Energy price increases ‘putting intolerable strain on food sector’

The Commission for Energy Regulation (CER) proposals for gas and electricity price increases could put an already pressurised sector under intolerable strain, a food and drink industry representative claimed today.

“Serious questions must be asked of the regulator who has once again critically failed to deliver a competitive energy price for consumers,” said Food and Drink Industry Ireland (FDII) director Paul Kelly today.

“Notwithstanding the rise in international fuel prices, much more can be done to keep domestic prices under control. The energy regulator has failed to eliminate many of the unnecessary costs that contribute to high prices here.

“These additional costs include revenue allowed for the purchase of fuel and also revenue allowed on gas and electricity network charges.”

Mr Kelly went on to point to the energy intensive nature of the industry, claiming that many jobs would be at risk as some firms would be unable to absorb the added cost.

“Food and drink production is an extremely energy intensive process, due to the heat required for processing, cooking and drying,” he said.

“Energy ranks alongside labour and raw materials as the biggest input costs for the industry and is now a massive concern for all employers in the food and drink sector.

“The cost of the increase alone to food and drink businesses is equivalent to up to 5% of operating profits. It is putting downward pressure on margins and ultimately jobs are being put at risk.

“With food prices falling in real terms, producers are simply unable to absorb Ireland’s unique cost increases.”

Mr Kelly went on to suggest that competition within the energy industry, could lead to lower prices.

“The energy regulator has singularly failed to stimulate competition in the energy market,” he said.

“Irish food and drink businesses struggle everyday to reduce costs, boost productivity and compete in international markets. There is no justification in the regulator granting the main energy suppliers the exorbitant increases they are looking for, until they deliver a more efficient and cost-effective services to their customers.

He went on to call for greater tax breaks for renewable energy, and for Ireland to meet its EU targets.

“Increased capital grant aid and tax relief for investments in alternative /renewable energy sources such as bio diesel where the agri-food sector had great potential both as a producer of biomass energy as well as being an end user.

“While welcoming the announcement last month on bio fuel excise relief by Minister Noel Dempsey, the spiralling increase in energy costs meant that the target announced (163m litres or 2.2% of the total fuel market) was not ambitious enough.

“The EU has set a target of 5.75% by 2010 which we should be planning for now.”