Tuesday, March 17, 2015
Regulator warned that ESB may exploit market power to increase electricity prices
Regulators have been warned not to allow the ESB to exploit its market power to overcharge consumers for electricity.
Changes are being introduced in how the electricity markets across the EU is regulated, leaving open the possibility that the ESB could end up dictating how much is charged here.
Electricity charges for households here are the seventh highest among 27 European Union countries.
Now an academic paper from the Economic and Social Research Institute (ESRI) warns that the dominance of the ESB, which has renamed its retail operation Electric Ireland, could lead to higher consumer prices.
“Today the Irish electricity market is characterised by one dominant firm, the legacy monopolist,” the new study states.
Author Dr Muireann Lynch said the changes on foot of EU regulations on how electricity is traded could mean that this country is “vulnerable to the of market power by a dominant firm”.
She called on the Commission for Energy Regulation to tightly regulate the way the ESB prices its electricity generation.
The ESB, through Electric Ireland, generates the most power of all electricity generators in the market, and has the largest number of retail customers. The semi-state is believed to have more than one million customers.
“This allows the firm, in theory, to hide the true costs in each market by passing costs between its retail and generation arms,” the study says.
Dr Lynch also called for more energy trading between Britain and Ireland as a way of keeping retail electricity prices down, and ensuring there is healthy competition in the market.
The costs of generating power in Ireland are high due to the fact that it is a small, concentrated market with a dominant firm, high levels of wind generation and low levels of interconnection with Britain.
The British electricity market, in turn, is poorly connected with the rest of Europe.
In the past few months retail electricity prices here have been reduced by between 2pc and 4pc in response to a 19pc fall in the in wholesale gas prices, a key driver of electricity generation costs.
Electric Ireland cut its standard price by 2pc last year, with a 2.5pc cut from Bord Gais, a 2pc cut by SSE Airtiricty, a 4pc cut by PrePayPower, and 2pc from Pinergy.
New player Energia has not cut its standard electricity prices.
Energy regulator Aoife McEvilly, of the Commission for Energy Regulation, told TDs and senators recently she expects all firms to introduce further price cuts by September/October to reflect lower input costs for energy firms.
She has insisted that electricity prices here were in line the European average.