Investing in a fair price for our customers

Yesterday I appeared on behalf of SSE Airtricity along with other energy suppliers before the Joint Oireachtas Committee on Transport and Communications. The purpose of the appearance was to discuss the cost of electricity and gas to consumers in the context of falling international wholesale prices.

At the outset, I felt it was important to outline the growth of our business in Ireland so far from its small beginnings to owning and operating over 1500MW of generation capacity, of which one-third is renewably generated wind power and supplying 800,000 customers up from 40,000 in 2009. We have achieved this growth by offering some of the most competitive prices in the market. In fact, customers who switched to SSE Airtricity have saved over €100 million since domestic market entry in 2009, all the more important given the tough economic conditions we have gone through over the same period.

It was also during these difficult economic times that SSE made some of Ireland’s largest capital investments. I was pleased to be able to inform the Committee that in the last year alone we have:

  • completed our 34MW Athea wind farm in Co. Limerick, a €70m investment that created 300 jobs during its construction;
  • we are nearing the completion of our new 460MW gas-fired power plant in Co. Wexford, a €330m investment that created over 1200 jobs during construction – 80% of whom were from the local area; and
  • we have just begun construction of Ireland’s largest wind farm, the 170MW Galway Wind Park in partnership with Coillte. This €280m investment will employ over 350 people during its construction.

Taken together, over the past 5 years, our business in Ireland has delivered a dividend of €70m to its shareholders which is turn has enabled us to generate significant economic activity and jobs here. As illustrated in our recently published PwC economic contribution report, in 2014 alone SSE has contributed €956m to Irish GDP. This brings SSE’s investment in Ireland in recent years to over €2.5bn, directly employing 800 full time jobs and supporting an additional 5,150 jobs. This was the equivalent of 0.3% of total Irish employment and 0.6% of Irish GDP in FY 14.

A core value for SSE is Sustainability. We live this value by not only investing in low carbon generation sources but also by investing €1.2 million every year in community projects through our wind farm community funds. In particular, we have sought to help communities reduce their energy consumption by investing in energy efficiency initiatives, including the retrofit of over 500 local authority fuel poor homes in partnership with the SEAI and local authorities in Limerick, Wexford and Fingal, and all provided free of charge to those households.

In these ways we believe we’re making a difference for Irish energy consumers and the communities in which we operate.

However, while I felt it important to set out the overall economic value of SSE’s investment in Ireland, the focus of yesterday’s discussion obviously centred on energy costs for consumers and ensuring customers benefit from falling wholesale markets while protecting them from rising prices.

This is a priority for us at SSE Airtricity too. Driving this is Ireland’s highly competitive retail market where SSE Airtricity must deliver competitive and value-based energy products in order to attract and retain customers.

In doing so, we at SSE Airtricity are also particularly focused on helping our most vulnerable customers. That’s why SSE Airtricity has been to the forefront in deploying prepayment meters to help customers in managing their bills, and also ensuring that they are on the cheapest Pay-As-You-Go tariff in the market.

In January, we announced that SSE Airtricity is reducing its gas prices by 4% and its electricity prices by 2% for all customers. This reduction applies to both the unit rate and standing charges. While market commentators suggested that bigger decreases were achievable, I asked the committee to note three things:

  • wholesale prices, gas in particular, influence less than half of the consumer’s bill;
  • individual companies’ hedging policies, foreign exchange rates, timing and the volatility of commodity markets directly influence price; and finally
  • while commodity prices, particularly oil, have reduced over a short period, other costs have increased. Among these are the cost of policy measures such as energy efficiency; use of system charges; market operator charges; and PSO costs. These costs, which are not in the control of generation or supply businesses, offset decreases in wholesale prices.

To remain competitive in a crowded market we must ensure we are passing on savings to customers and offering products they value. Meanwhile, it is also important that those costs not in the control of generators and suppliers are minimised; that all customers realise the savings achievable through supplier switching; and that costs more aligned with social policy are removed from the bill and funded through the Exchequer.

While the main focus of discussion was on energy prices, the engagement also afforded the opportunity to discuss other topics of interest in the energy sector. I was pleased to receive the strong positive recognition for the successful and proactive manner in which we approach community engagement on our large capital projects both through project delivery and in the operation of our community funds. Equally important was the recognition and call to action regarding the threat to the renewables industry posed by proposals to significantly increase wind farm commercial rates.

Overall, I felt our appearance before the Committee represented a really positive opportunity for all suppliers to engage with the Committee, a point echoed by Committee Chair Deputy John O’Mahony. In particular the opportunity to address concerns around falling wholesale markets and their impacts on prices from a supplier point of view and to provide our legislators with a greater insight into the levers that drive the costs of energy was invaluable. For that, I am very appreciative to the Committee.

About the author

Stephen Wheeler Managing Director, SSE Ireland

Read more articles by Stephen Wheeler