Higher prices for electricity and gas could be deferred

GAS AND electricity price rises proposed for January could be deferred due to the volatility of world energy markets, a consultation forum on the increases sought by the ESB and Bord Gáis has heard.

Responding to an appeal by the Irish Hotels Federation (IHF) for a four-month pause before prices are increased, Michael Tutty, chairman of the Commission for Energy Regulation (CER), said "all options are open" in relation to the decision, due in December.

However, Mr Tutty warned that the commission would have to ensure that the prices charged by the ESB and Bord Gáis did not distort competition with private operators.

He pointed out that the Spanish government was now "billions in debt" after it opted to defer an energy price increase in the hope that prices would fall - they actually soared.

The ESB is seeking a 5.6 per cent increase in electricity prices from January on top of the 17.5 per cent rise it got last August, while Bord Gáis wants a 3.9 per cent rise to follow its 20 per cent increase.

The price of crude oil has tumbled since the summer, but both utilities say they need the second price rises to cover the cost of forward buying, or hedging, of energy stocks.

However, they undertook to reduce further the price rise to be introduced should energy prices continue to fall.

The CER also indicated that domestic electricity and gas users may shortly be given the option of locking into fixed energy prices for specified periods, similar to the way mortgage customers can choose between fixed and variable products.

Pádraig Fleming, pricing manager of Bord Gáis, acknowledged that energy prices had fallen back in recent weeks "but not to the point that we can pass on the decrease" to customers.

He said in order to minimise the price rise passed on to customers Bord Gáis had voluntarily opted not to go ahead with a planned increase in its operating margins from 2 per cent to 2.9 per cent. It has also decided to forgo €15.6 million in costs it was due to recover from the market.

Pat Fenlon, general manager of ESB customer supply, said it seemed in the summer, when crude oil prices soared, that electricity prices would have to rise by 40 per cent.

However, the ESB's decision to provide a €300 million rebate to consumers cut the increase needed by almost 10 per cent, and fuel price falls since then took another 7 per cent off.

John Power of the IHF told the meeting that most hotels were in survival mode and could not afford further energy price increases in the current economic circumstances. He called on the CER to peg prices until the current volatility in the energy market has resolved itself.

The Consumers Association of Ireland also said the increases should be deferred to next summer because January was the worst time for consumers.

The meeting also heard a call from the St Vincent de Paul for the introduction of a lower energy tariff for "vulnerable customers".

However, ESB representatives said this would mean the rest of its customer base would pay more.