Opposition brands 36% electricity price hike indefensible

THE possibility of electricity prices being raised by 36% next year was yesterday described as outrageous and indefensible by opposition parties.

The warning of dramatic increases in the price charged by ESB and its rivals was signalled in a report issued by the Commission for Energy Regulation (CER), which sets the tariffs for electricity, this week. However, CER described the 36% figure as a "worst-case scenario".

Electricity prices have risen by almost 29% since 2003. Such a steep increase next year would mean that consumers would be paying 65% more for electricity bills in 2006 than they paid in 2003.

If the 36% increase were to be applied, the average two-monthly household bill of €118 would increase to €160.48.

Fine Gael communications spokesman Bernard Durkan said the prospect of astronomical increases presented "proof that when the going gets tough, consumers are the easiest target."

Describing such an increase as completely unacceptable, he argued that electricity costs were already too high and already damaging our competitiveness.

His Labour counterpart, Tommy Broughan said such an increase would be an "outrageous prospect for Irish consumers."

"A price increase of that magnitude would place an intolerable burden on too many Irish households," he said.

However, according to the CER report, a 36% increase represents an 'in extremis' situation. The new tariff it sets for next year will likely be less than 36%, though indications are that it will be over the 12%-14% rise widely predicted until last week.

The main factors behind the suggested increase are rising fossil fuel prices. The price of gas, in particular, has increased sharply over recent weeks while oil prices have now topped the $60 per barrel mark.

However, the ESB, which remains the biggest player in the market with a 67% share, has a number of long-term fixed-price contracts with gas and oil companies that it can use to partially 'hedge' dramatic fossil fuel price increases. The company also uses a range of fuel sources including oil, gas, coal, and - to a much lesser extent - turf.

Sources at the company said yesterday that while the CER will set the tariff for next year - most likely in August or September - they did not expect the price to be as high as 36%.

"The figure of 36% is there to be knocked down (in further discussions)," said the source.

The ESB made a profit last year of €250 million.