Bord Gáis vows to undercut ESB for three years
The gas company aims to take 2,000 customers a week from the ESB with a switch-over package that promises prices 10% lower than the ESB for the first year, and at least 5% lower in the second and third years.
Customers who switch to Bord Gáis and opt to pay their bill by direct debit will get a further 2% discount, while existing customers will get another 2% off.
That means a customer eligible for the full 14% discount would save e140 on a e1,000 annual bill.
The announcement came as the company also predicted a drop of up to 25% in its gas prices by the end of the year.
The ESB cannot match the discounts because it is tied into pricing arrangements with the state energy regulator under rules put in place to prevent companies with monopolies on vital supplies abusing their position with unjustly high prices.
However, with Bord Gáis’ entry into the market meaning there are now two rivals to ESB — Airtricity is the other — energy regulator Michael Tutty faced criticism for not standing back and allowing the ESB freedom to compete to retain its customers.
Fine Gael energy spokesman Simon Coveney said while Bord Gáis’ move into the electricity market was welcome, it was “madness” to stop the ESB meeting its new rival head-on.
“Currently the regulatory model prohibits the ESB from reducing their prices to respond to the Bord Gáis offer.
“This is madness at a time when we need to get electricity prices down,” Mr Coveney said.
Mr Tutty defended his role, saying that over time, with increasing competition, the regulatory model would end.
But he insisted it was needed now not only to stop unfairly high prices, but also to prevent the ESB selling at prices that did not cover its costs.
“Nobody wants a price war if it drives prices down below cost because it will not last,” he said.
In the long term new entrants would be put off coming into the market if they could not make profits and competition — and ultimately customers — would suffer.
Mr Tutty also warned that the promised price reductions for both gas and electricity would only last as long as world energy prices remained stable.
Bord Gáis, which imports most of its gas from abroad, will be supplying most of its electricity from a new gas-powered generation plant in Whitegate from next year, while the ESB also relies on gas, coal and oil for much of its supply output.
“One of the main costs of energy, whether electricity or gas, is the price of fossil fuels on the world market and they are going to have to be reflected in the price that the consumer pays at all times.”
Both gas and electricity prices rose steeply last year so any reductions to come would only reverse that trend.
Bord Gáis chief executive John Mullins admitted that he could not make price promises beyond the next three years.
However, he said, they would remain competitive.
“Our aim is not just to get customers to switch over to us but to hold on to them once they switch and that will be reflected in our prices,” he said.
