Electric Ireland to tell politicians ‘no choice’ but to raise prices for customers

‘Staggering’ gas price increases mean firm’s wholesale costs up from €300m per year to as much as €2bn

Electric Ireland will tell politicians it had “no choice” but to increase customers’ bills given the “staggering” rise in gas prices.

Its executive director Pat Fenlon is to appear before the Oireachtas Environment committee next week where he will be quizzed by TDs and Senators on the price increases.

The meeting was due to take place on Tuesday but it has been postponed due to the budget.

The company — which is a subsidiary of the ESB — has announced three price rises this year including increases in its standard household electricity and gas prices by 26.7 per cent and 37.5 per cent respectively from October 1st.

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Electric Ireland is the largest electricity supplier in the State with about 1.1 million residential customers.

It has approximately 170,000 residential gas customers.

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Mr Fenlon’s statement will say the ESB’s generation and supply businesses “are required to operate separately, so increased profits from ESB’s generation business cannot be used to offset costs incurred by Electric Ireland”.

This means Electric Ireland “must operate in the residential market as an entirely stand-alone supplier, buying electricity and gas from the wholesale markets and in turn selling it to customers”.

On the price rises, he will say “the significant increases in customers’ bills have been driven by extraordinary and sustained increases in the wholesale price of electricity” caused by increased gas prices “made much more acute as a result of the conflict in Ukraine and reduced Russian gas supply”.

Mr Fenlon will indicate there has been a 1,000 per cent increase in gas prices over 18 months.

“Two years ago, Electric Ireland’s annual wholesale energy costs were in the region of €300 million; at current market levels, we expect that cost to increase to circa €2 billion. Cost increases of this order of magnitude are staggering,” he will add.

His statement will also indicate: “As we operate as a standalone energy supplier in the market, we have no choice but to increase our prices given the quantum of increase in our costs.”

Mr Fenlon will say Electric Ireland is “committed to helping our customers during these challenging times”.

He will note “a lower standard variable tariff for electricity than almost all competitors across the last 18 months” and engagement with customers who have difficulty paying bills.

Vulnerable customers

Mr Fenlon will also say that “disconnections are and always will be a last resort” and he will highlight the regulatory moratorium on disconnections for the winter period for vulnerable customers.

Electric Ireland is also said to have launched a €3 million hardship fun similar to one in place during Covid, which will provide support to Electric Ireland customers who have difficulty paying their bills.

Earlier this month the ESB group reported half-year earnings in 2022 — including a one-off gain from what it called “exceptional volatility” in global commodity markets — jumped to €390.3 million from €128.4 million a year ago.

The group recorded revenue of almost €3.7 billion, which was up from almost €2.2 billion the year before.

Mr Fenlon will say “the most accurate representation of ESB’s underlying financial performance during the first half of 2022 is the operating profit before exceptional items”.

He will outline how in the first half of 2022 this was €357 million compared to €363 million in the first half of 2021, a drop of €6 million.

Mr Fenlon will say that the ESB has recorded exceptional gains in the first half of 2022 compared to 2021 but they relate mainly to the technical accounting treatment of financial instruments and are non-cash gains which are not related to the price paid for electricity by customers.

He will also say: “ESB must earn an appropriate level of profit, so that it can service debt, reinvest in critical networks, renewable generation and other important energy infrastructure, as well as pay tax and dividends to the Government.”

Cormac McQuinn

Cormac McQuinn

Cormac McQuinn is a Political Correspondent at The Irish Times