Electricity prices expected to increase by up to 20%

A rise of almost 20 per cent in electricity prices is expected to be announced later today by the energy regulator Tom Reeves. Emmet Oliver reports.

The Commission for Energy Regulation (CER), led by Mr Reeves, is expected to outline a range of increases for different customer categories, including householders and small and medium enterprises. The average increase will be over 15 per cent and will come in close to 20 per cent, but will not come into effect until January 1st.

Gas and oil prices have risen by over 40 per cent since the CER last reviewed tariffs for the ESB.

An ESB spokesman contacted last night said tariffs were strictly a matter for the regulator. But he added the ESB could not control the market price of international fuels. Fuel makes up 40 per cent of the cost of electricity.

Back in July Bord Gaís announced a 34 per cent rise in its prices, pushing its average bill from €902 to over €1,200.

The average bi-monthly household ESB bill is €123: a 15 per cent increase would push the bill to €141. If a 20 per cent rise was granted the bill would rise to €147.

The ESB chairman Tadhg O'Donoghue predicted two months ago rises were on the way because of international movements in oil and gas.

However, the ESB is able to spread the impact somewhat, because it has a range of fuels to draw upon, including peat and coal.

While the ESB will be the direct beneficiary of the price hikes, it will also allow independent generators to push up their prices. This is because prices in the independent sector track ESB tariffs. Independent producers are also mainly operating gas-fired stations, which are suffering from significant rises in cost.

Several elements go into the final price, including the public service obligation levy, generating costs and network charges.

The increases between 2001 and 2006 have been driven mainly by generating costs.

There has been two hikes in electricity prices in the UK so far this year, pushing up prices by 30 per cent in total.

The UK market is broken into different regions and Irish prices remain below UK levels, but the higher VAT rate in Ireland compared to the UK narrows the gap.

There is growing pressure on the Government to help consumers to cope with higher energy prices by reducing VAT on electricity bills. The VAT rate in the UK is 5 per cent, while the Irish rate is 13.5 per cent.

The National Consumer Agency yesterday said VAT on gas prices should be also be reduced.

It is understood today's announcement will also address the issue of regulating prices for large industrial users.