Electricity & Gas Retail Markets Annual Report 2013

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1 Electricity & Gas Retail Markets Annual Report 2013 DOCUMENT TYPE: REFERENCE: Information Paper CER/14/134 DATE PUBLISHED: 25 th June 2014 QUERIES TO: Adrienne Costello The Commission for Energy Regulation, The Exchange, Belgard Square North, Tallaght, Dublin 24.

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3 Executive Summary The purpose of this paper is to provide industry and interested stakeholders with relevant information on the developments of competition in the electricity and gas retail markets in Market Shares Competition continued to develop in the electricity and gas retail markets in There was one new entrant in the domestic electricity market, Pinergy. More recently in January 2014, Energia entered the domestic market in both gas and electricity. In electricity, Electric Ireland continues to be the largest supplier in terms of customers across all market segments and in terms of MWhs, except in the medium business market. Energia remains the largest supplier (in terms of MWhs) in the medium business market but is no longer the largest supplier in consumption terms in the small-business market. In gas, Bord Gáis Energy remains the largest supplier in terms of customer numbers and consumption in domestic, IC and FVT markets. In the RTF market Energia has the highest GWhs and customer number share. The CER will continue to monitor both markets to ensure the continued development of competition. Customer Switching Switching between suppliers is an important metric of competition and consumer engagement in the retail markets. Switching is continuing in both the electricity and gas markets and switching rates are above 10% in both markets. Under the VaasaETT description of the levels of switching, the Irish electricity market is considered a warm active market and the gas market is considered a hot market. The total number of switches completed in the electricity market in 2013 was 266,224, representing an increase of 5.6% compared to The level of switching in electricity has been at a relatively stable level since September The total number of switches completed in the gas market in 2013 was 117,002, representing an increase of +5.8% compared to PrePayPower experienced the highest net gain of customers in electricity in 2013 and Electric Ireland experienced the highest net gain in gas. Bord Gáis Energy experienced the highest net loss of customers in both markets. Given the importance of high rates of switching in sustaining the intensity of competition between suppliers in the energy markets, the CER continues to publish monthly switching reports to assess the trends and the level of customer engagement in the electricity and gas markets. Competition and Deregulation All electricity market segments are deregulated and the gas business market segments are deregulated. The domestic gas market is the only market still regulated. 3

4 At the end of 2013, Bord Gáis Energy s market share at 57.19% was above the threshold of 55% without rebranding, which the CER set as the threshold for the deregulation of the domestic gas market. A decision paper CER/14/117 NDM Domestic Gas Market Deregulation Decision was published in May 2014 which outlined the CER s decision with regard to the deregulation of the domestic retail gas market. The domestic gas market will be deregulated on 01 st July The CER will continue to monitor the gas and electricity markets and should it feel that customers are not benefitting from deregulation of the sector; the CER will use its regulatory powers to intervene and improve matters. Prices All suppliers are required to publish details of the tariff plans that are available to domestic customers. In 2013 Ireland s second price comparison website was accredited and one such website was audited. These developments serve to provide customers with more clarity and transparency in relation to prices and ease of comparison across suppliers. On average, the most recently available data from Eurostat shows that Irish electricity and gas prices are above the EU area average. All domestic gas and electricity suppliers introduced price increases in late 2013 or early Customer Protection, Debt and Disconnections Electricity and gas disconnections for non-payment of account are monitored on an ongoing basis by CER. Total disconnections in 2013 were 12,391 in electricity and 6,279 in gas, representing decreases of 29% and 17% respectively. Estimated data shows that over 40% of the domestic sites in electricity that were disconnected were suspected to be vacant and 35% in gas were suspect vacant. There were declines in the number of domestic disconnections in both electricity and gas during The decline in electricity disconnections can be partly explained by the increase in the number PAYG meters installed for customers in arrears compared to There were reductions in electricity disconnections across all suppliers compared to The level of disconnections varies by gas supplier. SSE Airtricity and Electric Ireland recorded increases in domestic disconnections compared to Both suppliers attribute the increase in disconnections to the date of their respective market entry in the domestic gas market. A number of actions have been taken to ensure that disconnections continue to be minimised. Suppliers can only pass on 50% of the charge for a disconnection or reconnection for reason of non-payment to a customer experiencing financial hardship. There continues to be stringent obligations on suppliers to make disconnections the last resort. In November 2013 the CER published an audit 1 of supplier s compliance with the code of practice on domestic disconnections. The audit found that suppliers are adhering to the minimum standards as set out in the Supplier Handbook. 1 CER 13/248, Audit of Compliance with the Code of Practice on Disconnections for the Domestic Market, 11 November

5 The CER continues to engage with stakeholders to ensure that the measures currently in place continue to support customers in genuine difficulty. Next Steps The CER will continue to monitor the electricity and gas retail markets throughout The next retail markets report will cover Q Monthly switching reports and Domestic Disconnection monitoring notes will continue to be published. The CER published a consultation paper on a new market monitoring framework in December This paper outlined the CER s proposals in relation to the indicators to be collected from stakeholders as part of a new market monitoring framework. The CER will publish a decision in due course and work will commence on implementation during In May 2014, the CER published a consultation paper, Debt Management Debt Transfer & Debt Flagging (CER/14/119). This paper seeks comment on proposed changes to industry systems/processes to facilitate the repayment of debt by PAYG customers in arrears after a change of supplier and it also seeks comment on the current debt flagging thresholds. 5

6 Table of Contents 1.0 Introduction The Commission for Energy Regulation Objective of Report Energy Market Structure and Developments Introduction Active Suppliers and New Entrants Market Developments Market Share Consumption & Customer Numbers Introduction Electricity Market Overall Trends in Retail Electricity Domestic Electricity Market Small-Sized Business Electricity Market Medium-Sized Business Electricity Market Large Energy Users (LEUs) Gas Market Overall Trends in Retail Gas Domestic Gas Market Industrial and Commercial (IC) Gas Market Fuel Variation Tariff (FVT) Gas Market Regulated Tariff Formula (RTF) Summary - Market Share Customer Switching and New Registrations Introduction Electricity Market Switching & New Registrations Total Switching Switching by Customer Category Net Switching by Supplier New Registrations Gas Market Switching & New Registrations Total Switching Switching by Customer Category Net Switching by Supplier New Registrations Summary Customer Switching Competition and Deregulation Introduction Deregulation in Electricity Deregulation in Gas Electricity and Gas Retail Prices Introduction Disaggregation of Prices in Ireland Supplier Prices in Ireland Analysis of Average Electricity and Gas Prices Summary - Prices Customer Protection, Debt and Disconnections Introduction Debt Flagging Pay as You Go Meters PAYG

7 7.4 Disconnections for Non-Payment of Account Disconnections Total Disconnections Electricity Market Disconnections Gas Market Summary - Customer Debt and Disconnections Conclusion & Next Steps Conclusion Market Monitoring Next steps

