Summer 2015 Issue of ESR

Some very interesting research that deserves review and comment with a view to informing policy, but I doubt it will attract much of the former or have much impact on the latter. I have a few observations on the piece of work that deals with issues in my neck of the woods.

At first sight it seems strange that the question “Is fuel poverty a distinct type of deprivation?” (and that therefore might require a differentiated and focused policy response) has motivated some detailed and statistically high-powered research by two ESRI staff members. One would expect that a more relevant question would be “What is the incidence and impact of fuel poverty and is the current policy response appropriate?” But this is Ireland after all and one needs to ask who would like the first question to be asked and answered in the negative (and who, simultaneously, would not like the second question to be asked). And the answer to this question is succinctly presented in the Acknowledgements: “Funding for the research was received from the ESRI Energy Policy Research Centre, which in turn is funded by contributions from Ireland’s Department of Communications, Energy and Natural Resources, the ESB, BGE, Eirgrid, Viridian and the Commission for Energy Regulation (CER).”

A more useful point of departure might be found in the following:
http://www.seai.ie/Publications/Statistics_Publications/Electricity_and_Gas_Prices/Price-Directive-2nd-Semester-2014.pdf
and, in particular, the key data presented on page 3 which shows that Irish residential electricity prices are among the most expensive in the EU. The approximately 75% of households whose consumption falls in to the first three bands (up to 5,000 kWh a year) are paying between 22% and 109% more than the EU averages for these bands.

The SEAI goes to get lengths to try to explain away these excessively high final prices, but most of the facile excuses it advances crumble when subjected to any scrutiny. There are numerous reasons why final electricity and gas prices are much higher than they need be – and as a result imposing an unjustified cost burden on low and fixed income households, but one stands out. Successive governments have refused – and this one continues to refuse – to invest one red cent of state equity in the electricity and gas networks despite an enormous increase in investment in these networks (in particular, the electricity network) over the last 15 years – and a projected heavy future programme. The energy regulator, the CER, has been both empowered and compelled to inflate the regulatory value of the network assets to extract additional investment financing ultimately from final consumers.

This generates significant additional cash flow that allows the network companies to finance their antics and ambitions at the expense of final consumers. Prices to final consumers, particularly to smaller volume consumers on low and fixed incomes, are excessively high and this leads to social welfare transfers to ameliorate the impact. It is a tribute to the power and influence of the special interest groups operating in the energy sector that such egregious economic wastefulness at the expense of the majority of citizens as final consumers and taxpayers evades any scrutiny or remedy.