McGrath: Energy providers must start dropping prices for households

'It shouldn't be the case that taxpayers have to pick up the bill at a time when many of these companies are enjoying very substantial reductions in the price that they're paying for energy,' Michael McGrath said.

Energy firms must start dropping their prices for customers sooner rather than later, the Finance Minister has said, as he confirmed more supports are on the cards for households.

Michael McGrath said the reasoning behind the failure of energy firms to pass on big drops in wholesale prices to customers "only goes so far" and that relatively minor drops in bills for households "needs to change".

Wholesale electricity prices were nearly 36% lower in June when compared with the same month last year, according to Central Statistics Office (CSO) data from last week. 

Utility firms have said customers will not see the drops in their bills for some time as companies signed up for long-term contracts to purchase energy when prices were high.

However, this has not stopped utility firms from posting healthy profits — last year for example, Bord Gáis' parent company posted record-high profits amid the ongoing energy crisis, reporting earnings of €3.7bn for 2022.

Finance Minister Michael McGrath indicated energy credits for households would be included in the budget.

Speaking in Cork, Mr McGrath said: "I can understand the commercial argument that energy companies entered into futures contracts, that they hedged, and may well be locked into rates now that are higher than the current wholesale rates. 

"But that argument only goes so far in that it doesn't fully explain the failure to pass through rate reductions to consumers to any extent. We have seen a dramatic fall in wholesale energy prices now, And yet we only have had a very small number of announcements of price reductions for households. So that needs to change.

As a Government, we do expect that the benefit of those wholesale price reductions, which have been dramatic, would be passed on to consumer. 

"It shouldn't be the case that taxpayers have to pick up the bill at a time when many of these companies are enjoying very substantial reductions in the price that they're paying for energy," he said.

Energy credits

The four €200 energy credits for households had been successful and more are likely, he indicated.

"I think they have been very successful way of getting cash to people and reducing the impact of high energy costs on their bills, so we will also consider whether it's appropriate to provide further energy credits in the context of the budget," he said. 

The budget will have a "tax and spend" focus when it comes to climate change, Mr McGrath said.

"We do recognise that we need transformational change across a whole range of areas, in our energy policy, and in our transport system. We are working with the agricultural communities as well, because we know they want to make their contribution to reducing emissions, and making sure that such an important industry operates sustainably into the future.

"The budget will of course have a climate focus both on the expenditure side, but also on the tax side. In recent weeks, I have been going through all the different parts of our taxation system with the respective teams and departments, examining is there more that we can do to help to move a change in behaviour in the direction that we know we need to go.

"I think tax policy can play a role, but also through our expenditure decisions," he said.