The annual cost of a typical family’s gas and electricity bills could reach €6,000 next year and potentially plunge more than half of all households into fuel poverty, the cabinet was quietly warned this week.
A memo handed to ministers exposed angry projections about the impact of rising wholesale gas costs caused by the war in Ukraine.
Probably fueling further unrest within the coalition, the memo also outlined energy companies’ growing concerns about their liquidity positions. That’s because they’re forced to make huge security payments to the gas suppliers before the fuel is delivered.
Ministers have been told the number of households at risk of fuel poverty – where 10% or more of their net income is spent on utility bills – could rise to over 50% by the end of this winter.
In an ominous warning, Cabinet was told: “The bulk of the increase will only be seen by households when they receive bills in the coming months.”
It comes as Tánaiste Leo Varadkar signaled yesterday that the government will help households with their energy bills over the next year.
“People will need help after Christmas and maybe next year and we have to remember that it is possible,” he said.
Projections show that a typical household will face an effective tripling of their energy bills compared to mid-last year due to increased wholesale natural gas prices.
“If the wholesale price of gas stays at the high levels expected for the coming months, further increases in retail prices can be expected, with a typical household paying around €6,000 annually for gas and electricity,” the memo said.
“The timing of these increases is unknown but could be early in the new year.”
What I’m saying is that the budget day announcements are not the final word on this
Households already pay 4,000 euros a year – 1,800 euros for gas and 2,200 euros for electricity.
That’s double the €2,000 – €900 for gas and €1,100 for electricity – they would have paid annually in mid-2021 before Russia invaded Ukraine.
Further estimates presented to ministers show that in the second quarter of this year, supplying a full year’s supply in an oil-heated home cost an average of €3,200, which is €1,100 more than in the last quarter of 2021.
“It should also be noted that significant increases in energy bills will not be limited to electricity and gas bills, as oil-fired households will also see comparable increases in energy bills,” the cabinet was told.
In terms of risk to energy companies’ liquidity positions, the memo said Electric Ireland and Bord Gáis – the so-called suppliers of last resort for customers whose existing utilities fail – could face an “unmanageable financial drain”. This could “create a contagion effect” on the energy market.
Customers who switch to last resort providers also lose access to preferential rates on their energy bills, meaning they “may have immediate exposure to prevailing market prices and are not protected by hedging.”
The government has already signaled that later this month it will seek budget support for businesses directly affected by the current crisis.
Speaking at the Fine Gael Pre-Dáil Think-in in Kilkenny yesterday, Mr Varadkar said the Government needs to come up with a “dynamic response” over the course of the next year, as it did in 2022 with cuts in excise duties, a €200 energy credit and increases in student grants and back-to-school allowances.
“What I’m saying is that the budget day announcements are not the final word on this,” he said.
“If we need to intervene sometime in 2023 and help people more, then we will.”
That Irish Independent announced on Thursday that an increased electricity credit of more than €200 is on the table in budget talks, with ministers examining the possibility of applying the subsidy to electricity bills before and after Christmas,
The government is expected to increase universal credit for all domestic energy customers by significantly more than the €200 payment applied to bills last April.
While a doubling of the loan requested in the spring was discussed, sources said ministers have yet to agree on a figure.
Coalition sources pointed out that energy bills in April were much lower than they are likely to be in the coming months and that a €200 loan would not be enough.
Asked about other budget priorities, Mr Varadkar said the government wanted to see “decisive action” to reduce childcare costs and was targeting a 50 per cent reduction in fees over the next two years.
https://www.independent.ie/irish-news/politics/secret-cabinet-memo-warns-home-energy-bills-could-treble-to-6000-a-year-41977857.html Secret cabinet statement warns that household electricity bills could triple to €6,000 a year