Irish consumers have been warned by the energy watchdog not to expect domestic gas and electricity prices to return to 2021 levels for some time, if at all.
However, the Commission for Energy Regulation (CRU) also said it was not prepared to be an “apologist” for the persistently high prices being charged by electricity and gas providers, adding that it expected price savings derived from cheaper energy on wholesale markets to be passed on to consumers as soon as possible.
Representatives of the CRU appeared before the Joint Oireachtas Committee on Environment and Climate Action on Tuesday.
Will prices fall?
In its opening statement it said it was “very concerned” at the impact high energy prices were having, adding that while it wants energy providers to “reduce prices as soon as possible”, many companies had signed up for long-term energy contracts with a fall in wholesale prices unlikely to be reflected in domestic bills “for a period of time”.
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More positively, it said it did not anticipate a “marked increase” in disconnections as a result of a “thorough process suppliers must follow” before they are given the green light.
CRU chairman Jim Gannon told the hearing that wholesale gas and electricity prices were more than double historical averages. And while falling prices on wholesale markets had brought stability to the market, prices remain high. When asked if the CRU was empowered to compel providers to lower their prices, Mr Gannon replied that was not the case and cautioned against such a move.
“I would say that a fundamental part of competition and supply is how suppliers hedge,” he said.
“How they hedge can vary depending on whether or not they predominantly offer let’s say dynamic tariffs which are in their infancy. But as the supplier becomes much more dynamic-pricing focused their hedging requirements are going to be very different to somebody who has a huge swathe of customers who want fixed tariffs,” he continued.
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He suggested that “any intervention would be done with great caution because the concern would be that we would stifle innovation and competition in the market and you’d end up with a homogeneous single thing, whereas the whole idea is to try to ensure that suppliers are competing. Part of the way they’re competing is the products they offer and the way they hedge those products so that they can beat their competitors on price.”
Mr Gannon was asked if the CRU had oversight of various companies hedging policies and could say for certain advance purchasing was down to persistently higher prices. He accepted that the CRU did not have insights into what the hedging strategies of individual operators continue to be.
Commissioner Aoife McEvilly noted that many households “are really struggling [and] the conversations we have with suppliers are challenging”.
She said the CRU expects prices to “follow on from the market trends and we’ve been very clear to them as well that we’re not here to be apologists for electricity suppliers and their pricing strategies”.
Managing ‘expectation’
She questioned why the companies were not “out explaining to their customers a bit better where they are in terms of hedging and what customers can expect”.
She said the reason the CRU had taken on this role in recent months was “to manage expectation for customers” and to make it clear that “wholesale prices are still about double where they were [and are] coming down slower than we’d all like and won’t come down to the level they were before. That’s just the clarity we’re trying to provide to customers.”
Ms McEvilly was asked if she thought companies were making excessive profits at a time of crisis. She replied it would have to be established if “that is the case”.
She said she recognised that high-profit levels were a concern highlighted across the media. But she added that the CRU operates “from a basis of evidence”, saying three suppliers have left the market because they couldn’t make money, while “two suppliers are handing back money to their customers”.
