Ireland should not write a blank cheque for energy price caps that could backfire

The introduction of energy price caps could have unintended or unforeseen consequences, a group of Fine Gael politicians have said.

Speaking today were Fine Gael Parliamentary Party Chair, Richard Bruton TD; Leader of Seanad Éireann, Senator Regina Doherty; and Fine Gael Seanad Whip, Senator Seán Kyne.

Deputy Richard Bruton said, “In Ireland, most energy companies are price-takers in the international energy markets. Capping the prices that energy companies can charge here would risk energy security because the companies would not be able to purchase the energy supplies needed. It would be foolish for an energy dependent country like Ireland to write a blank cheque to foreign energy suppliers.

“Furthermore, price caps can have unintended or unforeseen consequences. They do nothing to reduce demand or consumption of energy, which is key part of the EU plan. They are a blunt instrument that reduce the resources to help vulnerable or at-risk groups.

“Fine Gael will not be found waiting in helping people with their energy costs. Prior to Budget 2023, the Government’s measures worth €2.4bn decreased fuel tax and home energy tax, and increased heating supports. We have now introduced €4.4bn worth of new universal and targeted measures to help people immediately. Those who promote price caps as a panacea need to be aware of the possible unintended consequences.”

Senator Regina Doherty said, “Sinn Féin would have you believe that most of Europe have successfully introduced energy price caps. This is far from the truth and a reminder of how Sinn Féin is out of touch with Europe as usual.

“Price caps tend to be favoured by larger countries and do not reduce demand or consumption. In Spain, for example, a price cap on gas led to the country’s highest ever gas consumption in its power sector (in July 2022). Countries that have implemented price caps (e.g., France) have seen little change in demand than in countries (e.g., Denmark) that have not implemented caps.

“Even countries that have had price caps for several years – before the Pandemic or the Russian war on Ukraine – have had to implement changes on account of the rising energy prices. Last November, Hungary capped retail fuel prices (petrol, diesel) at €1.19 per litre, well below current market prices. The measure led to such an increase in demand that the government was forced to curb eligibility for the scheme. Similarly, in August, Hungary was forced to alter a price cap for gas and electricity that had been in place for over a decade.”

Senator Kyne said, “Fine Gael has prioritised helping people with home energy costs. Budget 2023 introduced:

• €600 in electricity credits to every household – 3 x €200 in Nov ’22, Jan ’23, Mar ’23
• Extending the lower 9% VAT rate for gas and electricity to Feb ’23.
• Helping with fuel costs by extending excise cuts for petrol (21c), diesel (16c) and Marked Gas Oil (5.4c), until Feb ’23.
• Keeping the 20% reduction in train and bus fares for 2023.
• A special €400 lump sum Fuel Allowance payment, in November.
• Extending Fuel Allowance by increasing the thresholds from €120 to €200 above the State Pension.
• Extending Fuel Allowance to up 70,000 over 70s households through increased means thresholds – €500 p/w for single persons and €1,000 p/w for couples.

“We are also backing business with the Temporary Business Energy Support Scheme designed to assist businesses with their energy costs.

“We know times are tough but Fine Gael is committed to putting money back in people’s pockets to help reduce the cost of living.”