Business

Consumers ‘highly likely’ to see another cut to their energy bills

CSO figures show cost of wholesale electricity fell 15.3% in February compared to January, and by 46.8% compared with the same month last year

Wholesale prices have fallen sharply in the last 12 months but consumer groups say energy companies are not passing on the lower prices to consumers quickly enough

Colin Gleeson
Fri Mar 22 2024 - 11:44

Consumers are in line for another cut to their energy bills after the cost of wholesale electricity fell by 15.3 per cent in February compared to January, and by 46.8 per cent compared with the same month last year.

Data from the Central Statistics Office (CSO) published on Friday shows the overall energy products index, which is contained within its wholesale price index, was down by 10 per cent since January and by 37.2 per cent when compared with February 2023.

The faster-than-expected softening of headline inflation in the Republic and across the euro zone has been driven almost entirely by falling energy prices.

Although on an upward surge in the wake of Covid and spiked after Russia invaded Ukraine in February 2022, prices reached a peak in August that year. While wholesale prices have fallen sharply in the last 12 months consumer groups have complained that energy companies are not passing on the lower prices to consumers quickly enough.

READ MORE

Daragh Cassidy, spokesman for consumer website Bonkers.ie, said on Friday that wholesale electricity prices still remain high by historical standards.

“Wholesale prices are now at their lowest level since the start of 2021 before a host of events caused prices to skyrocket over the next two years. Due to hedging it takes time for price decreases on wholesale markets to feed through into lower bills for consumers.

“Besides, wholesale prices only make up around half of the final cost of electricity for consumers. Government tax and levies, costs for the distribution of electricity into people’s homes, and supplier operating costs and profit margin also need to be factored in.”

However, if wholesale prices remain close to where they are, it is “highly likely” there will be another round of price cuts in the second half of the year of between 10 and 20 per cent, Mr Cassidy said.

That would come on the back of two rounds of price cuts over the past six months that have seen electricity bills fall by around 20 per cent to 25 per cent. “However even after this third price cut, presuming it happens, electricity prices would still be around 50 per cent to 60 per cent higher than what would, until relatively recently, have been considered normal levels,” Mr Cassidy added.

The latest CSO data also shows wholesale prices for construction products were up 0.1 per cent in the month to February but down 0.7 per cent in the 12 months since February 2023.

Ian Lawlor, managing director of Lotus Investment Group, which lends to developers, said the data shows “a significant improvement” on this time last year when annual inflation for construction materials stood at almost 14 per cent. “The fall in the cost of basic construction materials over the last year should be good news for prospective house buyers as this should ultimately reduce the cost of building homes – and in turn, help stop house prices accelerating.”

Elsewhere, domestic producer prices for manufactured goods were on average 3.3 per cent lower in February when compared with a year earlier, while producer prices for exported goods rose by 3.7 per cent.

Overall, manufacturing producer prices were 3.3 per cent higher in the year.

Producer prices for food products dropped 9.3 per cent in the 12 months to February, while the food products, beverages and tobacco index was down 8.2 per cent.

The most notable increase in producer prices for food products over the 12 months to February was in fish and fish products (7 per cent). In terms of decreases, the price of dairy products (-28.5 per cent) and other food products (-9.4 per cent) came down.

Colin Gleeson

Colin Gleeson

Colin Gleeson is an Irish Times reporter

LATEST STORIES