Fianna Fáil-Green coalition arranged cheaper electricity for large businesses at expense of ordinary consumers during economic downturn

by Seán McCárthaigh

The Fianna Fáil-Green government led by former Taoiseach, Brian Cowen, deliberately chose to impose higher electricity prices on ordinary households in the middle of the economic downturn in order to reduce energy costs for 1,500 large business users.                                

Cabinet papers released under the Freedom of Information Act show the coalition discriminated against domestic consumers by favouring cost-cutting measures to support some of the biggest multinationals in Ireland.

The documents show that in July 2009 the Minister for Communications, Energy and Natural Resources, Eamon Ryan sought Government approval for “the permanent rebalancing from October 1, 2010 of network tariffs towards Large Energy Users (LEUs) to be paid for by higher prices to domestic consumers.”

The addition of €50m to domestic customer tariffs added more than 3% to household electricity bills, although its impact was effectively nullified by a subsequent fall in international fossil fuel prices.

Justifying its decision, the Government noted that industry groups had regularly complained about the disparity between household electricity prices in Ireland which were “broadly competitive” with other EU countries and much higher energy costs for large companies.

Faced with the prospect of having to find €1 billion to maintain existing subsidy levels to avoid price rises for all electricity customers, the Cabinet voted instead to only provide such supports for large industry at the lower cost of just €176m.

Ryan also sought a special dividend of €176m from the ESB, from the profits of its sale of a generating plant to Spanish electricity firm, Endesa in order to ensure that LEU’s faced no increase in electricity network charges in 2009-2010.

He pointed out that all electricity users were benefitting from subsidies totalling €567m, which he described as “extraordinary measures taken to prevent major (40%) increases in electricity prices in 2008 as international fossil fuel prices soared.” However, he also acknowledged that they could only be “a temporary remedy.”

As the subsidies were set to expire in September 2009, Ryan warned that LEUs would see their electricity bills increase by up to 30% unless special measures were taken.

The document shows that the Cabinet Committee on Economic Renewal whose membership consisted of Ryan, Cowen, Finance Minister Brian Lenihan and Tánaiste, Mary Coughlan decided that large energy users should face no increases in their electricity bills.

Ryan highlighted how many LEUs were based in the technological, pharmaceutical and food and drink sectors and were major employers, representing a significant proportion of Irish export income. He claimed other EU countries had also adopted various measurers to keep energy costs lower for large businesses.

The Government also took care to note that electricity prices for Irish households were 4-7% below the EU average.

“A rebalancing of network tariffs in favour of LEUs, achieved through higher network charges for domestic users, would help safe-guard employment in some of our most critical and export-oriented industries,” observed Ryan.

It was estimated that adding €50m to domestic customer tariffs would also add €5m to the social welfare bill for providing free electricity units to some customers.

Ryan anticipated that such a measure would “prove unpopular” but argued households could still avail of discounts from ESB’s competitors which had recently entered the electricity market.

However, he added: “The rebalancing of tariffs would send a clear signal to industry that Government is committed to improving the competitiveness of energy costs for business as part of the overall competitiveness challenge.”

Rebates for LEUs were eventually ended in September 2012. Ireland currently has the 7^th most expensive electricity in the EU for LEUs with prices about 8% above the EU average.

Asked this week about the issue, Ryan – the current Green Party leader – said it was a difficult decision but “employment was a huge issue at the time.”