State tells ESB: reduce our costs or we'll switch
Government fury as energy company refuses to increase customer discount for department
RELATIONS between State-owned ESB and the Government have deteriorated sharply after the company refused to offer significant discounts to the Department of Social Protection -- one of its biggest customers.
The Sunday Independent has learned that a tense meeting between senior officials from Joan Burton's department and ESB management called to thrash out an agreement failed to finalise a deal last week.
The ESB has refused point blank to increase a discount offer of just 1.4 per cent to 1.7 per cent to the Department of Social Protection, which pays €150m a year to the ESB on behalf of social welfare recipients.
Ms Burton is deeply angry at the rejection -- especially since her department is now being forced to cover the cost of the ESB price increases, which came into effect from October 1.
The electricity allowance given by the department, which was €35.80 per month, will increase to €39.40. The new ESB charges will cost the department an extra €4m in 2011 and €17.3m in a full year.
Overall, the State will spend more than €530m in 2011 on the fuel scheme and the telephone, gas and electricity elements of the household benefits package.
Ms Burton's anger at the ESB action was clear in the Dail when she replied sharply to questions in relation to discounts.
"Given all of the reductions other businesses have made, it is more than appropriate that the big utility companies should recognise the difficulty of the economic position the country finds itself in, step up to the plate and offer saving measures to the department. It must be remembered that when we pay the fuel allowances, ESB bills and so on, there is no bad debt experience. The utility companies are in the newspapers every other week regarding their difficulty with bad debts. They do not experience that with the department," she said.
She said the core of the difficulty was that her department was not recognised as a bulk purchaser, with the contract for fuel supplies deemed to be between the individual social welfare client or pensioner and the company.
"The department is a major purchaser of fuel in the sense of paying for people's fuel, electricity and gas bills, but we do not get discounts. The view was taken quite a long time ago by the Competition Authority that the department did not have status in regard to negotiation. We are currently negotiating it. However, it may be necessary to put it out to tender and in that way achieve a reduction," she said.
"We may have to take other action because of legal difficulties but I have been working continuously on this issue. Eircom has given us some discount, by no longer charging the department €2 per month in perpetuity for the rent of the telephone," she added.
The row comes as the Government is finalising plans to sell a minority stake in the ESB as part of its obligations under the EU-International Monetary Fund memorandum of understanding.