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Energy Prices

Dáil Éireann Debate, Thursday - 16 June 2016

Thursday, 16 June 2016

Questions (11)

Mick Barry


11. Deputy Mick Barry asked the Minister for Communications, Energy and Natural Resources his views that the Electricity Supply Board should consider reducing its charges for electricity, given its reported profits of €635 million in 2015; and that high energy prices are being maintained to make the Electricity Supply Board an attractive proposition for privatisation. [16116/16]

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Oral answers (6 contributions) (Question to Communications)

The ESB clocked up profits of €635 million last year. Surely the Minister is not satisfied with the minimal 6% cut in electricity prices by Electric Ireland. Does he agree that the company must go much further than this? Does he believe the ESB is being fattened up for privatisation?

The electricity and gas markets are commercial, liberalised and competitive and operate within national and European regulatory regimes. I have no statutory function in the setting or review of electricity or gas prices. Price setting by all electricity suppliers, including the ESB's Electric Ireland, is a commercial and operational matter for the companies in question.

Responsibility for electricity and gas market regulation is a matter for the Commission for Energy Regulation, CER, which is an independent statutory body. The CER ceased regulating retail electricity prices in 2011 and retail gas prices in 2014. Business and domestic customers may avail of competitive offerings from a number of supply companies. The competitive energy market results in choice for consumers and businesses in terms of suppliers, products and prices, exerting downward pressure on prices. Under various relevant statutory instruments, the CER carries out statutory market monitoring functions and has responsibility for ensuring the market operates competitively for the benefit of the consumer.

On 29 April last, Electric Ireland announced a 6% reduction in its unit rate for domestic electricity consumers and on 18 May, the company announced that its customers could avail of additional savings of up to 8.5%. On 1 May 2016, SSE Airtricity announced a 5% electricity and 5% gas price cut and an 8% reward discount by moving to direct debit and e-billing. While I do not have a statutory role in the setting or review of energy prices by energy supply companies, I welcome these reductions.

The level of profit in ESB fluctuates due to market forces over which I, as Minister, have no control, nor do I have any function in the matter of the regulation of electricity or gas prices. The figure of €635 million does not take into account ESB debt and taxes paid to the State. The company's profit for 2015 after tax is €286 million. It is vital that the ESB is resourced to enable it to reinvest in maintaining generation capacity and the electricity network. There is no question of the ESB being privatised.

The Minister sounds a little like Pontius Pilate because he is washing his hands of the issue. When one strips out taxes and levies, electricity prices here are the second highest in the European Union. Regardless of how one looks at it, the ESB made bumper profits last year, yet the price cuts announced by Electric Ireland were minimal by any standards.

While I welcome what the Minister has said about the ESB and privatisation, is it not the case that prices are being kept high to allow the private companies on the market, which are uncompetitive, to compete, rather than give price cuts to ordinary families?

I will address Deputy Barry's last question first. Prices are not being kept high. No one in this country can keep prices high because they are unregulated. There is an open market. Representatives of ESB tell me the company makes little of its money from the Electric Ireland arm. Thankfully, ESB is in the black and making profits a little short of €300 million. A considerable amount of this profit comes from other arms of the company, including the network and electricity generation arms. I am told that of the pre-tax profits generated by the ESB, approximately 14% relate to the retail arm.

Other companies in the sector make margins as well. It does not seem to me to be excessive. The CER is accountable to the House and the relevant Dáil committee. I call on Deputy Barry to make direct contact with the Chairman of that committee and bring the commissioners before the committee to quiz them on the issue.

There the Minister goes again. Like Pontius Pilate, he is washing his hands of the situation. I will ask the Minister a far simpler question. How does the Minister feel about the fact that consumers in this country are paying the second highest electricity rates in the European Union, while, at the same time, the ESB is making profits which, whether we use the Minister's figures or my figures, run to hundreds of millions of euro?

Electricity prices are higher here than in most parts of Europe. However, we need to remember that Ireland is on an island. We have a small electricity market. It includes the North and South and we have had reference to the single electricity market on the island of Ireland. There are geographic issues.

The other point is that we have to import a substantial amount of our energy. We are not self-sufficient in the energy sector and that adds to the costs. As a result of the size of the market, there are additional transmission costs and such costs are not incurred in continental Europe. As a result these particular challenges are built into the cost.

I am not trying to wash my hands of it. By law I cannot directly intervene in this matter. However, Deputies can question the Commission for Energy Regulation. I am calling on Deputy Barry to use the tools available to him in the parliamentary committee to raise these questions.