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Regulator 'encouraging' energy suppliers to pass on price reductions 'as soon as possible'

The CRU says it is ‘very concerned’ about the impact of high energy prices on households and businesses.

THE COMMISSION FOR the Regulation of Utilities (CRU) says it is encouraging all energy suppliers to reduce prices “as soon as possible”.

Appearing before the Oireachtas Environment Committee today, representatives from the commission will state that it remains “very concerned at the impact of high energy prices on households and businesses”.

In its opening statement to the committee, the CRU states that the recent reductions in wholesale gas and electricity prices are welcome, acknowledging that some suppliers have announced price reductions for certain customer segments.

“While CRU notes that hedging practices are likely to be significantly different across suppliers we continue to encourage all suppliers to reduce prices as soon as possible,” it will state. 

The comments come after senior Cabinet ministers as well as the Taoiseach have called on energy companies to move to reduce prices for households.

Passing on savings to customers 

Finance Minister Michael McGrath has said that energy companies should pass on reductions in the wholesale market to customers, while Leo Varadkar has pointed out that the companies were quick to increase prices when needed, and should do the same now that wholesale prices are falling.

The CRU will tell the committee today that “it is important to note that wholesale gas prices remain at over two times the historic norms”.

“Due to supplier hedging, the majority of customers were protected from the worst impacts of the volatility and extremely high prices of 2022, when wholesale gas prices peaked at ten times the historic norms.

“However, the same hedging contracts and practices that protected customers can mean that the pass-through of wholesale price reductions to the retail market are not seen for a period of time,” it states. 

Wholesale prices 

While it will tell committee members today that falling wholesale prices have resulted in retail prices remaining stable since December 2022, they still are at significantly elevated levels compared to pre-2021.

“The CRU will continue to encourage suppliers to pass through price reductions as soon as possible whilst at the same time preparing for the winter ahead so Irish customers are protected,” says the statement. 

Looking at the number of customers that switched providers over a 12-month period, the CRU said approximately 20% of domestic electricity customers and 22% of domestic gas customers switched supplier in the year November 2021 to October 2022.

However, it notes that switching figures have since declined by more than 50% in both electricity and gas from their peak rates in September 2022.

In terms of customers in arrears, the CRU states the figures remain below pre-Ukraine war levels.

“The Government Emergency Electricity Credits have had a positive impact on electricity arrears with the level of arrears reducing but have tended to rebound quickly to pre-credit levels,” it states. 

However, the CRU adds that the impact of the credit has had “less of an observable impact more recently”, due to contributing factors including high prices, elevated winter consumption and the extended moratorium on disconnections. 

The moratorium on disconnections ended on 31 March, with the CRU expected to tell the committee today that it does not expect to see any marked rise in disconnections given the “thorough process suppliers must follow and the fact that suppliers will not disconnect engaging customers”.

The CRU says it is awaiting the data for customer disconnections for April 2023.

Committee members will also be given an update on how the domestic households were penalised with higher bills over a 12-year period due an ESB error, which resulted in ESB committing to a €50 refund for customers. 

The CRU says it is is currently engaging in a review of ESB Network’s initial submission on the error in order to fully identify the impact on consumer bills across all of the distribution tariff groups affected.

“The CRU is also exploring the reconciliation options available,” the committee will be told. 

“The CRU intends that the full error amount is returned to domestic (and any other affected customers) within the 2023/24 tariff year… We are also engaging with ESB Network to identify mitigation options in order to prevent any potential inaccuracies or errors in the future,” adds the statement. 

Separately, the CRU states it is reviewing the volatility in the market from June and October 2022, which made it not commercially viable for some suppliers to remain in the Irish retail market.

The review will include scenario planning should more suppliers exit the market, the opening statement to the committee outlines, adding that the regulator is seeking learnings from these market exits. 

Energy Minister Eamon Ryan said last week he was “frustrated” that the energy companies had not passed on savings sooner for customers. 

During the autumn, when energy costs were skyrocketing, the minister held a number of meetings with energy companies on protections for customers.

TheJournal asked last week if the minister had meetings arranged with energy company bosses in the days ahead.

A spokesperson for the minister said he holds meetings with energy companies on a “continuous basis” adding that he had met with one company last week. When asked for an exhaustive list of energy companies that the minister has met recently, none was supplied. 

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