8 1.0 Introduction 1.1 The Commission for Energy Regulation The Commission for Energy Regulation (CER) is Ireland s independent energy and water regulator. The CER was established in 1999 and now has a wide range of economic, customer protection and safety responsibilities in energy. The CER is also the regulator of Ireland s public water and wastewater system. The CER s primary economic responsibilities in energy cover electricity generation, electricity and gas networks, and electricity and gas supply activities. As part of its role, the CER jointly regulates the all-island wholesale Single Electricity Market (SEM) with the Utility Regulator in Belfast. The SEM is governed by a decisionmaking body known as the SEM Committee, consisting of the CER, the Utility Regulator and an independent member. The overall aim of the CER s economic role is to protect the interests of energy customers. The CER has an important related function in customer protection by resolving complaints that customers have with energy companies. The CER s core focus in safety is to protect lives and property across a range of areas in the energy sector. This includes safety regulation of electrical contractors, gas installers and gas pipelines. In addition the CER is the safety regulator of upstream petroleum safety extraction and exploration activities, including on-shore and off-shore gas and oil. In 2014 the CER was appointed as Ireland's economic regulator of the Irish public water and wastewater sector. Further information on the CER s role and relevant legislation can be found on the CER s website at 1.2 Objective of Report The purpose of this paper is to provide industry and interested stakeholders with relevant information on the developments of competition in the electricity and gas retail markets in the year 2013, with a particular focus on Q4. This report analyses trends in a number of key indicators: consumption, customer numbers, switching, pay-as-you-go meters, debt flagging, disconnections and prices. It also outlines the key developments in the market. The primary sources of data in this report are: Meter Registration System Operator (MRSO), ESB Networks and Gas Point Registration Operator (GPRO), Bord Gáis Networks (BGN). Published alongside this report is the 2014 Consumer Survey. The Annual Consumer Survey is an essential element of the CERs market monitoring activity and examines consumer s attitudes and experience in domestic and SME gas and electricity markets. The 2014 survey repeated the structure from surveys in 2011, 2012 and 2013 to facilitate trend analysis and included a number of new questions. Both reports are published simultaneously to provide a complete picture, qualitative and quantitative, of market activities. 8

9 2.0 Energy Market Structure and Developments 2.1 Introduction This section contains information on the structure of the electricity and gas retail markets. The main market segments and the suppliers operating in each are identified. The key market developments since market opening are outlined. 2.2 Active Suppliers and New Entrants There were 7 active suppliers in the electricity retail business and domestic markets 2 in There were 7 active suppliers in the gas retail business and domestic markets. In 2013 there were no new market entrants in the gas market and Pinergy entered the domestic electricity market in July In 2012, Airtricity acquired Phoenix and the customer base of Phoenix was transferred in early 2013 (some tables in this report contain references to Phoenix for comparison purposes). The main suppliers in the electricity and gas retail markets in 2013 are identified in the following table. Electricity Electricity Non- Gas Domestic Gas Non-Domestic Domestic Domestic Bord Gáis Energy Bord Gáis Energy Bord Gáis Energy Bord Gáis Energy Electric Ireland Electric Ireland Electric Ireland Electric Ireland Pinergy Energia Flogas Energia PrePayPower SSE Airtricity SSE Airtricity Flogas SSE Airtricity Vayu Gazprom SSE Airtricity Vayu Table 2.1 Suppliers Serving the Retail Electricity and Gas Markets in 2013 In December 2013, the Irish Government announced the sale of Bord Gáis Energy. The sale to a consortium comprised of Centrica, Brookfield Renewable Power and icon Infrastructure will see Bord Gáis Energy being broken into three separate units. Centrica will operate the Retail business unit in Ireland. 2.3 Market Developments The following table outlines the key developments in the electricity and gas retail markets over time, including some more recent developments in Airtricity, Bord Gáis Energy, Electric Ireland, Energia, Pinergy, Pre Pay Power and Vayu. 9

10 Year Electricity Gas 2005 February: Full market opening. Open to competition Single Electricity Market developed. July: Full market opening. Open to competition Airtricity enters domestic electricity market February: Bord Gáis Energy enters domestic electricity market October: Business market segments deregulated April: Domestic market segment deregulated October: Debt flagging process introduced. October: New PAYG meters for financial hardship introduced January: Prepaypower enters domestic market with supplier-led lifestyle choice prepayment model. March: First price comparison website, Bonkers, accredited by CER. July: Supplier Handbook published, outlining minimum service levels that suppliers must provide customers with. October: Harmonised retail systems between NI & RoI May: Second price comparison website, USwitch, accredited by CER. July: Pinergy enters domestic market with supplier-led lifestyle choice prepayment model January: Energia enters domestic electricity market. Flogas enters domestic gas market. PAYG meters for financial hardship & lifestyle choice introduced. May: Airtricity enters domestic gas market. April: Electric Ireland enters domestic gas market. October: Business market segments deregulated. October: Debt flagging process introduced. March: First price comparison website, Bonkers, accredited by CER. July: Supplier Handbook published, outlining minimum service levels that suppliers must provide customers with. October: Harmonised retail systems between NI & RoI. April: Decision on criteria for the deregulation of domestic gas. May: Second price comparison website, USwitch, accredited by CER. January: Energia enters domestic gas market. Table 2.2 Timeline of Key Retail Market Developments There were a number of developments during 2013 that have had positive implications on the level of competition and transparency in the electricity and gas markets. In electricity the market for supplier-led lifestyle choice prepayment where the customer pays for a prepayment device that is installed by the supplier expanded with the entry of Pinergy into the market 3. This development increases the choice 3 PrePayPower also operate in this space. 10

11 that is available to customers and has a positive knock-on effect on competition in the market. In May 2013, a second price comparison website 4 was accredited by the CER which increases clarity and transparency in relation to prices for domestic customers. In 2013, the CER published a decision on the criteria to be met for the deregulation of the domestic gas market which has paved the way for deregulation to occur. In December 2013, the CER published a consultation, Market Monitoring in the Electricity and Gas Retail Markets, which outlines a proposed new market monitoring framework. The new framework identifies all the indicators that the CER proposes to collect from networks and suppliers in order to comply with the EU 3 rd package and so that the CER has effective oversight of the retail markets to ensure that competition continues to develop and that customers are protected

12 3.0 Market Share Consumption & Customer Numbers 3.1 Introduction This section contains market share data for the main electricity and gas suppliers in Ireland. Data is presented in terms of actual customer numbers and consumption (MWhs/GWhs) for Q as well as showing the change in percentage share since the same quarter in the previous year. 3.2 Electricity Market The electricity market is comprised of four different market segments covering different DUoS groups (distribution use of system groups or DGs) 5 : Domestic market this covers the residential/household end of the market and is measured by DG 1 urban residential customers and DG 2 rural residential customers that have a connection to the low voltage network. Small-sized business market measured by DG 5 with a connection to a low voltage non-maximum demand Medium-sized business market measured by DG3 and 4 (unmetered public lighting & other unmetered connections) and DG6 (low voltage maximum demand) Large energy users (LEU) market measured by DG7 (medium voltage), DG8 (38kV), DG9 (38kV), DG10 (110kV network) and TCON (those connected to the electricity transmission system). The electricity market comprises some very large players and some very small players. Those that have at least a 1% MWh share are reported separately in a specific market. It is worth noting that, in electricity, the others category in some segments includes data on some suppliers that are not necessarily active in the electricity retail market, i.e. they are self-suppliers, or they only have very few sites. The activity of these companies generally does not have a significant impact on the overall data. However, some suppliers not active in the retail market may have only one/two sites but may generate a relatively high proportion of MWhs within the Others category Overall Trends in Retail Electricity Overall, in the electricity market, total customer numbers in the full year 2013 were 2,233,370 and total consumption was 24,203,055 MWhs. This represented a decrease of -0.17% and an increase of +0.16% respectively compared to A DUoS charge is a fee that ESB Networks charges to electricity suppliers for use of the electricity distribution system. The amount of DUoS that ESBN charges a supplier for each customer depends on which DUoS Group a customer is classified as, which is based on several factors including the voltage a premises is connected at, the type of meter installed, or if electricity is exported. Source: ESB Networks. 12

