The CER Competition Review is the second competition review of the electricity retail markets. It forms part of the process towards deregulation of the electricity retail market by assessing the competition in the retail markets. Following publication of a number of consultation papers outlining its plans to remove price regulation from the electricity market(1), the Commission for Energy Regulation (“CER”), on 21 April 2010, published its decision paper “Review of the Regulatory Framework for the Retail Electricity Market, Roadmap to Deregulation"(2). There are 4 electricity retail markets - Large Energy Users, Medium-Sized Business customers, Small Business customers and Domestic customers. The CER has concluded that the Large Energy User, Medium Sized Business and Small Business markets have met the criteria for deregulation. It is expected that the three business markets will be deregulated in early October. At the date of publication of this article an announcement has yet been made by the CER.
This will not extend to the domestic electricity market, as the criteria set down by the CER, for deregulation have not yet been reached, despite growing competition in the sector.
Since the enactment of the Electricity Regulation Act in 1999 and the establishment of the operation of the Irish retail electricity market has been progressively liberalised, particularly in relation to regulatory control over prices paid by electricity consumers.
The CER’s decision to deregulate the business markets was based on an assessment of the level of competition in the large, medium and small business markets as well as the domestic market. Due to the entry of companies such as Airtricity and Bord Gais Energy, ESB’s market share in 2010 is now less than 50% in the large business market and less than 40% in the small and medium business markets. As such, the CER decided to remove price regulation from all business markets from 1 October 2010.
Unlike the business markets, the domestic electricity market will continue to be subject to price regulation after 1 October 2010(3). The domestic market does not yet fulfil all the criteria for deregulation contained in the CER Roadmap, which are as follows:
- There must be least three suppliers active in the relevant market;
- There must be a minimum of 2 independent suppliers, each of which has at least 10% share of load (GWh) in the relevant market;
- ESB CS and ESB IE combined serves or will serve within a specified period a defined percentage of consumption market share in a relevant market. For each of the business markets, the percentage market share is 50% or less. In the domestic market, the percentage market share is 60% or less;
- Switching rates must be greater than 10%; and
- ESB must provide the CER with a satisfactory commitment for the rebranding of ESB supply companies where the commitment is in place prior to the deregulation of the domestic market.
According to the CER, the domestic market has not seen a sufficient increase of competition to warrant price deregulation, as ESB CS remains dominant with a 73% share. The CER has committed to removing price regulation when ESB’s market share falls to 60%. If customer switching continues at its current rate, the CER anticipates this threshold will be reached early next year. ESB CS must also commit to removing its brand from its retail business.