Energy prices can’t be going up again surely?
I’m afraid they are. Late last week, SSE Airtricity hiked household gas and electricity prices by 39 per cent and 35.4 per cent respectively. Then PrepayPower announced that its electricity and gas prices were going up by 19 per cent and 29 per cent. Then on Thursday, Electric Ireland announced electricity and gas prices of 26.7 per cent and 37.5 per cent respectively. A day later, Bord Gáis Energy (BGE) customers were hit with electricity price hikes of 34 per cent while the cost of its gas climbed by 39per cent. It is inevitable that the other companies will roll out price hikes of their own in the coming days.
What do these percentages mean in cash terms?
Well, the SSE Airtricity price hike adds a further €500 to gas bills and €600 to electricity bills while the Prepay Power increases will see its customers electricity bills climbing by around €340 and gas bills going up by around €430. Electric Ireland’s increaser will add around €446 a year to the average customer’s electricity bill and €516 to their gas bill while the BGE hikes will costs its electricity customers just under €600 a year with its gas climbing by €525 a year.
That is a lot?
It is for sure but it is not even half the picture. Thursday’s announcement from Electric Ireland was its third major price increase this year and these came on the back of two price increases last year. When all increases are taken into account households are looking at paying more than €1,000 extra for their electricity each year and in excess of €1,100 more for their gas. Some other companies have increased their annual dual fuel prices by more than €2,500.
What is driving price increases?
This time last year, the blame was being put on a global recovery and a spike in demand for energy in a post-Covid world. That was bad enough, but in late February, Vladimir Putin ordered the invasion of Ukraine which produced spiralling prices. Then, the Kremlin started weaponising the gas it supplies to the EU, which made the energy crisis even worse. Gas is now trading at close to 12 times its 2021 rate.
What about our wind? Why is that not suppressing prices?
The EU’s electricity market uses gas as the backstop fuel if the supply from renewables falls short. And through a system called marginal pricing the gas price sets the wholesale price of electricity from all sources, even those with a lower production cost such as wind and solar energy.
What? Why would they do that?
In normal times, this can be a positive policy and encourages renewable energy production by offering large profits. But these are not normal times and the EU’s reliance on gas as a price benchmark is causing big problems. “We’re in a very serious situation triggered by Putin’s manipulations of the gas market,” said European Commission president Ursula von der Leyen this week. “Gas dominates the price of the electricity market … With these exorbitant prices, what we see is, we’re going to have to decouple.”
‘Decouple.’ What does that mean?
In the simplest of terms, it means that the price of gas would no longer have anything to do with setting the minimum price for electricity across the EU.
That sounds good. Why hasn’t it happened before now?
The Spanish led calls for it to happen last year, but other counties in the EU — including Ireland — said such a reform was not needed.
What can I do about the price increases?
If you are one of the more than half a million customers of Irish energy companies who have not switched provider in recent years do it immediately.
What is the point of switching if all the companies are hiking prices?
Because all the companies are offering discounts to new customers. Those discounts can be as much as 40 per cent for the first year. So if you move from company A which is charging you €2,500 a year for gas, for example, and get a big discount, then you could save as much as €1,000 without any interruption of supply.
But I have already switched this year?
The good news — if that is not too strong a word — is that you will get a discount on the standard rate based on your agreement, but the bad news is that you too will see prices climb dramatically even though you have made the switch.