Regulator under fire over electricity, gas hikes

Consumers and business last night attacked the energy regulator after it announced plans to approve an increase of almost 20 per cent in electricity prices and a 34 per cent hike in gas prices.

Interest groups said the move will have a detrimental effect on household incomes and the viability of small firms.

The Commission for Energy Regulation (CER), led by Tom Reeves, said yesterday it proposed to give the former monopolies ESB and Bord Gáis the go-ahead to raise energy prices to help the semi-State bodies tackle soaring fuel costs.

The average household will pay a bi-monthly electricity bill of €150 from January 1 if the price rises are granted, up from €126 at present. The average annual gas bill will climb to €1,208 from €902.

Small and medium-sized businesses say they are struggling to remain competitive even without higher energy bills. "Incorrect regulatory decisions are imposing significant costs on the economy," said Mark Fielding, chief executive of small business lobby ISME, who added the latest price hikes would have "disastrous" cost implications for small firms.

"The continuous decisions to allow price increases to the ESB to recover their cost inefficiencies simply carries on the practice of a monopoly and fuels the argument that competition doesn't work. At the same time, ministers are able to wash their hands of responsibility and blame it on the regulator."

Gas and oil prices have risen by about 40 per cent and 36 per cent, respectively, since the CER last reviewed tariffs for the ESB this time last year. Including the proposed price hike, domestic electricity bills have risen by a cumulative 28 per cent over three years. In the UK, prices have climbed 40 per cent in two years, according to the CER.

The UK power market is divided into regions and Irish prices remain below UK levels, but the higher VAT rate in Ireland narrows the gap with the UK.

Ireland's independent consumer lobby called on the Government to provide financial relief to households by reducing VAT, which is 13.5 per cent on electricity bills compared to 5 per cent in the UK.

"It is impossible to expect that consumers, domestic or business, can continue to pay such increases," said Dermott Jewell, chief executive of the Consumers Association of Ireland. "This is not just about affordability for the aged or the low-paid - it affects everybody, because if these increases are passed on by businesses to consumers and product prices rise, jobs will be lost."