# IPE gas price increase of 50 %



## z102 (22 Nov 2005)

I noticed today that the IPE gasprice increased by 50% ( delivery for december 05) -within two days. Since Ireland is dependend on British gas deliverys: how will this increase effect the consumer energy prices, the electricity whole sale prices and what are the "plan B" options of the gouvernment.
From the news of the last few days I learned that 50% of the final consumer price incl.VAT is calculated/depending on the gas wholesale price . This info is from EON and RWE, published this week and last week.
So this would mean an other increase of consumers gas prices of 25% for December/January , electricity following .
Any opinions? Thank you.


----------



## Bootdog (2 Dec 2005)

*Re: IPE gas price increase of 50 % -> 1000%*

Hi Heinbloed,

Good to see someone else has noticed this!

The situation is actually worse than this ... just a few weeks ago, the UK within-day price for gas was as low as 15p/therm. Last week, it peaked at 160p/therm or so. The current price for December is over 100p/therm, compared to approx 30p/therm last year. January and February are at similar levels.

Below doc is the submission from BGE for price increases. I haven't read through it in detail, but the cost of procurement (i.e. IPE costs) is €291m, compared to €569m total costs, or 51%. VAT is probably on top of this.
http://www.cer.ie/CERDocs/cer05003.pdf

NOTE : BGE still have access to some cheap gas from Kinsale, so not all gas is procured from the UK at IPE rates.

However, as BGE supplies of cheap gas from Kinsale are dwindling, and Corrib will take some time to get out of the courts, we can expect BGE prices to be linked progressively more to the IPE in the coming years. 

I wouldn't be surprised to see price increases of OVER 25% next year, and again the year after. However, it all depends on supplies into the UK, Liquefied Natural Gas, and supplies coming from Europe. LNG is expected to bring prices down somewhat.

The price of diesel is approx 100 p/therm as a comparison, and may act as some form of ceiling on gas prices.

As for "Plan B", there is none AFAIK. Its a market, and the EU has decided thats the best way to manage prices and supply etc. The only upside is that if there is a shortage of gas, domestic customers will be the last to be shut off. Power generation would be the first to go, and would be asked to switch to diesel. They have to keep 5 days stock of diesel on each site.


----------



## z102 (2 Dec 2005)

Hi Bootdog!
You seem to have thought about the issue.So may I ask you the following: 
Is the output from Kinsale available for a fixed price during a fixed term? I noticed that the EU -bussy with a German gas issue on which the  Dep. of energy had had asked for clearification- had decided that contract terms over more than 2 years lenght would be anti competitive.And therefore illegal.The point is that since supply and sales are two different storys all -producer and supplier and seller -will  stick to the market rules. If the price to the grid goes up at  one side why should the other supplier not increase the price? Mr. Piebalg seems to have that mechanism in mind and-with all good intentions-this might help to stretch resources a bit further.
As far as I know there is only one (still planned?) LPG terminal on our island,what capacity does it have ?
Thanks for the link.


----------



## Bootdog (3 Dec 2005)

Well,

I don't work for BGE, so I don't know the details of the contracts (even if I did work for them, I wouldn't be able to tell you!). But I understand that there are very long-term contracts involved. Probably not fixed price, but linked to the price of another fuel. Historically, the other fuel was Heavy Fuel Oil. Remember the ads from BGE guaranteeing no price increases for 5 years? This is part of the same thing.

I think that BGE would be aware of any anti-competitive actions that they might be doing, and if they were illegal, or possibly illegal, I think that they would change them. From my experience, they are very responsible and play by the rules.

I really don't know much about the LNG terminal (planned?), but obviously you need to have it at a site which can be accessed by large ships (i.e. deepwater port).

My view is that if there is a shortage of supply in an "open market", prices will be very high ... of course, this will make new LNG terminals more viable, which will eventually bring the price back down again ...

Regards,


----------



## Bootdog (5 Dec 2005)

Heinbloed,

I linked to the wrong document before, below is the correct link...

http://www.cer.ie/CERDocs/cer05123.pdf

Sorry about that...


----------



## z102 (6 Dec 2005)

Thanks Bootdog!
A doubbling of the whole sale price ! Is any one aware of this? They are talking of give aways budgets and rip off Ireland and the like. What are our medias good for? In other countrys the medias are a pillar of society, here they seem to be the spade of the undertaker.
Speculating in insulation material would earn the investor a golden nose. But people still "invest" in badly insulated houses instead.


----------

