Your Money: Supplier beware
The massive amount of people switching their electricity and gas companies will smash the high prices that inevitably came with a monopoly of the energy markets, writes Simon Moynihan
HALF a million Irish electricity customers and thousands of gas customers have switched suppliers since February 2009 and all for the same reason: to save money.
Home-energy bills are among the biggest expenses facing Irish households with average electricity bills at around €1,000 per year and average gas bills at more than €700.
The high cost of heating and lighting our homes helps explain why huge numbers of customers have chosen to change suppliers in search of a better deal.
Although switching your gas or electricity suppliers can sound daunting, the actual process is very straightforward; a phone call or a visit to a website is usually all it takes to make the change.
The new company does all the work and can complete the switch within a week.
Usually the only thing customers are asked to do is provide meter readings.
During the changeover, there is no interruption to service, the same gas and electricity continues to flow and no new wires or pipes need to be installed.
Once the switch is completed, the only difference that customers notice is that they receive their bills from a new company.
Even the meters are still read on the same schedule by Bord Gais and the ESB.
So how much can be saved?
An average Irish home uses around 5,600 kilowatt hours (kWh) or units of electricity in a year.
This costs €1,000 with the ESB but can be bought from Bord Gais and Airtricity for around €884, giving a substantial saving of €116 or nearly €10 per month.
For gas, the average home uses around 13,750 kWh in a year. This costs €720 with Bord Gais, but can be bought from Flogas for around €652 giving a saving €68.
Airtricity also supplies gas at rates of up to 10pc cheaper per unit than Bord Gais but will only accept customers that switch their electricity accounts over to them as well.
Irish energy companies compete on unit prices but standing charges remain the same regardless of the supplier. These are paid to Bord Gais and the ESB, to maintain the supply networks and provide meter readings.
Although it may be tempting to stay loyal to the ESB for electricity or Bord Gais for gas, switching away from them will actually help them to get into the market and compete on price sooner.
The Commission for Energy Regulation (CER) currently does not allow the ESB to set its own electricity prices or Bord Gais to set its own gas prices.
However, in April, the CER said that as soon as the ESB's share of domestic market falls to 60pc, it would be allowed to start competing by setting its own prices.
If switching rates continue as they have been, it is expected that this will happen by the end of the year.
Although the ESB will have to re-brand before being allowed to compete, experts are expecting a price war as the company tries to recover some of the customers it has lost since competition started in the home energy market.
Most customers are not bound by contracts to their energy suppliers and are free to switch suppliers as often and whenever they wish.
The ESB will undoubtedly take advantage of this when it tries to lure customers back. It is also likely that when the ESB does start to compete, it will enter the domestic gas market as well, and offer rates that are cheaper than Bord Gais.
There has been no announcement yet as to when Bord Gais will be able to set its own gas prices.
- Simon Moynihan is a director of comparison website Bonkers.ie