Conor Pope: Bord Gáis Energy first with ‘astronomical’ price hikes but others will soon follow

Every other company on the market will have to follow suit, sooner rather than later

The timing of the "astronomical and unprecedented" hike in gas and electricity prices announced by Bord Gáis Energy on Tuesday afternoon was almost as significant as its scale.

Price adjustments on the Irish market tend to follow a fairly predictable pattern with smaller players moving first followed by the big guns.

As the largest supplier of gas into the domestic market and the second largest supplier of electricity, Bord Gáis Energy is, by any measure, a big gun.

So the fact that it has jumped first and so far means that every other company on the market will have to follow suit, and sooner rather than later, while feeling empowered to impose hikes of a similar – or even greater – scale.

In truth such price hikes would almost certainly have happened no matter who went first.

Bord Gáis Energy announced that from the middle of next month gas and electricity bills are to climb by 39 and 27 per cent respectively – the unit rate increase is even higher than that.

It blamed high global wholesale energy costs and market volatility which, it warned, was “expected to continue for some time”. The increases will mean the average domestic gas bill climbs by about €350 and the average electricity bill by €340 annually.

While that would be bad enough, coming on the back of two price increases the company rolled out last year, many of its customers will need an additional €1,000 or more to cover their energy costs over the next 12 months when compared with 2020.

"The outlook is bleak for energy customers," said Daragh Cassidy of price comparison and switching website bonkers.ie. "The increases are at astronomical and unprecedented levels."

He said he had “never seen a big supplier come out first. I knew there were increases coming, but I thought one of the smaller companies would have moved first.”

Many will be reeling by the increases and asking why.

While there is no questioning the volatility on global markets as a result of the Russian invasion of Ukraine, people in this part of the world might be forgiven for asking how is it that we are being asked to pay so much more by domestic suppliers given that Ireland imports no gas from Russia.

The reason is the interconnectedness of the market. Ireland gets its gas from the UK and from Norway and from fields off the west coast of Ireland but prices are all set on international markets which are – to put it mildly – jittery at present.

There is also the reality that when Germany and other countries which normally get much of their gas from Russia find it cut off to them, they will shop elsewhere, including those places which supply into Ireland and that will inevitably push prices higher.

Can prices go even higher?

The big questions are just how much higher they can go and what will the wider impact be?

“I think there will be more increases,” said Mr Cassidy. “And they will have an impact everywhere else. That is the most worrying thing. While heading into the summer you might be able to turn off, or down, your heating, you can’t not eat and higher energy prices are going to lead to higher food prices and higher prices for so many other goods and services. We use gas to produce most fertiliser for example and there are now fears of a huge increase in food-price inflation over the coming weeks.”

One of the only tools that people have in the face of rising prices is the capacity to shop around. That has been significantly blunted by this announcement.

Many of those who have proactively changed providers in recent months will find much, if not all, of the benefits of switching have just been obliterated by the price hike announced by Bord Gáis Energy and the ones inevitably coming down the tracks from other providers.

Someone who switches from one company to another can take advantage of a discounted rate with the discount applied to the standard unit rate charged. But all rates are variable rather than fixed and always tied to the standard rates charged by a company.

If the standard rate jumps by 40 per cent, then the discounted rate jumps by the same margin.

In terms of supports for those worried about rising prices, people should check if they qualify for any social welfare payments such as the winter fuel allowance or the free electricity allowance, which is paid as part of the Household Benefits Package to all over-70s and some people in younger cohorts.

Most suppliers also have support schemes and flexible repayment-plan options to help customers who are struggling while the Society of St Vincent de Paul and Mabs (Money Advice and Budgeting Service) can also provide help and guidance and, in some cases, financial support.