13 Customer Numbers Electricity Market Q Q Q Q % change between 2012 and 2013 Domestic Market 2,019,512 2,019,579 2,019,553 2,020,065 2,020, % Small Business 189, , , , , % Medium Business 24,432 24,476 24,474 24,554 24, % LEU 1,661 1,669 1,760 1,689 1, % Total Market 2,235,118 2,234,267 2,234,228 2,233,370 2,233, % Table 3.1 Retail Electricity Market, Customer Numbers 2013 There was a consistent reduction in total customers in electricity in each quarter of These decreases were driven by declines in customers in the domestic and small business segments, of -0.07% and -1.39% respectively. Customer numbers increased between 2012 and 2013 in the medium and LEU market segments. Consumption, MWhs Electricity Market Q Q Q Q % change between 2012 and 2013 Domestic Market 2,428,895 1,991,367 1,799,164 2,286,318 8,505, % Small Business 994, , , ,524 3,650, % Medium Business 1,056, ,834 1,012,414 1,061,286 4,111, % LEU 1,923,921 1,965,854 2,043,644 2,001,982 7,935, % Total Market 6,403,354 5,809,317 5,679,274 6,311,110 24,203, % Table 3.2 Retail Electricity Market, Consumption (MWhs) 2013 Total consumption increased compared to 2012, driven by an increase in consumption in the LEU segment (somewhat explained by the increase in customers in the period). In the domestic market, consumption peaked in Q1 and was at its lowest in Q3. Forecast numbers for customers and consumption can be found in Appendix A. Figures for consumption (kwh) per customer are outlined in the following table: Domestic Market Urban Rural Consumption per customer, kwhs 2013 % change between 2012 and ,211 4,036 4, % -2.11% -1.90% Small Business 19, % Medium Business 167, % LEU 4,698, % Table 3.3 Retail Electricity Market, Consumption (kwhs) per Customer Domestic Electricity Market Overall, in the domestic electricity market, total customer numbers in Q were 2,020,065 and total consumption was 2,286,318 MWhs. These represented decreases of -0.07% and -3% respectively compared to the same period in Not seasonally adjusted. 13

14 The following table shows the breakdown of customer numbers and MWhs by supplier: Domestic Electricity Market Actual figures Q Market share Q % change in market share between Q & Q Cust Nos MWhs Cust Nos MWhs Cust Nos MWhs Electric Ireland 1,268,696 1,307, % 57.20% -1.74% -2.40% SSE Airtricity 373, , % 22.02% +0.44% +2.16% Bord Gáis Energy 295, , % 16.77% -1.61% -2.52% PrePayPower 67,061 70, % 3.10% na na Others 14,574 20, % 0.91% +2.91% +2.75% Total Domestic 2,020,065 2,286, % % Table 3.4 Domestic Electricity Retail Market Customer Nos. & MWhs, Q Table 3.4 and the figures below show the market share in terms of customer numbers and MWhs for the fourth quarter of 2013 in the domestic sector. Electric Ireland retains the highest share of customers (62.8%) and MWhs (57.2%) in the domestic electricity market; however its share has declined compared to Q (and in comparison to Q3 2013). SSE Airtricity has the second highest share and its share has increased compared to Q However, SSE Airtricity has seen a decline in market share (in Q in comparison with Q3 2013). Bord Gáis Energy has experienced a decline in its market share of both customer numbers and MWhs since Q PrePayPower s share increased throughout % 3.32% 0.72% 16.77% 3.10% 0.91% Electric Ireland Airtricity Bord Gáis Energy 18.51% PrePayPower Others 22.02% 62.80% 57.20% Figure 3.1 Customer numbers share, domestic electricity market, Q Figure 3.2 Consumption (MWhs) share, domestic electricity market, Q Figures 3.3 and 3.4 below show the domestic market share trends in terms of customer numbers and MWhs from Q to Q Since full deregulation, Electric Ireland s market share of customer numbers has remained relatively stable. Over the same period Bord Gáis Energy s share has reduced. 7 In 2012 PrePayPower was not reported separately in the Retail Market Repots as it had a market share of MWhs of less than 1%. Therefore a comparison with 2012 is not included. In 2012, PrePayPower was included in the others category. The comparison of the others category includes the change in share of PrePayPower for both 2012 and

15 Figure 3.3 Domestic electricity customer number market share trend over time Figure 3.4 Domestic electricity consumption market share trend over time Small-Sized Business Electricity Market Overall, in the small-sized business electricity market, total customer numbers in Q were 187,062 and total consumption was 961,524 MWhs. This represented decreases of -1.4% and -0.8% respectively compared to the same period in The following table shows the breakdown of customer numbers and MWhs by supplier: Small Business Electricity Market Actual figures Q Market share Q % change in market share between Q & Q Cust Nos MWhs Cust Nos MWhs Cust Nos MWhs Electric Ireland 91, , % 36.85% +2.83% +5.80% SSE Airtricity 34, , % 19.53% -2.99% -4.17% Bord Gáis Energy 17,026 85, % 8.85% -0.22% -1.57% Energia 44, , % 34.35% +0.32% -0.13% Others 294 4, % 0.42% +0.06% +0.07% Total 187, , % 100% Table 3.5 Small-Sized Business Electricity Retail Market Customer Nos. & MWhs, Q Table 3.5 and the figures below show the market share in terms of customer numbers and MWhs for the fourth quarter of 2013 in the small business market. Electric Ireland maintains the largest share of customers in the small business market, and now has the largest share of MWhs (Energia had the largest MWh share in Q4 2012). Electric Ireland has gained market share of customer numbers and MWhs compared to Q Energia has lost market share in MWhs while both SSE Airtricity and Bord Gáis Energy decreased customer number and MWhs market share since Q

16 9.10% 0.16% 8.85% 0.42% 18.29% 48.72% Electric Ireland 19.53% 36.85% Energia Airtricity Bord Gáis Energy Others 23.73% Figure 3.5 Customer numbers share, smallsized business electricity market, Q % Figure 3.6 Consumption (MWhs) share, smallsized business electricity market, Q Figures 3.7 and 3.8 below show the market share trend in terms of customer numbers and MWhs from Q to Q Since the business market was fully deregulated in October 2010, Energia has increased its share of customer numbers and MWh. Bord Gáis Energy continues to experience a decline in market share and registered decreases in both customer numbers and MWhs. The charts show that when the market was deregulated, Electric Ireland initially decreased market share but its share has increased over the past two years. Figure 3.7 Small business electricity customer number market share trend over time Figure 3.8 Small business electricity consumption market share trend over time Medium-Sized Business Electricity Market Overall, in the medium-sized business electricity market total customer numbers in Q were 24,554 and total consumption was 1,061,286 MWhs. These represented an increase of +0.7% in customers but a decline of -0.7% in MWhs compared to the same period in The following table shows the breakdown of customer numbers and MWhs by supplier: 16

