Tom Hayes (Tipperary South, Fine Gael)
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Question 182: To ask the Minister for Communications, Marine and Natural Resources if his attention has been drawn to the likely negative impact on the economy here of electricity or gas price increases; if his attention has further been drawn to the fact that such price increases are likely to be passed on to the consumer; if he has a strategy in response; and if he will make a statement on the matter. [28029/05]

Noel Dempsey (Meath, Fianna Fail)
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As the Deputy will be aware, I do not have any function regarding the pricing of gas and electricity. This falls within the statutory remit of the Commission for Energy Regulation, CER, the independent regulator for electricity and gas.

I am advised by the CER that as regards electricity prices, the regulated ESB public electricity supplier, PES, prices will increase by an average of 4.11% from 1 January 2006. For domestic customers, the increase will be 3.1%, while for large energy users — commercial and industrial — the increase will be approximately 8.04%. However, the tariff increase which will seen by each individual business customer may be higher or lower than these average figures depending on that customer's level of consumption and consumption pattern.

Electricity price rises have a modest affect on inflation in the economy. Information supplied by the Central Statistics Office to the CER indicate that for every percentage increase in the retail price of electricity, the impact on the consumer price index is only 0.01774. Therefore, the approved 4.11% increase will add 0.0729 to the CPI. The CER has carried out a detailed review of the costs being faced by ESB PES for 2006 in supplying electricity and is satisfied that the tariff increases allowed are correct to cover these costs.

The increase in tariffs for 2006 is primarily driven by increases in the costs of generation for 2006. Oil and gas prices have risen by 50% and 60% respectively in the past year. The average cost of generation to ESB PES has increased from €69.50 per megawatt hour to €89.00 per megawatt hour, wholesale electricity, an increase of 28%.

It should be noted that the CER has also approved reductions in transmission and distribution costs. These savings are seen not only by PES customers but by all customers. Transmission tariffs are 6% lower in 2006 compared to 2005, while the cost of distribution is 10.7% lower in 2006. The PSO levy for 2006 is also 60% lower than the PSO in 2005, a fact which will see an overall reduction in fixed charges on most customers' bills. Furthermore the CER has recently completed a five year review for 2006 to 2010 of ESB's transmission, distribution and supply businesses. This review will impose significant downward pressure on these components of the final tariff over the next five years.

With regard to gas, the CER approved an increase of 25.26% to Bord Gáis energy supply, BGES, gas supply tariffs for the non-daily metered sector. In its application, BGES requested a revenue requirement of €535.88 million or an overall increase of 33.63%. The effect of the approved tariff increase on inflation is 0.135%.

I am advised that the level of price increase was unavoidable due to the high gas costs in the international natural gas market over which neither the CER nor BGES has any control. BGES procures most of its gas from the UK market. Wholesale gas prices in the UK for the year 2005 to 2006 are 69% over last year's levels.