Dáil debates

Thursday, 11 October 2012

Ceisteanna - Questions - Priority Questions

Gas and Electricity Disconnections

2:45 pm

Photo of Barry CowenBarry Cowen (Laois-Offaly, Fianna Fail)
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To ask the Minister for Communications, Energy and Natural Resources his views on the 30% increase in gas prices over the past year; the actions he will take to keep energy prices down; and if he will make a statement on the matter. [43955/12]

Photo of Pat RabbittePat Rabbitte (Minister, Department of Communications, Energy and Natural Resources; Dublin South West, Labour)
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As Deputies are aware, I have no statutory function in the setting of gas prices, whether in the regulated or non-regulated parts of the market. Responsibility for the regulation of the gas market is a matter for the Commission for Energy Regulation, CER, which is an independent statutory body. Until 1 October 2011, the CER regulated the Bord Gáis Energy tariffs for its residential and smaller business customers, at which point price regulation for the latter group ended. The regulator still regulates the Bord Gáis Energy tariffs for its residential customers. Prices charged to business gas customers are wholly a commercial and operational matter for the suppliers concerned and the same is the case for non-Bord Gáis Energy suppliers to residential customers. Business and domestic customers can avail of the competitive offerings, including discounts from a number of supply companies.


Concerning the most recent increase, I understand a marginal increase in wholesale international gas prices, which are sterling denominated, did not impact on the increase as much as the deterioration in the euro-sterling exchange rate and increase in gas network tariffs. The upward pressure on gas network tariffs is primarily due to a reduction in gas demand and higher financing costs for Bord Gáis Networks, both of which are related to the financial situation here and abroad. In making its decision, the Commission for Energy Regulation takes account of the need to protect consumers from unnecessary price increases by ensuring that only reasonable legitimate costs are recovered by Bord Gáis Energy.


The Government is concerned at the impact of electricity and gas price increases, especially on vulnerable households. Included in the measures taken by the Government to combat vulnerability to high energy prices is the Better Energy: Warmer Homes Scheme. More than 17,000 low income homes will benefit this year from energy efficiency retrofits under the scheme, resulting in lower energy costs and improved comfort and well-being in the households in question. In addition, the Department of Social Protection provides supports for electricity and gas customers and operates a fuel allowance scheme. Some €464 million was disbursed under these schemes in 2011.


The Commission for Energy Regulation is also working with energy suppliers to ensure vulnerable customers are protected through, inter alia, the installation of pay-as-one-goes meters.

Photo of Barry CowenBarry Cowen (Laois-Offaly, Fianna Fail)
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I note the Minister's abdication of responsibility in respect of the role of the Commissioner for Energy Regulation in pricing. On the latest hike in gas prices, it is incredible that in August, when Bord Gáis Energy applied to the Commission for Energy Regulation for a 7.5% increase in residential gas tariffs to commence in October, the regulator not only approved the application but added 1% to the increase requested. The latest hike in gas prices will result in an increase in the average annual bill, which was €700 in 2011, to €1,000 per annum.

As the Minister indicated, the role of the Commission for Energy Regulation is to protect the interests of consumers and act as a brake on the price hiking instincts of utility companies. Against a background of cuts in fuel allowances and the failure on the part of the State, as a major purchaser of energy, to secure discounts, is the Minister satisfied with the role of the regulator? Notwithstanding the Government's best efforts, for example, through retrofitting and the warmer homes scheme, has the regulator acted appropriately in this regard? Do we have a fuel poverty crisis?

Photo of Pat RabbittePat Rabbitte (Minister, Department of Communications, Energy and Natural Resources; Dublin South West, Labour)
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What is happening is being driven by events in the Middle East, North Africa and Japan. The particular matter Deputy Cowen raises about the application from gas companies and the decision of the regulator is a function of how rapidly the position is changing. From the date Bord Gáis Energy submitted its application until the delayed date of the regulator's announcement, the position had deteriorated. A major factor in this deterioration was the decreasing value of the euro against sterling. This and geopolitical events have driven recent developments.

Looking back over recent years, the professional modelling system used by the Commission for Energy Regulation does not vary. If, owing to a set of given circumstances, the model provided for a decrease in price, a decrease was awarded. Similarly, increases are awarded where the model indicates they are warranted. I do not have any basis to criticise the modelling used by the regulator based on the advice available to me. For example, in both half years of 2011, the Commission for Energy Regulation did not give any increase and in the previous half year - to 30 September 2010 - the regulator reduced the price by 8%. In one half year in 2008, the regulator increased the tariff by 20% and in one six month period the tariff was increased by 32%. The regulator applies the model impartially.

Photo of Barry CowenBarry Cowen (Laois-Offaly, Fianna Fail)
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Does the Minister have an opinion on whether the increases in the tariff are causing fuel poverty?