17 Medium Business Electricity Market Actual figures Q Market share Q % change in market share between Q & Q Cust Nos MWhs Cust Nos MWhs Cust Nos MWhs Electric Ireland 14, , % 33.45% +4.66% +8.58% SSE Airtricity 2, , % 21.31% -4.29% -5.79% Bord Gáis Energy , % 7.54% -0.81% -0.73% Vayu , % 1.80% Na na Energia 5, , % 35.59% +0.49% -2.06% Others 34 3, % 0.31% 0% 0% Total 24,554 1,061, % 100% Tables 3.6 Medium-sized Business Electricity Retail Market Customer Nos. & MWhs, Q The table above and the figures below show the market share in terms of customer numbers and MWhs for the fourth quarter of Electric Ireland continues to have the highest share of customer numbers and Energia the highest share of MWhs. Energia experienced a decline in share of MWhs compared to the same period in 2012 but more recently Energia s market share increased (between Q3 and Q4 2013). Electric Ireland experienced increases in share in both customers and MWhs compared to Q Both SSE Airtricity and Bord Gáis Energy s market shares of MWhs and customers declined since Q % 4.04% 0.14% 0.53% Electric Ireland 7.54% 1.80% 0.31% 33.45% Energia Airtricity 21.31% 22.98% 60.63% Bord Gáis Energy Vayu Others 35.59% Figure 3.9 Customer numbers share, mediumsized business electricity market, Q Figure 3.10 Consumption share, mediumsized business electricity market, Q Figures 3.11 and 3.12 below show the market share trend in terms of customer numbers and MWhs from Q to Q When the business market was fully deregulated in October 2010, Electric Ireland experienced declines in share of MWhs and customer numbers for a number of years. However, Electric Ireland s share increased throughout Bord Gáis Energy experienced declines in share over time, while SSE Airtricity s share increased in the first few years but has more recently declined. 17

18 Figure 3.11 Medium business electricity customer number market share trend over time Figure 3.12 Medium business electricity consumption market share trend over time Large Energy Users (LEUs) Overall, in the LEU electricity market total customer numbers in Q was 1,689 and total consumption was 2,001,982 MWhs. This represented increases of 1.5% and 4.3% respectively compared to Q The following table shows the breakdown of customer numbers and MWhs by supplier: LEU Electricity Market Actual figures Q Market share Q % change in market share between Q & Q Cust Nos MWhs Cust Nos MWhs Cust Nos MWhs Electric Ireland , % 41.35% +2.69% +0.46% SSE Airtricity , % 22.11% -4.41% -0.31% Bord Gáis Energy , % 10.41% +0.16% +1.10% Energia , % 16.81% +1.54% -1.64% Vayu 73 63, % 3.19% -0.19% +0.52% Others , % 6.13% +0.20% -0.14% Total 1,689 2,001, % 100% Tables 3.7 LEU Electricity Retail Market Customer Nos. & MWhs, Q The table above and the figures below show the market share in terms of customer numbers and MWhs for the fourth quarter of There are more suppliers active in the LEU market than any other electricity market segment. Electric Ireland continues to have the largest market share in both customers and MWhs and experienced an increase in share compared to Q Bord Gáis Energy also experienced a gain in share, while SSE Airtricity lost share since Q

19 9.53% 4.32% 2.37% 44.82% Electric Ireland Energia 10.41% 3.19% 6.13% 41.35% Airtricity 21.79% Bord Gáis Energy Vayu Others 22.11% 17.17% Figure 3.13 Customer numbers share, LEU market, Q % Figure 3.14 Consumption (MWhs) share, LEU market, Q Figures 3.15 and 3.16 below show the market share trends in terms of customer numbers and MWhs from Q to Q SSE Airtricity has experienced a large gain in share of MWhs and customers over time. Both Bord Gáis Energy and Energia experienced a loss in share of MWhs over time. Figure 3.15 LEU Customer number market share trend over time Figure 3.16 LEU Consumption market share trend over time 3.3 Gas Market The gas market is reported as four different market segments: Domestic market this represents non-daily metered (NDM) residential customers. Industrial and commercial (IC) market represents businesses with a supply point capacity of below 3,750kWh and consumption level below 73,000kWh. Fuel variation tariff (FVT) market NDM gas customers with a supply point capacity of above 3,750kWh and consumption level above 73,000kWh. Regulated tariff formula (RTF) market annual consumption of between 5.5GWhs and 264 GWhs. 19

20 This section contains the market share data for all gas suppliers. Data is presented in terms of actual customer numbers and consumption (GWhs) for Q as well as showing the change in percentage share since the previous quarter. The gas consumption (GWhs) figures used are cumulative figures from the beginning of Overall Trends in Retail Gas Overall, in the gas market, total customer numbers in the full year 2013 were 659,644 and total consumption was 17,523 GWhs. This represented increases of +0.6% and +0.8% respectively compared to Customer Numbers Gas Market Q Q Q Q % change between 2012 and 2013 Domestic Market 632, , , , , % IC 23,032 22,979 22,781 22,946 22, % FVT 1,757 1,766 1,770 1,757 1, % RTF % Total Gas Market 657, , , , , % Table 3.8 Retail Gas Market, Customer Numbers 2013 Total customers in gas increased between 2012 and The number of customers in all market segments increased in the same period with the highest rate of increase in the RTF market. Consumption increased by +0.8% between 2012 and 2013 with the highest percentage increase in the IC segment, of +1.55%. Forecasted consumption figures are in Appendix 2. Consumption, GWhs Gas Market 2013 % change between 2012 and 2013 Domestic Market 7, % IC 1, % FVT 2, % RTF 5, % Total Gas Market 17, % Table 3.9 Retail Gas Market, Consumption (GWhs) 2013 Data on consumption per customer is outlined in the table below. The data shows that consumption increased on a per customer basis in most segments, except the RTF segment. 20

