Wednesday, 17 November 2021
Saincheisteanna Tráthúla - Topical Issue Debate
I thank the Leas-Cheann Comhairle for selecting this issue.
Energy costs are rising which is really putting pressure on households and businesses. We have all heard reports of the numerous price hikes that energy providers have inflicted on customers all over the country in the last couple of months. At this stage, people who are living alone and those who are struggling financially are desperately trying to figure out how they will meet their energy bills over this winter.
I wish to raise a specific issue that was brought to my attention yesterday by three different constituents, all of whom have the same energy provider. I am seriously concerned about practices related to fixed price contracts with energy providers, the legality of which must be questioned. One small business owner in Thurles contacted me yesterday about a fixed price contract with an electricity provider. At this time of year, the electricity bill for two months of usage would normally be around €1,200 or €1,300 including VAT. The most recent bill shows energy usage amounting to €1,035, excluding VAT. However, the energy provider has included an additional market charge on the bill of €975 for the two months. This small business owner who is trying to manage overheads has received an electricity bill before VAT which is almost double what it would normally be because of a market charge that the energy provider has suddenly added to the bill.
Many business owners and families opt for fixed price contracts so that they have certainty regarding the bills coming through the door, as long as their consumption does not change dramatically. There are pros and cons to fixed charges but to be landed with an additional market charge out of the blue that effectively doubles an energy bill obliterates any certainty on bimonthly bills for those who opt to avail of fixed price contracts. How can an energy provider that has committed to a fixed price contract double the cost of electricity for its customers overnight? I cannot understand it. The provider may point to some small print on bills but the onus is on us to ensure that we protect those who enter into fixed price contracts. They suffered the negative consequences of such contracts when energy costs were lower in recent years but now, when energy costs are rising due to issues outside of our control, they also suffer. I cannot understand how providers can do this to their customers. An increase of 100% for someone on a fixed price contract makes a mockery of the very concept of fixed price contracting. How can an energy provider do this? Is it legal? Surely customers should be made aware when they enter into fixed price contracts that in the event of increases in the cost of electricity, there is scope for significant increases in their bills. Three people contacted me yesterday about this and while the additional charges were not as high as in the case to which I referred, they were all in the region of 70% to 80%. How is this happening? Is it legal? If it is legal, I would like it to be explained fully.
I am taking this matter on behalf of my colleague, the Minister for the Environment, Climate and Communications, Deputy Eamon Ryan. I thank Deputy Cahill for raising this important topic.
The most immediate factor affecting electricity prices in Ireland is the continuing upward trend in international gas prices where we are a price taker. In Europe, wholesale natural gas prices have been on an upward curve since the second half of 2020. This feeds directly through to retail electricity prices, as the wholesale price of electricity correlates strongly with the price of gas. This increase was cited by many suppliers as one of the main reasons they increased their prices recently. The wholesale cost of generating electricity makes up approximately 40% of the final retail price.
The Government is acutely aware of the impact on households of increasing energy costs and its primary response is to utilise the tax and social welfare systems to counter the rising cost of living, of which energy costs are one of the biggest drivers. To address this directly, budget 2022 increased the weekly rate of fuel allowance by 5%. Increases to the qualified child payment, the living alone allowance and the income threshold for the working family payment have also been announced.
The position of successive Governments for almost 20 years has been that competitive energy markets result in greater choice for consumers and businesses in terms of suppliers, products and prices and to support competition to drive down prices.
Operating within an overall EU framework, responsibility for the regulation of electricity and gas markets is solely a matter for the Commission for Regulation of Utilities, CRU, the independent energy regulator. The CRU was assigned responsibility for the regulation of the electricity and gas retail markets under the Electricity Regulation Act 1999 and subsequent legislation. The CRU, the independent energy regulator, has a wide range of economic, customer protection and safety responsibilities in both energy and water. In line with long-standing policy on deregulating price setting, the CRU ended its regulation of retail prices in the electricity market in 2011 and in the gas market in 2014. Given that prices are no longer regulated, they are set by all suppliers as entirely commercial and operational matters by them. Each such company has its own different approach to pricing decisions over time, in accordance with factors such as their overall company strategic direction and developments in their cost base. Data from approved price comparison sites show that consumers can make significant savings by switching energy suppliers. Accordingly, one of the main thrusts of Government policy on energy costs is focused on the competitive market. Government policy has supported competition to drive down prices.
Based on CRU data, active customers who switched supplier or renegotiated with their current supplier every year for the last four years could have saved €704 on gas, €1,097 on electricity or €1,696 on their dual-fuel costs. A recent CRU survey found that more than half of electricity and gas consumers have switched supplier at least once. As part of its statutory role, the CRU also has consumer protection functions and monitors energy retail markets to ensure that competition continues to develop for the benefit of the consumer.
As part of its statutory functions, including under SI 630/2011, the CRU carries out various market monitoring and reporting functions in association with its responsibility to ensure that the market operates competitively for the benefit of the consumer. Under that statutory instrument the CRU may take actions that it considers necessary to ensure that final customers benefit from competition in the supply of electricity and gas.
Measures introduced by the CRU include a stipulation that electricity suppliers provide customers with an estimated annual bill, highlighting the yearly average electricity bill for a particular electricity supplier rather than just the discounted offers. Additionally, suppliers must issue a written notification on an annual basis to prompt consumers who have been on the same tariff or a non-discounted tariff for more than three years to consider switching.
I thank the Minister of State. The reason most of these people were tempted into fixed-price contracts was following promises of reduced costs to them. While I accept what the Minister of State has outlined that much of the increase in electricity costs is outside of our control, it is not all outside of our control and we have made decisions that have impacted on energy price increases. Consumers in my constituency entered into a fixed-price contract. Such a contract is very simple, it means that a person is on that price for better or worse. Because of market trends, the company has added a market charge, which in one case is an increase of 100% in electricity costs. Where are the consumer's rights in this regard? People switched because they were told they would save and they have made savings in recent years but, unfortunately, the saving has disappeared overnight. For these consumers, a 12-month saving is gone in a two-month period. Have electricity suppliers that have offered fixed-price contracts to consumers the remit to put an additional market charge on them? Where are the consumer rights in this regard? Customers signed a contract believing they would have stable prices for the duration of the contract, but the electricity supplier has completely changed the ground rules and has imposed a significant price increase on them. Can suppliers impose a massive increase under the cloak of an additional market change on consumers in fixed-price contracts?
Price regulation ended many years ago. Suppliers must compete with each other on price and set their own prices accordingly, as one would expect in a liberalised market. The independent regulator, the CRU, has functions in regard to these matters, including consumer protection and monitoring the market more generally. I will undertake to refer the query Deputy Cahill has raised today with the CRU. I would be surprised if the Deputy has not done that already himself. If he has, I am interested to hear what it has said in response to him. The CRU has the responsibility to ensure consumer protection in this area and to ensure that consumers are protected and that energy suppliers live up to what they state on the tin, so to speak.
Deputy Cahill raised the high energy costs for businesses. I wish to highlight a scheme that is available for businesses from funding from the Department of Enterprise, Trade and Employment, through Enterprise Ireland. It is worth €10 million and can be used by businesses to improve their energy efficiency. It is totally undersubscribed at the moment. It is a very good scheme. I ask Members of the House to make sure that businesses in their respective constituencies are aware of this scheme because it will help identify where they can create energy efficiency and, accordingly, bring down their overall costs. I will undertake to refer the matter raised by Deputy Cahill to the CRU and I will report back to him.