The Irish electricity market has been going through a process of liberalisation since 1998. Prior to this ESB operated as a vertically integrated state owned monopoly. The liberalisation has happened in phases with sectors of the market being progressively opened for competition, with the market wholly open since 2004.
The Commission for Energy Regulation is the body responsible for regulating the Irish electricity market and as such has been promoting competition in the market since its inception in 1998. Since ESB Customer Supply (ESB CS) has remained as the supplier of last resort with the largest share of the domestic and commercial markets it is still regulated by the CER.
At present independent suppliers such as Airtricity, Energia and Bord Gáis Energy are gaining a foothold in the Irish Electricity Market and offer significant discounts on ESB Customer Supply’s regulated tariff, which has led to a significant number of customer’s switching their service provider.
The CER has outlined a programme for the full deregulation of the electricity supply market which would allow ESB CS to set unregulated tariffs and compete with independent suppliers.
Large Energy Users and Medium & Small Business Markets
The market for large energy users and businesses has been open to competition for some time with significant numbers of people already having switched. Customer switching is still active in this section with over 20% of customers changing supplier since March 2009. Criteria governing deregulation have been drawn up by the CER and state that:
· There must be three active suppliers in the relevant market
· There must be a minimum of two independent suppliers, each having a minimum 10% share of total electricity consumption in the relevant market
· ESB Customer Supply and ESB Independent Energy must supply 50% or less of the market by consumption in each of the relevant business markets.
As these conditions have been met, deregulation of these markets will begin from 1st October 2010 as announced by the CER chairman Michael Tutty, with ESB Customer Supply free to set its own prices. Deregulation should ultimately place downward pressure on prices as energy providers aim to keep their prices down in order to attract new customers and retain current ones.
Domestic Market
The domestic market has been open to competition since 2005 and although customer switching was low initially, this has changed significantly in the last eighteen months. Since February 2009 almost 500,000 domestic electricity customers have switched from ESB Customer Supply to either Airtricity or Bord Gáis. ESB-CS still hold 77% (21st April 2010) of the domestic electricity market and so in line with the CER’s competition rules, a further 300,000 people must leave before de-regulation can take place (thought to be early 2011). Customer switching reached a peak of roughly 1000 customers per day in June 2009.
Criteria governing this have been drawn up by the CER and further to the first two conditions for the business market they include:
· ESB-CS’s customer share must fall below 60%
· Switching rates must be greater than 10%
· ESB supply companies must rebrand themselves
When de-regulation comes about for the domestic market, it will leave ESB-CS able to set its own prices in a bid to win back customers.
The CER have also stated that ESB Customer Supply will have to change its name so as not to give it an unfair advantage with consumers, as it is almost synonymous with electricity in Ireland. A new name would have to be applied to its electricity supply arm, to differentiate it from ESB networks which would continue to provide the wires connecting homes to the national grid, regardless of which supplier is used.
Energy Solutions can help its clients in this ever growing market to discern between the various products and providers, thus helping them achieve the best and most cost effective tariff for their individual needs.
Sources:
CER – Factsheet: Competition in Electricity Supply, 21st Apr 2010
Aideen Sheehan – Irish Independent, 22nd Apr 2010
Niall Brady – The Sunday Times, 18th Apr 2010