Under section 23 of the Gas (Interim) (Regulation) Act of 2002, the CER is responsible for regulating charges in the natural gas market, including supply to final customers. As such, the CER examines the costs underlying these tariffs and approves revenues for Bord Gáis (the regulated incumbent). Bord Gáis Energy (BG Energy) is a business unit of Bord Gáis Eireann.
Regulated Revenue
To set the prices that BG Energy may charge customers, the CER first determines the revenue that BG Energy needs to earn to meet costs efficiently. These costs include the cost of buying wholesale gas, transportation, BG Energy's own supply cost, profit margin and capital expenditure.
The allowed revenue is determined for a number of years (the "revenue control period"). The first revenue review period was from 2003 to 2007. The second (current) revenue control period covers 2007 to 2012.
Regulated Tariffs
The allowed revenue is examined twice yearly. These examinations set the BG Energy tariffs for the following six months of the gas year. The CER sets the regulated tariffs for the (NDM) Non Daily Metered Residential, Industrial & Commercial and Fuel Variation Tariff customers. The CER recently (1st October 2010) deregulated the Regulated Tariff (RTF) sector. Further details on regulated tariffs can be seen below:
There are three distinct sectors in the market. These are the Large Daily Metered (LDM), Daily Metered (DM) and the Non Daily metered (NDM) sectors. The LDM sector is made up of power stations and large industrial energy users. The DM sector is made up of industrial and large commercial users. The NDM sector is made up of domestic customers and small and medium enterprises (SME's). Competition in the Irish gas market for industrial and commercial customers (in the LDM and DM sectors) commenced in July 2004, with several participants active in the sector. The domestic sector of the retail market was opened for full competition on the 1st July 2007.
In the LDM sector (>57.5 GWh gas comsumption annually) there is no regulated tariff. The largest users in the sector generally ship gas themselves, purchasing directly from the wholesale market.
In the DM sector (<57.5 GWh and .5.55 GWh gas consumption annually) there is no regulated tariff. There are approx 16 LDM customers and 240 DM customers.
The NDM sector is made up of residential, commercial and small individual customers that use less than 5.55 GWh of gas annually. The Fuel Variation Tariff (FVT) applies to any BG Energy customer whose supply point capacity is greater than 3750 KWh and annual consumptionis greater than 73,000 KWh. There are approximately 1700 FVT customers. The remainder of the NDM sector is split between the industrial and commercial (I&C) and residential customers. There are approximately 22,000 I&C customers and 620,000 residential customers.