Dáil debates

Thursday, 15 January 2015

Topical Issue Debate

Energy Prices

4:35 pm

Photo of John O'MahonyJohn O'Mahony (Mayo, Fine Gael)
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I thank the Ceann Comhairle for selecting this important topic which needs urgent attention. I also thank the Minister, Deputy White, for coming in to reply.

It is a simple matter. The prices of oil and gas have plummeted over the past few months but this has not been reflected in energy bills, that is, the electricity and gas bills that are dropping through the letter boxes of homes and business. In fact, the opposite is true because there was a recent increase in the public service obligation, PSO, charge.

From the point of view of companies, this is not acceptable. If the price of fossil fuel had gone in the opposite direction we would be told that Ireland, as a small country with no oil and little gas, has no control over the international prices and that would be a reason for hiking them. However, when the opposite is the case, it does not happen the other way.

I listened with interest to the energy regulator in a media interview. I accept what the regulator states, that she does not have a role in fixing the prices - either increasing or decreasing them - and that is taken care of through competition between the companies. However, the evidence does not support that argument. In other words, prices are not coming down.

The price of Brent crude oil today was $47 a barrel. The average price in 2014 was $110 a barrel. That represents a considerable decrease. I acknowledge that gas prices have fallen by 27%, but it is still a major decrease.

We have seen fuel prices, both for petrol and diesel, dropping at the pumps in recent weeks despite the Government tax take remaining constant and there should be capacity for a bigger decrease to be reflected in ESB and gas bills, but that has not happened. In fact, as I stated, the opposite is what is happening.

It has also been suggested that, with competition, consumers can make savings by switching from one provider to another. While there are incentives to switch, consumers must also sign a contract which ties them to a provider for a minimum of 18 months and the original decrease due to changing disappears after a few months. That should not be the only way that consumers can make savings on energy bills. Consumers have changed provider without reading the terms and conditions and found that they were tied in for 18 months. If the companies are suggesting that consumers can make savings only by switching provider, I have another suggestion. The simple suggestion is that the bills should reflect the price of fossil fuels on the international market, and that has not happened.

Photo of Alex WhiteAlex White (Dublin South, Labour)
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I thank Deputy O'Mahony for raising this issue.

The Government is acutely aware of the financial challenges faced by families and businesses from high electricity prices. However, it is important to note - the Deputy has fairly acknowledged this although the consequences of it are a matter for debate - that the electricity and gas markets are commercial, liberalised and competitive and they operate within national and European regulatory regimes, supported by legislation.

Responsibility for electricity and gas market regulation is a matter for the Commission for Energy Regulation, CER, which is an independent statutory body. The CER is focussed on actions to mitigate costs for business and residential consumers, such as rigorous scrutiny of network costs, deeper integration with European energy markets and the delivery of a truly competitive market in the interest of customers. My officials continue to liaise with the Commission for Energy Regulation on all these matters. Indeed, there was a meeting earlier today in this respect. The commission also continues to monitor the electricity and gas markets to ensure that competition continues to develop and that customers benefit from competition.

At a national level, electricity and gas prices are no longer regulated by the CER. The competitive energy market results in choice for consumers and businesses in terms of suppliers, products and prices and this exerts downward pressure on prices.

The reduction in wholesale gas prices since the beginning of 2014 has led to reductions in the wholesale electricity price. It should be noted that wholesale electricity prices tend to reflect the price-setting fuel in the market, which is natural gas, not crude oil. It is worth noting that only 1% of electricity was generated from oil in 2012. Lower wholesale gas prices in 2014, compared to 2013, should have a knock-on impact on retail prices and this is reflected in the latest EUROSTAT figures published by the Sustainable Energy Authority Ireland, SEAI, on 9 December last. However, I should caution that wholesale gas prices have been rising since the summer of 2014 and this rise is likely ultimately to feed through to retail electricity and gas prices.

