Belfast Telegraph

Big companies may save small fortune in gas bills

By Clare Weir

Price controls set to be imposed on Phoenix Natural Gas could save large business customers tens of thousands of pounds.

The Utility Regulator's interventions mean that up to 50 larger firms and public sector bodies could see gas bills drop by £10,000 each annually from 2013.

Companies expected to benefit include Bombardier Shorts, Belfast's Royal Victoria Hospital, Montupet and Thompson Feeds.

Domestic customers will see a £10 decrease in bills a year, despite Phoenix's original proposals to the regulator which would have seen bills rise by £15 per year.

The decision still leaves Phoenix, which started operating in Northern Ireland in 1996, with the highest rate of return on investments than any other utility company in the UK, at around 7.5%. The biggest impact will be on Phoenix's 'regulatory asset base', which will be reduced by £74.4m, to £375m. The asset base is money put aside for projected future capital projects and expenditure.

The reduction will comprise £17.3m in deferred capital expenditure and £57.1m in 'outperformance' - where the company completed work at below projected costs. Previously these savings had been retained within the company rather than shared.

Regulator Shane Lynch (below) has said that the business savings would help other big firms here and could boost foreign direct investment.

Phoenix has 28 days to agree or oppose the price controls.

If it does not accept, the case could either be taken to the Competition Commission or Phoenix could seek leave for a judicial review. Owner, private equity fund Terra Firma, is expected to reject the controls, but a spokesman remained tight-lipped.

"We are currently considering the Utility Regulator's final determination on the Phoenix Natural Gas Limited price control 2012-2013 and will be responding to it in due course" he said.

The decision by the regulator could now lead to the downgrading of Phoenix by an influential business ratings body.

In October Fitch placed Phoenix on 'Rating Watch Negative' and warned that the firm's status could drop by one notch from BBB to BBB-, pending the outcome of the price control proposals.

Phoenix owns and operates the gas distribution network in Belfast and Larne.

The company has 140,000 customers around 20,000 of which are business customers. As the monopoly owner of the gas distribution network, it must be regulated.

The price control is aimed at "setting an efficient level of revenue to finance Phoenix's build and operation of the gas network" over 2012-2013.

background

Phoenix Natural Gas is the largest gas distribution business in Northern Ireland and was founded in 1996. It owns and operates the licence for the distribution network in the Belfast area and Larne. The distribution business is responsible for the development of the pipeline network and for providing services to other gas suppliers. The Phoenix network covers around 3000 kilometres of gas mains.

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