Saturday 18 November 2017

Greek debt crisis is blamed for keeping natural gas bills high

Fall in the value of the euro has pushed up price of gas - BGE boss

Greek Prime Minister Alexis Tsipras
Greek Prime Minister Alexis Tsipras
Sarah McCabe

Sarah McCabe

Gas companies are not reducing bills because of the tanking value of the euro, the country's biggest natural gas provider has claimed.

Wholesale gas prices have fallen by 18pc between early 2014 and 2015, according to the Commission for Energy Regulation - but Irish households have only seen a fraction of that reduction in their energy bills.

Dave Kirwan, chief financial officer at Bord Gais Energy, blamed this on a decline in the value of the euro.

Mario Draghi's quantitative easing policy which will see the European Central Bank print money for the first time and the threat of an exit from the euro by Greece - despite Friday night's four month extension - have pushed the euro down relative to sterling this year. The value of sterling against the euro hit a seven year high this week.

This is important for gas providers because Ireland largely imports natural gas from the UK via a pipe under the Irish Sea known as an interconnector, Kirwan said.

Irish gas companies earn revenue from Irish taxpayers in euros but pay for raw natural gas in sterling. "We have an issue with sterling," he said.

His company Bord Gais Eireann was bought by UK company Centrica from the State in July for €1.1bn.

Its sister company Bord Gais Networks stayed in State ownership and was subsumed into Ervia, also the parent company to Irish Water.

"The euro-sterling relationship has deteriorated by about 12pc in the last nine months and probably more in the last few weeks," said Kirwan.

"This has minimised any savings provided by falls in the wholesale cost of gas and prevented us from passing on bigger savings."

Bord Gais Energy reduced gas bills by 3.5pc and electricity bills by 2.5pc in January.

Its UK counterpart British Gas, also owned by Centrica, is passing on more generous savings to its customers.

British Gas will cut gas bills by 5pc at the end of February.

Centrica chief executive Iain Conn said the company expected lower wholesale prices to persist for all of 2015 and potentially through 2016 and 2017.

Conn said it was "absolutely feasible" that there could be further price cuts in Britain this year.

Kirwan did not make as strong as a commitment, but did not rule out further price cuts. "We are monitoring it. If there are more savings that we can pass on, we will" he said.

Bord Gais Energy will generate €8.4m in profit for its new owners for the second half of 2014, the company said this week.

The cost of integrating the company into the Centrica group hurt the result, a spokesman said.

The Irish business should generate an operating profit of between €40 and €50m for its British parent in 2015, Conn said in a call to investors during the week.

Bord Gais Energy has around 680,000 gas and electricity customers, split between residential and business accounts.

It lost market share in the gas business in 2014, Kirwan said, as required by the Commission for Energy Regulation.

The company is not permitted to control more than 55pc of the gas market.

It also controls 15pc of the Irish electricity market.

The industry is growing more competitive every day, Kirwan added. "We have had a number of new entrants. Just turn on your TV - I have never seen so many offers before and I have worked in this sector for a long time.

"We have been quiet for the last two years because of the sale but you can expect to hear more from us from now on."

Hedging policies have also hurt savings from falls in gas prices, Kirwan added.

Energy companies buy ahead of "hedge" their supplies at fixed prices. Bord Gais Energy is hedged up to 18 months ahead. It tends to take six months for price changes to feed through, he said.

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