Regulation complicates NIE figures
Northern Ireland Electricity (NIE) is the transmission and distribution (T&D) company with responsibility for carrying electricity from generators to customers within Northern Ireland.
It also has constrained cross-border links which help to facilitate the single electricity market and can receive (and send) electricity from the Moyle interconnector, linking to Scotland, when the system is available, and on a cross-border link to Co Louth.
Until December 2010, NIE was a wholly owned subsidiary in the Viridian Group. It was sold for a reported £1.2bn to become a wholly owned subsidiary of ESBNI, the Northern Ireland subsidiary of the Irish ESB (Electricity Supply Board).
Part of the agreed arrangements is that ESB will maintain a separate company structure for NIE with a local board of directors, currently chaired by Stephen Kingon.
Through the utility regulator, NIE charges are regulated for T&D. The recent regulatory review, which should have been operational on March 31, 2012, is still under challenge through the UK Competition Commission. The final judgment of the commission is still awaited.
The regulatory process can make interpretation of the financial figures complicated. A key example is that NIE has an agreed formula to determine permitted revenue and if the out-turn is different, then the over, or under, recovery is carried into the pro forma accounts. In 2010-11, there was an under-recovery of £29.6m.
When the revenue figures are adjusted, the permitted revenue in 2010-11 increased by about 7% compared to 2009-10. Revenue in 2011-12 and the nine months of 2012 included over-recoveries of £14.4m and £20.4m on the allowed permitted revenue. When total revenue is adjusted for this feature and the shorter trading period, permitted revenue in the last period was stable.
The adjustment to regulated entitlement also affects operating profit which, after adjustment in 2011-12 was £92.6m, 6% lower than in the previous year. In the recent shorter period operating profit was, at an annual rate, 7% lower than in 2011-12.
Employment numbers have averaged 301 in the recent period.
The electricity sector in Northern Ireland is now due for a major upgrade of the T&D assets, including the proposed cross-border connector from Tyrone to Cavan, which has been seriously delayed by an official planning appeal.
The former owners of NIE received a dividend of £55m in 2009-10. No dividends have been awarded under the new owners. In May 2011, the new company secured funding for a 15 year bond for £400m to help finance its capital development programme.