Homes and businesses could face further energy price rises despite sharp falls in European natural gas prices, it has emerged.
“Spot” prices for natural gas to be delivered the next day have fallen significantly in Britain, where Ireland buys most of its needs, since September, trading at 33 cent a therm on Tuesday against a brief 600 cent high in August.
Gas prices determine energy costs here as the fuel is used to generate half of Ireland’s electricity, while many homes and businesses also rely on it directly. However, leading Irish electricity and gas suppliers are not ruling out further increases in their charges, blaming continued volatility and unpredictability in energy markets.
Industry calculations show that most Irish energy suppliers have yet to fully factor the impact of Russia’s invasion of Ukraine on gas prices into the rates they charge customers. The conflict added 80 per cent on average to the prices that energy companies are paying for natural gas used to generate electricity or supply direct to customers. They could add this to the bills of domestic and business customers next year.
ESB subsidiary Electric Ireland noted that its wholesale energy costs will rise to €2 billion this year, from €300 million in 2020. “Unfortunately we expect this volatility to continue over the coming months given the ongoing uncertainty in the geopolitical situation and international markets,” said the company, adding that it was keeping prices under review.
Bord Gáis Energy said it employed analysts who worked to protect customers as far as possible from the current unprecedented energy price volatility, and pointed out that it had kept prices as competitive as possible.
Energia said it monitored wholesale electricity and gas prices. “Any changes in pricing are carefully considered with updates to customers being a primary focus,” the company added.
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SSE Airtricity said it was committed to lowering prices when it could, and any change “will be communicated to customers”.
Energy companies buy the gas used to generate electricity or to supply direct to homes for heating and cooking a year or more in advance on forward markets rather than the more volatile spot market.
Prices for this winter averaged 281 cent a therm last year, three times what they were historically, which in turn prompted increases over the last few months. However, prices for next winter are averaging 394 cent a therm, 80 per cent more than last winter, prompting speculation that this will force energy companies to further increase prices next year.
Russian state company Gazprom’s move to cut supplies to Europe this summer, sparking accusations that the country was weaponising energy, drove most of the increase in the forward price. That briefly hit a high of 850 cent a therm in August as buyers panicked following predictions of severe shortages next year.
Gas spot prices are falling as Europe has filled most of its storage capacity, aided by high liquefied natural gas (LNG) imports, while Britain currently has a surplus of the fuel and so is exporting it.
However, industry observers caution that the broader outlook remains volatile, naming a cold snap this winter as one of the factors most likely to reverse the recent falls.