Community Power drops its electricity prices by over 40%

Community Power has become the third supplier this year to announce a cut to its electricity prices in a further sign that some normality is returning to the energy market. 

It follows cuts by Pinergy and WaterPower earlier in the year.

The electricity supplier is decreasing its standard unit rate by over 40% from 64.86 cent per kWh (ex VAT) to 37.08 cent per kWh (ex VAT) from 1 July.

This means its electricity will now be cheaper than all the main suppliers, including Electric Ireland, whose standard rate is now over 7% dearer at 39.70 cent per kWh.

Community Power’s standing charge will remain at 60 cent a day (ex VAT) for those in urban areas and 70 cent a day for those in rural areas. 

*standard 24-hour unit rate, excluding VAT which is currently 9%. Those with smart meters and day/night meters may be paying more or less depending on time of day.

Will other suppliers follow suit?

Other suppliers will no doubt come under some pressure to follow Community Power’s reduction.

But it's important to remember that Community Power’s electricity prices were among the highest in the market before today's announcement - over 60% higher than Electric Ireland’s for example. 

However this reduction now makes it the second cheapest - if you could use that word in today's market, just behind another small supplier called Waterpower, which lowered its prices in May.  

Whether the main suppliers respond will also depend on their hedging strategies. 

Although energy suppliers keep their hedging strategies top secret, given how high Community Power’s prices reached, it feels safe to say it didn’t hedge very well. It may be buying energy on a very short term month-to-month basis as opposed to several months or years in advance as most other suppliers do. 

While this is risky, as it means you're highly exposed to sharp fluctuations in the price of energy, it means when prices on wholesale markets fall, then these prices can be passed on fairly quickly. 

See our explainer on hedging and why households' energy bills haven't been falling yet. 

What's the outlook?

The energy market still remains volatile with gas and electricity prices on wholesale markets still at levels that are way above normal, despite recent well publicised drops. 

For example the average cost of electricity on the Irish wholesale market for the first half of the year is still around €130 per MWh. This compares to an average price of less than €40 in 2020, when prices were last at what would have been considered a normal level. Back then Community Power’s standard unit rate was under 17 cent (ex VAT) for example. So even after today’s announcement it’s still double that!  

But the outlook for hard-pressed households is much more positive than a few months ago and hopefully we'll see more widespread reductions from the main suppliers in the second half of the year.

At the moment it looks like we may see gas and electricity prices from the likes of Electric Ireland, Energy, SSE Airtricity and Bord Gáis fall by around 10% to 20% towards the end of the year.

However this would still leave our energy prices at very high levels and way above the European average. 

Assistance 

The Government has committed to keeping the reduced rate of VAT on gas and electricity bills until October. However it will no doubt come under pressure to retain the lower rate for much longer given prices will remain at very high levels for the medium term.

The Government may also pay another round of energy credits this winter - though perhaps at a slightly reduced level. 

In the meantime, to help you cope with high energy prices, here are 16 ways to use less electricity and save money. 

And if you're struggling to pay your energy bills, here are a range of supports that are available.