More energy price hikes in store as spectre of rationing looms

Since October 2020, the energy price hikes introduced by some suppliers have added €1,500 to annual household gas and electricity bills. That’s according to price-comparison website Bonkers.

The average price increase is probably less, but the figures are unprecedented and unlike anything we’ve seen since the oil prices shocks of the 1970s.

The announcement by Electric Ireland on Wednesday of another 23 per cent and 25 per cent increase in electricity and gas prices – adding on average €300 and €220 to annual electric and gas bills – was merely the latest instalment in a biting series of increases which are placing enormous strain on household budgets.

There will almost certainly be more to come as suppliers have been hedging against the rise in wholesale prices, triggered by the faster-than-expected bounce-back from Covid-19 and more recently the war in Ukraine. But most of these contrasts have now run out, meaning more painful pass-throughs are on the way.

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"We delayed the increase as long as we could in the hope that wholesale prices would drop back to early 2021 levels, but regrettably this has not happened," said Marguerite Sayers, executive director of Electric Ireland.

A worsening of the conflict and/or a bad outcome to the gas-for-roubles stand-off between Russia and the EU could result in energy rationing. Germany on Wednesday implemented the "early warning phase" of a gas emergency plan, where a crisis team from the economics ministry, the regulator and the private sector will monitor imports and storage.

Italy and Latvia have done the same. The move is seen as the clearest sign yet that the European Union is preparing for Moscow to cut gas supplies unless it gets payment in roubles.

Germany and other Russian gas-reliant countries are scrambling to arrange substitute supplies while exploring the possibility of alternatives such as LNG. Energy has always been Russia’s great leverage against the West. We’re now getting close to seeing just how great.