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Deregulation of domestic gas market pushed back

The CER says deregulation now likely in May or June 2014

The deregulation of Bord Gáis Energy is edging closer, but according to the Commission for Energy Regulation it remains unlikely until at least May 2014.

The CER January review found that the energy company was yet to meet the criteria required for deregulation – which would increase market competition were it to happen. The company must have below 55% of the market share, while there must be at least three companies in the market with a share of at least 10%. Furthermore, customer switching rates must also be in excess of 10% per year.

A threshold below 55%

When original discussions with the CER took place, it was decided that Bord Gáis Energy could rebrand, which would mean the threshold for deregulation would be a 60% market share.

This threshold has been met as it is above the company’s current domestic gas market share of 56.88%, but the threshold drops to 55% if the company does not rebrand. The CER says it still has not received a decision on branding for Bord Gáis Energy and has stated that at least one month’s notice will be given before deregulation takes place. According to market share forecasts, Bord Gais Energy will have less than 55% of the market share in May this year. Further forecasts estimate that Electric Ireland will boost their domestic gas market share by around 3% by June, while SSE Airtricity’s share is expected to remain stable.

Meeting the criteria

In terms of a share in the gas domestic retail market, there are two active energy suppliers in the market with a share of 10% or more.

This criteria for regulation requires that there must be at least three suppliers, and two of those must be a supplier other than Bord Gáis Energy. At the end of January, the CER said SSE Airtricity had 17.31% of the market and Electric Ireland has 20.58%, meaning this part of the criteria is met. Meanwhile Flogas also has 5.15% of the market, although they are unlikely to directly influence any deregulation procedures. [caption i Irish Domestic Gas Market Share 2014

Switching rates

The original decision paper required a switching rate that is greater than 10%, and the switching rate between February 2013 and January 2014 was found to be 17.34%.

This meets the criteria, as 109,854 customers choose to switch, from a total of 633,662 meaning two of the three criteria from the CER are met. However, until the threshold point of 55% market share is met, the deregulation of Bord Gáis Energy will not occur.