The size of heating and lighting bills landing on doormats and in inboxes in recent days have left people across almost all sectors of Irish society reeling. For thousands of households, this was the week when the theory of energy cost inflation became a reality.
The steep rise in utility bills, coupled with January credit card payments, rising interest rates and hiked grocery prices, has left many revising upwards the expected impact of the cost-of-living crisis.
In February of last year financial commentators and experts were suggesting that the worst of the inflation spike would be over by the summer, while The Irish Times, almost exactly 12 months ago, suggested that Irish households would be worse off by about €2,000 over the course of the year ahead.
It is now all too clear that a shortfall of €2,000 was wishful thinking and, with five successive interest rate hikes from the European Central Bank (ECB), a doubling of energy bills, fuel on forecourts flirting with €2 for many months, and the cost of groceries climbing by more than 15 per cent, many if not most households were worse off by well in excess of €4,000 over the course of the last 12 months.
And while there is a cause for optimism in some respects, in other areas things are getting worse.
“Things are very grim,” says Rose McGowan, president of the Society of St Vincent de Paul (SVP), as she recalls a visit this week to a woman with emphysema living alone and trying to get by on the weekly State pension of just over €265 while feeding €70 a week into an increasingly voracious prepay energy meter.
“This woman had called our team looking for food but, even though that was her request, it quickly became clear it was all about her energy bill.”
Given her chronic medical needs, heat is essential to the woman’s wellbeing and McGowan was shocked when she greeted her at the front door “huddled in a dressing gown” having taken to her bed simply to stay warm and unable to keep the heat on for too long.
It is just one of many depressing stories McGowan has to illustrate how hard the cost-of-living crisis has been hitting people over recent months. Last year, the charity handled 228,301 calls for help, an increase of 19.5 per cent compared with 2021. The number of first-time callers increased by 24 per cent last year with food shortages, high energy bills, education bills and the cost of household goods the most common reasons for people to seek help. All told, 66 per cent of requests came from households with children and about 45 per cent of those were from people parenting alone.
We have people putting their children to bed at night and worrying that they have nothing for their breakfast in the morning— Rose McGowan, president of the Society of St Vincent de Paul
McGowan says the main issues people are struggling with are food and energy poverty and difficulties paying rent but she also points to the impact the cost-of-living crisis is having on the mental health of callers.
“People are suffering, I don’t know how some people get up in the morning. They are out the door with bills. I am around a long time, we wouldn’t have been visiting a lot of people who have jobs but I am visiting them now. We have people putting their children to bed at night and worrying that they have nothing for their breakfast in the morning.”
Dozens of readers of The Irish Times sent us details of their utility bills earlier this week with the vast majority telling us they had doubled at the very least, often despite the fact that usage over the winter months this year was significantly down on 2021.
Irish Times columnist Jen Hogan’s bill was worse than most. At the start of the week she opened the gas bill covering the period from November 26th to January 28th and was horrified to see that it was €1,186.22.
“It was €559 for the same period last year and we are with the same company,” she says. “That is just our gas and it is just our heating. I don’t know how anyone is expected to pay a bill that big. I couldn’t believe it and I was knocked for six. My first thought was that it couldn’t be right. I live in a four-bed semi and while it is an old house we have modern windows and we do what we can with insulation. I just can’t understand it. People will say we have loads of kids but the house is heated the same if there is one person in it or nine. It is just such a depressing start to 2023.”
Muireann Lynch is an energy expert with the ESRI and says the sky high bills which have arrived in recent weeks are an inevitable consequence of the geopolitical turmoil caused by Russia’s invasion of Ukraine last February. She expresses hope that we may have lived through the worst of the price hikes but warns that, while we might not see a fresh round of increases, there is no sign that prices will be falling any time soon.
“It seems that wholesale markets have finally calmed down a little bit and, therefore, retail markets have kind of calmed down in response. But they’ve calmed down at a very high level.”
She says that what happened on gas markets last year “was a little bit unusual. We saw very high wholesale prices in the summer because we were shoring up our gas storage as much as we possibly could. So the really high gas prices were actually seen over the summer, and the diurnal pattern of high prices in winter and lower prices in summer didn’t manifest this year, but that was due to the particular dynamics of storage.
“Barring any further shocks, I think it would be unlikely if we saw the kind of hikes we’ve seen again. What I’m less certain of is whether they will stabilise at this high price level, or whether we’ll eventually see some fall.”
When people are presenting with those types of bills [in excess of €6,000], it is because they have been pushing out payment of them because they can’t afford food and other daily living costs— Ursula Collins, from the Money Advice and Budgeting Service (Mabs)
Gas futures markets remain at very high levels. “So even though wholesale prices right now are actually lower than they’ve been in recent months, future markets are not coming down to the same extent. That would give us a hint, we may stabilise at these higher prices.”
Ursula Collins from the Money Advice and Budgeting Service (Mabs) believes that, while energy prices might be easing, the impact of the ECB interest rate hikes is going to hit people hard, including both mortgage holders and people with personal loans.
She says the high cost of energy “has continued to be probably the highest demand issue” and she says Mabs has dealt with people with bills of in excess of €6,000. “That is clearly an indicator of a much broader problem. When people are presenting with those types of bills, it is because they have been pushing out payment of them because they can’t afford food and other daily living costs.”
Eoin Clarke of price comparison site Switcher.ie is more optimistic, saying “it appears wholesale gas prices have peaked and the energy shocks of 2022 should be behind us. It could be a while until consumers see any price drops reflected in their bills, but with spring on the way, households can breathe relief. Now we’re through the cold, dark winter months, there could be light at the end of the tunnel.”
He points to a recent move by Flogas to launch the first fixed rate tariff for several years. This “hints at stability and confidence returning to the energy market after a turbulent couple of years, but Government help could melt away, so it makes sense to remain energy aware”, Clarke adds.
On the horizon are a planned increase in the VAT charged on gas and electricity bills and the removal of the current excise duty reductions on petrol and diesel. Both are set to take effect at the end of the month, which could add hundreds of euro more to the typical Irish household’s annual costs.
On a slightly more encouraging note, headline inflation in the Irish economy fell to below 8 per cent in January, according to a Central Statistics Office estimate this week. Prices are estimated to have risen by 7.7 per cent in the 12 months to January this year, down from 8.2 per cent in December.
While the trajectory may be downwards, most forecasters believe it will take many months, if not years, however, before the cost-of-living crisis comes close to an end.