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Deregulation of the domestic gas market getting closer

CER Criteria for deregulation in the domestic gas market is close to being met but question remains over Bord Gáis Energy rebranding decision

Ireland’s independent energy regulator has outlined that the criteria for deregulation of the domestic gas market has yet to be met, despite figures indicating the prospect of deregulation is inching ever closer.

In its latest Competition Review, the Commission for Energy Regulation (CER) forecasts that leading energy supplier Bord Gáis Energy will capture less than 55% of the market share in June 2014, rather than the date of May 2014 outlined in its last review.

The threshold for deregulation stands at a market share of less than 55% without the firm rebranding, and under 60% if it rebrands its retail business.

Bord Gáis Energy has yet to confirm whether or not they will be ploughing ahead with the rebranding of its retail business. Its current market share surpasses the threshold at a figure of 56.47%.

Whatever decision the firm reaches, the CER will give the market one month’s notice on a decision to deregulate.

Currently the CER is working on the premise that deregulation of Bord Gáis Energy will not involve a rebrand. If the firm had confirmed a rebrand, it would already have met the first criteria for deregulation (a market share of less than 60%).

Additional criteria for regulation includes the requirement for a minimum of 3 suppliers, of which two are non-Bord Gáis Energy suppliers, to hold a gas supplier market share that exceeds 10%. Current figures show that Electric Ireland and SSE Airtricity have managed to achieve this criteria point, taking 20.84% and 17.27% of the market respectively. The third and final part of the criteria for deregulation is customer-switching rates that exceed 10% on an annual basis. Current figures show that this point has already been met and addressed, with average annual switching rates standing at 17.03% for the year running from March 2013 to the end of February 2014.

Domestic gas supply - a changing picture in the marketplace

Since the first quarter of 2011, Bord Gáis Energy has seen its share of the market fall from a figure of more than 80% to its current figure of 55%.

In contrast, Electric Ireland has seen its market share climb over the same period from 0% to more than 20%. SSE Airtricity has seen its market share fluctuate over the above period. The firm sat just above 15% in Q1 2011, hit a peak of almost 20% in Q1 2012 and now sits at 17%.

Deregulation – how soon?

While there is still a question mark over the prospect of Bord Gáis Energy rebranding, The CER estimates that the 55% market share threshold will be met by June, if current switching levels in the domestic gas market are in line with its projections.

If Bord Gáis Energy decides against rebranding, deregulation of the domestic gas market should commence around this time also. In the meantime, The CER will continue to conduct monthly reviews analysing market completion. The next of these will be published towards the end of April.

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