Mr. Paul McGowan:

I will refer to electricity and gas prices, beginning with a summary of the electricity price drivers in Ireland at present. Some 60% of the price of electricity is made up of the wholesale price of electricity in the single electricity market. That market is regulated on an all-island basis by the committee comprising the utility regulator in Northern Ireland, the CER and an independent member. The biggest cost driver in our wholesale market pertains to gas but it is also fair to say that PSO is a factor in terms of the wholesale price of electricity.

The second major component of electricity prices comprises the networks, a monopoly. That represents approximately 30% of the price. This cost aspect is regulated by the CER. In this area, capital expenditure in terms of the rolling out of networks, both at distribution and transmission levels, is a big cost driver.

The final element determining electricity prices concerns the competitive supply side, that is, the cost of running supply businesses and other associated costs and margins. That represents approximately 5% to 10% of the price of electricity. In this area, given that we no longer regulate the price of electricity in the market, our focus is on customer protection.

The next slide serves to illustrate the weighting the various fuels have in the wholesale market. Members can see that the wholesale market is very much dominated by gas, first and foremost. Some 50% of the power comes from that fuel. It is followed by coal, which results in 19% of the power. Renewables constitute a large proportion, with 16% of the power being from wind.

The first graph I have made available to members illustrates neatly the very strong relationship between the price of gas and our wholesale market price for electricity. The two track each other very closely and have done so pretty much since the market was established. The following graphs illustrate that there is generally a trend of increasing prices for electricity across Europe. Ireland is broadly following the trend but our industrial prices are generally above the EU average and our domestic prices, while closer to the EU average, are none the less above the EU average although slightly below the euro area price.

There are three broad gas price drivers.