Thursday, 24 January 2019

Questions (11)

Brian Stanley

Question:

11. Deputy Brian Stanley asked the Minister for Communications, Climate Action and Environment if consideration has been given to providing a policy direction to the energy regulator to investigate the increasing price of household energy bills in view of the fact that under the Electricity Regulation Act 1999 he has the power to issue a policy direction to the regulator. [3354/19]

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Oral answers (8 contributions) (Question to Communications)

My question relates to the price of energy. Prices are high and there is talk of an increase in carbon tax which is already applied to some goods. In comparison with other European countries, we have some of the highest electricity prices. Section 10A of the Electricity Regulation Act 1999, as amended, sets out a procedure whereby the Minister can give a general policy direction. What is being done in that regard?

Section 10A of the Electricity Regulation Act sets out the procedure under which a policy direction may be issued to the Commission for Regulation of Utilities, CRU. The legislation sets out details of the tasks and, inter alia, restrictions, timelines and consultation requirements with the independent regulator and the Oireachtas.

Energy markets in Ireland operate within a European regulatory regime in which member states must guarantee the independence of national regulatory authorities which are expressly forbidden from taking direct instructions from government. The regime also restricts policy directions in the form of general policy guidelines in certain areas that are prescribed regulatory duties and powers in the European Union's third energy package. A policy direction in this matter, therefore, is not being considered. Consistent with European energy policy, the electricity and gas markets in Ireland are commercial, liberalised and competitive. The position of successive Governments has been that competitive energy markets result in greater choice of suppliers, products and prices for consumers and businesses.

The regulation of retail market prices for electricity and gas in Ireland ended in 2011 and 2014, respectively. The thrust of Government policy on energy costs is focused on the competitive market and supports for energy efficiency. Government policy has supported competition to drive down prices and data from approved price comparison sites show that consumers can make significant savings by switching energy suppliers.

The CRU has a statutory market monitoring function in the electricity and gas markets and is solely accountable for the performance of its functions to the Joint Committee on Communications, Climate Action and Environment.

There are boundaries to what the Minister of State can do, which I understand, even though I would prefer if some of them were not in place. They are set out in the legislation. The problem is that there is no competition on prices; rather, in some cases there are signs that energy prices have increased since the so-called liberalisation of the sector. The regulator judges competition solely by switching rates, that is, the number of people who change from one supplier to another in any one year. I understand the rate is high compared with that in other European countries. That is the reason the regulator gives and has given in the past, but the problem is it does not deal with the issue of price because people are given a reduced price for a short period only. Has there been any recent initiative? Through his powers in legislation, has the Minister of State asked the regulator to initiate an investigation into the prices charges? Last year the electricity supply of 4,626 households was disconnected.

I would not like to see a return to price fixing. Long-standing Government energy policy since 1999, aligned with the thrust of the European policy, has focused on the importance of increasing retail market competition, which results in a choice for consumers. Government policy has supported competition to drive down prices. Data from approved price comparison websites such as bonkers.ie or switcher.ie show that consumers can make significant savings by switching energy suppliers. For example, in switching supplier a customer could save consuming an average amount of energy up to €148 on an annual electricity bill and up to €118 on an annual gas bill, while a customer of a single dual-fuel supplier could save up to €300, as estimated by independent websites. Therefore, there is competition and prices are being driven down by it, which is how the market should work.

The Minister of State is correct that people can switch and reduce their bill for a short period. The problem, however, is that the rates charges go back up, as anybody who has tried to switch supplier will have learned. There is not a long-term saving. In the past 20 years the percentage of household income spent on energy has increased dramatically. If we consider the profits of suppliers, we can see that Bord Gáis Energy which was once a State-owned company but which was sold to British Gas in 2014 made a profit of €28 million in 2015, while pre-tax profits at SSE Airtricity have also increased. Other companies' profits have risen substantially. Has there been any investigation by the CRU or the Competition Authority? Pay-as-you-go meters are typically used by people and households on the lowest incomes, but they are being charged significantly more for electricity. The Minister of State needs to examine the matter to provide a policy direction and must speak to the CRU about it. The poorest households pay on time because they must, but they are being charged the most.

I reiterate that EU restrictions are the main reason such a policy direction is not being considered. In addition, it is clear that such a move would run counter to the thrust of long-standing Government policy on energy, which favours competition. Moreover, the CRU has carried out investigations of energy market competition in recent years and recommended a range of new measures which are being enacted by the regulator to boost consumer engagement and raise awareness of the availability of cheap, discounted tariffs to customers who switch suppliers. If a customer switches suppliers, he or she can switch again the following year.

Switching suppliers takes half a day.

There is no reason not to switch.