Could the ESB take the hit on oil prices until this crisis passes?

Am I the only person out there who thinks the ESB may well hold the key to solving some of the dire problems associated with the present cost of living crisis that is hitting almost every corner of the country?

  For me, it was the decision announced by that company on the first day of October last year that catapulted this issue into the headlines for the very first time – and soon sent colossal electricity bills into the letter boxes of some of the poorest people in our society. These are the people who can least afford to pay more for the pleasure of having the electric cooker working in their kitchen as they try to feed their family.

  It was on that fateful Friday morning that the ESB announced, through its commercial consumer wing Electric Ireland, that it was increasing residential electricity prices by a whopping 9.3 per cent, and gas prices by 7 per cent – with effect from 1st November 2021. The company blamed the decision on what it said were “unprecedented increases” in wholesale energy costs – which would in turn put up the ESB price by €9.02 per month on the average residential electricity bill and €4.85 per month on the average residential gas bill. If, like me, you don’t have an average ESB bill like this, I’m afraid the price increase was to prove much, much more painful.

  It was Marguerite Sayers, Executive Director, Electric Ireland, who was sent out to bat on the national media on that day in October. She told us repeatedly that they did their very best to keep prices as low as possible for their customers, but unfortunately, the hike of oil and gas and everything else on the world markets was pushing them into the bill increases.

  “We appreciate that energy price increases combined with other bills may put some households under financial pressure as we move into the colder winter months” Marguerite Sayers said at the time, “and we would urge any customer who has difficulty in paying their bills to engage directly with us, or with the Society of St. Vincent de Paul or MABS, with whom we work in such circumstances” – and that’s the best advice they could give anyone on the day.

  I remember reading the story of the price hikes on the RTE News website that evening and reacting with a mixture of anger and incredulity. Regular readers of this column will know I have been writing here consistently for months about the economic and environmental madness of the energy policy at play in the Irish market. Several times I’ve highlighted that, even though we may be doing the right thing for the global warming situation and reducing the carbon output associated with burning peat in the midlands power stations, the totally botched up way we did it means we are actually burning MORE oil than ever before in places like Moneypoint in County Clare – and are now being screwed for it after that price hike for oil on the world markets.

  Just four months before that price hike came, the ESB Group had (ironically) published its interim financial statements for the six months ended 30 June, 2021, and had told us they had delivered improved financial results year on year, including an operating profit (before exceptional items) of €363 million. All of this coming despite the fact that operating profit in the first half of 2020 was negatively impacted by Covid-19 – yet they still managed a huge increase in operating profit of €114 million compared to the same period in 2020.

  These are incredibly profitable numbers for a company that is now telling us it cannot cope with world oil prices and meet the challenge in front of them from their own means – without crippling their customers with a near-10% price hike.

  As a backdrop to what is going on, it seems to me that the ESB’s role in Irish society is sometimes misunderstood by many people. Often they are placed beside Bord Gais and Energia and all the others in public commentary as if they were somehow just a commercial operation with no background in terms of the national picture, and no obligations to recognise their own history either. Their real position in Irish society is in fact a very different one.

  The facts are that the Electricity Supply Board (ESB) was established in 1927 as a statutory corporation in the Republic of Ireland under the Electricity (Supply) Act 1927 and has been in operation with a lucrative state monopoly of the electricity customer market pretty much ever since. Yes, they did indeed bring electrification to Ireland in the early years of the State, but they were well paid for it by successive governments and throughout the industrial booms in this country they absolutely ‘cleaned up’ in terms of profits. Long before the opening up of the markets in recent times, they had already recorded millions if not billions of pounds and euro in profits every year.

  Conveniently forgotten by many in the middle of this profit-making operation is another fact – the reality that, with a holding of 95%, ESB is majority-owned by the Irish Government, with the remaining 5% held by the trustees of an employee share ownership plan.

  So in fact, we the citizens (the bill-payers) of the Irish Republic are actually the real owners of the ESB – which raises the very fair question from our perspective as shareholders that perhaps we are well justified (are we not?) in asking what has happened to all those profits – and could the ESB not step in now and take the hit themselves for about 12 months until this crisis passes?   

  It’s not as if the ESB has not got ample supplies of our money in reserve to deal with the financial crisis ahead of us. Those accounts, published in June, showed that in 2021, ESB had a net exceptional charge of €24 million. This gigantic sum of money was made up of a non-cash impairment charge on the Neart na Gaoithe Scottish offshore wind farm project they are involved in, offset by a gain on the sale of a 47% stake in Tilbury Green Power, a waste wood energy plant they have also spent ‘our money’ on in Great Britain – many miles from their native shore.

  Sometimes one wonders if it is not well past time for the ESB board of directors to sit back and perhaps take stock of their international investments in the face of the crisis facing its shareholders here at home. Our ‘director’ on the board is actually representing the Minister for Communications, Climate Change and the Environment, Eamon Ryan.

  There’s not a day of the week that goes by when his Department is not speaking to ESB management and the board about what they are doing with ‘our money’ – and one wonders when and if this suggestion about doing more to support those worst affected by fuel poverty is actually going to be discussed at board level and made a priority.

  The result of any such debate could surely be a case by case review of the price increases hitting the worst affected in our society. We are not suggesting for one minute that everyone in the country is entitled to a price cut in ESB and gas, but we are certainly proposing that the ESB board of directors who represent us as shareholders might begin to sit up and listen to the horrific stories of poverty and disadvantage that are emerging – and then take some action on their behalf!

  And before somebody from the ESB writes back to tell us there is a state dividend paid from the ESB back to the Government every year, let me confirm I am well aware of it. Less than a hundred million came back this year – a figure that could have been much higher if the state electricity board had actually focussed at a much earlier stage on what they were going to do after the closure of the peat burning power stations in the midlands. Perhaps if they did, they would not be spending the millions they are now dishing out on the burning of millions of gallons of oil in Moneypoint power station all the way through the winter.