EA Ireland

FAQs on Electricity Prices

What are electricity suppliers doing to protect customers?

Suppliers protect customers by empowering them to manage their use and costs. They are actively:

  • Providing clear and understandable data on energy consumption.
  • Offering personalised messaging and tips on energy efficiency.
  • Providing innovative “Time-of-Use” smart tariffs, which have cheaper rates at off-peak times to incentivise shifting demand.

Crucially, suppliers also co-developed the Energy Engage Code. This is a clear commitment that no customer who engages with their supplier will be disconnected.

🔗 Read the full Energy Engage Code here: Home – The Energy Engage Code


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Why do gas prices affect electricity prices?

In Ireland, our wholesale electricity prices directly track the price of natural gas because 46% of our electricity is generated using mostly imported natural gas. Imports of natural gas rose from 32% in 2017 to 77.5% in 2023. This makes the Single Electricity Market particularly vulnerable. However, retail electricity prices track the “forward price” of natural gas – this is the price of gas bought up to two years previously.

When global gas prices spiked following Russia’s invasion of Ukraine in 2022, this triggered a dramatic and sustained spike in the cost of generating electricity due to Ireland’s exposure to global gas market shocks.


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Why is the consumer price of electricity higher than the wholesale price?

In Ireland, about half of our electricity is generated using natural gas. Because of this, the wholesale cost of electricity is closely tied to the international market price for gas.

This leads to the important question of why the price you pay as a customer can be higher than the “wholesale price” you see in the news. Suppliers work to protect customers from the extreme volatility of the electricity market, where prices can spike dramatically based on global events. Instead of passing on these daily shocks, suppliers use a strategy called hedging — buying energy months in advance at a fixed, known price. This is the primary tool used to provide customers with stability.

This creates a “smoothing” effect.

  • When daily wholesale prices fall (as seen on the news), the customer price may be higher for a time because it reflects the energy bought up to two years previously.
  • This same mechanism, however, is what protected customers from the very worst of the price spikes, cushioning households from the full impact of the market shock.

It’s also important to remember that the “energy cost” is only 55% of the total market cost. Your final bill must also cover all the fixed, non-energy costs of delivering power, including network transport (Transmission & Distribution) , ensuring supply (Capacity), and other system charges.


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How are suppliers tackling high prices?

In addition to the hedging strategies, discussed above, that suppliers use to provide greater price stability and enhanced protection for customers, they are also tackling high prices by empowering customers to reduce their own bills. This includes:

    • Suppliers ensure they hedge efficiently to avoid sudden wholesale price spikes, providing greater price stability and enhanced protection for customers.
    • Offering “Time-of-Use” smart tariffs, which provide cheaper electricity at off-peak times. By shifting energy use away from the 5-7 pm peak, customers can maximise their savings.
    • Providing enhanced insights from smart meters to help customers see exactly where their energy is being used.
    • Communicating practical, “Top Tips” on energy efficiency and how to “cook clever” or “switch stuff off”

Furthermore, as of December 1st, 202, suppliers have been required to ensure that all customers with a financial hardship meter are automatically placed on the most economic tariff. This includes a tariff that might otherwise only be available to, for example, a new customer or a customer as a retention offer. The customer in financial hardship must be placed on whichever tariff is the cheapest.

Supporting these measures, suppliers have also established hardship funds which seek to support customers who are struggling with paying their energy bills.


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So, what is the other stuff electricity customers pay for?

The wholesale “Energy cost” is only 55% of the total market cost. The rest of your bill is made up of fixed costs to run the system – most of which are outside of your supplier’s control:

  • Distribution Costs (14%)
  • Transmission Costs (15%)
  • Imperfection Costs (7%)
  • Capacity Costs (6%)
  • Public Service Obligation (PSO) (3%)

These charges cover everything from the wires that bring power to your home to the supports for renewable energy and ensuring supply can always meet demand. These charges have increased significantly due to temporary emergency generation, which was driven by increased electricity demand from an expanding economy post-Covid and electrification.

Capacity charges have increased due to the need to build new power stations and to refurb others. This is all work that is tendered on international markets and which has seen significant increases globally.

Imperfections charges are increasing significantly post energy crisis due to things like not having the North-South Interconnector and EirGrid having to operate the system with a certain number of thermal plants on, which requires the turning down of wind and the turning on of expensive gas pants. Your final bill also includes supplier costs and VAT.


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How are suppliers preventing disconnections?

Suppliers prevent disconnections through active engagement. Suppliers were key in developing the Energy Engage Code – an industry-led initiative to encourage customers to stay in contact.

This code includes a “clear commitment that no customer who engages will be disconnected”.

For customers who do not engage, we are also recommending new “early intervention mechanisms such as debt flagging” to help prevent large debts from accumulating in the first place.

🔗 Read the full Energy Engage Code here: Home – The Energy Engage Code


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Is this not a problem with the electricity market then?

The market is not “broken”; it is in a “fundamental recalibration”. The cost of electricity is driven by global gas price shocks and the essential, large-scale investment needed to move away from volatile fossil fuel prices.

This investment in renewables, grid upgrades, and security of supply is precisely what will deliver a “secure, affordable, and efficient electricity system” for Ireland in the long term.  Ireland needs to increase electrification which will reduce average unit costs of electricity, decarbonise heating and transport, reduce dependency on imported fossil fuels and use our own indigenous renewables. More renewables will reduce wholesale prices as seen in other countries and thermal units will provide much needed back-up when renewables are not available and secure the electricity system to support our economy and society.


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