Amateur traders cost you in your pocket

RTE today report that despite the 31% fall in oil prices from its peak a couple of months ago, the cost of electricity will not fall in the medium term. The ESB increased electricity prices by 17.5% on 1 August. This is owing to the fact that they hedged the rate at which they buy oil over the summer meaning that despite the fall in oil prices they will still be paying over the odds for the supply.

To me, this smacks of absolute incompetence. Whatever about Michael O'Leary missing the boat on not hedging at 75 dollars a barrel, an eijit could tell you that oil was going to fall from its peak of several months ago. Even the Government were telling us that there was an element of a speculative bubble about current oil prices, regardgless of what they will do in the future.

What should we expect of the leaders of semi state bodies who make such bad decisions?

what do you expect of people from whom consequences and accountability have no bearing on their career?

they hedged to make their billing process easier over the life of the hedge, not to source the cheapest fuel for consumers.

Ryanair made two bad mistakes on this too - first they didn't hedge, then they hedged far too high.

I read a worrying piece recently about the gas inerconnector. There seemed to be no clarity about who would pay its cost if Ireland was using it less - the implication was that if we were using an Irish supply and not using the interconnector, we would still have to pay for the interconnector's development and maintenance costs. I'd like to have a look at that deal too.

Well if it is State infrastructure that will of course be the case. That said I've no idea about anything to do with the interconnector, only that it is in the pipeline, excuse the pun.

Some links on gas supplies and the interconnector - a lot to get the head around.

http://www.bordgais.ie/corporate/index.jsp?1nID=93&pID=97&nID=354

http://www.cer.ie/GetAttachment.aspx?id=f42a3275-12f2-4908-932f-a2defc5e770f

http://www.cer.ie/GetAttachment.aspx?id=6fa1ee98-5bfe-45af-816f-7872fdf73238

http://www.feasta.org/documents/energy/gassupplies.htm

http://debates.oireachtas.ie/DDebate.aspx?F=MAJ20061004.XML&Ex=All&Page=10

http://archives.tcm.ie/businesspost/2006/05/07/story14010.asp

This wouldn't happen in a more competitive market because those fools in ESB and Bord Gáis would be shown the door. As it stands, Airtricity, Veridian and others are hamstrung from providing a persuasive alternative because of the intransigence of the Irish government to provide real choice, dynamism and competition in these industries.