Written answers

Wednesday, 18 September 2013

Department of Communications, Energy and Natural Resources

Energy Prices

Photo of Clare DalyClare Daly (Dublin North, Socialist Party)
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807. To ask the Minister for Communications, Energy and Natural Resources if he is satisfied with the operation of the Office of the Energy Regulator and the reason the rationale for allowing price hikes in gas and electricity. [38027/13]

Photo of Pat RabbittePat Rabbitte (Dublin South West, Labour)
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The Commission for Energy Regulation (CER) is responsible for regulating the electricity and natural gas markets in Ireland. It was established under the Electricity Regulation Act of 1999 (ERA) as the statutory independent energy regulator. Responsibility for the regulation of these markets is a matter for the CER. Prices in the electricity retail market are fully deregulated since April 2011. Prices are set by suppliers, not the CER. It is important to highlight that electricity customers can avail of price and product offerings from a range of electricity suppliers in the competitive market. Up until 1 October 2011 the CER regulated the Bord Gáis Energy (BGE) tariffs for its residential and smaller business customers. CER's regulation of BGE's tariffs for the latter group ended at that point. The CER still regulates BGE tariffs for its residential customers. Prices charged to business gas customers are commercial matters for the suppliers concerned and the same is the case for non-BGE suppliers to residential customers. Both business and domestic customers can avail of the competitive offerings from suppliers including discounts.

In regard to the most recent decision by the CER to apply an increase of 2.04% in BGE's regulated residential gas tariffs with effect from 1 October, this decision followed a review by the CER of BGE's application for an increase. While BGE originally applied for a 7.22% increase in its residential tariff, a separate and subsequent decision by the CER, aimed at increasing bookings for larger customers, resulted in mitigating the level of the rise in the network charges component of prices. This decision, combined with a cut by the CER in BGE's allowable supply costs, resulted in a lower increase than had been requested by BGE. It is also important to note that lower gas demand results in higher network charges as these costs are mostly fixed and need to be paid even when demand reduces. I understand that a marginal increase in wholesale international (sterling denominated) gas prices, which accounts for approximately 50% of Irish gas prices, did not impact on the tariff increase as much as upward pressure on gas network tariffs driven by lower gas demand, which accounts for 40% approximately of a typical gas bill.

In making its decisions on the tariffs, the CER takes account of the need to protect consumers from unnecessary price increases by ensuring that only reasonable, necessary and efficiently-incurred costs are recovered by BGE. The CER is concerned at the impact of electricity and gas price increases on vulnerable households and is working with energy suppliers to ensure that vulnerable customers are protected through, inter alia, the installation of Pay As You Go meters.

As regards the operation of the CER, I am satisfied that the CER has the knowledge, skills, and expertise to carry out its functions in accordance with its statutory mandate. The Electricity Regulation Act provides that the CER shall be independent in the performance of its functions subject to the Act itself. Additionally, Schedule 1 of the Act provides that the CER shall account for the performance of its functions to a Joint Committee of the Oireachtas and shall have regard to any recommendations of such Joint Committee relevant to its functions.

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