Ms Laura Brien:

While there has been a great deal of information in the press recently about the 50% drop in oil prices, oil prices do not impact on the retail prices for either electricity or gas. Oil-fired generation accounts for less than 1% of the generation in Ireland, so the 50% drop in oil price will not feed through into a drop in the retail electricity or gas prices. Natural gas prices are what matters in this context. They have the big impact. About 95% of the gas consumed in Ireland comes from Great Britain, which is one of the most liquid and transparent wholesale markets in Europe. In that context, the gas cost is out of Ireland's control. We are a price taker in that we accept the wholesale price from Great Britain. In the context of fuel price declines, gas prices have declined by about 18% over the last 12 months in euro terms. They have declined a bit more in sterling terms, but since the euro has weakened against sterling, we get a correspondingly lower reduction in gas costs in Ireland. While that 18% is significant, it is not the 50% we have seen on the oil prices. The British price counts for about 50% or more of the cost of gas delivered in Ireland, the rest of which is the cost of delivery, that is, the cost of the network of pipes.

We have not seen a similar reduction in retail prices because of the decline in gas prices but this is partly because suppliers buy ahead at fixed-price contracts, a practice often referred to as "hedging", on both the electricity and gas sides. That is to provide greater retail price stability. It works both ways. It tends to take about six months for a change in fixed-price contracts to feed through into retail prices, so when the spot price is declining, the fact that there are fixed-price contracts means that there is a slower rate of decline that feeds through into retail prices. Similarly, if spot gas prices were rising, we would see a slower response to a price increase. The graph on slide 5 of the presentation, in which the red line reflects the euro value and the blue line reflects the sterling value, shows that while we have seen a decline in wholesale gas prices, headline sterling gas prices have dropped closer to 25%, while there has been just a 16% to 18% drop in euro prices.

How do Irish electricity and gas prices stack up compared to the rest of Europe? The graphs here come from the most recent EUROSTAT report, which was published in December 2014. We have highlighted Ireland in the graph on slide 6 so it is easy to see where we are with respect to the rest of Europe. Domestic electricity prices, shown in the graph on the left, are marginally lower than the euro area average and business electricity prices are approximately the same as the euro area average. We are in there with other European countries. The difference compared to some of the lowest-cost countries is primarily explained by our generation mix. The majority is gas, while those countries with coal-fired generation or hydro-generation have lower generation costs. We also have a relatively low density population, which is dispersed, meaning that we have relatively higher network costs because we need more kilometres of wires to service a similar population.

Slide 7 shows recent trends in gas prices. This is the same report that was published in December 2014 by EUROSTAT. We are about 6% lower than the euro area average for domestic gas prices and around the average for business customers.

Our location on the periphery of Europe has an impact because, while we have the opportunity to buy at the British wholesale market price, we have additional transportation costs and the cost of networks to ship it primarily from Scotland to Ireland.

Members may also be aware of recent domestic price changes. We have seen the reduction in gas prices feed through into wholesale electricity prices and they have, in turn, led to reductions in the prices charged to domestic customers. The prices listed apply to both the standard charges of each supplier and the discounted charges. The reductions range from 2% to 4% on electricity and 3.5% to 4% on gas. The CER welcomes the reductions and we think it important that they have applied to both standard and discounted charges such that all customers will benefit from lower prices.

The overview provided by Ms MacEvilly indicated that the CER does not regulate end-use retail prices for customers. However, significant benefits come to customers from retail competition. We regulate and oversee the terms and conditions offered by suppliers but we do not fix the prices for end users. Strong competition and price deregulation have helped to deliver competitive prices and innovative products as well as more choice to customers. We have also seen this by the entry of new competitors into the market over the past years. Standard rates have declined and we have seen increased availability of discounted offers for customers who switch suppliers. We think retail competition is working in Ireland, as evidenced by the switching rates. This is the rate at which customers choose an alternative supplier in response to the offers available. Switching rates in the Irish gas and electricity retail markets are high. In the 12 months to the end of 2014, just over 16% of electricity customers switched suppliers and just under 16% switched in gas. These are significantly higher rates than in other European countries. They are also higher than those of our nearest neighbour, Britain, where the most recent data show 12% of electricity customers and 11% of gas customers switched.

Switching supplier is simple, fast and free and has no impact on the cost of supply. All that is needed is the meter number and payment details. It is easy to do it over the telephone or online. For customers to get the best deal, we recommend shopping around. The CER credits two price comparison websites that provide lists of all available price offers. People can also contact the suppliers to see if a lower tariff is available. If they are happy with the existing supplier, there may be better offers than the standard tariffs.

The CER actively overseas customer protection through the licensing of suppliers and monitoring of their activities. We do so on an ongoing basis and audit the operations of suppliers to make sure they are complying with terms and conditions of codes of practice. We also actively monitor the operation of the market through examining market share and switching rates. We also monitor the level of disconnections and report regularly on price plans. We have a role with regard to customer complaints and overseeing how suppliers deal with customer complaints and follow-up where it is not appropriate.