Monday 23 October 2017

Energy firms face probe for manipulating costs to keep consumer prices high

A probe is to be carried out by the Commission for Energy Regulation Thinkstock
A probe is to be carried out by the Commission for Energy Regulation Thinkstock
Charlie Weston

Charlie Weston

The energy regulator has questioned whether electricity and gas suppliers are manipulating their costs to keep consumer prices high.

A probe is to be carried out by the Commission for Energy Regulation to see why retail energy prices have not fallen more for customers.

In a review of retail competition in the energy market, the regulator said wholesale energy costs had fallen sharply in the past three years.

Despite this, price falls for householders have been much more modest. At the same time, the energy companies claim their supply costs and the funds needed to maintain their networks have gone up.

The rise in network and supply costs has led to suspicions that energy companies are deliberately bumping up some of their costs to avoid deeper cuts in the price of electricity and gas for householders.

Energy Regulation Commissioner Aoife MacEvilly said: "While retail prices have fallen in recent years based on falling wholesale costs, we have also seen network and supply costs increasing. We understand the drivers for increasing network costs but more work is needed to understand why supply costs have risen and to ensure that customers are getting best value."

Best value: Aoife MacEvilly Picture Tom Burke
Best value: Aoife MacEvilly Picture Tom Burke

The regulator's report shows wholesale electricity costs fell by a cumulative 39pc between 2013 and 2106, due to lower costs for wholesale gas and falls in the cost of a barrel of oil.

But consumers saw prices fall by just 3pc. Those availing of a discount saw prices fall by 4pc. At the same time, electricity supply costs shot up by 46pc, raising fears that energy suppliers may be inflating their costs to avoid passing on larger price reductions to consumers.

The regulator's report states: "While wholesale energy costs have been decreasing on average from 2013, network costs (both transmission and distribution) have generally increased."

The questioning of how energy prices are set comes after the most recent results for the ESB show it made operating profits of €635m in 2015, an increase of €83m from the previous year.

The ESB cut electricity prices by just 4pc for households.

Asked whether ESB/Electric Ireland is manipulating its network and supply costs upwards to avoid deeper retail cuts, a spokesman for the semi-State company denied the accusation.

"ESB Networks is a fully regulated business, transparently regulated by the Commission for Energy Regulation," it said.

Irish Independent

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