Irish households could face a wait of up to two years before seeing a significant drop in energy costs, despite the rapid fall in wholesale energy costs, according to leading energy suppliers.
Energy companies are looking to hedge their bets with wholesale energy costs by up to 24 months, which is a key reason why the decline in wholesale energy costs is yet to be passed on to consumers.
Bord Gáis Energy has reported that it purchases energy up to 18 months in advance, whereas Electric Ireland states the tenure of forward hedging positions can be between 18 and 24 months. High prices have led to energy companies posting surging revenues amid the cost-of-living crisis.
The reason for the recent decline in wholesale energy prices is due to the mild winter season and an increase in storage. However, consumers have not yet seen the benefit of the drop in their incoming utility bills.
In addition to this, the European Union reduced its reliance on Russian gas after the invasion of Ukraine, which led to wholesale prices increasing dramatically. This eventually had a negative impact on the Irish energy consumers’ pockets.
Some companies, however, have attempted to provide relief to customers amid the rising costs of energy. Last year, Electric Ireland increased prices three times, but in late December the company announced that it would forego profit from its residential electricity business and provide a €50 credit to customers. Its Hardship Fund was also increased by €2m to €5m.
SSE Airtricity also forewent profits for the financial year to assist customers, and it has mentioned that it would reduce prices as soon as market conditions allow.
Energy companies such as Energia and Bord Gáis Energy have also stated that they will monitor the wholesale electricity and gas prices on an ongoing basis, and they will continue to do so with any future changes to customer pricing being carefully considered and communicated accordingly.
Overall, it is the consumer who will ultimately be most affected by the current predicament.
While energy companies hedge against potential energy price increases, they are leaving customers to foot the bill for a period of up to two years, something which many consumers will find difficult to absorb in these challenging times.