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Finance Minister Paschal Donohoe Leah Farrell
Energy prices

Donohoe not drawn on energy price caps despite UK move to freeze prices

There were calls from People Before Profit to introduce a price cap on energy.

IN RECENT DAYS, there has been additional scrutiny on what the Government plans to do to tackle the ongoing energy price crisis ahead of the Budget.

While a second electricity credit has been confirmed, there is pressure being heaped on the Government to act and place price caps on the cost of energy.

It comes as Energia became the latest energy company to hike their prices, with the provider set to raise electricity prices by 29% and gas by 39% in early October.

The pressure to act is not only coming from some opposition parties, like People Before Profit, but from the UK, where the new Government looks set to introduce price caps on energy in the coming weeks.

New UK Prime Minister, Liz Truss, announced that energy prices will be frozen at £2,500 (€2,875) for the next two years, which is set to cost around £100 billion (€115 billion), more than the country’s Covid furlough scheme.

When asked about whether or not Ireland was considering capping energy prices, Finance Minister Paschal Donohoe would not be drawn and said that the Government would take measures that were “the right thing for the people of Ireland”.

“We’ll be guided by what’s the right thing for the people of Ireland, what are the measures that can help, what are the measures we can bring in quickly and what are measures that we are confident that we can afford without creating further difficulties in the future,” Donohoe told The Journal.

“Of course, we look at what other governments are doing. We’ll be informed by decisions that we make but we will be guided by our own judgment in this area.

He said that it would be inappropriate for him to comment on any budgetary or taxation measures two weeks before Budget 2023 is unveiled.

Yesterday, Environment Minister Eamon Ryan updated the Cabinet about current energy supply and cost concerns.

Current wholesale price expectations for this winter and throughout 2023 are at over 10 times their historic level, Cabinet was told. 

Price caps

Dr Paul Deane, research fellow at UCC’S MaREI institute, told The Journal that while price caps would be effective in the short term at alleviating the pressure on people, in the longer term the taxpayer would likely foot the bill of the measure.

He said that measures like direct financial measures that were targeted at the worst impacted by the energy price rises would be best placed and that “a certain level of pragmatism is needed”.

“Looking at price caps, you might get some short term relief,” said Deane, adding that it would be preferable if the Government examined tackling the problem at the source by “putting manners on the gas markets”.

Currently, energy ministers in the EU are set to meet on Friday to discuss action on the energy markets, with European Commission President Ursula von der Leyen proposing multiple measures, including a cap on gas prices.

Von der Leyen also said that a mandatory target for reducing electricity use at peak hours would be on the table, as the EU has to save electricity, but “in a smart way”.

“So what we have to do is to flatten the curve and avoid the peak demands. We will propose a mandatory target for reducing electricity use at peak hours. And we will work very closely with the Member States to achieve this.

“We are facing an extraordinary situation, because Russia is an unreliable supplier and is manipulating our energy markets,” she warned today.

“Our unity and our solidarity will ensure that we will prevail,” she added.

Laying out her plan, von der Leyen urged that member states agree a price cap on Russian gas imports, a measure that Putin has warned would be “an absolutely stupid decision”.

A spokesperson for Minister Ryan said yesterday:

“We haven’t the detail of the proposal yet, however, we agree with the overall principle of not paying excessively for low-cost energy in order that costs can be kept as low as possible for home and businesses across the country. Minister Ryan looks forward to discussing the matter at Friday’s meeting of EU Ministers.”

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