Going Up: bill cuts may be reversed

The State's energy regulator looked like it was charging to consumers' rescue in the autumn when it cut their gas and electricity bills, just as the weather was beginning to cool and the nights lengthen.

The cuts meant the average household would save about €100 a year on its gas bill and €51 in electricity costs.

However, the 10.88 per cent cut in gas prices and the 6 per cent reduction in electricity charges were no more than a blip. The main driver of energy costs - the price of oil, natural gas and coal on world markets - continued to increase during 2007.

In fact, the ESB, which supplies power to the Republic's 1.7 million homes, said in July that it could cut prices by as much as 10 per cent. However, it had to row back when the time for setting the price came, as the price of coal, used by the State company's biggest power plant in Moneypoint, had gone up in the intervening period. The Commission for Energy Regulation (CER) allowed it a 6 per cent cut instead.

Nor was the gas price concession all that it was cut out to be. A year earlier, the CER allowed a 34 per cent increase on the back of record world prices for the fuel. These costs promptly fell, forcing the regulator to order a 10 per cent cut in February. This 10.88 per cent price cut did not eliminate all of the increase imposed in October 2006, and consumers are still paying 6.5 per cent more than they were before this date. In any case, other energy costs are eating up the savings. Home heating oil increased by €40 to €60 for the average tank, while petrol hikes added €2 to the price of filling up.

Figures from the Central Statistics Office and various other measures, such as NCB's purchasing managers' indices, show that energy costs were on the way up. The issue has gone from down the list of priorities to close to, or at, the top.

The problem is not likely to go away. It's largely rooted in the Republic's dependence on fossil fuels, which supply about 60 per cent of our energy needs.

With oil prices continuing to increase, and gas and gasoline following suit, it's likely that the CER will have no choice but to allow the ESB and Bórd Gais to reverse this year's price cuts next autumn.