energy poverty | 

Secret Cabinet memo warns that home energy bills could treble to €6,000 a year

Varadkar hints at supports as half of households facing into poverty

Tánaiste Leo Varadkar and Justice Minister Helen McEntee in Kilkenny yesterday for the Fine Gael parliamentary party think-in. Photo: Dylan Vaughan.© Dylan Vaughan

Hugh O'

The annual cost of a typical family’s gas and electricity bills could hit €6,000 next year, potentially plunging more than half of all households into energy poverty, the Cabinet was secretly warned this week.

Dire projections on the impact of the soaring cost of wholesale gas, brought about by the war in Ukraine, have been laid bare in a memo given to ministers.

In what is likely to prompt further alarm within the Coalition, the memo also outlined energy companies’ growing concern about their liquidity positions. This is because they are being forced to make huge collateral payments to gas suppliers before the fuel is delivered.

Ministers were told that the number of households at risk of energy poverty – where 10pc or more of their net income is spent on utility bills – could go above 50pc by the end of this winter.

In an ominous warning, the Cabinet was told: “The majority of the increase will only be seen by householders when they receive bills over the coming months.”

It comes as Tánaiste Leo Varadkar yesterday signalled that the Government will give assistance to households with their energy bills throughout next year.

“People will need help after Christmas and perhaps throughout next year, and we need to bear in mind that that’s a possibility,” he said.

Projections show that a typical household is facing an effective trebling of their energy costs when compared to the middle of last year as a result of the increased price of wholesale natural gas.

“If the wholesale price of gas remains at the elevated levels expected for the coming months, further retail price increases can be expected, with a typical household paying circa €6,000 for gas and electricity annually,” the memo said.

“The timing of these increases is unknown but could be early in the new year.”

Households are already paying €4,000 – €1,800 for gas and €2,200 for electricity – annually now.

This is double the €2,000 – €900 for gas and €1,100 for electricity – they would have paid annually in mid-2021, before Russia invaded Ukraine.

Further estimates presented to ministers show that in the second quarter of this year, a full year’s supply in an oil-heated dwelling costed an average of €3,200, which is €1,100 more than the cost in the last quarter of 2021.

“It should also be noted that significant rises in energy costs will not be confined to electricity and gas bills as oil-heated households will also see comparable energy bill increases,” the Cabinet was told.

Referring to the risk to the liquidity positions of energy companies, the memo states that Electric Ireland and Bord Gáis – which are so-called suppliers of last resort for customers whose existing utility companies fail – could face an “unmanageable financial burden”. This could “create a contagion effect” in the energy market.

Customers transferred to providers of last resort also lose access to any preferential deals on their energy bills, meaning they “may face immediate exposure to prevailing market prices and not be protected through hedging”.

The Government has already signalled that it will be targeting supports in the Budget later this month for businesses directly impacted by the current crisis.

Speaking at the Fine Gael pre-Dáil think-in in Kilkenny yesterday, Mr Varadkar said the Government had to have a “dynamic response” over the course of the next year, as had been the case in 2022 with cuts in excise duty, the €200 energy credit and increases in grants for students and back-to-school allowances.

“What I’m saying is that the announcements on Budget day aren’t the final word on this,” he said.

“If we need to intervene and help people more throughout the course of 2023, well then we will.”

The Irish Independentrevealed on Thursday that an increased electricity credit of more than €200 is on the table in Budget talks, with ministers exploring the possibility of applying the grant to utility bills before and after Christmas,

The Government is likely to increase the universal credit for all domestic energy customers by substantially more than the €200 payment that was applied to bills last April.

While a doubling of the credit applied in spring has been mooted, sources said no figure had yet been agreed by ministers.

Coalition sources pointed out that energy bills in April were much lower than they are likely to be across the coming months and that a €200 credit would not be sufficient.

Asked about other priorities in the Budget, Mr Varadkar said the Government wanted to see “decisive action” to reduce childcare costs and was targeting a 50pc reduction in fees over the next two years.

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