In addition, the company said yesterday that its fuel bill rose last year by €190 million.

The company is expected to publish its latest annual accounts later this month but it is believed to have recorded a pre-tax profit in the region of €230 million last year and a post-tax profit of about €165 million.

In June, the company's incoming chief executive, Mr Pádraig McManus, pledged to double its post-tax profits by 2007. This was despite an obligation under EU rules to significantly reduce its market share in 2005.

Mr Reeves's determination ends a process begun last March in which ESB sought an average increase of 14.7 per cent.

Business lobbies said the increases would put companies under pressure. The chief executive of the Chambers of Commerce of Ireland, Mr John Dunne, said: "The level of the rise comes at a very crucial time for small and medium-sized enterprises, who are finding it difficult to meet other increasing costs, such as insurance and wages."

IBEC's director of enterprises, Mr Brendan Butler, said: "It is unacceptable for business to foot the bill after decades of State neglect in developing appropriate energy infrastructure."