Energy company profits not tied to prices says watchdog

High energy company profits are not tied to surging prices, the industry’s regulator told politicians on Tuesday.

Companies blame rising natural gas prices on world markets for a 27.4 per cent increase in families’ energy bills over the last year.

Bríd Smith TD pointed out at an Oireachtas committee on Tuesday that she had figures showing profits at ESB Networks increased by €74 million to €206 million in the first six months of last year. She also noted that Airtricity and Energia grew their surpluses.

Aoife MacEvilly of the Commission for Regulation of Utilities (CRU) responded that her organisation found no relationship between prices and energy comapanies’ profits.

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“They can change over time, it’s difficult to identify a trend,” she told the Oireachtas Committee on Environment and Climate Action.

Ms MacEvilly told several committee members that the commission was unlikely to use price caps to halt energy price inflation.

“We would have to have very significant evidence to suggest customers would be better off if we did,” she said.

The commissioner added that the CRU’s own research showed competition benefitted customers.

Price caps

Ms MacEvilly argued that price caps had not worked in the UK, saying they had damaged customers’ interests by forcing some companies out of business.

ESB said the growth in profits at the networks’ business in the first half of 2021 was due to higher regulated charges and an increase in demand over the previous year.

Covid-19 cut demand for electricity in the first half of 2020 by around 4 per cent, according to ESB.

Commission member Jim Gannon told the committee that "capacity payments", made to power stations simply for making themselves available to generate electricity when needed, were likely to increase in the future.

Irish electricity customers will pay €2 billion in capacity payments over 10 years from 2025 to companies that won contracts earlier this month to build gas-fired power plants to head off likely shortages later in the decade.

“I would expect capacity payments to increase over time,” he said. The payments are made irrespective of whether a power plant produces and sells electricity.

They aid generators in covering costs and act as an incentive to developers to build power plants in the first place.

Mr Gannon explained that the payments were made to guarrantee security of supply as the Irish system switched to more renewables.

Earlier, chairman Brian Leddin TD, said members were disappointed that the CRU had not provided a formal opening statement before its appearance at the committee.