Nobody can refute the assertion by the chairman of the ESB, Mr Tadhg O'Donoghue, that fuel costs are "rocketing". A visit to any petrol station would confirm that he is not exaggerating. As a consequence of the rise in oil prices, now at a 13-year high, the ESB is planning to apply for a price increase which would be in "double digits". Oil prices, in fact, have been rising sharply throughout the last 12 months.
The price surge, up by more than 25 per cent this year alone, is partly down to production restraint by OPEC members but other contributory factors are the huge demand coming from China and the US and production difficulties in Nigeria and Venezuela, not to mention Iraq. Oil, however, is paid for in US dollars and the increase in the value of the euro against the dollar shielded us from the effects of the price rise until now.
It comes as no surprise that the ESB will be applying for a price increase. Timing the announcement to coincide with a disclosure of profits of €248 million last year, an increase of 62 per cent on the 2002 performance might seem incongruous to the company's customers. However, even profits approaching €5 million a week represent a return of only 6 per cent on the capital that is tied up in the company. Neither do the profits seem so large when measured against the ESB's enormous need for further investment which last year ran to €1.2 billion.
An application for a double-digit price increase will nevertheless warrant great examination by Mr Tom Reeves, the Commissioner for Energy Regulation. It has been suggested by the Minister for Communications and Natural Resources, Mr Ahern, that the commissioner should take into account national competitiveness. This is nonsense. The ESB must be allowed pass on price increases for raw materials if the commissioner rules the application to be valid. But the price of oil has now turned down and OPEC has announced it will increase production in order to bring prices down further.
The ESB for its part must display a greater determination to reduce its cost base. Because of new competition criteria its market share has to shrink, perhaps to as low as 50 per cent. Its costs and in particular its employee numbers will need to reflect accurately its reduced customer base. There is a €250 million refit pending for Moneypoint which produces one-fifth of the State's electricity but does it with increasingly expensive coal. It is by no means a given that it should be kept in operation. The ESB must shake off its monopolistic appearance and convince the public that it is on the way to being a lean, customer-driven organisation determined to reduce costs to the minimum.