SFA slams 'incredulous' energy price increases

The Small Firms Association (SFA) has today criticised the announcement by the Commission for Energy Regulation (CER) of gas price increases of 33.8%, and proposed electricity price increases of 19.6% for small companies.

The increases are further evidence that the CER is intent on introducing competition to the energy market at the cost of industrial competitiveness, according to the organisation.

The scope, scale and extent of these increases will have wide ranging impact on Irish business, according to the SFA director Patricia Callan.

“This type of decision has now become the hallmark of the regulation of the Irish public utility sector,” said Callan.

“Ireland is moving further and further out of line with our competitors for energy costs, and the consequences of this decision will undermine the exposed sectors of the economy, increase already high inflation by 0.4%, add to raw material costs and severely impact our manufacturing sector.”

“Energy is complementary to the rest of the economy. A failure to supply at competitive prices adds costs to businesses operating in Ireland, with consequential effects on business competitiveness.

“It is incredulous that at a time when every economic report on the Irish economy stresses the need to reduce costs, increase productivity and regain competitiveness, Irish businesses are again being undermined in this way.

“Competitiveness is critical to the survival of all Irish companies and energy price is a key input indicator.”

In the SFA’s fifth Annual Business Survey, energy costs emerged as second only to labour costs, in terms of business costs, being cited as the number one business problem by 11.2% of respondents, and as a major business problem by 77% of small businesses.

“The business community urgently requires a business-friendly energy policy, which ensures the secure, reliable, efficient and competitively priced delivery of energy, as a key ingredient for successful and sustainable growth of businesses, competing in a global marketplace,” said Callan.

She went on to criticise the price rises in the context of recent increases VAT & excise duties collected on foot of the increasing oil and energy costs.

“Earlier this week, the Department of Finance announced a surplus of €203m, compared with an anticipated deficit of €3bn,” said Callan.

“Whilst this may appear to be good financial management, it is arising from the imposition of undue hardship on those businesses already struggling to remain competitive and is clearly unnecessary.

“In Budget 2007, the Government must address these issues by reducing excise & VAT rates on energy; and by providing capital grant aid and/or tax credits for energy efficient investments”.

Callan then echoed the call by many organisations for greater competition in the Irish energy market.

“The current model of energy market liberalisation, has not alone failed but has also added significant costs to Irish business,” she said.

“The proposed increases in gas and electricity prices are simply unacceptable to the small business community. There is little or no effective competition in the energy supply markets in Ireland.

“In addition, investment in energy infrastructure must be financed in an equitable manner to ensure that customers of today are not paying for the benefit that will also be derived by future generations.

“We need to see some equity in this system, some competition in the system, but all we get are price increases.”