Written answers

Tuesday, 27 April 2010

Department of Communications, Energy and Natural Resources

Energy Prices

12:00 pm

Photo of Brian O'SheaBrian O'Shea (Waterford, Labour)
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Question 55: To ask the Minister for Communications, Energy and Natural Resources his policy in relation to ensuring competition in the gas market; and if he will make a statement on the matter. [16658/10]

Photo of Eamon RyanEamon Ryan (Dublin South, Green Party)
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The Irish gas market has been fully opened up to competition since July 2007. Experience in other markets has shown that there is a time lag between full market opening and the emergence of fully viable competition. The very small size of the Irish gas market by international standards, with some 640,000 customers, adds to the challenge of creating competition.

Competition in the upper segments of the market is continuing to develop and there are now eight licensed suppliers. The largest users of gas are the power generating stations and a small number of large energy users (LEUs) who account for 66% of total gas demand. This segment is not regulated by the Commission for Energy Regulation (CER). Large commercial and industrial customers account for a further 10% of the market in volume terms. There are about 245 customers in this category. The current regime of regulation in this sector is known as the Regulated Tariff Formula (RTF) regime.

The RFT is based on the gas commodity cost, transmission and distribution costs, plus margin. This regime was introduced as an interim measure in 2003 to encourage competition in this sector. At that time Bord Gáis Energy (BGEnergy) had 100% of the market of the sector. In volume terms BGEnergy now has 39.8% of the sector with the independent suppliers holding the balance. I am advised by the CER that their current review of the RTF is in line with its commitment to keep under regular review the case for retaining or removing the RTF regime. Public consultation on this review has recently closed and I expect the CER to make a balanced and evidence based decision on the issue taking appropriate account of various perspectives. A decision is due to be taken by end May.

The smaller Industrial and Commercial customers are regulated by the Fuel Variation Tariff segment (FVT). They account for only 4% in volume terms of the market. This segment is also regulated by means of a price regulated mechanism. The domestic gas tariff continues to be regulated with the CER setting the BGE supply tariffs twice a year. Pending the emergence of meaningful competition, the CER has no immediate proposals to deregulate either the FVT or domestic segments. BGE supply tariffs for domestic customers will continue to be set on a twice yearly basis by the CER.

The nature of regulation is to drive improved efficiencies and to lower costs in areas that are under regulatory control. This is designed to benefit customers first and foremost. The CER has stated that it will consult on a road map for deregulation in the gas retail sector, analogous to the new road map for deregulation of the electricity retail sector, when the time is appropriate. I welcome that commitment. The continued entry of new suppliers into the gas market, with both Phoenix and ESBIE entering in 2009, demonstrates that regulatory policy to underpin the growth of competition in gas supply has paid dividends for consumers.

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