Dr. Muireann Lynch:

It is tricky. There is a fixed portion that is directly under regulatory control, which is the public service obligation. These days, it only covers renewables, but the renewables component is going up and up. That is just set by the regulator and that is per household. As it is on every single household, it is regressive because it represents a higher proportion of a poorer household's income compared with a higher income household's income. The other part is the fact that the cost base is moving increasingly toward network assets and also the capacity element, essentially, and less and less is coming from fossil fuels and carbon. The way the costs of the network are recouped is by network tariffs, that is, the distribution use of system, DUoS, and transmission use of system, TUoS. At the moment, the supply companies buy their electricity on the wholesale market, which is a variable cost. They pay their network tariffs, which is a fixed cost. It is totally up to them as to how they pass those costs on to their consumers. From what we see on the various retail tariffs, it seems that some suppliers have a higher fixed standing charge and a lower variable tariff. Other suppliers go the other way. However, we do not at the moment have any kind of regulation that says how much of the revenues from the supply companies must come from fixed or variable.

There are really good reasons for that. The question that is being asked worldwide in which policymakers in all jurisdictions are interested is, as we move more and more towards the fixed side of things, if we are charging fixed costs to recoup the variable costs as well and then higher income households can do things like invest in solar panels which means they have to pay even less toward the networks, do we then get a higher network cost being borne by a smaller and smaller proportion of households, within which are disproportionately poorer households? These things can compound on one another.

It is tricky to calculate and we have tried to model this a number of ways. This is a live policy question and the European Union is interested in it as well.