21 Consumption per customer, kwhs 2013 % change between 2012 and 2013 Domestic Market 12, % IC 76, % FVT 1,279, % RTF 22,855, % Table 3.10 Retail Gas Market, Consumption (kwhs) per Customer Domestic Gas Market Overall, in the domestic gas market total customer numbers in Q were 634,692 and total consumption in 2013 was 7,818 GWhs. This represented an increase of +0.7% in customer numbers compared to Q4 2012, and a +0.96% increase in GWhs compared to The following table shows the breakdown of customer numbers and GWhs by supplier: Domestic Gas Market Bord Gáis Energy Actual figures Q Market share Q % change in market share between Q & Q Cust Nos GWhs Cust Nos GWhs Cust Nos GWhs 363,002 4, % 60.41% -8.45% -7.86% SSE Airtricity 109,905 1, % 17.86% +0.18% -1.11% Electric Ireland 128,861 1, % 16.53% +7.92% +8.12% Flogas 32, % 5.19% +0.28% +0.84% Others % 0.01% +0.07% +0.01% Total Domestic 634,692 7, % 100% Table 3.11 Domestic Retail Gas Market, Market Shares, Q The table above and the figures below show the market share in terms of customer numbers and GWhs for the fourth quarter of Bord Gáis Energy continues to have the largest market share in both customer numbers and consumption in the domestic market at 57.19% and 60.41% respectively. However, its share is declining with an 8.45% decline in customer numbers since Q Electric Ireland significantly increased its share of customer numbers and GWhs, as did Flogas but to a much lower extent. Electric Ireland now has the second highest share of customers in the market. 21

22 5.12% 0.07% 17.32% 5.19% 0.01% 17.86% 20.30% Airtricity 16.53% Bord Gáis Energy Electric Ireland Flogas Others 57.19% Figure 3.17 Customer Numbers, Domestic Gas Market, Q % Figure 3.18 Consumption, GWhs, Domestic Gas Market, Q Figures 3.19 and 3.20 below show the market share trends in terms of customer numbers and GWhs from Q to Q The charts show that there has been a significant change in Bord Gáis Energy s share over time and that market share across suppliers has become more distributed. Figure 3.19 Domestic Gas Customer number market share trend over time Figure 3.20 Domestic Gas Consumption market share trend over time Industrial and Commercial (IC) Gas Market Overall, in the IC gas market, total customer numbers in Q were 22,946 and total consumption was 1,766 GWhs. Customer numbers remained relatively constant compared to Q4 2012, and GWhs increased by +1.55% since The following table shows the breakdown of customer numbers and GWhs by supplier: 22

23 IC Gas Market Actual figures Q Market share Q % change in market share between Q & Q Cust Nos GWhs Cust Nos GWhs Cust Nos GWhs Bord Gáis Energy 9, % 34.94% -4.82% -4.05% SSE Airtricity 1, % 8.72% +3.37% +4.35% Electric Ireland 1, % 3.40% +3.96% +2.30% Flogas 5, % 30.86% -0.19% +0.33% Energia 3, % 18.40% -1.57% -2.76% Vayu % 3.68% -0.73% -0.11% Total IC 22,946 1, % 100% Table 3.12 IC Retail Gas Market, Market Shares, Q The table above and figures below show the market share in terms of customer numbers and GWhs for the fourth quarter of Bord Gáis Energy has the highest share of GWhs and customers in the IC market, however, its share is decreasing (with a decline of 4.82% in customers compared to Q4 2012). Energia also saw its share of customers and GWhs decline between Q and Q Electric Ireland and SSE Airtricity both have experienced increases in shares of customer numbers and GWhs since Q % 1.73% 8.66% Airtricity 18.40% 3.68% 8.72% Bord Gáis Energy Electric Ireland Flogas 34.94% 25.46% Energia 6.87% 41.70% Vayu 30.86% 3.40% Figure 3.21 Customer Numbers, IC Gas Market, Q Figure 3.22 Consumption, GWhs, IC Gas Market, Q Figures 3.23 and 3.24 below show the market share trends in terms of customer numbers and GWhs from Q to Q Market shares have changed significantly over time, with Flogas gaining considerably and Bord Gáis Energy continuing to lose share. 23

24 Figure 3.23 IC Gas Customer number market share trend over time Figure 3.24 IC Gas Consumption market share trend over time Fuel Variation Tariff (FVT) Gas Market 8 Overall, in the FVT gas market, total customer numbers in Q were 1,757 and total consumption was 2,248 GWhs. This represented an increase of +0.4% in customer numbers compared to Q4 2012, and a +0.45% increase in GWhs since The following table shows the breakdown of customer numbers and GWhs by supplier and the change in market share in the year since Q FVT Gas Market Bord Gáis Energy SSE Airtricity Actual figures Q Market share Q % change in market share between Q & Q Cust Nos GWhs Cust Nos GWhs Cust Nos GWhs % 30.96% -2.98% -4.07% % 8.27% % +5.91% Flogas % 25.62% +1.68% +2.52% Energia % 16.50% -7.25% +0.15% Vayu % 18.46% -5.49% -4.51% Others % 0.18% +0.34% 0.00% Total FVT 1,757 2, % 100% Table 3.13 FVT Retail Gas Market, Market Shares, Q The table above and figures below show the market share in terms of customer numbers and GWhs for the fourth quarter of Bord Gáis Energy has the highest share of customer numbers and GWhs in the FVT market. Similar to the IC and domestic markets, Bord Gáis Energy s share has declined since Q Energia experienced the largest decline across suppliers in share of customers since Q with Vayu also experiencing a decline in customer numbers. All other suppliers increased their market shares, with a significant increase by SSE Airtricity in terms of customers. 8 There are no longer regulated business tariffs; however, the reporting structure has been maintained for consistency and to allow for comparison. 24

25 12.52% 15.71% 0.74% 16.33% Airtricity Bord Gáis Energy Flogas 18.46% 0.18% 8.27% 30.96% Energia Vayu Others 16.50% 24.02% 30.68% Figure 3.25 Customer Numbers, FVT Gas Market Segment, Q % Figure 3.26 Consumption, GWhs, FVT Gas Market Segment, Q Figures 3.27 and 3.28 below show the market share trends in terms of customer numbers and GWhs from Q to Q Bord Gáis Energy s market share has declined significantly and market share has become more distributed over time. Figure 3.27 FVT Gas Customer number market share trend over time Figure 3.28 FVT Gas Consumption market share trend over time Regulated Tariff Formula (RTF) 9 Overall, in the RTF gas market, total customer numbers in Q was 249 and total consumption was 5,691 GWhs. This represented an increase of over +1.2% in customer numbers compared to Q4 2012, and a +0.51% increase in GWhs since The following table shows the breakdown of customer numbers and GWhs by supplier and in percentage change in market share in the year since Q There are no longer regulated business tariffs, however, the reporting structure has been maintained for consistency and to allow for comparison. 25

