Thursday, 12 May 2011
Dáil Éireann Debate
5. Deputy Martin Ferris asked the Minister for Communications, Energy and Natural Resources his views on the application by An Bórd Gáis for an increase in the prices it charges to its customers; and if he will make a statement on the matter. [11071/11]
Deputy Pat Rabbitte: Responsibility for the regulation of gas prices is a matter for the Commission for Energy Regulation which is an independent statutory body. Bord Gáis Energy’s gas tariffs for domestic customers and small businesses are still regulated by the Commission for Energy Regulation and reviewed each year. I have no function in the matter. Decisions on gas prices by the commission involves reviewing all the controllable cost inputs and forecasting the likely wholesale gas costs. The objective is to ensure that tariffs are cost reflective.
The largest component of gas prices is the wholesale global cost of gas. The last increase of 20% in regulated gas prices was in September 2008. Wholesale gas prices moved downwards from autumn 2008 until recent months. This has resulted in consistent reductions in gas tariffs for domestic and small business customers. However, wholesale gas prices have been trending significantly upwards in Europe in recent months. This is driven by geopolitical events in the Middle East and North Africa and high demand in Asia, including Japan, in the wake of the nuclear crisis. The regulator and Bord Gáis Energy estimate that increases in wholesale prices in October are likely to result in a significant increase in tariffs for Irish customers. The extent of the increase has not been quantified as yet but this should be seen in the context of a cumulative decrease of 27% for consumers since January 2009.
The regulator will undertake its detailed annual review of the Bord Gáis energy tariff during the summer months. This will involve assessment of Bord Gáis Energy’s own submission on gas prices which will be made in June or July, followed by a consultation process. A decision by the regulator will follow in early September on whether any variation should be applied to the tariff from 1 October next.
The continued entry of new suppliers into the residential gas market, offering discounts on the BGE rates, shows that regulatory policy to encourage the growth of competition in gas supply pays dividends for consumers. Customers can also help to reduce the impact of rising prices by shopping around for the best deal. They can also take steps to improve the efficiency of their gas usage as this will deliver demonstrable savings.
The regulator is currently considering the timing for complete deregulation of the residential and small business segment of the gas market, as has happened in the electricity market. Full deregulation leading to further competition will keep downward pressure on prices for consumers. However, Ireland is a price-taker for gas and the outlook for the European gas market is for a continued rise in the commodity price.
Deputy Martin Ferris: I do not believe the application by Bord Gáis Energy for an increase of 20% in gas prices and 10% in electricity prices is justified. As the Minister correctly stated, the company has cited global prices as a mitigating factor, despite the fact that the company made €120 million profit last year. The company also admits that many of its customers are in arrears. The obvious knock-on effect of an increase in prices will mean more people will fall into arrears of payment.
When the Minister sat on this side of the House he tabled a Private Members’ motion on the issue. Does he intend to fulfil the Labour Party’s election commitments to introduce a fuel poverty Bill? Will that Bill include criteria to deal with exorbitant increases such as Bord Gáis’s 20% and 10% increases in order to ensure that people on low incomes will have adequate fuel and heating and will not be cut off as has happened to ESB and Bord Gáis customers?
Deputy Pat Rabbitte: The Deputy is correct in that I responded to the huge increases in 2008. Since then, the cumulative decline in prices has been 27% which does not mean that for the consumer the prospect of Bord Gáis raising its consumer price in the coming winter will be welcome. I have expressed this view to the company and to the regulator. I have been working with my colleague, the Minister for Social Protection, Deputy Joan Burton, on the fuel poverty dimension. Deputy Ferris will understand the difficulty is that 95% of our gas is imported. The Kinsale field is winding down and notwithstanding all that gas which Deputy Ferris and his colleagues discovered out there — I asked him to tell me where it is exactly so I can bring it ashore——
Deputy Pat Rabbitte: We need to be able to pin it down because the extent of our reliance on a gas pipeline from elsewhere is not the ideal situation to be in. If we could get the liquified natural gas project under way down in the Deputy’s neck of the woods in Tarbert this would be a contribution and bringing the Corrib gas on stream would also make a contribution. However, unfortunately, at the moment, because of events in Libya, the nuclear accident in Japan — a country which will have a voracious appetite for gas — because nuclear reactors are being shut down in mainland Europe and because China has an endless demand for gas, therefore, unlike the situation in the other Continent, in the United States, prices are trending upwards here. The use of shale gas in the US means prices have come down there. It does not seem to be having any effect on Europe, where market power is continuing to keep prices up.
Deputy Martin Ferris: Will the Minister try to ensure the proposed fuel poverty Bill, which he has made a commitment to introduce, includes a provision that would prevent substantial price hikes like those being experienced at present? He made the point that prices have decreased by 27% since 2008, but I make the point that people are far worse off than they were in 2008. Given that Bord Gáis made a profit of €120 million last year, it is grotesque that it should be seeking gas and electricity price increases of 20% and 10% respectively at this time.
Deputy Pat Rabbitte: The Deputy has made a fair point. He is right to say that those who are in distress are in more acute distress now than they were in 2008. I do not advance the fact that gas prices have decreased by 27% since then as any kind of excuse for them to increase. I do not know how much it is intended they will rise by as no figure has been set. The companies have put figures out there in broad terms. It is ultimately a matter for the regulator. It is true there are people in distress. I have raised this directly with the chief executive and chairman of the company. They have argued that they are going to great pains to introduce pay-as-you-go meters and other strategies to help those who find themselves in these circumstances. I hope we will be able to soften the blow. I do not know how severe the blow will be when it will come. I imagine the regulator will take all factors, not just submissions from the companies, into account.
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