Home electricity market opening costs €120m

It has cost €120 million to open up the domestic electricity market even though virtually no customers have switched supplier…

It has cost €120 million to open up the domestic electricity market even though virtually no customers have switched supplier since February.

The ESB confirmed yesterday the cost of putting in new IT systems, issuing a new type of bill to householders and establishing a new meter reading system had cost €120 million.

This cost will now be passed to consumers, although new entrants may also have to pay for some of it. The domestic electricity market was opened to full competition on February 19th.

The high cost and the low level of switching may raise serious questions about the design of the Irish market.

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However, the Government points out that EU directives made it necessary to open up the domestic segment of the market, regardless of cost.

The Commission for Energy Regulation (CER), which regulates the sector, believes switching will not happen for some time, but once companies exhaust opportunities in the commercial and industrial markets, they will turn their attention to the domestic sector.

The CER points to the slow rate of switching in the UK market in the first few years of deregulation.

The Republic's market is smaller than some regions of Britain and consequently major international players are not interested.

However, plans to merge the southern and northern electricity industries may make the Irish market as a whole more attractive.

Today the Minister for Communications, Noel Dempsey, is due to open the new national electricity control centre in Dublin. His speech may include some remarks about the electricity market.

Since the market was deregulated on February 19th there has been virtually no change of supplier among consumers.

The only company, apart from ESB, prepared to supply householders, Airtricity, said the number of people contacting it since February 19th was "negligible".

A spokesman said while the company had 38,000 business customers, the margins from the domestic sector were too low.

He said Airtricity was happy to connect up consumers, but was not actively advertising a residential product.

A spokesman for Viridian plc, which is active in the industrial market, said the cost of opening up the domestic market and the low level of switching raised serious questions.

A Viridian spokesman said: "These systems will cost customers a lot of money, but they will have to wait for effective competition before they will start to see any benefits in return. Unfortunately, there is little prospect of this happening until ESB's dominance of the generation sector is addressed."

Another company which intended to enter the market, Direct Energy, has so far failed to make an offering to residential or industrial customers. The company, started by some former telecoms executives, won some power during an auction last year but it is understood it has not managed to sell any of it.