The decision by a number of Bord Gáis Éireann's large customers to form a rival co-operative indicates that the partial opening of the natural gas market to competition has so far failed to deliver lower prices.
The promoters of the Irish Energy Co-operative Society cite the trigger point for many of their members as the 15 per cent increase in the price of gas that is due to come into effect on January 1st. For large energy intensive industries this represents a very significant increase in their cost base. By combining in a co-operative society to buy gas from third-party suppliers they expect to achieve substantial savings.
It will be a blow to the State owned gas company, but not a mortal one. The members of the co-operative will still have to pay for the gas to be delivered to their premises via the company's network. In addition the customers in question number less than 30 and account for only €20 million out of total gas sales last year of almost €500 million.
The members of the co-operative have yet to identify themselves. Only when their names emerge will we have a true measure of how serious a player the organisation will be. But what is worrying from a Bord Gáis perspective is that - according to the promoters of the new co-op - they account for around 20 per cent of the liberalised segment of the market which is worth around €100 million.
In addition it should not be lost on Bord Gáis that one in five of the 250 customers who currently have the choice of going to an alternative supplier intends to join the new venture. Another 16,000 commercial customers will have the choice from the middle of next year.
The market will not be fully open until mid 2005 at the earliest, but there is nothing to stop other groupings - small businesses and even entire towns - forming such not for profit ventures to buy their gas. The promoters of the Irish Energy Co-operative claim that their model is based in part on energy co-operatives operated by rural communities in the United States
The ESB should also take heed. The new organisation has deliberately styled itself as an energy co-operative and intends to apply the same model to electricity supplies.
In the short term the development will be neutral for the residential customers of Bord Gáis, but by the same token the industry regulator must ensure that they do not pick up the tab if, as seems likely, the company loses some of its largest and most profitable customers.