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Energy contracts torn up in bid to drive down bills

The electricity regulator has confirmed it will cancel two historical power generation contracts with Kilroot Power Station, a move it expects will boost competition and help bring down power bills.

Known as Generating Unit Agreements (GUA) the contracts between Kilroot and Northern Ireland Electricity have been in place since NIE was privatised in 1992. They will be cancelled on November 10.

The announcement follows two separate public consultations carried out by the Regulator over the last year, the most recent of which concluded last month.

Iain Osborne, chief executive of the watchdog, said: "We have carried out a considerable amount of analysis and consulted extensively to make sure that our decision on the future of these power generation contracts is the right one for consumers.

"Cancelling the contracts will have the beneficial effect of exposing the two units directly to the Single Electricity Market, which will boost effective competition in the wholesale market across the island. We are confident that the cancellation will benefit consumers and play a role in reducing electricity bills in the future."

It has been forecast that ending the contracts could save electricity customers between £10m to £20m a year.

But some commentators believe it could leave the province more exposed to volatility in gas prices.

The only coal-fired plant in Northern Ireland, Kilroot provides a third of the province's power consumption.

Mark Miller, managing director of Kilroot's owner AES, said: "AES remains committed to our plant and staff in Kilroot and operating in the Single Electricity Market. This announcement by the Regulator will have no impact whatsoever on the daily operation of the plant, which has fully participated in the Single Electricity Market since 2007. We will continue to optimise the operation of the plant within the market arrangement.

"In our transition to a low carbon economy, AES believes that coal-fired plants have an important contribution to make in the years ahead in terms of security and diversity of supply."

Economist John Simpson added that more transparency around what had driven the regulator's decision would have been welcome.

He added: "Abolishing the GUA contracts should end up in consumers getting slightly lower prices in that we won't be giving guaranteed prices.

"But it hangs on an assumption that the price of gas will stay low relative to the cost of using coal."