Cheaper electricity on cards as ESB allowed compete with rivals

CONSUMERS are set to benefit from cheaper electricity from next month after the Commission for Energy Regulation (CER) announced it is to allow the ESB to compete with its rivals on price for the first time in a decade.

The decision to deregulate the domestic electricity market will enable Electric Ireland — the new name for ESB’s supply business — to set its own prices from April 4 without needing prior approval from the energy regulator.

The move is likely to trigger increased competition between Electric Ireland and its main competitors, Bord Gáis and Airtricity, as well as other suppliers — a development which should lead to lower electricity prices.

It follows a similar decision by the CER last October to deregulate prices for the business sector in a bid to boost competition and drive prices down.

And there is more good news for hard-pressed households as the ESB confirmed it is also set to enter the residential gas supply market in the next few weeks. Such increased competition in the domestic gas market should also result in similar downward pressure on gas prices.

However, electricity industry representatives have warned that lower prices may not necessarily follow from deregulation as international fuel costs remains the biggest factor in setting the price of electricity for the residential and business sectors.

The CER said deregulation of the residential electricity market was being triggered as Electric Ireland’s share of the market has fallen below the 60% threshold set by the energy regulator.

It is estimated that ESB will hold approximately 58% of the retail market by the end of this month followed by Bord Gáis (26%) and Airtricity (16%).

The CER noted there has already been very strong competition in the retail electricity market since early 2009 with about 40% of all customers having switched supplier at least once over the past two years. It is estimated that one million households have switched at some stage in recent years.

“This is one of the highest switching rates ever seen in Europe, showing real customer choice,” said a CER spokesperson.

The energy regulator said the CER would also be implementing a range of initiatives in the near future to underline how consumer protection remained paramount in a newly deregulated market.

These will include customer education campaigns, the provision of detailed consumer information and tariff comparison facilities.

He pointed out that the energy regulator still has powers to reintroduce regulation if it deemed the market had become uncompetitive again. The CER is also considering the introduction of a non-discrimination clause to prevent Electric Ireland from charging different prices to different types of domestic customers amid fears that households in more isolated areas could face higher electricity tariffs.

With its decision to enter the domestic gas market, the ESB will also soon be able to offer its customers a dual bundle package to provide electricity and gas.

ESB has seen a net loss of almost 344,000 customers to its main competitors over the past 12 months and some 800,000 customers since 2009.

Reacting to the CER’s decision, Bord Gáis said all suppliers except Bord Gáis were now free to offer both electricity and gas without price control as the company’s ability to set price for its gas customers is still restricted by the CER.

“It is obvious that this put Bord Gáis at a competitive disadvantage in the gas markets relative to ESB and Airtricity, particularly in the residential sector,” said a Bord Gáis spokesperson.