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Sunday 21 September 2014

ESB makes €415m profit after hiking prices by 8pc

Published 15/03/2014 | 02:30

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Low angle view of an electricity pylon
ESB has made a healthy profit

PROFITS at the ESB surged to more than €400m last year, even as the semi-state company piled price hikes on hard-pressed householders.

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The state-owned power company yesterday reported profits of €415m for 2013 – up from €335m a year earlier.

The soaring profits will spark calls for the hugely profitable company to reduce the price of electricity and gas for customers.

The boom in profits at the ESB comes as it is under increasing pressure from Government to pay higher dividends that could help fund the Exchequer.

Last year the Government took €258m out of the business, including a special dividend of €161m raised by selling the ESB share in a UK power station.

The latest 23pc rise in profits comes after the company raised electricity prices for consumers by 1.7pc at the start of January, following a 5.9pc price hike in late 2012 – a cumulative rise of almost 8pc. The price rises have added around €82 to the annual electricity bill for a typical customer.

The January increase made it the third winter in a row that households were hit with a price rise for electricity.

The ESB raised gas prices by 2pc last October. It says rising gas prices on international markets is the big driver of prices. Profits at the company rose more sharply than sales, which increased by a more modest 5pc to €3.42bn.

The founder of price comparison website Bonkers.ie David Kerr said rising profits highlighted the need for consumers to make sure they were not overpaying for electricity.

"Consumers have to be vigilant, there are great rates available for electricity and gas, including for the ESB's Electric Ireland, but you have to go out and get the discounts," he said.

Deregulation of the sector means power companies can charge what they want, and standard tariffs across the sector are high, according to Mr Kerr.

Meanwhile, the simmering industrial relations row at the power giant means this year's financial results will be pored over by unions, whose demands that the main company pension be classed as a "defined benefit" scheme almost led to nationwide power outages last year.

The wording in this year's accounts around the controversial pension appears to leave open the question of who is financially on the hook, if the scheme was ever to fall short of cash, despite a deal with unions last year to end the strike threat.

This month, unions at the ESB wrote to management threatening legal action if the pension was not referred to as a 'defined benefit scheme' and a 'balance of costs' scheme in the 2013 accounts.

The new ESB accounts do call the pension a defined benefit scheme – meaning pensioners are entitled to a fixed income regardless of the performance.

But they go on to say it is "different to the normal 'balance of cost'" pension and that the ESB has no legal obligation to increase contributions to maintain payouts – in the event of a deficit.

Last night, the workers' union declined to comment on the carefully worded accounts.

Meanwhile, the ESB itself puts the likely bill for this winter's storms at around €30m for the company.

The past winter saw the worst storms in 20 years, according to ESB's finance director Donal Flynn.

The state-owned power company "threw everything" at the storm clean-up, including bringing in 300 contractors from abroad and sparing no expense when it came to machinery and materials, he said.

He praised the extraordinary efforts by ESB staff to restore power in the aftermath of the storms that hit nationwide.

Average pay at the ESB fell to €59,000 last year for the company's 7,500 thousand staff from €69,000 in 2010 as a result of a five-year programme that aims to slash 25pc of costs from the business by 2015.

That programme remains on track to deliver total savings of €280m, Mr Flynn said.

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