34% gas price rise to stand for at least a year

The 34 per cent increase in gas prices which came into effect yesterday will remain in force for at least a year, despite recent reductions in the cost of oil, the Minister for Communications, Marine and Natural Resources Noel Dempsey said yesterday.

Mr Dempsey said the Commission for Energy Regulation (CER) had opted for a system of deciding on price levels on an annual basis.

He said the price increases were determined by a number of factors and would stay in place for 12 months. He said that if the energy regulator was to drop the system of annual price assessments that "we could end up with a situation as in the UK, where there have been 13 gas price rises since the first of January this year".

"Personally I don't think that that is a great system either," Mr Dempsey said. The 34 per cent gas price rise is expected to add around €25 to monthly household bills. The increases are likely to see the average annual gas bill climb to €1,208 from €902.

The National Consumer Agency (NCA) last week called on the energy regulator to rescind its decision to allow Bord Gáis to impose the price increase. It also called for a proposed 20 per cent increase in electricity prices - expected to come into effect in January - to be withdrawn.

The NCA urged that both Bord Gáis and the ESB should submit new proposals to the CER in the light of developments in international energy markets.

Ann Fitzgerald, executive chairwoman of the NCA and director of Consumer Affairs, stated: "In relation to the proposed electricity price increases, the main drivers seem to be the recovery of higher-than-expected fuel costs in 2005 and 2006 and an expectation that oil/gas prices would continue at a high level. CER's decision in relation to a 34 per cent increase in gas is also predicated on continuing high wholesale prices of fuel.

"It is now generally accepted, however, that oil prices have peaked in July 2006 and have subsequently dropped by approximately 20 per cent. Bearing this context in mind the proposed increases should be shelved without delay. The impact of unnecessarily high increases on both consumers and businesses alike should not be underestimated", she said.

Mr Dempsey said one of the best ways of seeking to have some control over gas prices would be to obtain an indigenous supply of gas such as bringing the Corrib field into the system as fast as possible.

"At the moment we are very much price-takers. There will always be a global price that we will be paying. But we would be paying an awful lot less for the transmission of gas if we had our own supply and the Corrib field is capable of supplying up to 60 per cent of our needs over five or six years," Mr Dempsey said.

The new 34 per cent increase in the price of gas follows a rise of 25 per cent last year.