Single electricity market means savings of £100m
Published 26/09/2007 | 09:42
It is all systems go for the single electricity market which comes into effect in Northern Ireland and the Republic on November 1, the utility regulator said today.
Iain Osborne said that, although customers would notice no immediate change, efficiencies of scale and enhanced competition would eventually produce savings north and south.
He said: "We expect that there will be a net benefit to customers across the island of £100m over the next 10 years.
"In addition, if we get the competition we are expecting, we should also stand to get a further benefit of £150m over the same period, north and south."
The system, which is known as the SEM, will create a single trading arena throughout the island which will then enable supply companies to shop around for the cheapest source of electricity available.
The mechanism has been market tested over the summer and, when it goes live in five weeks' time, it is expected to lead to active trading of more than £1.3bn a year.
The move has already attracted the interest of British supply company Scottish and Southern, which applied six weeks ago for a retail licence in the Republic and is also exploring the potential of the Northern Ireland market.
Mr Osborne said: "We estimate that there will be a marginal fall in end-user prices in both Northern Ireland and the Republic.
"Consumers will capture the majority of net benefits of SEM implementation, with a fairly even split between Northern Ireland and Republic of Ireland consumers."
Mr Osborne said that SEM would provide greater security of supply, especially once a second cross-border interconnector between Armagh and Monaghan is opened in 2012.
He said the system would make the market in Ireland less volatile than in Britain, and help protect it against tariff fluctuations.
This, Mr Osborne said, was because a "capacity cost" would be incorporated into customers' bills to cover the payback over 30 years of the cost of infrastructure improvements in the north and south.
But he denied that this meant that consumers in Northern Ireland would be subsidising infrastructure upgrades in the Republic.
Mr Osborne insisted that the benefits would grow over time and flow both ways as long-term infrastructure investments such as new power stations were required north and south.
He said that, with demand for electricity growing by 2% per annum, Northern Ireland would need new generating capacity by 2012/14.
In June AES, the American company which owns Kilroot power station, unveiled plans to open a new, £150m, gas-fired power station on its Carrickfergus site in 2010.
AES's supply contract is up for renewal in 2010, but Mr Osborne said he was entitled to terminate the contract if the terms were not beneficial to customers.
Kilroot, which provides the Northern Ireland grid with a third of its needs, is undergoing a clean-up thanks to the installation of a £40m flue gas desulphurisation (FGD) plant which will reduce emissions.
Northern Ireland Electricity says that the installation of FGD kit at Kilroot is adding the equivalent of £11 per annum to the bills for each household.