Mr. Jim Dollard:

I welcome the opportunity to come before the joint committee to discuss what is an issue of significant importance. I will spend my time talking about a small number of key issues which have an impact on electricity prices on the island of Ireland. The first relates to what drives electricity prices. There are four key factors in this regard, the first of which is wholesale commodity prices. As the CER indicated to the committee last week, it is the main driver of electricity prices in Ireland. Oil accounts for less than 1% of the electricity generated on the island. The second factor is infrastructure costs. I refer to the networks used to bring energy to people's homes. Given the island nature of our system, we are unique in Europe in this regard. The third factor which has an influence is Government policy, which involves support for renewables, security of supply and energy efficiency factors. The fourth factor is the market in the context of the activity of suppliers, their endeavours and practices in supplying customers and the costs incurred in doing so.

The second issue to which I wish to refer is Irish prices as seen in a European context. Intrastat reports indicate that as of June last year, most Irish businesses were paying for energy at prices which were at or below the eurozone average. That is a very important point. Another issue to which I refer in this regard relates to the fact that the Irish residential market is broadly comparable to those of the other countries in the eurozone. The largest category of residential customer in Ireland, which represents the average Irish consumption of energy, is paying 2% below the eurozone average.

In the context of the comments the committee has just heard, Ireland probably has the most competitive market in Europe. The level of switching here is the highest in Europe and, in global terms, is probably right at the top of the league. This means that the market is incredibly competitive.

The third point is wholesale energy costs. That is probably what is causing attention on this industry, particularly at this point in time. Wholesale gas prices have a significant impact on energy costs. They are the driver. Forward gas prices in euro terms fell in 2014 by about 18%. It is important to understand that much of the 18% happened towards the second half of the year. Recent forward prices have risen by about 8% as of earlier this week, in tune with commodities generally. One can see it at petrol pumps where prices are beginning to come up again.

Another factor in wholesale energy costs, as pointed out by CER, is that energy costs represent about 30% of the total electricity price. The other factors are infrastructure costs, Government policy and the cost of supplying customers. One of the key factors in end-user energy costs is the concept of hedging. This is the process of buying power into the future in small slots each month, typically over a 12 or 18 month period. One is trying to protect domestic customers which is essential in a volatile market. Electric Ireland does this on a staged basis over a long period of time. This is common practice around the world in terms of the residential market.

On our approach, Electric Ireland is a State body which has served customers for almost 90 years in this market. We see affordability and confidence in the market as a huge issue. Last autumn Electric Ireland implemented a 2% electricity price reduction before the winter as we considered this to be incredibly important. Be assured that we can give an assurance that we will continue to pass through reductions in wholesale prices if other factors stay static. Margins are modest in this market when we compare with other markets in Europe.

Affordability, be it for domestic, business or small business customers, is a huge issue for our economy. Right through our history we have been focused on that. Things are very difficult for businesses and domestic customers out there. A lot of work has gone into trying, as best we can, to shelter people from the impact of that. Disconnections by Electric Ireland are down 20% this year, a significant reduction in the teeth of an incredible recession. An important tool in helping people deal with arrears in a structured way is the pay as you go meter. We actively support the installation of these meters. The number of customers who have payment plans with us, typically people who are struggling, is beginning to fall. This is a positive development of which we are proud. Electric Ireland has additional protections for vulnerable and elderly customers who are important in this environment.

As wholesale prices continue to fall, Electric Ireland is committed to passing the reductions through. Thank you.