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Questions need to be asked over high prices

By John Simpson

Published 16/12/2015

Enterprise Minister Jonathan Bell knows that energy costs for large energy-using businesses are disproportionately higher in Northern Ireland than elsewhere in the UK and the Republic.

Now, the Minister has set up an advisory group and asked it for ideas on how to remove or reduce the problems.

The Energy and Manufacturing Advisory Group has, superficially, been given terms of reference that are probably too wide.

It has been asked to reflect on the effect of energy costs on manufacturing competitiveness and identify examples of good practice in reducing energy costs.

Both of these are laudable objectives, but another issue in the terms of reference is critical - to offer recommendations on cost-reduction measures to be included in the forthcoming Economic Strategy and Strategic Energy Framework.

Almost inevitably, the focus will spin towards the role of the Utility Regulator and the Department of Enterprise, Trade and Investment (DETI). The regulator already regulates any changes in the electricity costs for domestic households which then have unseen indirect consequences for the part of the electricity market that is not directly regulated - the large energy users.

The balance of regulated tariffs alongside the unregulated tariffs applied to industry must attract careful review. The allocation of costs between the two sections is critical. If the fixed electricity costs allocated to domestic users are too low, then industry can claim a form of unfair discrimination.

The expertise on this cost division lies with the regulator. However, the regulator should now be answerable to independent experts on both the arithmetic and the decision-making process.

Neither the regulator nor the department are members of the advisory group. Both contain expertise that must be tested.

The department carrying devolved responsibility for energy knows that energy pricing is subject to the combined pressures of EU competition policy and the need to have an acceptable competitive outcome. To date, the department has been slow to open up a wider debate.

The advisory group should now be entitled to ask the policy experts in DETI to offer constructive suggestions to alleviate disproportionate tariff consequences, caused partly by an unusual regulatory framework.

However, the new advisory group has no remit in offering a solution to the continuing hiatus in the regulation of applications to install new renewable energy capacity.

Belfast Telegraph

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