26 RTF Gas Market Actual figures Q Market share Q % change in market share between Q & Q Cust Nos GWhs Cust Nos GWhs Cust Nos GWhs Bord Gáis Energy 52 1, % 17.62% +1.37% -3.46% SSE Airtricity % 15.38% +6.31% +9.16% Electric Ireland % 5.11% +2.76% +2.18% Gazprom 13 1, % 19.33% -0.47% -0.05% Energia 75 1, % 22.74% +8.58% +2.07% Vayu 51 1, % 19.79% % +0.11% Other % 0.04% +0.40% +0.04% Total RTF 249 5, % 100% Table 3.14 RTF Retail Gas Market, Market Shares, Q The table above and figures below show the market share in terms of customer numbers and GWhs for the fourth quarter of Energia now has the largest share of customers and GWhs in the RTF market. Electric Ireland, Bord Gáis Energy, SSE Airtricity 10 and Energia have all experienced increases in market share of customer numbers since Q (with Energia experiencing the highest increase in the year). The market shares of Gazprom and Vayu declined in the year. More recently SSE Airtricity and Energia both experienced declines in customer number market share (between Q3 and Q4 2013) % 30.12% 0.40% 5.22% 16.06% 6.83% 20.88% Airtricity Bord Gáis Energy Electric Ireland Gazprom Energia Vayu Other 19.79% 22.74% 0.04% 15.38% 17.62% 5.11% 19.33% Figure 3.29 Customer Numbers, RTF Gas Market Segment Q Figure 3.30 Consumption, GWhs, RTF Gas Market Segment Q Figures 3.31 and 3.32 below show the market share trends in terms of customer numbers and GWhs from Q to Q The figures show that the market shares have become more dispersed over time with more suppliers actively participating in the market. In 2013, the change in the dominant suppliers is indicative of an active, competitive market. 10 This is partly explained by its acquisition of Phoenix Energy in 2012 and the subsequent transfer of customers to SSE Airtricity 26

27 Figure 3.31 RTF Gas Customer number market share trend over time Figure 3.32 RTF Gas Consumption market share trend over time 3.4 Summary - Market Share In electricity, Electric Ireland continues to be the largest supplier in terms of customers across all segments and in terms of MWhs (except in the medium business market). Energia remains the largest supplier (in terms of MWhs) in the medium business market but is no longer the largest supplier in consumption terms in the small-business market. The domestic market share (MWhs) of Electric Ireland (57.2%) is under the threshold at which it was deregulated (60%). Electric Ireland is gaining across most electricity market segments except in the domestic market. Bord Gáis Energy is losing share across all segments, except the LEU market. SSE Airtricity is also losing market share except in the domestic market segment. In gas, Bord Gáis Energy remains the largest supplier in terms of customers and consumption in domestic, IC and FVT markets. In the RTF market Energia has the highest GWhs and customer number share. Bord Gáis Energy had a 57.19% share of the domestic gas market in Q Flogas continued to gain customer market share in the domestic and FVT gas markets, but lost share in the IC market. SSE Airtricity is increasing market share in terms of customers in all gas segments. Vayu has lost share in all the gas segments in which it operates and Energia in the IC and FVT segments. Bord Gáis Energy lost share in most segments, except in the RTF market compared to The CER will continue to monitor both markets to ensure that competition is growing and continues to be promoted. 27

28 4.0 Customer Switching and New Registrations 4.1 Introduction This section contains data on customer switching activity with a breakdown of supplier switches in the relevant markets. Data on new registrations is also examined. Registrations represent the total number of sites that were connected in a period 11. Switching refers to the action where a customer changes from one supplier to another. It is measured by the number of completed switches in a period (not the number of switching requests). There is a free and easy switching process in place in Ireland which facilitates customers that wish to switch their supplier. Switching information is critically important in monitoring the effectiveness of market opening, the level of customer engagement in the market and the choices available to customers. It is important to note that this data measures the total number of switches completed in a given period. It does not report separately the number of unique switches and the number of repeat switches. 4.2 Electricity Market Switching & New Registrations This section analyses the level and trend in switching and new registrations in the electricity market by supplier and customer category Total Switching The total number of switches completed in the electricity market in 2013 was 266,224. This represented an increase in the total number since 2012 of +5.6%. 86% of the total number of switches in 2013 were in the domestic market. Switching remained above the 20,000 level per month throughout 2013, with a dip in December (likely due to seasonal effects). 11 New registration data may include a small number of sites that were reconnected/ reregistered in addition to sites that are new to the system. Switching data does not include new registrations. 28

29 Figure 4.1 Total Switching in Electricity, January 2009-December 2013 The switching rate is measured by calculating the proportion of total customers that switched in the period. The average number of customers for the year is calculated from the quarterly customer numbers data. The average switching rate in electricity in 2013 was 11.92%, which represents a higher proportion to that in 2012 (which was 11.27%). This rate compares well internationally and is indicative of an active market. 12 Total Electricity Market Total number of switches 454, , , , ,224 Switching rate 20.5% 21.0% 15.1% 11.27% 11.92% Table 4.1 Total Switching in Electricity Switching by Customer Category The domestic market made up 86% of total switching in electricity in The figures below analyse the trend in switching across all market segments and show that the trend varies quite significantly across segments. In the domestic market, the number of switches per month in 2013 was slightly higher than in 2012 (which had the lowest level of switching since market opening). Figure 4.2 demonstrates how domestic switching peaked in the first six months of 2009 following the entry of Bord Gáis Energy and SSE Airtricity in the domestic market. Domestic electricity switching has been relatively stable since September In the small business market, the level of switching varied across the year with a peak in May but with a decline towards the end of the year. This decline in Q4 contrasted to the trend in the same period in 2012 and According to the VaasaETT description of levels of switching. 29

30 Figure 4.2 Domestic Electricity Switching Figure 4.3 Small Business Electricity Switching Switching in both the medium-sized business and LEU markets also varied across the year. In the medium-sized business market, switching in 2013 was the highest it has been since Switching in the business sectors is more volatile than in the domestic sector and this reflects seasonal and contractual influences. Contract renewal dates in the LEU sector generally take place around October and January and this explains some of the differences in levels across the year. 30

31 Figure 4.4 Medium Business Electricity Switching Figure 4.5 LEU Electricity Switching The average switching rates in the domestic, small business, medium business and LEU are 11.32%, 18.11%, 13.74% and 11.98% respectively. By international comparison, all of these rates are relatively high. In comparison to 2012, there was an increase in the switching rate in all segments except the LEU segment, where switching declined by -12%. Electricity by Segment Domestic Small Business Medium Business Total number of switches, ,544 34,114 3, % change in total switching % +2.3% +2.8% -12.1% Switching rate, % 18.11% 13.74% 11.98% Table 4.2 Switching in Electricity by Market Segment, 2013 LEU Net Switching by Supplier Net switching represents the net gain or loss in customer numbers experienced by supplier. It is estimated by the gain in customers less the loss in customers experienced by the supplier. The data shows that Bord Gáis Energy consistently experienced a net loss in customer numbers in 2013, correlating with the reduction in market share. However, in November 2013 it experienced its first net gain in customers since March Similar to 2012, while SSE Airtricity experienced an overall gain, it had a volatile year with large net gains experienced in early 2013 but net losses in the second half of the year. Electric Ireland experienced relatively large net losses every month (except January) and had the largest net losses of all suppliers in November and December. Given that the majority of switching is in the domestic market, this is consistent with the trend in Electric Ireland s customer numbers. The relatively large losses experienced by both SSE Airtricity and Electric Ireland towards the end of the year correlated with price increase announcements by each of these suppliers in Q PrePayPower consistently experienced the largest net gain per month throughout