The SEAI report shows that all business consumption bands in electricity and gas experienced reductions in average prices in the first half of 2014, ranging from 0.7% to 4% in electricity and 6.7% to 12.9% in gas. Similarly, in the first half of 2014 EUROSTAT figures show a reduction of 5.7% in the average price of gas in the residential consumption band with the largest share of the market. The average price of electricity in the residential consumption band with the largest share experienced a reduction of 1.3%.

Electric Ireland, the larger supplier of electricity in this country, reduced its unit rate for domestic customers by 2% in November 2014.

I listened carefully to what the Deputy said about switching, but it remains true that consumers can and in many cases have mitigated electricity and gas prices by shopping around to get the best possible price and service deal from suppliers. I would encourage people to continue to do so. Measures such as comparison websites, approved by the regulator, are there to assist people in this endeavour. Even if customers wish to remain with their existing supplier, they should contact that supplier and insist that they be placed on the best possible offering.

I realise that energy supply companies have not automatically passed savings on to their customers, but I expect that savings will feed through to domestic prices in due course. However, all supply companies offer competitive deals to customers who switch or engage with their suppliers. For example, a customer can go online today and achieve a discount of approximately €150 per annum by switching from the standard rate electricity offering and also more than €150 on gas by switching from the standard rate. That equates to a saving of more than €300 a year by switching electricity and gas suppliers.

However, I fully appreciate that some customers, particularly older and more vulnerable people, are reluctant or feel unable to switch. In this situation I urge all stakeholders, including the energy companies and the regulator, to make the more vulnerable customer categories aware of the most competitive offerings available and to facilitate their transition to the best value deals in the market. I intend to meet the chief executive officers of the various energy supply companies in the very near future to outline the Government's concerns regarding these matters and to insist that they offer their customers, our citizens, the best value available in a competitive, liberalised market.

4:45 pm

Photo of John O'MahonyJohn O'Mahony (Mayo, Fine Gael)
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I am not suggesting that the Minister sets the prices. I also accept that the energy regulator does not set the prices. I heard an argument to the effect that energy companies must buy supplies in advance and that the current prices reflect the price of fuel bought at a higher price. If that is true then we should expect a reduction in the coming months, because I presume they are taking advantage by buying fuel at the current lower price.

The Minister provided a lot of facts. I refer to an article from The Irish Timesfrom 29 December 2014 which suggests that the wholesale price for natural gas fell by 27% in 2014. As far as I am concerned, that reduction has not been reflected in the price paid by domestic consumers. I noted yesterday the point made by the National Competitiveness Council that this country has higher than average energy prices which restrict job creation. That matter must be addressed. We are all aware of it. I am not the only one saying it; the National Competitiveness Council has also made the point.

I wish the Minister well in his forthcoming meetings. There is a need to do something, because the ordinary person sees prices going up very quickly but they do not drop as quickly. That is not a good message to send. We must get to the bottom of the matter. As Chairman of the Joint Committee on Transport and Communications, which also deals with energy, I intend to tease out the matter further with the energy companies and the regulator.

Photo of Alex WhiteAlex White (Dublin South, Labour)
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I again thank Deputy O'Mahony for raising the issue. He referred to his perspective as Chairman of the joint committee. He exercises his important role assiduously in this regard, as indeed in other areas within the remit of the committee. It is important - and perfectly natural and reasonable - that this issue should be debated publicly and in this House. The Deputy has fairly acknowledged the legal framework in respect of the fact that we have a liberalised market and there are no price controls, as such, but he raises very good points, particularly with regard to the reasonable expectation that if purchases are made at a lower price this would have a consequent positive implication for customers and businesses in the future. Deputy O'Mahony is correct to be vigilant and I will join him in that regard. I look forward to meeting with the chief executives of the supply companies. I have no doubt the issues raised by the Deputy can feed into the discussion.

The Dáil adjourned at 5.25 p.m. until 2 p.m. on Tuesday, 20 January 2015.