Consumer Watch: Sky-high prices of our energy bills

Last November, I rang my plumber to come check our boiler. I was convinced we had a leak because our gas bill had skyrocketed.

However, the boiler was fine. We – along with every household in the country – saw huge spikes in our energy bills.

Last year alone, there were 35 price hikes across the 14 providers and prices spiked by between 30% and 70%.

Let’s put that into perspective. The average annual electricity bill in Ireland is €1,300 a year while the average gas bill is €1,000, a total of €2,300. The average hike was €870 which is a huge jump. So what is going on that we are seeing such increases?

There are a few reasons and we will discuss the price of gas and electricity together.

Obviously, not every household heats their house with gas, but while renewable energy continues to gain more and more importance, we still rely on gas to power between 40% and 60% of our country’s electricity. So when the price of gas rises, so too does the price of electricity. And gas prices were at an all-time high globally.

Gas is measured in price per term. Throughout 2020, the price per term sat around 50 pence.

In 2021, it rose to 200 pence and in December, it skyrocketed even further to an all time high of 450 pence. It is now back at around 200 pence mark again but that is still four times more than it was two years ago.

1 The price of fossil fuel has skyrocketed globally

The pandemic has had a massive impact on the price of gas. The world’s energy supplies are a delicate balance and that was really scuppered by businesses opening and closing around the world during lockdowns. It created a mismatch between supply and demand, which really pushed prices up.

You might be thinking, “It’s nearly two years since the first big lockdown in 2020, how are we still feeling the effects?” But look at the Irish property market; when building ceased and people weren’t able to view and bid on houses in lockdown, it also created an imbalance of supply and demand and we are still living with those price hikes now.

Tension between Russia and the Ukraine is also forcing energy prices up. Russia supplies 35% of Europe’s gas and by withholding gas reserves, not only is it affecting supply and demand, these tensions are also spooking the market.

2 The weather

Weather both at home and further afield has also had a massive impact. Last year, in Asia they had a very cold winter which depleted gas reserves and led to an increase in demand globally which pushed prices up.

But closer to home, the weather also had a big impact. It’s not something you pick up on a day-to-day basis but did you notice there was very little wind last year?

Across Europe, it was one of the least windy years in about a decade and Met Éireann reports that in Dublin, the wind hasn’t been as calm since 1959. This impacted the wind turbines. As they didn’t generate as much energy, gas had to pick up the slack. So not only did we need more gas than usual, it was already at a higher price because of the weather in Asia.

3 Power plants down

If that wasn’t enough, last year, two gas power plants were out of action – Whitestown in Cork and Huntstown in Dublin. They were both down for maintenance reasons but between the two of them, they generate 15% of our renewable energy. So again, we weren’t firing on all cylinders and needed to rely on gas more.

This may be the global situation but why are we seeing such variations in increases between providers? While the average price increase is €870, Flogas customers have been hit with increases of €1,136 while Electric Ireland customers have increases of €323.

Daragh Cassidy, head of communications at Bonkers.ie says: “It is a very unusual situation because there is good competition in the market and their rates usually sit around the same mark. There is no definitive answer to this but we can make some observations.

“The companies with the smallest price hikes are Electric Ireland, SSE Airtricity, Bord Gáis Energy, all big companies. The biggest price hikes are Flogas and Panda Power – smaller companies.

“Perhaps the bigger companies are absorbing the price increases themselves, eating into their profits in the hope that prices will fall again quickly and they won’t lose customers.

“The other reason is that gas can be bought in advance. Suppliers can hedge their bets and perhaps the bigger companies could see this coming down the line and had more capacity to buy oil at a cheaper price and therefore, don’t need to pass on some big increases to consumers.”

It’s well and good knowing the reasons but consumers still need to pay their bills.

The fact is that, although switching providers can be an inconvenient, it saves money – and in some cases a lot of money. This year, more than ever, consumers need to take it upon themselves to avail of these savings.

So let’s take a customer living in rural Ireland who uses the national average amount of gas and electricity. Currently their provider is Flogas. If they are to move to Electric Ireland EnergySaver Dual, they could be looking at saving €1,749 a year across their bills.

You may be thinking, I am already with Electric Ireland so I didn’t need to switch but remember companies do not honour loyalty.

So let’s take the same consumer. If they are already with Electric Ireland they could switch to Bord Gáis Dual Fuel and save €367. That’s because most discount deals only last for one year so you need to switch every year to get the best price.

There are many companies out there that help you to switch such as Bonkers.ie, Switcher.ie and OneBigSwitch.ie. They have become an invaluable resource for consumers and mean you don’t have to make 14 different phone calls to get the best deal.

The way many of them work is they get a commission payment from the suppliers for every successful switch. So they get paid, the supplier gets a customer without having to advertise or send people out knocking on your door and you get the best deal, happy days.

To switch energy providers, you need:

Both these numbers can be found on a recent bill.

In light of this turbulent and unprecedented times in the energy sector, the Minister for the Environment, Climate and Communications Eamon Ryan brought a memo to the Cabinet last week called the Electricity Costs Emergency Measure Bill.

The bill proposes that by the end of March, every household will receive €100 plus VAT, a total of €113 towards their energy bill. It won’t be means tested, consumers don’t have to apply for it and it will be given as a credit through ESB Network.

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