Written answers

Wednesday, 18 January 2012

Department of Communications, Energy and Natural Resources

Energy Costs

9:00 pm

Photo of Bernard DurkanBernard Durkan (Kildare North, Fine Gael)
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Question 141: To ask the Minister for Communications, Energy and Natural Resources the extent to which gas and electricity prices here, both to the domestic and commercial market, are competitive with those throughout Europe; the extent to which it might be expected that the prices here can be brought into line with or become the lowest in Europe; and if he will make a statement on the matter. [2824/12]

Photo of Pat RabbittePat Rabbitte (Dublin South West, Labour)
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I do not have a statutory function in the setting of energy prices, whether in the regulated or unregulated 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. Prices in the retail electricity market are now fully deregulated and from 1 October 2011 gas residential consumers are the only segment of the electricity and gas markets where prices are regulated. Prices in the electricity market and unregulated part of the gas market are wholly a commercial and operational matter for the suppliers. Ireland's electricity and gas markets, both wholesale and retail, are characterised by vigorous competition regulated by the CER.

The Government recognises that the cost of energy in Ireland is a serious competitiveness issue facing energy consumers during this difficult period for the economy. The provision of secure, sustainable and competitive energy supplies is critical for the economy and is a challenge we are determined to meet.

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 electricity and gas prices, as reflected by recent increases in domestic electricity prices announced by the suppliers competing in that market and by CER's decision to allow an increase in BGE's regulated gas tariff for the residential sector.

Given Ireland's heavy reliance on imported gas and oil and relatively small market size, it is a price taker in the global fossil fuel market. The economy is therefore vulnerable to fossil fuel 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 fuel 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.

EU energy Ministers have focused in recent years on bringing about change in Europe's electricity and gas supply and consumption by setting EU targets for 2020 in relation to both energy efficiency and renewable energy. These EU developments have at the same time allowed for Member State subsidiarity in these matters, especially in relation to their fuel mixes. The successful implementation of these policies should contribute to a lesser dependence on fossil fuels, and therefore a lower vulnerability to global price increases in such fuels.

At a national level, 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 are as competitive as possible through those measures at our disposal including sustained focus on energy efficiency and renewables.

The latest analysis of data published by EUROSTAT for electricity and gas prices is published by the Sustainable Energy authority of Ireland and covers the period January to June 2011. The figures show Irish electricity and gas prices performing well by reference to the EU average for medium to large business customers (above 2,000 MWh/annum). The VAT-exclusive electricity price in Ireland for these business consumers ranged from 10% to 17% below the EU average and from 13% to 19% below the Eurozone average. These customers accounted for 48% of the business electricity market. Prices for gas customers were below the EU average by 4% to 25% for most business gas categories.

Larger domestic electricity consumers, representing 64% of the domestic electricity market (over 5,000 kWh/annum) experienced price reductions between 6.1% to 7.6% over the period. The prices for these consumers were between 7% and 19% below the EU average.

In the first half of 2011 natural gas prices for household consumers fell by 3.3%. The EU average for gas price reductions for the same period was 1.4%. For this period the price of gas for Irish householders was 10% below the EU average.

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