Written answers

Tuesday, 19 July 2011

Department of Communications, Energy and Natural Resources

Energy Prices

10:00 pm

Photo of Michael Healy-RaeMichael Healy-Rae (Kerry South, Independent)
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Question 324: To ask the Minister for Communications, Energy and Natural Resources if he will review a matter (details supplied) regarding energy costs. [21249/11]

Photo of Pat RabbittePat Rabbitte (Minister, Department of Communications, Energy and Natural Resources; Dublin South West, Labour)
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I have no statutory function in the setting of energy prices, whether in the regulated or non-regulated market. Responsibility for the regulation of the electricity and gas markets is a matter for the Commission for Energy Regulation (CER), which is an independent statutory body.

The electricity retail market is now fully deregulated and CER has announced that the small to medium business segment of the gas market will be deregulated from 1 October next. Business and domestic customers can increasingly avail of the competitive offerings from a number of electricity and gas supply companies. The first step that business customers should take to reduce their energy costs is to work actively in securing better value offers in the market and in switching to suppliers delivering lower prices. This is resulting in positive outcomes as is evidenced by improved competitiveness in the gas and electricity sectors when compared with other European countries.

Eurostat data for 2010 showed such convergence to the EU average for many categories of business and residential consumer in both the electricity and gas sectors. Analysis by SEAI shows that average residential gas prices for the majority of Irish gas consumers went from being 4% above the EU average at the end of 2009 (or 8th most expensive out of 25 countries analysed by Eurostat) to being 8% below the average in the second half of 2010 (or 13th most expensive of 25 countries analysed). Business electricity prices for 2010 fell by over 10% for most consumers and electricity costs for business ranked between 6th most expensive in the EU to 15th most expensive at the end of 2010. In the two year period between the end of 2008 and the end of 2010, Ireland has moved from 7th most expensive to 14th most expensive in the smallest segment of the market by band share and from 11th most expensive to 17th most expensive in the largest segment of the market by band share.

The convergence to the EU average in business electricity and gas prices over the last two years has been an important factor in supporting greater competitiveness for Irish enterprise and foreign direct investment.

Global gas and oil prices have risen sharply since the start of 2011 driven by events in North Africa and Japan and high demand from the emerging economies of China and India. There are clear indications that international oil and gas prices will rise further over the coming months. These trends are leading to higher domestic gas and electricity prices as shown by Bord Gáis Energy's recent 12% increase in domestic electricity tariffs and their application for an increase in tariffs in the regulated gas sector.

Ireland is a price taker in the global fossil fuel market and the economy is therefore vulnerable to energy price fluctuations and price rises. Competitor countries are in many instances facing the same prospect and the objective in the context of higher global prices must be that we retain or improve our competitive position. Ireland's concerns about high oil and gas prices are shared at EU level and fellow Member Countries of the International Energy Agency (IEA). The EU and IEA agree that high fossil fuels prices which pose a threat to economic recovery underline the need to reduce dependence on fossil fuels by radically enhanced energy efficiency measures and the development of renewable energy.

I acknowledge the action taken over the last two years to bring Ireland's energy prices into line with, or below, European averages. Our competitive energy market helps put downward pressure on prices. In addition, we must focus on all possible additional actions to mitigate costs where possible for business and domestic customers. This is essential for competitiveness, employment and for economic recovery. I am committed to working with enterprise and with the energy sector to ensure that the costs of energy for business are as competitive as possible through those measures at our disposal including notably a sustained focus on energy efficiency.

In the latter context I would urge all businesses of whatever size to place a relentless focus on energy efficiency. The Sustainable Energy Authority of Ireland (SEAI) is available to provide advice and, subject to available resources, financial assistance in this respect. In addition, there is now extensive tax relief available to businesses under the accelerated capital allowances (ACA) scheme for energy efficient technologies.


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