The committee asked us to make a five-minute presentation and I have a very short presentation. We circulated a longer briefing note as well, which, I presume, the members have.
There is a great deal of competition in the electricity market. Some 680,000 users switched supplier between last year and mid 2010, and this is one of the highest levels of customer switching in Europe.
Last year we issued a roadmap on deregulation of prices. We have decided that the business and industrial sector is fully competitive at this stage and that we will no longer be regulating ESB prices from 1 October. On the domestic side, once ESB gets down to 60% of the market with a few other conditions, we will deregulate it too, and that is likely to happen sometime in the first half of next year. At present, we are only regulating ESB domestic prices from October next. We will still be monitoring the business and industrial end, but not setting the prices.
People seem to think that there is no downward movement in electricity prices and all that happens is that prices keep going up, but that is not what has been happening in recent years. In November 2007, there was a reduction of 5.4%. There was an increase in August 2008 because the price of fossil fuels on world markets reached record levels, and subsequently there were two reductions in 2009.
For this coming year, our presentation shows an increase of approximately 5%. We issued a press release this morning with the precise figures, which turn out to be a 4.9% price increase from 1 October next. ESB has issued its press release on that too.
This year the overall generation costs, which are the biggest element of the electricity bill, have gone up somewhat because fossil fuel prices are rising at present. We have had a significant reduction in network costs, which are the costs that are under our control. We carried out a full review of the ESB Networks and EirGrid costs and we have issued a consultation document with proposals for significant price reductions, which are being fed into the tariffs for next year. Between the two of those, the network reductions have been offset by increased generation costs. The only thing that is pushing up prices this year is the PSO levy, which was at zero in recent years. It is not that it is a new levy; it has been there since 2002. It was at a significant level up to 2006 but it has been zero since then. It has gone up largely due to lower market prices because the subsidy varies to a large extent with the price of fossil fuels and I will come back to that. Overall, therefore, the price for domestic customers over the coming year will increase by 4.9%
The levy was introduced in 2002 and it is designed to support certain peat, gas and renewable generation plants, as determined and mandated by Government and approved by the European Commission under state aid laws. The underlying policy objective is security of supply, including the use of indigenous fuels such as peat, and the promotion of renewable energy. The levy fluctuates to a significant extent with the cost of gas and other fossil fuels because effectively it is there to provide for the difference between the cost of these generators and the actual market cost. The higher the market cost is, the lower the levy has to be. Because fossil fuel prices were very high in recent years, no levy was needed. Last year fossil fuel prices were not as low. They were starting to rise but special factors kept the levy down last year and, to some extent, special factors this year have increased the levy to its present level. However, it is not a new levy. It is there to meet the statutory requirements, as contracts have been entered into by Government with renewable energy, peat and some gas stations.
The other issue the committee wanted to discuss is disconnections. We in the CER require all electricity and gas suppliers to put in place a code of practice on disconnection. Included in that code are the following: disconnection is to be used as a last resort; suppliers must inform customers in advance of disconnection, including information on the costs; suppliers are required to work with third parties acting on behalf of customers such as MABS and the Society of St. Vincent de Paul; they are required to enter into payment plans where appropriate; and they may offer prepayment meters or budget controllers. Disconnection is, therefore, a last resort. We have required further protection for two particular categories. The elderly cannot be disconnected for non-payment during the winter months and customers dependent on electrically powered life support equipment cannot be disconnected at any time for non-payment of bills. To get this protection, customers need to register their requirements with the supplier in order that the supplier knows they are in these categories.
I also have information, which is in the briefing note, on the total number of disconnections in recent times. It shows an increase in recent months. Some figures that appeared in the newspapers refer to the number of times ESB Networks is asked by a supplier to carry out a disconnection. In practice, only about half of those disconnections take place because when ESB Networks staff get there, there are various things they have to do and I will come to that on the next slide. However, the number of disconnections is only about half the number called for by suppliers. We have interesting figures for the number of reconnections, which is much less than the number of disconnections, and this suggests that while quite a number of premises are disconnected, a reconnection is not sought, most likely because the premises are vacant or have been closed down. We are not aware of people who are still in premises without electricity. When ESB Networks is called, its staff disconnect only about half the time. They are required to ring the supplier and confirm it still wants to disconnect the premises. Quite often in those cases payment is made or a deal is worked out with the resident and he or she is not cut off. In addition, if nobody is there, he or she cannot be cut off or he or she may not be cut off for compassionate reasons. A great deal happens, therefore, between the time the ESB is asked to cut somebody off and disconnection.
With regard to figures for gas, there has not been a trend of increases in disconnections. It seems to be going down rather than up. With regard to electricity, there were fewer disconnections last year than in the previous two years. It looks as if it is up somewhat this year but it is not a trend of just increases all the time. With regard to the cost of disconnections, ESB Networks has agreed a charge with us to de-energise, which is not a nice word, but there is a difference, technically, between de-energising and disconnecting. De-energising is just cutting off the supply but leaving it ready to be reconnected or re-energised as opposed to taking out the meter and other equipment. Technically, that is the correct word but we have tried to use "disconnection" as far as possible while realising that the difference is immaterial. There is a cost of €86, excluding VAT, for disconnecting electricity and €61.74 for gas. These costs are agreed with us as being cost reflective and ESB Networks imposes this charge on the supplier when it is asked by him or her to disconnect. We are ready to answer questions.
