Transcript generated automatically by AI and may contain errors.
Chapter 1: What is the main topic discussed in this episode?
The Last Word on Today FM. We have Charlie Weston, our personal finance editor from the Irish Independent, with us for our weekly money spot. And Charlie, we put people in an awful bad mood the way we're going to start the programme today, but it can't be helped. Tell us about how, within the European Union, Ireland is now the country with the highest household electricity prices.
Yeah, Matt, we're back up there. This is a position we don't want. We don't want to be at the top of this league of shame, but there's new figures out from Eurostat, which is the European Statistics Agency, and it shows that Irish energy prices, Irish electricity prices, are the highest across the European Union. That's followed by Germany and Belgium, but we're the top.
And it probably means that the average household here in this country is paying about ā¬480 a year more for their electricity than the average across the European Union. Union prices here are about 40% higher. So, I mean, this is just, you know, so annoying. And a big chunk of that, Matt, is it's not the tax because that's reduced. The VAT rate is temporarily reduced to 9%.
A lot of it is grid fees, the heavy investment that has to be put into the grid to connect up data centers, to put wind farms on, you know, on,
Chapter 2: Why does Ireland have the highest household electricity prices in Europe?
into the system, you know, to cover that, the poles, the wires, the substations, the pylons, that whole cost. And that's a huge part of your bill. It could be anywhere between 40% and 50% of your bill, which is probably about ā¬800 on the average bill.
So just to explain that a little bit more, right? I'm interested that you say Germany and Belgium. I know Germany has had a major problem because when Angela Merkel decided to shut down all the nuclear, they became entirely dependent on getting their oil and gas out of Russia. And then they were snookered when the Russians invaded Ukraine. So I can understand why the prices went up there.
But what you're saying is that it's not as much the price of the electricity and gas that we bring, or the oil and gas that we bring in from overseas. It's actually charges been put on the bill to pay for the upgrading of the infrastructure to allow more customers onto the network.
That's a big element of it, Matt, a huge element of it. And this has actually been recognised recently. I've been hearing comments from the Taoiseach. I wrote a story a couple of weeks ago saying that there was a new EU document out to try and get countries to grapple with high energy costs.
And one of the things they were saying is maybe governments should take on some of the charges associated with upgrading these grids because they're huge in every country, but they're particularly bad in this country. You know, a huge part of our bill, as I say, is made up of these grid fees or network charges in various forms. So maybe the government should take over a bit of that.
And the Taoiseach has kind of hinted that maybe the government will. You know, why should the massive bill for all of the upgrades, all of the investment, and we're talking here something like 18 billion euros over the next few years in upgrading the grid, why should that all land at the feet of users, in other words, consumers and businesses?
And remember that data centers pay a cheap rate anyway. They pay half the electricity costs of consumers and use a huge proportion of the electricity.
Sorry, Charlie, can we just clarify why that is? Is that basically because they get a discount because of bulk purchase, that the more electricity you use, the cheaper the price to you because you're guaranteeing to buy from the supplier a big amount?
That's it, Matt. Yeah, these large users, they get a discount because they're big users. Traditionally, they were big employers. So, you know, so big industry always got a discount. That's all very well if you have a big factory like Intel and you have thousands of people in it.
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Chapter 3: What factors contribute to the high electricity costs in Ireland?
But data centers are incredibly intensive users of electricity, and it is costing us an arm and a leg to get them into the system. Now, they have been told that they will have to help producing their own electricity in And they're allowed to put in private wires, which is fine. But they're still, you know, they're a big drag on the system.
And it's one of the reasons why it's costing so much to upgrade the grid to kind of connect up them. And because of the sheer amount of electricity they're using. But also it's expensive. Renewable, getting renewable onto the system is expensive once you have it on there. you know, it tends to operate at a low cost. But all of this costs an awful lot of money and our grid is outdated as well.
I mean, it just needs to be upgraded. So massive expense. So we have this awful situation where we have the most expensive electricity in Europe. This is based on figures from last year, the Eurostat lockdowns.
Charlie, it's going to get worse this year because we had last Friday Pre-Pay Power, which has 240,000 customer accounts, putting up its prices 8.8% for electricity from the 1st of June, gas going up 10.6%. If it's putting up the prices, what are the chances everyone else will take advantage of that and do much the same?
Yeah, and it's already been flagged by the Energy Minister, Dar O'Brien, that we're going to see increases this year. He talked about a figure of between 4% and 9%. Now, 9% on your average electricity bill will be about ā¬150. In some senses, if we got away with that amount, it mightn't be too bad. But yeah, as you say, prepaid power... a pay-as-you-go operator with 240,000 customers.
They've already announced an increase for June the 1st. I've been asking Electric Ireland what their plans are because they had a price freeze in place, but they didn't go last year, even though a whole string of companies increased their prices. So look, it could just get worse, unfortunately.
Okay, something else I want to ask you about. We've had an enormous reaction on the programme in recent times to the idea of modular cabins or sheds for beds in the back garden. And a lot of popularity with the idea.
A lot of people doing the sums and thinking, well, you know, the price of actually putting one of these in, and if you're able to charge rent 14 grand a year tax-free, these things could pay for themselves within just a few years. But you've spotted a little angle which didn't come up in recent times in the conversations. The insurance cover for these modular homes in the back garden.
What have you uncovered in this?
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Chapter 4: How do grid fees impact household electricity bills?
You add a ā¬100,000 modular home. Suddenly, you're talking about a rebuild cost of ā¬400,000 if there's a big fire on that site, say. But maybe you didn't upgrade the insurance. If you didn't upgrade the insurance, you're still insured for ā¬300,000. you have a 75% shortfall. So if you go make a claim for 200,000 euros, say you're going to be 50 grand short. So that's the big risk.
So I've been talking to this insurance claim specialist and he's also a quantity surveyor, Trevor Kelly, and he's been outlining all this to me. And it's been confirmed by Insurance Ireland that there's a big risk here that people don't realize your liability completely changes as well because you've
Charlie, I just thought of a few things as you're talking about that there. If you're going to have an additional water and electricity supply, that would actually increase risks in relation to things potentially flooding or fire. Also, what about home security?
Say if you have an alarm in the main house, do you have to extend that alarm into the modular unit to have the cover against break-in, for example?
Of course, there's a massive issue around security. You have extra people there. You have somebody else with a separate entrance, probably more people with keys to the premises. So that's a massive extra security risk.
But would you actually have to put the extra alarm in? Would you have to extend the alarm into the new shed?
Well, if you're getting a discount based on the fact that you have your home, your main home alarmed and you don't have it in the bed for sheds, well, then, you know, you're nullifying that. So, you know, you need to consider that as well. That's a massive consideration.
You're absolutely right as well in what you're saying, Matt, about, you know, the extra services that are coming into the home as well you're talking here about. You know, sewage, water, electrics, you know, there's a whole range of different things which have been added to the site. So, you know, that changes the profile as well, the risk profile, if you like.
So a whole load of things to be considered. So people shouldn't go into this blindly. They need to consider there's a big insurance implication here if you're going to build one of these modular homes in your garden.
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