‘Serious questions’ to be answered by ESB over rising electricity costs, suppliers say

State-owned ESB and the Government must answer "serious questions" on rapidly rising electricity prices, independent power suppliers say.

Fianna Fáil TD Barry Cowen recently told the Dáil that consumers paid an extra €250 million for electricity in the three months to September 30th because "the ESB has orchestrated and extracted super-normal profits".

The Independent Energy Suppliers of Ireland (IESI), a new group founded by Naturgy, Panda and Prepaypower, says it shares Mr Cowen's concerns.

IESI warned that the TD's questions were serious and warranted a detailed response from the ESB and Eamon Ryan, Minister for Communications, Climate Action and Environment.

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An IESI spokesman said electricity generators, most notably the ESB, had been seeking inexplicably high prices for power this year.

“The prices being offered are far in excess of the levels justified by increases in gas prices. ESB need to explain why they are demanding such high prices for baseload generation,” he said.

Wider discussion

The spokesman added that the group hoped Mr Cowen’s arguments would encourage a wider discussion about pricing behaviour by the ESB, which would benefit the entire economy.

“This has been a difficult and expensive period for households and businesses and we would expect that the ESB would do all it can to keep generation costs as low as possible.

“However, if the opposite is the case, then the ESB has very serious questions to answer,” said the spokesman.

IESI’s three founding members, Naturgy, Panda and Prepaypower, supply electricity and natural gas to about 220,000 homes and some of the Republic’s biggest businesses. They buy electricity wholesale which they then supply to their customers.

ESB “strongly refuted” any suggestion that it did not comply with single electricity market rules when offering electricity for sale on the wholesale market, known as “bidding in”. The State company blamed rising natural gas and carbon prices on world markets for the increased cost of electricity.

“Gas prices are now in excess of five times what they were a year ago and similarly carbon prices are almost three times higher,” its statement said.

Generators burn gas to produce more than half the electricity used in Ireland while they must buy carbon credits to cover the cost of fossil fuel emissions.

ESB said that gas and carbon prices mainly determined the cost of electricity on day-ahead markets, where power is traded every hour.

Average price

The company maintained that the average price it sought for electricity on the day-ahead market in the three months to September 30th was €122 a megawatt hour (MWh), around 25 per cent less than the overall average of €161 MWh.

This meant that “ESB bids were competitive with and at lower prices than other generators in the market”, the company added.

Electricity suppliers generally buy their power 12 to 18 months ahead to avoid short-term price volatility, the ESB argued.

“ESB supports suppliers in this regard by offering to sell power forward, typically up to 12 months ahead,” the company pointed out.

Mr Cowen’s remarks, made during a debate on the Republic’s rapidly rising energy costs, came after it emerged that some ESB gas-fired plants made gross profits of about €138,000 at different times in September.

The profit calculation was based on the difference between what it cost the ESB’s plants to generate the power and the prices they received. It did not include other business costs.

ESB rejected these numbers, saying its prices were lower than the average between July and September.

Temporary power plant shut-downs and low wind speeds, which hit renewable generation, combined with high demand this year to push electricity supplies close to capacity.