Regulator: No evidence energy firms failing to pass on sharp falls in wholesale gas prices

The Commission for Regulation of Utilities (CRU) — the regulator of firms generating and supplying electricity and gas — said there is no evidence at this stage that energy companies are failing to pass on dramatic declines in wholesale gas prices to users.   

It comes after some business leaders and politicians have said they are impatient that large price cuts in wholesale gas on the continent and in Britain are not yet being matched by large falls in the bills paid by business and households.      

Gas suppliers are under scrutiny as the price of wholesale gas falls, but industry observers have said that hedging or buying supplies for future months locks in higher prices for some time.    

Gas is a key fuel to generate power on the all-Ireland grid even as demand for heating falls as spring and summer temperatures rise. 

That's because at the end of the Atlantic storm season relatively little power is generated by wind farms during the summer months.

The price of wholesale gas has fallen dramatically, in particular, since spiking to record levels last July, as Europe got through its first winter by bulking up storage, and despite ending its once huge dependence on vast amounts of relatively cheap Russian gas supplies.

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Wholesale prices have continued to fall through the winter and early spring months.    

Late Monday, the prices of wholesale continental gas had fallen back to levels of January 2022, a month before Russia invaded Ukraine. 

At €35.75 per megawatt hour, the contract for wholesale gas for delivery in June had tumbled by 57% since the start of the year, according to futures markets.      

To secure supplies and to hedge or insure against future price spikes, wholesale buyers such as generators typically pay a premium to buy gas for delivery in future months. 

But the contract for wholesale gas for delivery in November, although trading at a higher price of €42.40 per megawatt hour, has also fallen sharply since early January, by 46%.   

Continental European markets influence the prices paid for UK natural gas prices from the North Sea, where Ireland draws the bulk of its gas to generate electricity across the island. 

Prices on the UK Natural Gas Futures Markets have also fallen sharply.

The CRU said it welcomed the falls in wholesale gas and electricity prices and continued to encourage customers to switch suppliers whenever possible.  

However, it said that because of hedging that it will likely take time for retail prices to reflect the declines in wholesale prices "until we have seen sustained and further reductions in wholesale prices, and the impacts of hedging work through". 

"This will vary from company to company, based on their current hedging and retail price positions," the regulator said.  

At the same time, it is important to note that gas prices remain up to two times higher than historic norms. 

"Due to supplier hedging, the majority of customers were protected from the worst impacts of the volatility and extreme high prices of 2022, where gas prices peaked at more than 10 times the historic norms," it said in a statement to the Irish Examiner.