IFI demise may fuel electricity price rise

The closure of Irish Fertiliser Industries (IFI) and consequent decline in gas consumption could lead indirectly to an electricity price increase for business and consumers next year.

Until IFI was closed last week, it was consuming one-tenth of the gas that Bord Gáis transmitted from independent suppliers to large industrial users in the Republic. Now that such a large client has disappeared, some fear that Bord Gáis will seek to limit the shortfall in revenue through raising transmission charges for remaining customers, the largest of which is ESB.

Informed observers say that if this occurred, it would be reasonable to presume that ESB would be forced to pass on the higher charges to customers.

An ESB spokeswoman said gas constituted 37 per cent of the fuel the company uses to generate electricity.

Bord Gáis's relationship with IFI produced revenue of €14 million for the utility last year, a period over which pre-tax operating profits amounted to €107 million.

A Bord Gáis spokeswoman said the company would seek to make up the loss through expanding its customer base and penetrating new markets, pointing out that any increase in transmission charges would have to be sanctioned by the energy regulator, Mr Tom Reeves.

It has been estimated that transmission charge increases of 16 per cent already approved by Mr Reeves earlier this month could effectively raise electricity prices by 1 per cent.

If a further hike in charges is approved in the near future, it would be natural to presume that it would have an additional knock-on effect.

Electricity prices are already due to rise in January.

Some commentators estimate that gas transmission charges have risen, on a cumulative basis, by 60 per cent over the past three years.

It has been suggested that the closure of IFI, and the effect it will have on the Bord Gáis business model, could lead the company to seek a further increase of at least 10 per cent when transmission charges are renewed a year from now.

Bord Gáis is precluded from raising transmission charges until then.

When he was implementing the most recent transmission charge increases, Mr Reeves said that the main driver behind them was Bord Gáis's €1.37 billion capital investment programme.