Someone, somewhere is making a huge killing on the back of our misery
EARLIER this year, as the energy crisis began to bite, I suggested in this column that the Government should increase its dividend take from the ESB. It now seems likely that this is going to happen, because of the huge level of profits the ESB announced last week – at a time when its retail arm, Electric Ireland, is heaping large price hikes on its customers.
In normal times, the semiState company pays 12.5% tax on any of its profits, as well as over 30% of the net figure in a dividend payment directly to the Exchequer.
In 2021, ESB Group paid €126million as a dividend to the Government. This was up from €81million paid in 2020.
Now, we learn that the profits at the ESB for the first six months of this year have trebled, leading to demands from all political sides that the Government announce a ‘special dividend’ from the company in the upcoming Budget. These calls have been prompted by the exceptional price increases which ordinary consumers have now to deal with.
However, it is not just the ESB that is in the sights of our politicians.
Other energy companies are being criticised because of the eye-watering profits they are making from massive price hikes for the ‘end customers’ – that is, you and me.
For instance, the owners of our only indigenous gas supplier, the Corrib gas field, have seen a fourfold increase in their profits. On top of that, because of the way pricing is set in the energy market, owners of wind farms are now reaping up to seven times the level of profits usually expected from wind turbines. So the Government is looking at ways to claw back some of their profits too.
Unconscionable
While we are being crucified by price hikes in our energy bills, someone , somewhere, is making a huge financial killing on the back of our misery.
Of course, the executives of big business involved in the energy sector will try to bamboozle us with technical jargon as to why they need to keep their profits high. They will say that such profits are required in order to reinvest in further infrastructure and generation.
There is a rationale to this argument, especially in the case of ESB Networks. It is responsible for the infrastructure used by all energy companies to bring their power to us. Also, it has to be accepted that other energy generation companies need to use some of their profits in order to further expand their generation capacity.
But what is happening now with prices in the energy sector is unconscionable, in that energy companies’ profits are reaching the outer stratosphere, on the back of huge rises to the consumer.
Even the CEO of ESB Group, Paddy Hayes, acknowledged that the enormous profits being made from wind-generated energy were an ‘anomaly’. In other words, even he accepted that something needed to be done to stop this.
What we have seen recently, with the big price hikes, makes it imperative that these high profits cannot be allowed to continue. All the more so given that the gas that comes into the
Corrib gas field is a State asset, albeit leased to the developers of the gas field.
Similarly, it is our wind that is being used to generate the energy – and the profits – from wind turbines.
EU Commission President Ursula Von der Leyen couldn’t have put it better: ‘In these times, it is wrong to receive extraordinary record profits benefiting from war, and on the backs of consumers.’
From the Taoiseach, the Tánaiste, and down the political chain, all politicians are adamant that something has to be done.
Hence, the strong indications from the Government that it will announce a special dividend clawback from ESB Group in the Budget.
It will also be hoping that the proposals coming from the EU to curtail excessive profits in the energy sector will add to the money available to it to help the public cope with the massive price hikes.
The Taoiseach has been clear that any extra funds coming to the Exchequer will ‘underpin the Government’s efforts’ to help the public at this trying time.
In the run-up to the Budget, expectations will be at an alltime high. The figure mentioned in the media as representing the extra money available to help customers started at around €2billion but gradually crept up to over €4billion. Even that may not be enough.
Now, over the weekend, we hear of calls for the planned increase in carbon taxes on fuel to be paused, leading to potential strife between the Greens and the rest of the Coalition. No doubt between now and Budget Day on September 27, more calls will be made to help the worried public.
The Government will be trying to manage expectations, while at the same time emphasising that it needs to hold back some financial fire power for more potential problems in the New Year.
Expectations
So far, most of us have been slow to turn on our heating. Thankfully, the weather has been kind to us. However, slowly but surely, the nights are closing in, and the mercury in the thermometers is dropping. People are very worried already, even before the weather takes a turn for the worse. I cannot imagine what their attitude will be when the cold dark days arrive.
The Government needs to respond to this impending crisis in a comprehensive way, but especially targeting those less well-off. The talk is that we all will get the benefit of energy credits at different times in the months ahead. Many will find fault with that type of way to soften the blow of higher bills – in that rich and poor alike will get the exact same amount.
Government figures will say that that is the best way to deal quickly with high bills. They will justify the scattergun approach by saying that it would be too difficult and costly to set up a system to means-test such energy credits, and that a €200 credit in the hands of a lowincome family, is much more valuable than it is in the hands of a well-off one.
Even if the Government persists in delivering help in this way, I feel that it should also come up with other, more targeted measures to help the less well-off.
I believe that the rest of our population will not find fault with the Government’s response, if it is seen to be genuinely trying to help the more vulnerable in our society.
This Government has faced many challenges, not least Covid, during its tenure. The cost of living and energy situation could well turn out to be its biggest headache so far. The Coalition could stand or fall depending on how it responds to this unprecedented crisis.