Deregulation of retail electricity pricing - International Law Office

International Law Office

Energy & Natural Resources - Ireland

Deregulation of retail electricity pricing

June 06 2011


On March 4 2011 the Commission for Energy Regulation published its final assessment on the deregulation of the residential Irish retail electricity market, and on April 4 2011 the commission duly removed all remaining price regulation from the retail electricity market.

This deregulation decision occurred at the final stage of the Roadmap to Deregulation, published by the commission in April 2010, in which it outlined its plan to phase out the remaining price controls (for further details please see "Plan to deregulate retail electricity pricing published").

Before April 4 2011 one of the key areas of regulatory intervention in the electricity market had been the commission's ability – under the Electricity Regulation Act 1999 and the relevant supply licence – to determine effectively the retail prices charged by the Electricity Supply Board Public Electricity Supply (ESB PES). ESB PES is a business unit of the ESB, Ireland's state-owned vertically integrated electricity utility, and remains the supplier with the largest share of the residential electricity market.

The commission had already removed price regulation from all business electricity markets on October 1 2010. Due to the entry of suppliers such as Airtricity and Bord Gáis Energy, by 2010 ESB's share of these markets had fallen below 50% in the large business market and below 40% in the small and medium-sized business market.

In relation to the residential electricity market, the Roadmap to Deregulation contemplated that once an adequate level of competition (evidenced by customer switching activity) was occurring in this market, this price regulation function would be removed entirely and ESB PES would be free to engage in price-based competition. In its March 2011 assessment, the commission found that ESB PES's market share had fallen below 60% and on this basis, the commission determined that an adequate level of competition existed in the market and that accordingly price regulation would be removed.

The commission's view is that deregulation of the residential electricity market is capable of delivering benefits to consumers in terms of choice and quality of the offers available from suppliers, improved services and lower prices. However, following the removal of price regulation, the commission has indicated its intention to continuing monitoring the electricity retail market to ensure that deregulation does not result in unintended consequences that will disadvantage some consumer groups. The commission has also stated that any future review of the retail electricity market will be guided by the best practice propositions of the European Regulators' Group for Electricity and Gas in relation to switching, billing and customer complaint handling, together with experiences from other jurisdictions.

In a related development, which is intended to assist in levelling the competitive playing field in the retail electricity market, ESB PES will no longer be allowed to use the ESB brand and must market its retail electricity offering under the brand 'Electric Ireland'.

Against a backdrop of ongoing macroeconomic issues and a focus on value among Irish consumers, developments such as these can be expected to stimulate further competitive activity within the retail energy sector.

For further information please contact Michael O'Connor or Peter McLay at Matheson Ormsby Prentice by telephone (+353 1 232 2000), fax (+353 1 232 3333) or email (michael.oconnor@mop.ie or peter.mclay@mop.ie).


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