Bord Gais announced this afternoon that they would be increasing electricity prices from March 1st. The price increases will add around 2.2% to most customer bills.
An average customer on Bord Gais Standard rates can expect to pay around €26 per year more for electricity, and customers on the best discounted deals can expect to pay an extra €25.
Bord Gais’s price increase announcement was widely expected because the company said in October that they would freeze electricity prices until February - which they have done.
What is surprising is that just one day after Energia announced its entry into the residential gas and electricity market offering substantial discounts on both gas and electricity, Bord Gais has chosen to announce a price increase. Bord Gais has typically given at least one month’s notice of increases, so that could be factor in the timing of the announcement.
Bord Gais’s electricity price increase is broadly in line with what we’ve seen from the other big providers. On November 1st Airtricity increased electricity prices by 3.5% and on January 1st Electric Ireland put up prices by around 1.7%... so Bord Gais are somewhere in the middle.
At €26 per year for an average customer, the Bord Gais price increase is nothing like the huge hikes we’ve seen in the past, but they are hardly welcome. Company MD Dave Kirwan said “factors driving this increase are outside our control.”
What is interesting is how the increase is structured. Bord Gais is increasing their standard unit rate by 1.6% which is just a quarter of a cent. In cash terms this will mean average customers will pay an extra €15.64 for electricity per year.
However, Bord Gais has also chosen to increase their standing charges. The company which has had the cheapest electricity standing charge in the market will add 7.65%. It’ll mean at least an extra €10.65 for every single Bord Gais electricity user regardless of how much electricity they use.
We’ve seen this kind of price hike structure a lot recently. Electric Ireland substantially increased standing charges on January 1st while only increasing unit rates by two hundredths of a cent. And back in November, Airtricity increased both standing charges and unit rates by 3.5%.
Irish consumers are using less energy. A lot less. In fact, we are now using around 20% less than we were in 2006. What this means to suppliers is that traditional unit rate increases just won’t have the same effect as they used to. So energy providers have all taken to increasing standing charges as well unit rates. It makes sense because everyone with an electricity or gas connection pays the standing charge at the same rate, so that part of the bill income is guaranteed regardless of consumption.
This is also the reason why Bord Gais Standard and Bord Gais 10% discount customers will pay almost exactly the same increase if they are average customers.
In terms of marketing messages, suppliers can also still advertise discounts of 10% or 15% which refer only to unit rates. And then standing charges, which may have gone up, are generally ignored in the marketing altogether.