Energy regulator tells ESB to cut payroll costs by 5%

THE ESB has been told to cut its pay costs by 5 per cent over the next two years. The Commission for Energy Regulation has also cut the State-owned utility’s provision for bad debts, a move likely to result in greater pressure on customers in arrears.

The ESB had told the regulator it wanted to allow for a 1 per cent rise in pay costs next year and 2.4 per cent in 2012. Instead, the commission has decided, in the light of inflation and broader wage patterns, that a 5 per cent cut is more appropriate. The decision applies to the ESB’s retail business, which accounts for a relatively small proportion of overall costs. However, it is likely to be replicated in a 5 per cent cut in wage costs in the ESB’s network business, to be announced shortly.

On the retail side, the ESB made a submission to the regulator earlier this year on the costs it thought should apply in 2011 and 2012. However, the commission decided not to allow all its cost proposals “as it was not clear they represented reasonable, efficient and necessary levels of cost”.

“The CER has made every effort to ensure that . . . efficiencies are being made and passed along to consumers,” its decision stated.

Electricity prices rose by almost 5 per cent this month. Last year, ESB workers were among the few to benefit from a 3.5 per cent increase under the last national wage deal. The decision shaves almost €500,000 off proposed spending on capital projects, €3.2 million off payroll, €1.1 million off sales and advertising and €2 million off corporate centre and inter-business unit costs.

The largest saving will be made on bad debts, where a cut of €7.4 million is provided for. The commission says this will incentivise the ESB to reduce the level of bad debts, which rose 20 per cent in 2008 and 115 per cent last year.