Energy Prices

Dáil Éireann Debate, Tuesday - 28 February 2023

Tuesday, 28 February 2023

Questions (56)

Darren O'Rourke

Question:

56. Deputy Darren O'Rourke asked the Minister for the Environment, Climate and Communications the measures being taken to ensure that energy companies reduce their prices for customers to reflect the significant reduction in wholesale energy costs; if he has met with the Commission for Regulation of Utilities in this regard; the date on which windfall taxes will be introduced; the amount they are expected to raise; if he will support an energy price cap; and if he will make a statement on the matter. [9983/23]

Oral answers (6 contributions)

Deputy Darren O'Rourke

I am disappointed the senior Minister is not here. It is not the first time this has happened. I think he has ten advisers at this stage and he does not seem to be able to line up his diary. We can reschedule these questions. They are rescheduled regularly. I am disappointed that he is not here and that neither he nor his ten advisers gave us the courtesy of telling us he would not be here.

I wanted to ask the Minister the measures being taken to ensure that energy companies reduce their prices for customers to reflect the significant reduction in wholesale energy prices.

Minister of State at the Department of the Environment, Climate and Communications (Deputy Ossian Smyth)

I believe that the Minister for the Environment, Climate and Communications is representing his country at a meeting of European energy ministers.

The war in Ukraine has resulted in an unprecedented rise in energy prices and is a major challenge for families and businesses throughout Ireland and across Europe. This very significant increase in costs for consumers has caused real hardship for many people. This is most pronounced over the winter months, when energy use is at its highest.

That is why the Government has taken sustained action over the past year, and as recently as last week, to support households and businesses to meet the cost-of-living challenges. Direct measures to reduce energy bills include the €800 in total of energy credits introduced between April 2022 and April 2023; reductions in VAT; and the temporary business energy support scheme. In addition, the Government has introduced a range of targeted supports for the most vulnerable households, once-off measures and enhancements to tax and social welfare protections.

Electricity and gas retail markets in Ireland operate within a European regulatory regime wherein electricity and gas markets are commercial, liberalised and competitive. The market is overseen by the Commission for Regulation of Utilities, CRU. As part of its role, the CRU is monitoring the implementation of the strengthened consumer protection measures that were put in place for this winter. Earlier this week the CRU extended the moratorium on disconnections of electricity and gas for a further month until the end of March. As the Deputy will be aware, the CRU is independent and accountable to the Oireachtas.

Wholesale prices reached peak levels in August of last year, when wholesale gas prices were 706% higher than in January 2021, while electricity prices increased by 463% in the same period. Although they have since fallen back from their peak, wholesale gas prices remain more than double what they were in January 2021. Retail prices, based on an estimated annual bill, are 138% higher for gas and 98% higher for electricity this January versus January of last year. The differences in the level and speed of fluctuation in the wholesale market versus those of retail prices demonstrate the supplier hedging strategies and the extent to which those strategies shield consumers against the full extent of the utterly unprecedented international energy market volatility.

Deputy Darren O'Rourke

That is an incredible response. People will endure and will get on with it but they hate this idea of "we are all in it together". The truth is that we are not all in it together. People hate a double standard and they hate inequity and unfairness. The price of energy is being hiked, but at the same time energy company profits are going through the roof. Energy companies are reporting record profits, and what do we hear from the Government? We have heard it from the Minister of State, as the latest spokesperson for the Government defending their position, explaining that, actually, they did not pass on the full price of the hikes. There is not a word about the record profits, the obscene profits, they are reporting. We have a Government that resists energy market reform, resists price gaps and resists windfall taxes. There has been a U-turn but there is still a delay in that regard. We have a PSO that is deeply regressive. The Minister of State's party, including the senior Minister, who is not here, has supported and introduced the large energy user subsidy. There is a track record there of treating the energy companies with kid gloves. Has the Minister of State met them? What have they got to say? When will reductions be introduced?

Deputy Ossian Smyth

My Department will bring before the Government proposals for a windfall tax to be approved by the Cabinet in the coming weeks. Primary legislation will be required to bring that through. The measure will impose taxes on unfair profits which were generated not just by people who own oil or gas reserves but anybody generating electricity from sources other than gas who unfairly profited from the very significant increase in the price of electricity. That could be wind farms or people generating electricity from solar or other sources. They will be taxed in such a way that a maximum price will be put on the amount for which they are able to sell their electricity to the grid. We were guided by the EU that that could be €180 per megawatt hour - in other words, 18 cent per unit. In fact, we will impose a cap of 12 cent per unit, and we are proposing a 75% take in excess profits from those who own oil or gas reserves. We will legislate for that in the coming weeks and all that money will be ring-fenced for electricity consumers.

Deputy Darren O'Rourke

I want to ask the Minister of State a straight question and I hope he will give me a straight answer. When will the windfall tax be legislated for, when will it be introduced, what period will it apply for and how much will it bring in? I noticed that initial estimates were in the region of €1.9 billion and the lower estimates are in the region of €200 million to €300 million, which is a significant difference.

I will ask another straight question. Has the Minister or the Minister of State met the energy companies? Have they met ESB, Bord Gáis, SSE Airtricity and Energia to discuss this and insist that they pass on the price reductions? The Minister of State said himself that prices peaked in August and they have been reducing ever since but we have seen no commensurate reduction in the cost to consumers. Has the Minister of State met the energy companies and has he insisted that they pass on the reduction and do it now?

Deputy Ossian Smyth

I am as eager as the Deputy to see these reductions passed on and that is why we are legislating for unfair profits. I have met the ESB and Bord Gáis and my Department continues to meet them. I am sure the Minister does as well, although I have not spoken to him on it. We will be legislating for this in the coming weeks. The amount of money that is expected to be raised is between €280 million and €600 million, a significant amount of money, and all of that money is legally ring-fenced for electricity consumers. That is only part of it. We extended the 9% rate for electricity and gas VAT last week, which is the lowest rate of VAT we have ever had on energy in this country. We have a range of welfare benefits, extra payments and then the windfall tax on top of that. A number of approaches have been taken, therefore. I see that two electricity companies have cut their rates but I expect the others to follow suit as soon as possible.