A 14.1% reduction in electricity prices will be tempered by multi-million pound costs associated with a faulty power line in the years ahead, a top economist has warned.
While hundreds of thousands of Power NI customers will save £83 a year under a new pricing system from Power NI from October, John Simpson said consumers here could face paying £14.5m a year because of breakdowns in electricity links to Scotland.
Last month it emerged that the Moyle interconnector, which transfers power across the Irish Sea, has suffered a fault - for the fourth time in 22 months. As a result of the defect, located offshore, half of its 500 megawatt capacity has been lost since June 23.
Mr Simpson said that in the last two years four major faults - three underwater in the North Channel - have made the interconnector unreliable. He said that a guarantee that any funding shortfall because of insufficient trading of electricity, which has to be met by Northern Ireland consumers, could add £14.5m to electricity prices if the Moyle system operates below expected capacity.
Speaking in July, Mutual Energy, which owns the interconnector, said a "locate and repair programme" would take six months to complete.
In a statement, Mutual Energy admitted that the problems were serious, adding that it had not been decided whether the defect is to be repaired.
"A more cost-effective approach could involve replacing entirely the unreliable part of the cables by laying a standard back-up support cable, work which would take a number of years. In the meantime, we could reconfigure the cables to allow Moyle to operate reliably at half its full capacity."
A final decision on whether or not to repair the fault will only be made when Mutual Energy has concluded all the fault location work. The fault is located offshore, approximately 7km from the Scotland converter station.
Mutual Energy was not available for comment yesterday.
Up until 2011, over 30% of our electricity was being imported from a cheaper Scottish source via the Moyle interconnectors. However, last July, one of the interconnectors developed problems, cutting capacity in half. Then, in August 2011, the second broke.
The Moyle interconnector is a link between Auchencrosh, South Ayrshire, Scotland, and Ballycronan More, Co Antrim, that transfers electricity across the Irish Sea.
It went into service in 2001 and is owned and operated by Mutual Energy, a not-for-profit company which manages energy assets for Northern Ireland's energy consumers.
Last July, one of the interconnectors developed problems, cutting capacity in half. Then, in August 2011, the second broke down.
Unreliable system and inadequate grid hits consumer pockets
By John Simpson
Electricity customers in Northern Ireland, until now, have had the reassurance of supplies from three power stations, supported by extra supplies from Great Britain, through the cross-channel Moyle interconnector, and, on a limited scale, from the cross-border Irish ESB grid.
The all-island grid is currently inadequate. The constraints are costing customers an extra £20m-£25m each year. That problem awaits the urgent completion of the planning inquiry on a new high-capacity link from Tyrone to Cavan.
In recent years, the Moyle interconnector to Scotland has been a useful reserve, but unfortunately in the last two years it has become unreliable. Four major faults have disrupted its full operation.
The future reliability of the cross-channel cables is in doubt. The owners, Mutual Energy, must soon decide on what to do.
The expectation is that the Moyle cables may only be able to continue, even with repairs, at half of the original designed capacity. If so, there could be questions about whether there is any liability on the former owners or any suppliers.
More immediately, repayments on funds borrowed to build the interconnector must be paid and this will have a knock-on effect on electricity prices. At its inception, Mutual Energy negotiated a guarantee that any funding shortfall due to insufficient trading of electricity would be met by Northern Ireland consumers.
Next year, that guarantee is expected to add £14.5m to local electricity prices if the Moyle system operates below expected capacity. This extra cost may continue into the future for the remaining period of the capital repayment obligations.
Mutual Energy's directors now have a critical role in the financing of electricity supplies. Also, the case for early decisions on the planning appeal for the enhanced cross-border grid has become more compelling.
Our electricity system is not working as well as expected.