All-island electricity market 'will cut costs'

An all-island electricity market will cut energy costs by close to 2 per cent by 2009 and deliver actual savings of €155 million over 10 years, the Government says.

Reports last week stated that the 32-county electricity market - due to be launched on November 1st - will not result in cheaper electricity for households and businesses.

Consumers and businesses in Northern Ireland pay up to 17 per cent less for their electricity than those in the Republic, and the region's regulator recently cut prices that suppliers can charge householders.

In the Republic, domestic electricity charges went up by an average of 12.6 per cent this year, and industry commentators and the energy regulator do not expect the single market to have an immediate impact.

But, the Department of Communications, Marine and Natural Resources said yesterday that an analysis of its likely impact showed that it would deliver savings to customers.

A study carried out by NERA Economic Consulting predicts that it will take less than two years for the impact to be felt on customers' bills. It states that as new generating plants come on stream in 2009, prices will begin to fall.

"Prices are estimated to fall by up to 1.9 per cent in the Republic and by up to 0.9 per cent in Northern Ireland," it says.

It adds that this trend will continue in the succeeding years. "It is estimated that prices will fall further in 2010, by up to 4.6 per cent in the Republic and 2.2 per cent in Northern Ireland, as further new entry of generation plant occurs," the report says.

"The direction in price movement is expected to be unambiguously downwards."

The document warns that predicting price movements after 2011 becomes increasingly difficult, but says that everything points to further falls in energy costs. "As further new entry occurs to replace older, less efficient plant and to meet demand, it is estimated that wholesale single electricity market generation prices will continue to fall during the period from 2011 through to 2013."

The consultants took a 10-year timespan beginning with November 2007.

They estimate that the total cost to the industry of implementing the single market will be €256 million in today's terms.

But at the same time the consultants calculate the benefits of a single market at €411 million, which will result in a net gain of €155 million.

From next November the two regulators will simultaneously review and adjust the charges they set for domestic users.