Although energy prices are easing, several developments mean households may not be much better off financially this winter compared to last.
Energy prices are falling. However recent developments mean it's not all good news for consumers. Upcoming hikes to the PSO levy, network fees and the carbon tax will reverse many of the savings, as will a potential hike in the rate of VAT.
We take a look at some of the good, bad, and uncertain news for energy customers over the coming months.
The good
Let’s start with the good news.
It’s possible the cost of your gas and electricity will fall by around another 10% over the coming weeks. That’s because wholesale energy prices have eased significantly over the past year or so and this fall is now being passed on to consumers (mind you, wholesale prices still remain around double normal levels).
Since last September all the main energy suppliers have cut their prices twice, amounting to a cumulative reduction of around 20% to 25% for most households.
But a third price cut is possible very soon. Indeed SSE Airtricity has already announced its third reduction in under a year. Its customers saw the cost of their gas and electricity fall by a further 10% from 1st July. And if you’re a customer of Electric Ireland, Bord Gáis Energy, Energia or Flogas etc you should expect a similar announcement from your supplier before the end of the summer hopefully.
The not so good
You may be familiar with the PSO levy.
This is a charge that the energy regulator, the CRU, places on all electricity bills to help support the renewable energy sector.
For the present year the PSO levy has been zero. Unfortunately the CRU has announced that the levy is increasing to €3.23 ex VAT a month or €3.52 a month including VAT at 9% from October.
It's not a huge sum of money. But it’s adding to electricity bills at a difficult time. And many consumers will, of course, struggle to understand why we’re paying an extra levy for renewable energy when we’re constantly told renewable energy will bring our electricity prices down. An article for another day perhaps...
Another fee that’s going up is the ‘network’ fee.
Energy suppliers pay ‘network’ fees to Eirgrid and Gas Networks Ireland for the upkeep of the electricity and gas networks respectively.
As consumers, we don’t see these charges on our bills as they’re incorporated into the unit rate that we pay for our energy as well as the standing charge. But around 30% of the total cost of a household’s gas and electricity bill is made up in these network costs.
The CRU sets the amount that Eirgrid and Gas Networks Ireland can charge suppliers each year based on detailed discussions with all relevant stakeholders. As with the PSO levy, the year runs from October to September.
For the 2024/25 year the CRU has agreed an increase in the network fees that Gas Networks Ireland can charge. According to the regulator, this is to support Gas Networks Ireland in delivering “a safe, secure and decarbonised gas network”.
Based on average usage, this increased charge works out at around €5 a month or €60 a year per household.
The CRU has also increased the network fees for the upkeep of the electricity grid. This works out at around €8.42 a month or just over €100 a year per household.
It’s up to individual suppliers to determine how they pass on the increase. They can absorb the hike themselves, increase their prices, or reduce their prices by a lower amount than they otherwise would have.
A charge that definitely will be passed on to consumers is the carbon tax. This will increase yet again in the upcoming budget in October. It currently adds around €122 a year to the average gas bill. The increase in the next budget will add another €20 or so. But the hike will likely be postponed until the start of next May as is customary.
The uncertain
To help with the cost of living crisis the Government reduced the rate of VAT on energy bills from 13.5% to 9% in May 2022.
The measure was only meant to be temporary but was extended at the last Budget until the end of this October.
At the moment the Government has given no indication as to whether it’ll extend the reduced rate of VAT again. But given how high energy prices remain, it’ll come under pressure to do so. Prices are still around 70% to 80% above the level they were at only three years ago.
But if the Government does hike the rate of VAT back up, it’ll add around €65 a year to the average annual electricity bill and around €55 a year to the average annual gas bill.
Another uncertainty is whether the Government will pay another round of energy credits to all households this winter.
Last winter the Government paid three credits worth €150 each or €450 in total. And the winter before it paid three rounds of €200 credits, so €600 in total. These credits, coupled with substantial social welfare support, have helped shield households from the worst of the energy crisis.
But with energy prices having eased from their record highs, albeit still at very high levels, the case for another round of universal credits is less compelling.
However if the Government doesn’t pay any credits this winter, and hikes back up the rate of VAT on top of an increase in the PSO levy, households may still end up paying almost as much for their energy this winter as they did last year, despite recent price cuts. So something to bear in mind...
Switch and save on bonkers.ie
Regardless of what happens to energy prices over the coming months, you can ease the burden by switching supplier. Right now, suppliers are offering discounts of up to 30% or more to new customers. Meaning you could save hundreds on your energy bills in minutes.
And the good news is that you can compare tariffs from all of Ireland’s energy suppliers and switch to a cheaper deal in just a few clicks on bonkers.ie.
