'Clear lag' between wholesale energy prices and those charged to consumers, CRU says 

CRU emphasised that a return to retail prices similar to those in 2021 is "not expected" in the near term

most recent data from EU statistics agency, Eurostat, shows that domestic electricity prices in Ireland were the 9th most expensive across all of Europe, while Irish domestic gas prices were the 5th most expensive in Europe.

A report from the Commission for Regulation of Utilities (CRU) has shown a "clear time lag" between when changes in wholesale gas prices happen and when those changes reach retail prices charged to consumers.

Looking at when wholesale gas prices were at their highest between the second half of 2022 and the beginning of 2023, the CRU found that much of the current energy being consumed in Ireland was purchased at a time when wholesale prices were higher than they have been in recent months. 

The basis for the time lag is dependent upon suppliers’ hedging strategies with some buying hedging contracts up to 24 months in advance, the CRU added. 

The report found that supplier hedging was an "effective method" of providing price stability for certain customers, shielding them from the worst effects of the spike in wholesale gas prices.

In the past twelve months, Irish electricity prices have fallen by more than 22%, with the price of gas also dropping significantly by almost 19%, according to latest inflation figures by the Central Statistics Office (CSO). 

In addition, most recent data from EU statistics agency, Eurostat, shows that domestic electricity prices in Ireland were the 9th most expensive across all of Europe, while Irish domestic gas prices were the 5th most expensive in Europe.

As the wholesale market continues to recover from post-covid shocks driven by the Russian war in Ukraine, the CRU said it expects further price reductions from suppliers in the coming months. 

However, the CRU noted that wholesale prices still remain at higher levels than in 2021, emphasising that a return to retail prices similar to those in 2021 is "not expected" in the near term. 

"We are aware of the challenges that customers face in the context of ongoing high energy prices," said CRU Commissioner, Aoife MacEvilly.

"As wholesale and retail prices remain above historic average levels, we would continue to urge customers to be active in ensuring they are on the most suitable tariff for their needs."

Meanwhile, European wholesale gas prices rose only slightly on Tuesday as the market monitored the escalation in fighting between Russia and Ukraine, while warm weather softened demand, limiting the upside. 

The price of wholesale gas ticked higher to €29.70 per megawatt hour, while the price of gas for delivery next winter rose by 1% to €36.90. 

Traders and analysts linked the small rally to news that Russia's military had stationed small assault units near Ukraine's northern Sumy region, which is close to the Shudzha area where Russian gas transits to Europe via Ukraine.

An industry source also tied it to news on higher frequency drone strikes by Ukraine in the Sudzhansky district of Russia.

Despite the clear geopolitical risks, the market is enjoying a comfortable supply and demand balance as a result of warmer weather and strong storage inventories, which is limiting further price gains. 

European gas storage facilities were last seen 65% full, according to Gas Infrastructure Europe data.