Energy crisis: Customers won’t be unplugged, but cold comfort when inflation picks up

The little-known Commission for Regulation of Utilities (CRU) last week quietly announced what it called a “set of new enhanced consumer protection measures.”

In short, this winter there will be no gas or electricity supply disruptions for a period of three to six months.

The announcement came a day before an energy company confirmed some of Ireland’s biggest increases in residential gas and electricity prices.

SSE Airtricity went where other providers were expected to follow, raising the unit price of electricity and gas by more than 45 percent from Oct. 1 — that is, to come into effect days after the government’s “cost of living” budget.

More energy price hikes are expected this fall, adding to the more than 50 already announced over the past 18 months, from during the Covid pandemic to the Russian invasion of Ukraine.

For vulnerable groups like older people, the numbers are already tight: older people’s savings and income could lose 15 to 20 percent of their purchasing power by the end of next year.

An end to this energy crisis is not expected anytime soon. So much will be recognized at the heart of government as ministers return to their desks to prepare a range of measures in a much-anticipated budget that they hope will ‘defuse’ severe shocks coming this winter.

“It’s really hard to predict when inflation will peak,” admitted a government minister last week. Price increases are only going in one direction for the time being, all experts are revising their forecasts upwards.

The central bank’s latest estimate in July was that inflation is likely to peak at over 10 percent in the coming months and then start to decline.

But that was then and that is now. In the UK, which introduced an energy price cap two years ago that is being steadily lifted in the current crisis, inflation was forecast to rise by 18 per cent next year last week.

According to government sources here: “If we have price stability by this time next year – it’s 50-50.”

This is mainly due to the fact that Vladimir Putin is not going to back down in Ukraine any time soon.

On the contrary. The Kremlin autocrat is betting on a weaker resolve in Western Europe this winter as he turns the knob on Russia’s gas supply when consumers need it most – domestically and in the economy.

It will be cold comfort to households here that measures announced by the CRU last week will extend the shutdown moratorium.

This means that ESB Networks will be uninterrupted for three months from December to February next year.

For vulnerable groups such as B. Customers registered as critically dependent on electrically powered tools, the moratorium has been extended to six months from October to March.

However, there are other issues that weigh more heavily on the economy and could potentially plunge the country into recession next year.

“The real issue for businesses this winter will be affordability. Prices will continue to rise, especially if Russia’s gas supply falls, which could lead to self-rationing, operational and liquidity problems,” the employers’ association IBEC said.

More broadly, this group has said that the economy is “at an important tipping point.”

Shifts in global capital markets and persistently higher prices for commodities such as energy imports are undermining the momentum of the post-Covid recovery.

The slowdown in consumer spending and business investment is already underway, and this contraction is likely to continue into 2023.

IBEC Chief Economist Gerard Brady said events will reshape the global economy from the one we have seen over the past decade.

The era of record low interest rates, low inflation and idle capacity since the financial crisis is being overturned – and this will have an outsized impact on Ireland’s growth model.

In a speech in May, Paschal Donohoe also expressed his belief that the economic fallout from the war will persist beyond the short term, with several structural changes on the horizon. He spoke of a “transformation” of the world economy in the coming years.

For now, however, the Treasury Secretary’s priority will be a make-or-break budget next month designed to help people through the immediate effects of this winter’s crisis. He will have his work cut out.

Based on average earnings and savings from CSO surveys, Age Action Ireland, the group that represents the interests of older people, estimates that single people will lose €1,532 in spending power by the end of this year and the average elderly couple will lose €3,364 .

By the end of 2021-2023, the total loss for older people could be 20 percent or more of their purchasing power, which most cannot replace.

Or put more simply, while the face value of €1,000 remains the same, heating oil or groceries are now being bought for only €900 compared to a year ago, and possibly only €800 by the end of next year.

Add to this the likelihood that many older, poorer and more vulnerable people will choose to dress warmer than turn on the heat this winter and the existential risk becomes even more real.

In short, and without wanting to attract attention, the cold can kill.

And as we know, Covid can do that too. A fresh wave of the virus at a time of severe economic hardship would continue to put enormous pressure on the country’s hospitals in the coming months.

Since the invasion of Ukraine at the end of February, the government’s cost-of-living measures have cost 2.4 billion euros, which was not budgeted for.

Calls for further action include union calls for a new collective bargaining agreement for the public sector, citing the recent sharp rise in consumer prices.

The government’s options are limited: it could continue to subsidize the cost of living or lower taxes, but the new reality is that the only way it can fill the gap is by borrowing more.

As economist Colm McCarthy has repeatedly pointed out, Ireland cannot give in to short-term pressures without risking another sovereign debt debacle.

ESRI has warned that the government must be particularly careful that any measures it takes could fuel inflation further.

The government is likely to take a targeted approach to the hardest-hit, low-income households.

Measures such as increased fuel allowances and Christmas bonus-style payments are likely, while other temporary measures on healthcare costs and public transport policy are also planned.

But failing to sustain workers’ wages is bound to have a negative impact on domestic demand and economic growth.

The government faces enormously difficult decisions and is aware that whatever it is doing will not be enough.

https://www.independent.ie/irish-news/energy-crisis-plug-wont-be-pulled-on-customers-but-its-cold-comfort-as-inflation-heats-up-41942146.html Energy crisis: Customers won’t be unplugged, but cold comfort when inflation picks up

Fry Electronics Team

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