ESB told it can set own prices if customers fall by 300,000
Published 22/04/2010 | 05:00
THE ESB will have to lose another 300,000 domestic customers and change its name before it is allowed to set its own prices and compete with its rivals.
The Commission for Energy Regulation announced yesterday that it would stop fixing ESB prices as soon as its competitors sign up 40pc of household customers -- a target likely to be achieved early next year.
Bord Gais and Airtricity have already persuaded nearly 500,000 (23pc) domestic electricity customers to switch since entering the market a year ago offering lower prices than the ESB. The commission said that at the current customer-switching rates, which are among the highest in Europe, it expected the ESB's market share to fall to 60pc by early next year, allowing deregulation to begin.
Deregulation of the business electricity market will begin this October, as ESB rivals have already captured more than 50pc of this market, said commission chairman Michael Tutty.
ESB prices are fixed by the regulator to stop it undercutting new competitors trying to get a toehold in the market, but deregulation should allow greater competition and ultimately place downward pressure on prices, he said.
"While international fuel prices will remain the main influence on Irish electricity prices, effective competition has the potential to bring real benefits to all customers through improved choice and quality of tariff products on offer and through further downward pressure on prices."
It should also give customers greater choice and more electricity options, such as the ability to fix electricity prices at a certain tariff, or to receive rewards for using electricity at times when it is less expensive, said Regulator Dermot Nolan.
The ESB will have to change its name, because the regulator says this gives it an unfair advantage with consumers, as it is almost synonymous with electricity in Ireland.
A new name would have to be applied to its electricity supply arm, to differentiate it from ESB networks which would continue to provide the wires connecting homes to the national grid, regardless of which supplier is used. The ESB welcomed the decision as a "significant milestone in the development of a competitive retail electricity market in Ireland and a positive step for consumers".
"ESB looks forward to competing as a fully deregulated supplier. It cannot, however, make any specific comments regarding future electricity prices at this point," it said. It accepted the requirement to rebrand its supply business, but said: "Changing a long-established brand is a challenging and complex undertaking that requires careful planning and implementation in order to avoid customer confusion and uncertainty."
Bord Gais CEO John Mullins welcomed the clarity on ending price regulation, but said it had wanted a lower target of 50pc. FG energy spokesman Simon Coveney welcomed the decision.
The commission said it would work with the Department of Social Protection to get better value for 300,000 ESB customers, mainly senior citizens, who get a free electricity allowance, as few had switched. A competitive tender for such custom may be considered.
Power to the People: Thomas Molloy, Business supplement