PUTTING OFF recently proposed gas and electricity price increases will hit long-term competitiveness and slow the modernisation of the Republic’s energy networks, one industry player has warned.
Last week it emerged that the Commission for Energy Regulation (CER) is unlikely to grant electricity and gas price increases sought for last January by State operators, the ESB and Bord Gáis Éireann, as oil prices, which determine both the costs of companies, have fallen on world markets.
Harry McCracken, managing director of one of the ESB’s main competitors, Dublin-based Viridian Power and Energy, warned yesterday that deferring the price increases was not in the long-term public or economic interest.
“Low investment in energy infrastructure in the 1980s and 1990s and an ageing generation of power plants has contributed to the current high costs of energy in Ireland today,” he said.
“The drive for short-term tariff freezes at that time resulted in a lack of proper investment and customers and the economy are paying for this legacy position today.
“Ireland will suffer long-term competitiveness issues if this mistake is repeated.”
Mr McCracken added: “The setting of tariffs must be cost reflective. While falling fuel commodity prices throughout November may reduce the impact of proposed increases, this does not reduce the need for continuing investment in energy and other infrastructure which is a serious and long term issue for Ireland.”
The ESB and Bord Gáis Éireann own the Republic’s electricity and gas networks. Both companies are obliged to allow rivals to use their networks to supply their own customers, thus any problems with these systems will hit independent operators as much as both State companies.
The Commission for Energy Regulation sets the prices that both State companies charge their domestic and business customers.
The regulator has to take their costs into account as well as the need for both to maintain and invest in their respective networks and other infrastructure.
Independent electricity players also tend to benchmark their prices against those charged by the ESB, so that a CER-approved price increase could signal an increase in prices charged to businesses and large organisations who buy power from the State electricity company’s competitors.
The ESB is the sole supplier of electricity to the Republic’s 1.78 million householders, although both Scottish Southern Energy and Bord Gáis Éireann intend entering this market as well.
Scottish Southern Energy also intends to compete with Bord Gáis Éireann for its domestic gas business.
A number of players, including Scottish Southern, Bord Gáis Éireann, Viridian and others, are already competing with the ESB to supply industries and business with electricity.
Mr McCracken said yesterday that competition in the electricity market had delivered €40 million a year in savings.
