The 20 per cent rise in electricity prices due to kick in next January is set to be scaled back by at least 5 per cent by the energy regulator. A formal announcement could come as soon as next week and follows discussions between the ESB, the regulator and other electricity suppliers.
The ESB said it would consider a larger reduction in the price rise, but the Commission for Energy Regulation (CER) is coming under pressure from independent generators to either stick with his original decision or only alter it marginally.
The recent softening in oil prices is the key reason for the change and the CER is nearing the end of a review of the original decision which was announced in September. A meeting on the issue with non-ESB generators such as Viridian, Airtricity and Bord Gais is expected to take place today in Dublin.
These companies usually offer their customers the ESB rate minus a discount. If the 20 per cent average is reduced these companies will have to effectively drop their prices too.
An executive from one of these companies said: "A change in the original decision would send out all the wrong signals. It would certainly do nothing to encourage new entrants to the market".
This week the chairman of the CER, Tom Reeves, received a hostile reception from some chief executives when he made a presentation on the energy market to them following an invite from Ibec, the employers' group. About 50 chief executives attended the presentation. Several multinationals have warned that they could be forced to lay off workers if the energy prices hikes continue.
Companies like CRH and Wellman International have written to the CER over recent months pointing out the damage increases are doing to their competitiveness. However, Mr Reeves has said that movements in international fuel markets cannot be controlled by him and must be recouped by the ESB.
Many of the chief executives said the review should lead to a major reversal of the 20 per cent original decision. Mr Reeves was non-commital at this meeting and last night the CER refused to comment on when the review would end, or what its result might be.
Sources familiar with the situation said 5 per cent at least would be shaved off the 20 per cent originally agreed, bringing the increase back to 15 per cent, but the final details were still being worked out.
There were calls for major reduction in price last night from Ibec. A statement from energy spokesman David Manning said: "Ibec have long called on the regulator to reduce tariffs to reflect the downturn in fuel costs and deliver competitive prices. A reduction in tariffs would be a welcome move for hard-pressed consumers."
US crude oil prices may fall as much as 9 per cent next year as global supply rebounds, outpacing growth in demand, analysts predict.
One of the key factors pushing oil prices down next year is the increased production from non-Opec affiliated markets. A rise in oil production from the Caspian, Africa and North American regions will ease Opec's burden in meeting world oil demand next year.
Countries outside Opec, including second-largest exporter Russia, pump about 60 per cent of the world's supply but hold only a quarter of its proven reserves. When output lags, the pressure falls on Opec, which sets supply limits for its 10 members, to meet global demand of about 85-million barrels per day.
