THE ESB GROUP has announced a 30% rise in its operating profits to €676 million during the first six months of this year.
The state-owned energy company said its profits from the start of the year to 30 June had increased by €157 million compared to the same period last year, during what it said was “a period of continued uncertainty and change for the energy industry”.
ESB said that the increase in profit relates primarily to its operations in Great Britain, where its Generation and Trading business and its energy supply business benefitted from a higher energy margin.
The energy margin is the value of its sales of energy minus the direct energy costs.
ESB said that revenue in ESB Networks – which builds, operates and maintains the electricity network in Ireland – also rose as a result of “regulated network tariff changes”.
It said it also benefitted from “foreign exchange movements”.
These increases were partially offset by lower profitability from the Electric Ireland, which is the commercial, front-facing division of the ESB Group.
Why are bills still so high?
Domestic electricity and gas prices have risen hugely since 2020, driven first by the Covid-19 crisis and then by the spike in wholesale energy costs as a result of the Russian invasion of Ukraine in February 2022. Since then, Electric Ireland, along with every other energy company, have risen their prices significantly.
Electric Ireland announced price hikes in gas and electricity in March, July and September of last year, with the last rise being for 38.4% on electricity and 47% on gas.
Wholesale electricity prices have since fallen significantly. According to the latest CSO figures, wholesale electricity prices decreased by 17.9% in the month to July 2023 and were 64% lower in July 2023 when compared with July 2022.
Early this month, ESB announced a drop in electricity prices of 10% and gas prices of 12%. However, prices are still significantly higher than they were before 2022.
In the meantime, profits at ESB Group and other energy companies have soared. Last year, the ESB Group recorded profits of €847 million last year compares to €679 million in 2021.
Commenting on this in a statement today, Paul Stapleton, ESB’s Chief Financial Officer said that the company’s commercial and generation wings were entirely separate.
“We fully understand that people find it difficult to comprehend energy company profits at a time when prices for families and businesses remain high,” he said.
“As ESB’s generation and supply businesses are required to operate separately, we cannot use profits from ESB’s generation business to offset Electric Ireland’s prices.
However, we remain committed, as we have been throughout the energy crisis, to supporting our customers in so far as we can.
It remains crucial that ESB continues to earn sufficient profits to allow us to support the increased investment required to deliver a future powered by clean electricity.
“This increased level of investment is required to ensure a reliable and sustainable electricity system as we transition to net zero.”
ESB said capital investment in the first six months had increased to €779m, a rise of 46% compared to last year.
It also said it has provided about €1.5 billion in dividends to the State over the past 10 years, including a €317 million dividend from 2022 profits. Dividends from 2023 profits will be considered at the end of the financial year, the company said.
The Government plans to introduce a windfall tax to recoup some of the bumper profits secured by energy company in recent years.
The Energy (Windfall Gains in the Energy Sector) (Temporary Solidarity Contribution) Act, 2023 adopted this June will see energy companies paying up to €450 million in tax on profits this year.
Minister for Finance Michael McGrath also said that the government will be doing all it can to support households with energy bills.
Taoiseach Leo Varadkar also said earlier this month that energy companies must reduce their prices further coming into the winter.
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