Consumers are unlikely to see any reduction in their electricity bills, despite another sharp monthly fall in wholesale electricity prices in October, the energy regulator has said.
Wholesale electricity prices dropped to their lowest level in 14 months in October, falling by 52 per cent on the previous month, according to the Central Statistics Office. This came on top of a 27 per cent decline the previous month.
The CSO’s index measuring wholesale prices found electricity costs on the wholesale market are lower than at any time in the past 12 months, driven by a fall in the price of gas on wholesale markets due to unseasonably high temperatures in October and increased wind output. But electricity customers are unlikely to see any respite in soaring electricity bills as wholesale electricity prices remain elevated, coming off historic highs, peaking in August and September due to increased and volatile gas prices, according to the Commission for Regulation of Utilities.
A spokesman for the regulator said that while lower wholesale electricity prices were welcome, forward contracts for the next 18 months remained at many multiples of normal gas prices.
“Unfortunately, without further significant and sustained downward pressure on wholesale prices, it remains likely that retail electricity and gas prices across the EU and in Ireland will remain at elevated levels,” said the spokesman.
In contrast to the declines in wholesale prices, consumers’ electricity bills rose by just over 28 per cent last month, while electricity prices are 72 per cent higher than a year ago.
Energy suppliers buy energy for delivery at different times throughout the year and for up to 12 or 15 months in advance through hedging, so households pay for electricity at an average price of the cost of wholesale electricity over a year to avoid weekly or monthly price swings.
Lisa Ryan, professor of energy economics at the UCD school of economics, said it was up to companies to decide how quickly to pass on wholesale price rises or falls to customers but added that companies had not passed on the full increase in wholesale gas prices over the past year.
“They don’t pass through all the costs immediately and in the same way they won’t be passing through any drops immediately either,” she said.
Daragh Cassidy, head of communications at Bonkers.ie, the price comparison website, said falling prices were coming on the back of prices “at record highs to begin with”.
“We will need to see a sustained reduction in the price of energy on wholesale markets for several months before we can talk of smaller bills for consumers,” he said.
Cold spells over the winter months could see demand for gas rise which could result in prices increasing again, which would in turn impact electricity prices, he said. Gas prices were already high from the summer of 2021 due to increased demand in Asia before the Russian invasion of Ukraine sent prices soaring, leading to higher household bills.
On Monday, Russian state gas company Gazprom threatened to cut supplies to Europe through Ukraine, jeopardising the last remaining pipeline still bringing Russian gas to western Europe.
Meanwhile Minister for Environment Eamon Ryan defended the Government’s new cap on energy company windfall profits. Questioned on how effective it would be, and how much revenue it would yield, given a recent sharp drop in electricity prices, he said that given the volatility of gas prices, the level of proceeds from the cap was difficult to estimate. However he said it could range anywhere from €300 million to €1.9 billion. The actual value of the cap is expected to be at the lower end of this range and could be even lower if gas prices fall.
In more positive news on cost savings for motorists, new figures from the AA showed that average diesel prices had slipped below €2 a litre, following a 3 per cent reduction in a month; while the average price of a litre of petrol has fallen to €1.77, a reduction of almost 4 per cent.