32 Figure 4.6 Net Switching in Electricity by Supplier, January 2010-December 2013 The table below outlines the net switching levels across suppliers over time. Similar to 2012, Bord Gáis Energy again experienced the highest net loss in customers (of - 32,709 customers) in However, Electric Ireland s net loss was also significant at -31,175. PrePayPower experienced the largest net gain in 2013 of +47,558. Electricity Net Switching Electric Ireland Energia SSE Airtricity Bord Gáis Energy PrePayPower Others Q , ,668-9,797-5,291 Q ,899 1,463 5,557-11,163 8, Q , ,116-12,422 12,826 2,408 Q , ,199-8,544 15,642 3,229 Q ,582 1,987-6, ,816 2, , ,368-55,744-17, ,175 4,089 3,696-32,709 47,558 8,545 Table 4.3 Net Switching in Electricity by Supplier, Q Q New Registrations New registrations in electricity are situations where a customer has moved into a site (which has been de-energised for at least 3 months and has remained vacant during the three month period 13 ). New registrations in electricity increased by 4% since There were 14,938 new registrations in total in ESB Networks. Sites normally remained registered to a supplier for 3 months after they are deenergised. 32

33 Figure 4.7 New Electricity Registrations over time by supplier, January 2010-December 2013 Electric Ireland continues to be the supplier associated with the majority of new registrations in electricity. However, Electric Ireland s share of new registrations continued to decline in 2013 and was 84% of total registrations (compared to 87% in 2012). Electricity New Registrations Others PrePayPower Bord Gáis Energy SSE Airtricity Energia Electric Ireland Total Q ,166 Q ,175 3,694 Q ,110 3,675 Q ,585 4, , ,597 14,938 % share % % 5.57% 3.08% 87.38% 100% % share % 0.80% 4.93% 7.44% 2.34% 84.33% 100% Table 4.4 New Registrations in Electricity by Supplier, Q Q Gas Market Switching & New Registrations This section analyses the levels and trends in switching and new registrations across suppliers in the gas market, as well as providing information on switching by customer segment Total Switching The total number of switches completed in the gas market in 2013 was 117,002 which was the highest level of switching recorded in a full year in the gas market. This represented an increase in the total number compared to 2012 of +5.8%. 96% of the total number of switches in 2013 were in the domestic market. 33

34 Figure 4.8 Total Switching in Gas by Supplier, January 2010-December 2013 The switching rate is measured by calculating the proportion of total customers that switched in the period. The switching rate in gas in 2013 was 17.8%. This represented a higher proportion to that in 2012 (which had a rate of 16.97%). By international comparison the gas market is considered a very active market with regard to switching. Total Gas Market Total number of switches 93, , , ,002 Switching rate 14.54% 17.38% 16.97% 17.8% Table 4.5 Total Switching in Gas Switching by Customer Category The domestic market makes up 96% of total switching in gas. The figures below analyse the trend in switching across the domestic and IC gas market segments. The trend varies quite significantly across segments. In the domestic market, the total number of switches in 2013 was 112,216 and there was an overall downward trend in switching per month throughout the year. In the IC market, total switches were 4,786 and the level of switching varied significantly across the year. 34

35 Figure 4.9 Switching in the Domestic Gas Sector Figure 4.10 Switching in the IC Gas Sector The switching rate in the domestic market was 17.7% and in the IC market was over 20%. Total switching has increased in both market segments compared to Gas Market Segment Domestic IC Total number of switches, ,216 4,786 % change in total switching % % Switching rate, % 20.9% Table 4.6 Switching in Gas by Market Segment in Net Switching by Supplier The data shows that, similar to the case in 2012 and the experience in electricity, Bord Gáis Energy consistently experienced a net loss in customer numbers in Electric Ireland has experienced a net gain since it entered the domestic market in March 2011 and it continued to experience significant net gains in gas throughout

36 Figure 4.11 Net Switching in Gas by Supplier, January 2010-December 2013 The table below outlines the net switching levels across suppliers over time. In 2013, Bord Gáis Energy experienced the highest net loss in customers (of 56,041 customers), higher than its net loss in Electric Ireland continued to experience the highest net gain (of 52,599 customers). Other suppliers had varied experiences throughout 2013, with SSE Airtricity, Flogas and Energia gaining and Vayu experiencing a net loss. SSE Airtricity Bord Gáis Energy Electric Ireland Energia Flogas Gazprom Phoenix 14 Q ,027-14,831 15, , Q ,301 13, Q ,505-16,199 15, Q ,911 12, Q ,630 10, ,270-47,524 50, , ,099-56,041 52, , Table 4.7 Net Switching in Gas by Supplier, Q Q Vayu New Registrations New gas registrations are defined by BGN as the situation where a new meter is fitted or a meter is unlocked at sites where there is no supplier registered 15. The 14 The customer portfolio of Phoenix transferred to Airtricity during A registration unlock is where the site has been locked for greater than 18 months and there has been no consumption since the lock was carried out and no customer registered. 36

37 figure below shows the trend in new registrations by supplier since January New registrations in gas have increased by +7% compared to There were 7,006 new registrations in total in Figure 4.12 New Registrations in Gas by Supplier, January 2010-December 2013 Bord Gáis Energy continues to be the supplier associated with the majority (67.6%) of new registrations in the gas market. However, Bord Gáis Energy s share of new registrations was 6.5% less than its share in Gas New Registrations SSE Airtricity Bord Gáis Energy Electric Ireland Flogas Energia Vayu Total Q , ,400 Q ,438 Q , ,645 Q , , ,733 1, ,006 % share % 74.10% 9.34% 8.28% 1.13% 0.52% 100% % share % 67.56% 14.52% 8.38% 0.63% 0.26% % Table 4.8 New Registrations in Gas by Supplier, Q Q Summary Customer Switching Switching is continuing in both the electricity and gas markets and switching rates are above 10% in both markets. Under the VaasaETT description of the levels of switching, the Irish electricity market is considered a warm active market and switching activity is sufficient. The Irish gas market is considered a hot market. Ireland ranks very well globally in terms of switching rates. The total number of switches completed in the electricity market in 2013 was 266,224. This represented an increase in the total number since 2012 of +5.6%. The level of switching in electricity has been at a relatively stable level since September 37

38 2011. The total number of switches complete in the gas market in 2013 was 117,002. This represented an increase in the total number since 2012 of +5.8%. Switches in the domestic market made up 86% and 96% of total switching in electricity and gas respectively. PrePayPower experienced the highest net gain in customers in electricity in 2013 and Electric Ireland experienced the highest net gain in gas. Bord Gáis Energy experienced the highest net loss in both markets. 38

