Belfast Telegraph

Friday 11 July 2014

Gas and electricity bills spark boisterous debate

Government policy makers need to show urgency in delivering an agreed strategy

Household home fuel bills are more than 50% higher than a year ago.



There are, however, several questions to examine.

  • Did the tariff increases need to be so large?
  • l Was the Regulator sufficiently rigorous in his scrutiny?
  • l Was the evidence adequate enough to persuade the Consumer Council?
  • l What scope is there to alleviate hardship to low income households?
  • l Should Ministers in the Executive take special action?
  • l Would the Treasury make special funds available to Northern Ireland?
  • The main justification for the increases is that wholesale natural gas prices have risen dramatically. Unfortunately Northern Ireland cannot avoid gas price increases that are determined in the international market.

Plans for alternative energy supplies need long-term policy decisions.

All-island interconnection needs to be stepped up. Major interconnection from Ireland to Britain is a must. Gas from Corrib should be linked into the Irish grid and into the North. Investment in renewable capacity should expand and bottle neck grid linkages removed.

Ultimately, access to nuclear power must come on the agenda.

Government policy makers need to show urgency in delivering an agreed strategy.

The Regulator says that he scrutinised the claims carefully. He has been more forthcoming this year in demonstrating his scrutiny. Previously the Regulator has tended to ask the public to accept his word that he has fully tested the evidence.

His reputation for integrity needs to build on an improved degree of transparency.

When NIE Energy asks for a tariff increase, the price that it pays through the Single Electricity Market (SEM) depends not just on today’s marginal prices, but also on the assumptions linked into the forward pricing as reflected in the available contracts for difference (or the hedging process).

There is no information on whether NIE Energy was challenged on its forward hedging and, if so, how.

The Consumer Council was involved in the consultations that preceded the Regulator’s approval. Yet the Consumer Council now says that it does not accept that the scale of NIE Energy’s increase which makes electricity dearer than other GB areas. The Council wants this ‘fundamental question’ fully answered. Did the Council ask for this when it was ‘at the table’? Why complain now?

The Council also claims that the NIE Energy price increase is almost double the recent increases in GB. That point might have been posed by asking why an average price difference of 7% which favoured Northern Ireland was, for now, going to become an adverse difference of 17%.

Part of the explanation is that NIE Energy compares favourably with ESB and both are working in the smaller (more expensive) Irish market.

Also, in general, English prices adjust at different dates so that a comparison as at one particular date can mislead.

Whatever, the justification the tariffs are now set. There will be extra hardship for many families and the scope for any easing of this rests with the Fuel Poverty Group reporting to Minister Margaret Ritchie. The Executive faces a three way test.

First, can the families facing extra hardship be identified.

Second, can the Executive devise an appropriate delivery mechanism.

And lastly, what Government funding can be found? These questions are easier posed than answered.

The Consumer Council wants the Treasury to allocate £40m to an emergency fund from additional tax receipts. Special pleading for an earmarked fund may not get much sympathy from the Chancellor!

These price increases have exposed Northern Ireland’s vulnerability to gas prices, the lack of a coherent long-term energy strategy and, more immediately, the need for a more rigorous transparent regulation process.

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