Gas prices are set to rise by at least 22 per cent from the beginning of October after the Commission for Energy Regulation (CER) announced that it will approve increases next month.
Bord Gáis Energy had initially applied for a 28 per cent rise in its residential gas tariffs after a steep climb in wholesale prices since the start of the year.
The regulator said today that after reviewing the submission, it had made a provisional decision to sanction an increase of 6 per cent less.
The average domestic gas bill in the Republic is €720 a year and an increase of 22 per cent will see bills increase by just under €160 a year.
Earlier this month, Bord Gáis Energy announced an electricity price increase of 12 per cent, which will add a further €144 to consumers’ bills.
Bord Gais Energy is understood to have sought the 28 per cent increase in order to offset the growing problem of bad debts and substantially increased costs associated with the managing the administration of payments.
It now has more than 114,000 customers in arrears of two months or more, an increase of 300 per cent on 2010 and made provisions for bad debt of about €26 million in its annual report which was published in April.
However, the regulator has refused to allow the company to factor these higher costs into its price increase submission.
It said the main reason for the requested rise was the higher wholesale cost of gas in the international markets. It pointed out that nearly all of Ireland’s gas was bought externally and said the cost accounted for half the price of gas paid by Irish customers, while the rest is determined by transmission, distribution and administrative costs.
It said out that a drop in international wholesale gas prices from late 2008 led to significant falls in gas prices for Irish customers by 25 per cent. “Unfortunately, the wholesale gas price has risen dramatically again, more than doubling in price over the last two years. This means that a significant rise in regulated residential gas prices is now unavoidable,”
Major price rises have recently been announced in neighbouring jurisdictions for the same reason. For example, UK suppliers have increased their gas prices by approximately 25 per cent over the last year.
The CER said it accepted that gas price rises would add further to the pressure faced by many customers in the current economic climate, but said that “wholesale gas costs are not something that Ireland controls.”