Bord Gáis Energy Index rose 3% in March; ESB to cut Irish electricity bills by up to 17%
By Finfacts Team
Apr 4, 2011 - 3:10 AM

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The Ardnacrusha, Co. Clare electricity generating project on the River Shannon, commenced in 1925 and it cost the young Irish State over 20% of its annual budget of £25m.

The Bord Gáis Energy Index rose 3% in March. Meanwhile, the State-owned ESB is to cut electricity bills by up to 17% to coincide with deregulation of the Irish electricity market.

The Bord Gáis Energy Index (BGEI), an Irish-specific index designed to measure the prices in the wholesale energy market, continued to rise in March, increasing by 3% to 146.

The increase in energy prices is attributed to conflict in Libya and other North African and Middle Eastern countries, along with the Japanese earthquake and the subsequent tsunami on March 11th. These issues, along with increasing demand in Q4, 2010 are responsible for a rise in the index in five of the last six months, and of 31% over the period.

The index is designed to track movement in the wholesale energy market and comprises the four key energy commodities of oil, gas, coal and electricity.
BGE says it tracks the monthly price movements of these commodities, factoring in any currency shifts, and producing an overview and insight into the energy sector.

The following are the key trends recorded for the month of March:

Oil: The oil element of the index is up 2% to 152.09. Brent crude oil prices closed at $117 per barrel, more than $5 per barrel higher than in February. As a result of political unrest in North Africa and the Middle East, Brent crude oil prices rose 17% in the first quarter of 2011, its biggest quarterly gain in almost two years.

Natural Gas: The natural gas element of the index is up 8% to 194.03. Natural gas prices were stable at the beginning of March but rose to above 65p per therm for the first time since December 2010. It closed at 60p per therm. The price of natural gas was impacted by the earthquake in Japan, which caused the shutdown of over 25% of all nuclear power generating capacity for the forseeable future.

Coal: The coal element of the index is up 3% to 153.91. Coal prices rallied to over $130 per tonne following the Japanese earthquake because of expectations that coal fired power plants would fill the generation gap caused by shut down nuclear plants. These prices retreated at the end of the month, closing at $127 per tonne, as six coal plants in Japan were damaged, reducing demand by 18m tonnes.

Germany’s announcement of a three month closure for stress testing of seven of its older nuclear plants leant further support to coal prices towards the end of the month.

Electricity: The electricity element of the index is up 5% to 126.59 System Marginal Price rose to €81 MWh in March from €60 MWh in February.
BGE says this is largely due to increased fuel prices as natural gas and coal prices increased on the back of the Japanese earthquake and tsunami. Decreased wind output and plant availability issues account for the rest of the increase.

Michael Kelleher, Energy Trading analyst at Bord Gáis Energy, said:
“Oil prices continue to rise as a result of conflict in Libya and other countries. Although Saudi Arabia has covered the production shortfall arising from the situation in Libya, concerns are being raised about the long term implications for the oil industry. OPEC had hinted that $90 dollars would be a fair price for oil in 2011, but with oil averaging over $105 so far this year, it remains to be seen if OPEC will intervene.

“Natural gas prices experienced a sharp rise in March and could see further increases as Japanese LNG imports increase to meet the demand from gas powered generation as it ramps up to fill the gap left by nuclear and coal plant shutdowns. This raises concerns that cargos will be diverted away from the UK market to the higher priced Japanese market.

“Coal prices are likely to fall if the drop in Japanese demand sees more cargoes diverted into European markets. However increased demand from Germany could offset this. Consumers are likely to see an increase in energy prices as the rise in wholesale energy prices is expected to push up domestic energy prices.”


While Bord Gáis is seeking a price hike, the newly rebranded ESB Electric Ireland has announced new price tariffs that could cut almost €190 off average electricity and gas bills every year.

Dual electricity and gas customers could save 17% on electricity rates and 6% on their gas usage, paying up to €190 less a year in bills based on average annual usage of 5,300kwh, or gas usage of 16,000kwh per year.

Those using electricity only can save up to €120 a year based on the same level of usage, while those selecting the gas-only option will save up to 6% on regulated Bord Gáis energy unit rates.

ESB Electric says there are savings of 9% on electricity through the company’s green electricity price option. The products will be launched as the company seeks to compete in the gas and deregulated residential electricity markets.

ESB Electric Ireland general manager Liam Molloy said:
"We are very aware of the financial pressures on customers in the current environment.

"In developing our new electricity and gas price plans we are determined to provide customers with the best choice, value and products in the Irish energy market."

The discounts, which will be available until March 2012, will not apply to more than 100,000 ESB customers who have fallen into arrears over the past 12 months.

The company has lost about 800,000 customers to rivals Bord Gáis Energy and Airtricity in just two years and its electricity market share has fallen below 60%.

It is currently still losing about 5,000 customers a week.

Bord Gáis is seeking approval for a price hike from the regulator, which is reported to be more than 10%.

SEE: Finfacts March article: Global gas glut unhinges natural gas and crude oil prices

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