Belfast Telegraph

Friday 31 October 2014

Electricity pricing probe: Commission to judge if regulator right to cut NIE budget

A year after it was supposed to be resolved, a long-running battle between the Utility Regulator and Northern Ireland Electricity (NIE) over prices will now be decided by the Competition Commission.

The referral follows NIE’s rejection of a plan put forward by the regulator Shane Lynch  limiting how much the company can spend on updating its infrastructure, which includes electricity lines, poles and substations.

NIE’s charges typically make up 20-30% of electricity bills and, because it has a monopoly in Northern Ireland, the regulator is tasked with setting controls on how much it charges customers.

That also includes limiting how much it can spend on updating infrastructure. Up until now, this has been set in five-year periods, known as regulatory periods (RP), since NIE was privatised in 1992.

The current period, RP5, should have started in April 2012, but because agreement can’t be reached, the previous conditions set out in RP4 have run on.

NIE said the amount of money the regulator wants it to spend in its RP5 proposal is not enough to allow it to service its network or to meet its licence obligations.

In essence, NIE wants to spend more updating its infrastructure, and has hinted that the quality of service could drop if it can’t invest in this area.

“The allowances proposed by the Utility Regulator fall substantially short of the amounts required to enable NIE to meet its statutory and licence obligations and to carry out the necessary programme of work for RP5 to deliver the level of service customers expect,” it said. The regulator believes that NIE should spend less on infrastructure in order to keep customers’ bills down.

“Towards the end of last year, Northern Ireland Electricity (NIE) rejected our price control determination (known as RP5) for the next five-year period,” it said.

“Consequently, we have referred this matter to the Competition Commission for its determination within six months.

“This determination will be final and binding,” it added.

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