39 5.0 Competition and Deregulation 5.1 Introduction The CER is responsible for the promotion and monitoring of competition in the electricity and gas retail markets. The CER has overseen the liberalisation and the full market opening of both the electricity and gas markets. The introduction and growth in competition in both markets has reduced the necessity for the CER to regulate the prices of the incumbent suppliers in each market. For each market segment in electricity and gas the CER identified the various conditions that must be met in order for deregulation to take place. These conditions are measured using the metrics contained in retail market reports (market share and switching). With the continued development of competition, the only market yet to meet the criteria for deregulation (and will remain subject to regulation until 01 st July 2014) is the domestic NDM retail gas market. 5.2 Deregulation in Electricity All market segments in electricity are deregulated. Business markets were deregulated in October 2010 and the domestic market was deregulated in April The following were the criteria for deregulation in the domestic electricity market: At least 3 suppliers active in the market; A minimum of 2 independent suppliers, each of which has at least 10% share of load (GWhs) in the market; Switching rates greater than 10%; Deregulation at market share of 60% conditional on ESB removing the ESB brand. In Q4 2013, Electric Ireland s market share (MWh), at 57.2%, was still below the threshold of 60% which was set out in the electricity Roadmap. Electric Ireland s share of MWhs in the domestic market reduced in There continues to be two independent suppliers with over 10% market share which satisfies the market share criteria. The final condition set out was that domestic switching rates had to be above 10%. The rate in the domestic continues to meet this criterion. At 11.32% the switching rate in the domestic market remains above 10% and is higher than the rate in The CER commits to continue to monitor all electricity market segments and, as outlined in the NDM gas decision paper 16, should it feel that customers are not benefiting from deregulation of the sector, the CER will use its regulatory powers to intervene and improve matters. 16 CER/13/096, Review of the NDM Retail Gas Market. 39

40 5.3 Deregulation in Gas The gas business markets were fully deregulated in October The domestic NDM retail gas market remains regulated, however the CER has recently published a decision which states that the date for deregulation will be 01 st July A decision paper CER 13/096 NDM Retail Market Review was published in April This paper outlined the CER s decision with regard to the development of competition in the domestic retail gas market and identified the market share thresholds at which deregulation would occur: At least 3 suppliers, of which two are non-bord Gáis Energy suppliers; Each non-bord Gáis Energy supplier has a market share is in excess of 10%; Customer switching rates in excess of 10% per year; Threshold for deregulation is 60% (customers) with rebranding of its retail business and without rebranding the threshold is 55%. By the end of 2013, the domestic gas market had not met all the required criteria for deregulation as set out in NDM Review. Bord Gáis Energy s market share at 57.19% was above the required threshold of 55% without rebranding (defined in terms of customer numbers in the gas market 18 ). There are at least three active unrelated suppliers in the market, and three of these have a market share greater than 10%. The final condition set out was that the annual domestic switching rate is greater than 10%. At almost over 17% at the end of 2013 this was been met. The CER has issued monthly NDM Competition Reviews since May 2013 which contain forecasts of when the threshold might be met. The last review was issued in May 2014 and indicated that all criteria are forecast to be met during June On 30 th May 2014, the CER issued a decision to deregulate the domestic gas market on 1 st July The CER is continuing to monitor the development of competition in all gas markets. 17 CER/14/117 Domestic Gas Market Deregulation Decision. 18 The threshold is set at 60% with rebranding however the CER did not receive a decision on branding in 2013 and so worked on the basis that rebranding would not take place. 40

41 6.0 Electricity and Gas Retail Prices 6.1 Introduction Open and competitive energy markets will result in competitive energy prices. However, there are many factors to consider in analysing trends and levels of prices in Ireland. Specific market conditions may result in a large proportion of price changes to be outside of the control of (or external to) suppliers/other stakeholders in Ireland. Notwithstanding these external factors, it is important to ensure that prices are competitive and set in a transparent way for customers. This section outlines the components of end user price and identifies the recent trend in energy prices in Ireland. 6.2 Disaggregation of Prices in Ireland 19 Energy prices in Ireland are made up of a number of different components, each driven by differing factors. Prices are based on costs incurred by a supplier in serving its customer base. The following diagram indicates the key components that comprise retail energy prices in Ireland and the key external/internal factors that impact on each component: DRIVERS Cost of distribution and transmission DRIVERS costs faced by supplier in supplying energy: labour Profits Network costs Supply costs Irish Energy Prices DRIVERS Public service obligation Carbon tax VAT rate Government Policy Wholesale costs DRIVERS energy costs (including impact of exchange rates) capacity costs market operator cost Figure 6.1 Composition of Energy Prices It is important to note that each component affects prices to a different degree and the proportionate impact is not equal across factors. A significant factor affecting energy prices in Ireland is the change in global gas prices given Ireland s 19 Eurostat and SEAI. There is no data on the disaggregation of gas prices. 41

42 dependence on fossil fuels and the knock on impact that this has on energy prices in Ireland. The high reliance of Ireland on imported fossil fuels for electricity generation results in Ireland having a high exposure to currency fluctuations. Variations in global prices are outside the control of suppliers/other stakeholders in Ireland and result in Irish-based energy supply companies to develop hedging strategies that allow them to minimise the impact of sudden global energy price shifts. Of all the costs that are likely to comprise a final price, suppliers must charge their customers the PSO levy 20, carbon tax and VAT. They may, however, choose to either absorb or charge the remaining costs to their customers. Nonetheless, the final prices will be primarily influenced by energy costs, see below. Of the other charges there are a number of these which are regulated and approved annually (network charges, certain generation-related charges in electricity, PSO in electricity). These regulated costs are necessary in order for networks and other market operators to recoup the cost of generating, transmitting and distributing electricity, and suppliers are required to pay these annually. Changes to these charges generally come into effect on the 1 st October annually (electricity capacity charges are updated on 1 st January). While it is the decision of each supplier whether or not to pass through such costs to final customers, it is likely that most suppliers pass through all such costs. These costs, with the addition of the applicable taxes, are referred to as Pass Through Costs The CER has responsibility for regulating network prices in Ireland. The CER directs and carries out annual reviews of the charges for access to and use of the electricity and gas distribution systems. The CER also reviews the costs incurred by ESB and BGN/Gaslink in developing, maintaining and operating the system. These charges are ultimately passed onto customers. The CER in conjunction with the NIAUR (Northern Ireland Authority for Utility Regulation) 21 have jointly regulated the all-island wholesale electricity market, which is known as the SEM (Single Electricity Market), since The SEM includes a centralised gross pool (or spot) market which is fully liquid and electricity is bought and sold through a market clearing mechanism. Suppliers purchasing energy from the pool pay the system marginal price for each trading period. The RAs publish quarterly reports that show changes in fuel and carbon prices which provide transparency to the market. The following charts show the breakdown of average electricity prices into three components for the dominant domestic and IC consumption bands: energy and supply; network costs and taxes and levies. The data for Ireland is estimated on an annual basis and published by Eurostat. 20 The Public Service Obligation Levy (PSO) is charged on all electricity customers and designed to support the national policy objectives of security of supply, the use of indigenous fuels (i.e. peat) and the use of renewable energy sources in electricity generation 21 Together referred to as the Regulatory Authorities/RAs. 42

43 Figure 6.2 Disaggregated Domestic Electricity Price, Band DD, S Figure 6.3 Disaggregated Industrial & Commercial Electricity Price, Band IB, S Indicative data from Eurostat shows that energy and supply costs comprise a significant proportion of the average Irish domestic and non-domestic electricity price in comparison with other EU countries (of 51% for domestic and 67% for nondomestic prices). Taxes and levies in Ireland account for one of the smallest proportions of final price in the EU. 6.3 Supplier Prices in Ireland There are a large number of tariff plans available to domestic and business customers that are provided by electricity and gas suppliers in Ireland. These plans offer customers different tariffs comprised of standing and unit charges. Suppliers 22 Source: Eurostat. 23 Source: Eurostat. 43

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