Dáil Éireann Debate, Tuesday - 3 July 2012
402 Deputy Seamus Kirk asked the Minister for Communications, Energy and Natural Resources if his attention has been drawn to concerns regarding an increase in natural gas prices to the consumer; if he will examine same; and if he will make a statement on the matter. [32180/12]
View answer409 Deputy Patrick Nulty asked the Minister for Communications, Energy and Natural Resources if he has entered into discussions with the regulator regarding possible increases in gas prices for consumers, and in particular, the steps he will take to prevent energy poverty as result of any such increase; and if he will make a statement on the matter. [31854/12]
View answerI propose to take Questions Nos. 402 and 409 together.
Responsibility for the regulation of natural gas prices is a matter for the Commission for Energy Regulation (CER), which is an independent statutory body. Bord Gáis Energy's (BGE) gas tariffs for domestic customers continue to be regulated by the CER and reviewed each year. I have no function in the matter.
The largest component of gas prices is the wholesale price of gas. While the international cost of gas fell in 2008 and 2009, wholesale gas prices have been trending significantly upwards in Europe since late 2010. This is driven by geopolitical events in the Middle East and high demand in Asia including Japan in the wake of the Fukushima nuclear incident.
The value of the Euro has decreased considerably against Sterling over the last year. This is a key driver for the likely upward pressure on gas prices given that Ireland purchases virtually all of its gas from Great Britain. Other price pressures include increased financing costs of the networks for BGE, reflecting the high cost of borrowing due to the financial crisis, as well as a reduction in gas volumes as a result of the economic crisis.
The CER and BGE estimate that as a consequence of these factors the increases in wholesale prices are likely to result in increases in gas prices for Irish customers, in October. The extent of the increase has not been quantified as yet. The CER decision to increase regulated gas prices in October 2011 (21.72%) was the first increase in gas prices since September 2008.
Over the coming months the CER will complete its detailed annual review of the BGE tariff. This will involve assessment by the CER of BGE's own submission on gas prices, which has just been received, followed by a consultation beginning in mid July. The level of the likely variation in the tariff will not become clear until BGE's detailed submission is analysed. A decision by the CER is likely to follow at the end of August on whether any variation should be applied to the tariff from 1st October next. In making its decision, the CER will only allow efficient costs and will make every effort to ensure consumers are protected as much as possible. The objective is to ensure that tariffs are cost reflective.
Customers can help reduce the impact of rising prices by shopping around to get the best possible price and service deal from suppliers. They can also take steps to improve the efficiency of their gas usage which delivers demonstrable savings. The CER is also working with gas suppliers to ensure that vulnerable customers are protected through, inter alia, the installation of Pay As You Go meters. The long term policy responses for Ireland to combat vulnerability to high and volatile gas prices continue to be increasing the use of renewables, better energy efficiencies and reducing the reliance of gas in the fuel mix. Implementation of the measures set out in the Government's Energy Affordability Strategy are also key to protecting the interests of vulnerable customers.
The timing for complete deregulation of the residential segment of the gas market, as has taken place in the electricity market, is an issue under active review by the CER. Full deregulation leading to further competition will keep downward pressure on prices for consumers. Ireland is, however, a price taker for gas and the outlook for the European gas market is for a continued rise in the commodity price. Currency exchange trends will continue to have a significant impact, either positive or negative, on gas prices for Ireland.
