Fresh rises in energy prices signalled

 

HOUSEHOLDERS ARE almost certain to face further increases in the price of electricity and gas in the New Year in spite of recent falls in world energy prices, according to the Commission for Energy Regulation (CER).

Commission officials told the Oireachtas Committee on Energy that recent "softening" in world oil and gas prices would have a "minor" effect on projected price increases.

They also warned that the coming on stream of gas from the Corrib field off Co Mayo could lead to higher, rather than lower, prices for consumers because of the cost attached to the current supply infrastructure.

Commission chairman Tom Reeves said customers preferred to know prices for the year ahead. The present system of setting prices for a yearly period was "the best we can get" for now.

Mr Reeves assured deputies the commission would not allow Corrib to drive up the price of gas for ordinary consumers. But he acknowledged that if Ireland used more domestic gas and therefore made less use of the gas interconnector with Britain, it would have to pay for this infrastructural cost.

It would be dreadful if in this situation prices were driven up for everyone and windfall profits left for others, but it wouldn't be allowed to happen.

The ESB increased the price of electricity by 17.5 per cent in August and Bord Gáis increased gas prices by 20 per cent last month, and the companies have said they will be seeking further rises to account for soaring energy prices over the past year.

Over the past few months, the price of a barrel of oil has dropped considerably and gas prices have also fallen back, raising hopes that the second tranche of increases would not be needed.

However, the CER says that because the utilities hedged their bills by buying energy in advance, they were locked into the higher prices for a 12-month period.

Dermot Nolan of the CER said international gas prices which had risen 130 per cent over the past year now stood at 113 per cent higher. Oil was 47 per cent dearer, down from a peak of 85 per cent.

He said the commission had asked the ESB to provide a €300 million rebate to consumers and this would serve to reduce the projected increase by 8-10 per cent.

Mr Nolan said the Corrib gas field would improve security of supply, but wouldn't result in cheaper gas for consumers. Ireland's reliance on imported fuels meant that prices would track international fuel prices.

Fianna Fáil Senator Jim Walsh said it was ludicrous that the regulator was protecting the ESB. If the ESB got it right in setting prices, it got the benefit. If it got it wrong, the commission was compensating the company by allowing it to increase prices.