All-island electricity deal will not benefit consumers

Consumers and businesses in the Republic will not benefit from cheaper electricity when an all-island market is introduced here in November.

Households and small businesses pay more for their electricity in the Republic than in the North. In some cases, the difference has been found to be as much as 17 per cent.

Both jurisdictions have agreed to open an all-island market from November 1st next. The move is partly driven by EU policy, but also by the fact that an all-island market will in theory increase competition and cut prices.

Last week the Commission for Energy Regulation (CER) and its Northern counterpart, the Northern Ireland Authority for Utility Regulation, agreed that they would set their charges simultaneously on November 1st, but they have not agreed to set the same price for both parts of the island.

The two regulators set the electricity prices paid by consumers. Most businesses buy their energy on the open market.

The CER and other sources agree that the single market will not result in a cut in the cost of power in the short term at least.

A CER spokesman acknowledged that it would take some time before this happened and said that neither regulatory body could pinpoint when precisely the benefits would be felt. "It is more likely to happen over the medium term," he said. He added that the wholesale price trends were "going in the right direction".

Consumers in the Republic saw their electricity bills jump by 12.6 per cent in January after the regulator approved a price increase in the closing months of 2006.

Last November, the CER produced an analysis based on a household using 4,200 kilowatts a year. This took the 12.6 per cent price increase in the Republic into account, but it did not calculate for a subsequent fall in the price in the North. It showed that the customer would pay €783.49 a year in the Republic, compared with €721.58 in the North.

The regulator pointed out that a high proportion of this charge was due to the 13.5 per cent VAT that the State charges on electricity in the Republic, while the levy is just 5 per cent in the North. Excluding VAT, the difference was just over €3 a year. However, prices have since fallen in Northern Ireland, which has further widened the gap between the charges.

A recent survey by UK-based energy consultancy McKinnon & Clarke shows that for businesses such as a medium-sized factory or a hotel, charges are 17 per cent cheaper in the North. These businesses have the option of buying electricity on the open market.

The consultancy believes that part of the reason for the gap in household charges is that the CER's approach is too conservative, and that it should push to align charges with Northern Ireland.

The CER is likely to cut prices later this year, but this will be due to the fall in oil and gas prices rather than the all-island market.