Charlie Weston: Energy regulator must do more to stop the blatant customer rip-offs
Good news that Electric Ireland has kicked off price cuts, but the energy regulator must do more to stop the blatant customer rip-offs
It was only a matter of time before energy companies eased off a bit on the fleecing of their customers. Electric Ireland got the ball rolling with a decent 6pc reduction in electricity prices for its 1.2 million customers recently. This reduction in standard rates will save customers around €57 a year.
But the reduction was not before time. Electric Ireland and its competitors know they were pushing it too far by not acting before now.
Wholesale gas prices, which largely determine the cost of electricity and gas supplied into homes, almost halved in the year to April. This was a six-year low.
The latest Wholesale Energy Market Report published by Vayu Energy also shows there was a 6pc fall in wholesale gas prices in the last month alone.
Vayu Energy, which supplies gas to industrial and commercial market, said the collapse in prices was due to "an abundant supply of gas in Europe, suppressed demand and a significant strengthening in the value of the euro".
Energy suppliers have acknowledged the wholesale gas falls, but have been using the strong euro up to now as an excuse for not cutting prices more. That argument is gone and what we are left with is nothing short of a blatant rip-off of consumers.
Consumer energy prices have only come down by 5pc in the last year. That means that a year's supply of electricity from the market leader, Electric Ireland, now costs €1,182, a fall of just €29 in the year, according to figures from the Commission for Energy Regulation (CER).
But don't look to the CER to do anything about the scandal of energy firms reaping the benefits of a collapse in wholesale prices while only passing on tiny cuts to consumers.
Pressed about what it was doing to end the rip-off of energy users, before Electric Ireland announed its 6pc cut, the CER said it no longer sets prices as the market is fully deregulated when it comes to pricing.
"In an open and fully deregulated retail energy marketplace, the regulator does not set prices," it says.
Since the ESB's dominance of the market was adjudged to have fallen to an acceptable level in 2011, it has been free to set its own electricity prices. Bord Gáis's dominance of the gas market fell to the point in 2014 where the CER allowed it to set its own gas prices.
The regulator claims there is now a competitive marketplace that is delivering retail prices that are as low as possible.
It says this competition is reflected in switching rates that are the highest in Europe. Some 15pc of consumers switch energy supplier to get better value, using websites like Bonkers.ie, the CER says.
What it does not say is that the majority do not. The regulator says competition will deliver lower prices, but that is not the case.
Wholesale gas accounts for 30pc of the final electricity bill. By that reckoning electricity bills should have fallen by at least €160 in the last year, and not a miserly €30. This means prices should be at least €130 lower.
No wonder Electric Ireland's parent, ESB, reported operating profits for last year of an obscene €630m recently.
We may have a competitive market in theory, but the reality is that the vast majority of households are not benefiting from it.
If only one in seven is benefiting from lower prices after switching, with the rest paying way over the odds, then something is not right. Many households lack the knowledge and do not have the time to manage their financial affairs effectively. This points to a need for a paternalistic intervention in the energy supply market.
We need the CER to do more to force reductions in prices to stop the overcharging that is going on.
Just because we have seven electricity suppliers and five gas suppliers does not mean we are getting any real competition, based on the generally accepted definition that competition results in lower prices.
It is just not good enough to be depending on the goodwill of energy companies.