The price of residential gas will increase by just 2 per cent from the beginning of next month after the Commission for Energy Regulation (CER) rejected two applications from Bord Gáis Energy for significantly higher price hikes.

The increase will cost most customers around € 18 a year and will take the average residential gas bill to € 980.

Bord Gáis Energy is the only company to have its prices controlled by the CER and in the middle of last month it applied for a 7.22 per cent price increase before submitting a revised price rise application of 5.43 per cent 10 days later. However the CER announced this afternoon that was only prepared to sanction a rise of just 2.04 per cent which will take effect from October 1st.

While the increase is smaller than anticipated, it is the third October in a row that gas prices have gone up and coupled with a price hike of 22 per cent in 2011 and an increase of 8.5 per cent a year later gas prices will have climbed by €250 in just two years.

The CER said the latest tariff increase was mostly driven by lower gas demand which leads to higher network charges to cover the cost of the pipes that transport the gas to consumers’ homes. Such charges make up around 40 per cent of a typical gas bill and are mostly fixed and need to be paid for even if demand reduces. In addition the wholesale cost of purchasing gas from Britain has risen marginally and contributed slightly to the overall price increase.

It is expected that all gas suppliers will follow the Bord Gáis price increase with an identical hike in standard prices. The cost of home electricity is also set to go up by around 1.5 per cent in the weeks ahead which will add € 17.22 to electricity bills.

"Bord Gáis Energy regrets that a price increase is necessary and although networks tariffs are beyond our control, we continue to do everything we can to deliver good value for our customers" said Bord Gáis Energy's managing director Dave Kirwan.

"Back in 2011, gas customers were paying just € 727 per year to heat their homes," said David Kerr of price comparison website bonkers.ie. "Although these price increases will affect all customers, there remains a big difference between standard energy plans and the cheapest deals available," he said. He pointed out that 60 per cent of gas customers have never switched and are paying the most expensive rates.

“Any increase in tariffs is of course difficult for customers,” the CER said. It said it had sought to keep the sanctioned increase to the minimum necessary. “We would like to emphasise that there are a number of competing gas suppliers and encourages customers to shop-around for the best tariff and service deal.

It also pointed out that recent Eurostat data shows that Ireland's residential gas prices were generally lower than the EU average.