ONCE gas production comes on stream from the Corrib Gas fields off Belmullet, Co Mayo, next year the price of gas to Irish users is set to shoot up by 15 per cent.
Consumers are already facing a 20 per cent increase in gas bills from September. However, an internal memo from the energy regulator warns that the price will soar even higher once production starts at the Corrib gas fields next winter.
The memo attributes the rising cost of gas to the declining use of two inter-connectors linking the UK's gas supplies with Ireland.
At the moment, Ireland gets 90 per cent of its gas from the UK. Once production starts at Corrib and a second producer, Shannon LNG, starts distributing gas from 2012, less gas will be imported.
The inter-connectors, which must meet fixed costs, will consequently become more expensive.
The energy regulator is currently considering whether the consumer shoulder the burden of that extra cost -- which is estimated to represent a 15 per cent rise in the price of gas.
Consumers currently foot the bill for the inter-connectors, with the price built into the twice-monthly gas bills. Bord Gais invested in two inter-connectors in Scotland to import gas from the UK when Irish gas supplies started running out. The company passed the cost on to its customers.
A memo, circulated in July, sets out several options under consideration.
The first is a "do nothing" scenario, in which the price of gas would increase dramatically and consumers would shoulder the increased gas prices. A second option is for the Government to cover the additional cost to Bord Gais, thereby protecting the consumer from an immediate price rise.
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A third is to allow the gas suppliers to share the extra cost between them. Gas suppliers are likely to resist this option, however.
Ireland is anxious to decrease dependence on UK gas supplies by generating its own supply. That means encouraging production in the Irish market. Charging gas suppliers for the cost of the inter-connector could be seen as a deterrent.
The supply of indigenous gas is unlikely to mean cheaper prices for consumers. Shell and Statoil are scheduled to begin producing gas from the Corrib field off the west coast in 2009. Shannon LNG is due to come on stream in 2012. That company will ship liquefied gas to Ireland and restore to its gaseous state for distribution on the Irish network.
According to the memo, Corrib and Shannon will not provide enough gas to supply the Irish market so gas will still be imported from the UK and priced at world market levels.
The indigenous gas producers are likely to set their prices at those market level, even though their costs may be lower.
Simon Coveney, the Fine Gael spokesman on energy, said the regulator's job is ultimately to protect the consumer and businesses by ensuring that gas is provided as cheaply as possible.
"The onus is on the regulator to ensure there is a pricing structure in place so that Ireland's consumers benefit from Ireland producing it's own gas and not having the extra costs associated with importing gas," he said.
"What is required is a new formula for regulating gas prices in Ireland that can differentiate between imported gas and gas produced off the coast of Ireland."