Wholesale gas prices slide to late 2021 levels increasing scrutiny on Irish energy firms

Prices tumbled to December 2021 levels with wholesale gas trading below €33 per megawatt on Friday

The €33 per megawatt wholesale price traded on Friday compares to the record €305/MW wholesale gas price last February. Stock picture

Wholesale gas prices have tumbled to their lowest level since mid-December 2021, increasing the scrutiny on energy generators and suppliers to cut Irish utility bills in the coming weeks.

The price of wholesale gas traded at below €33 per megawatt hour late on Friday, marking an extraordinary turnaround in prices since Russia's invasion of Ukraine in February 2022, which helped drive spot market gas to a record of over €305 per megawatt by last summer.

Futures markets also suggest that wholesale gas prices will not be surging again this winter — unlike last year, when Europe scrambled to do without inexpensive Russian supplies.

Wholesale gas prices for delivery in September were trading at around €36 per megawatt, a small premium to the spot price, although markets do suggest that prices will rise to higher levels by December.

The week has been marked by energy companies and regulators facing questions about how quickly the slide in wholesale prices will be passed on to Irish households in terms of substantially lower utility bills.

Previous eras of inflation have witnessed the 'rockets and feathers' phenomenon in many market economies — where companies have been quick to hike the prices for their customers when wholesale prices shoot up, but are slow to pass on cuts when wholesale prices tumble.

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

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

However, it also said that, because of hedging, 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”.

Gas is a key fuel used 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.