The ESB misapplied a support measure for 1,500 of the largest power consumers in Ireland, resulting in domestic households being penalised with higher bills over a 12-year period, an Oireachtas committee has heard.
Appearing before the Environment and Climate Action committee on Tuesday the Commission for Regulation of Utilities (CRU), which regulates the Irish energy sector, came in for sustained criticism for how long it took to detect the overcharging error.
In a statement following the meeting, ESB Networks said: “While the process and mechanism of the rebalancing is still to be determined with the CRU, ESB Networks anticipates that it will result in the reduction of a domestic electricity bill in the order of €50 in total.”
The measure came into force in 2009 and was ended last year, but CRU has yet to determine the amount of money overcharged, though its chairperson Aoife MacEvilly confirmed affected customers would be refunded fully following a “deep dive” on what happened and how much households were penalised.
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At the committee on Tuesday, McMacEvilly said “an administrative error” had occurred in how the subsidy for large businesses – including major manufacturers, heavy industry and data centres – had been applied. The “large energy rebalancing subvention” had been introduced during a financial crisis when large employers were threatening to leave Ireland, she added.
It was due to take €50 million off high electricity user bills annually but was mistakenly applied as a percentage rather than a limit by the ESB, which was “a significant discrepancy”.
EirGrid applied the measured correctly but It was only in latter years that it emerged that the ESB was exceeding €50 million annually.
The total support has been estimated at €600 million with more than €50 million added to domestic customer bills with the error adding between €40 and €100 per year to household bills.
The matter was raised by Senator Lynn Boylan (SF), who said the rebalancing measure ended up being subsidised by domestic consumers, and should not have been provided at a time when householders were struggling during an economic crisis.
She criticised lack of due diligence over 12 years, as the issue only arose last year when the subvention was being wound up on foot of the current energy crisis.
Ms MacEvilly admitted there was lessons for the CRU arising from the error, but underlined: “ESB did not benefit from this. They did not retain any of that money. It did not in any way favour them. It was clearly an administrative error.”
Independent Senator Alice Mary Higgins said that while she did not agree with reasoning behind the subvention in the first place, the question was “how was this happening over the past three to four years in the context of a cost of living crisis?”
There was no indication bills were being artificially inflated, while there was a failure to put the brakes on a 285 per cent increase in usage by big energy consumers, she added.
Ireland saw new record electricity peak demand in December 2022 but no system alerts were necessary, Ms MacEvilly confirmed. But CRU was not resting on its laurels as in recent years the most challenging period was in February-March, she said.
December had been marked by a cold period with low wind, which meant tight margins on supply but Eirgrid’s work ensuring power plant maintenance during last summer meant there was good quantities of dispatchable electricity available. Ireland would be an even better position to ensure security of supply in the winter of 2023-24, she believed.
“We remain very concerned at the impact of high energy prices on households and businesses,” Ms MacEvilly said.
Enhanced customer protection measures, along with the Government electricity credit scheme, communication campaigns, “reduce your use” campaign and other measures are helping some of the most vulnerable customers. The electricity credit had a positive benefit in reducing customer debt, she said.
There has been a 30 per cent increase in the number of registered vulnerable customers, but stressed vulnerable customers could only receive the necessary support if they register with their supply companies.
In response to Social Democrats TD Jennifer Whitmore, Ms MacEvilly confirmed “the financially vulnerable” were not included under that heading. While the Government had flagged this cohort would be included, this had yet to happen.
The CRU would engage on how to extend the moratorium on disconnections and to include the financial vulnerable, she said.
People Before Profit Deputy Bríd Smith expressed disquiet that people were still in a cost-of-living crisis when wholesale gas and electricity price reductions were not being passed on.
There was a need to extend the moratorium; not to withdraw credits and to end profit gouging by energy suppliers, she said, noting “a shocking 20 per cent of gas customers are in arrears”.
Ms MacEvilly acknowledged many households were in real difficulty with their gas bills, but there was no equivalent to the electricity credit on the gas side.
While gas wholesale prices have eased recently, “they remain, along with electricity wholesale prices, significantly elevated above previous yearly norms”. Ireland, along with the UK and EU, would continue to see high retail prices for a further period to come, she said.
EU measures to lower electricity and gas demand, fill gas storage and increase LNG imports have had a positive impact on the outlook for the remainder of this winter and next winter, but “the situation remains volatile of course and a prolonged period of adverse weather could reverse some of these gains”, she warned.
