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Corrib gas could push up prices

10 July 2011 By John Burke Public Affairs Correspondent

Homeowners are facing the ‘‘very likely’’ risk that energy prices could rise due to competition between the new Corrib gas supply and the Bord Gáis owned undersea gas-supply interconnectors, the state energy regulator has warned.

In a paper published last week, the regulator said that any decline in demand for gas from the Bord Gáis interconnectors could be expected to fall following the addition of supply sources, but it also warned that this might lead to higher prices for consumers.

‘‘When a new supply comes On stream, there will be a large diversion of capacity bookings away from the interconnectors to the new supply source, as it is fully expected that the new supply source will be marginally cheaper,” the Commission for Energy Regulation (CER) paper said.

However, the CER warned that falling interconnector bookings could have a significant effect on the interconnector subsidy paid to Bord Gáis, as ‘‘the lower the bookings go, the higher the tariff goes in return’’.

The paper set out a range of options to prepare for the change in demand from interconnectors to other sources of gas supply, following an earlier request for submissions from interested bodies.

In addressing the importance of a proper regulatory framework to resolve emerging issues with different gas supplies, it said ‘‘any increase [in the tariff] would allow producers to price up’’ their gas to consumers, allowing gas companies to ‘‘gain further margins, thus putting an even bigger burden on the final customers’’.

‘‘If the current interconnector tariff structure is not altered, it is very likely that all consumers – gas and, indirectly, electricity – will be impacted by higher gas costs,” CER said.

In its submission to CER, the Irish Offshore Operators Association, which also represents Shell EP Ireland, the company behind the Corrib gas field, questioned what it said was CER’s ‘‘de facto decision’’ that the interconnectors had a high value in terms of security of supply.

The association argued that Bord Gáis’s decision to construct the second of the two existing interconnectors in 2000 was ‘‘commercial’’, reiterating its long-held view that any decline in demand for interconnector supply should be borne primarily by the state utility company.

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