Eamon Ryan (Dublin South, Green Party)

The regulation of ESB customer supply electricity tariffs and BGE gas tariffs is the statutory responsibility of the Commission for Energy Regulation under the Electricity Regulation Act 1999 and the Gas (Interim) Regulation Act 2002. The CER does not apply tariff regulation to large users of electricity or gas. There is enough competition at the upper end of the markets to allow customers to receive competitively priced offers without the need for price regulation. The majority of these large industrial and commercial electricity users are now supplied by independent suppliers. Many of these large industrial consumers are on tariffs directly linked to commodity prices or single electricity market prices. These companies have directly and regularly experienced the benefits of falling fossil fuel prices in recent months.

I welcome the CER's decision to reduce regulated electricity tariffs by 10% and gas tariffs by 12% from 1 May following the first-quarter review of tariffs it undertook at my request in light of the economic circumstances and the decline in fossil fuel prices. The commission's decision on electricity tariffs reflects the fall in international fossil fuel prices, which follows a period of sustained increases in oil, gas and coal prices. The CER's decision on gas tariffs reflects the lower gas costs, exchange rate developments and increased sales during the winter months due to the particularly cold weather. Under the regulatory regime, these tariff decreases would have taken place from 1 October. There is still scope for a further reduction in gas tariffs from 1 October if wholesale gas prices continue to remain low. The likelihood of a further reduction in electricity tariffs is limited.

The CER is required to assess the costs underlying regulated tariffs to ensure they are fully cost reflective. Energy prices have fallen by less than the overall fall in global fuel commodities because the CER took steps in 2008 to ensure that when international oil, gas and coal prices were increasing rapidly, customers were insulated from the worst effects of the spike in fuel prices. Additional information not given on the floor of the House. The CER's approach in 2008 took account of the emerging difficulties in the economy and the negative impact of large-scale price increases on business and consumers, including vulnerable customers. With the dramatic increase in gas prices, we faced potential electricity and gas tariff increases in the range of 30% to 40% from 1 October 2008. In order to prevent such dramatic increases the CER decided to adopt a two-phase approach to its pricing process. This involved a lower increase in the summer of 2008, which meant selling electricity and gas below the full estimated cost for that period. These costs then had to be recovered in 2009, but the potential price increase was offset by falling gas prices and an ESB rebate of more than €300 million negotiated by the CER for all electricity customers.

This approach meant that when fossil fuel prices were increasing exponentially in early and mid-2008, the CER decided on an increase of 17.5% in the price of electricity and 20% in the price of gas. These increases were significantly lower than the wholesale price of gas would have suggested. In contrast, some of our European neighbours saw much steeper price increases.

The comparatively high energy costs in Ireland have been an acknowledged issue for the enterprise sector for a number of years, despite the overall relatively low energy intensity of Irish industry. This concern has been exacerbated for business in the current economic climate. A range of policy actions are underway that aim to mitigate energy costs in the medium term as well as reviewing all possibilities to reduce the extent of the price differential for the enterprise sector. This work is of the utmost priority for my Department, working with the CER and all key players, in the very challenging economic environment for business.

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