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Shock hike in electricity charges to be probed

By Robin Morton

Former energy regulator Douglas McIldoon is being called out of retirement to conduct an independent review of NIE Energy’s controversial 33.3% price hike.

Following a public outcry about the extent of the increase, Mr McIldoon is being invited by his successor, Iain Osborne, to carry out a probe.

Mr McIldoon’s brief will be to examine the case made by NIE Energy for its increase, which takes effect on October 1, to determine whether it is justified.

The move was triggered by Mr Osborne after Economy Minister Arlene Foster intervened to request him to convene an independent review.

Before it was approved, NIE Energy’s proposal for an increase was scrutinised by the Northern Ireland Authority for Utility Regulation in consultation with the Consumer Council.

Mr Osborne told the Assembly’s enterprise committee that the increase was regrettable, but justified in light of the soaring cost of wholesale gas. Mr McIldoon has been asked to report to NIAUR by mid-November.

Mrs Foster issued a statement welcoming Mr Osborne’s response to her call for an independent review of the electricity price setting process.

The minister said she was responding to concerns raised about the scale of the electricity price increase, including those expressed by members of the Assembly’s enterprise committee.

She added: “I recognise that the recent price increases were of a scale that has caused real anxiety among consumers.

“In the interests of maintaining public confidence I wrote to the Utility Regulator suggesting that they bring forward proposals for an independent review of the electricity price setting process.

“The Utility Regulator has proposed terms of reference for this review which I believe are sufficiently wide to address the major concerns that have been expressed.

“I am also satisfied that appointing Douglas McIldoon to lead the review, should inspire public confidence in the rigour and independence of the exercise.”

Mrs Foster said she had asked Mr Osborne to progress the review “as a matter of urgency”.

Mr Osborne said: “We are announcing an independent review of the electricity tariff setting process as a direct consequence of concerns expressed about the increase in electricity prices announced last week by NIE Energy.

“I hope that the independence of this review will help reinforce public confidence in the regulatory process and show customers that the Utility Regulator is working to protect their interests”.

Stephen McCully from NIE Energy said they welcomed the review and expressed the hope that it would allay concerns about the tariff review process.

He added: “This most recent tariff review process was no different from any of the other recent tariff review processes, but it is perhaps understandable, given the size of the necessary price increase, that there have been calls for the process to be validated.

“NIE Energy is well used to having close scrutiny by the Utility Regulator and engaging fully in a consultation process with the Consumer Council.

“Record wholesale fuel costs, which have increased by on average over 100% within the last year, will require NIE Energy to increase electricity prices by 33.3% from 1st October (2008). We do not make a penny more profit from this price increase.

“This increase has already been approved by the Regulator as necessary and unavoidable.”

Mr McIldoon has been asked to look at the following areas:

  • The Utility Regulator's scrutiny of the proposed tariff increase;
  • The consultation process between NIE Energy, the Utility Regulator, the Consumer Council and the Department of Trade, Enterprise and Investment;
  • Whether the 33.3% rise was justified;
  • The Utility Regulator's scrutiny of hedging processes;
  • Any policy areas that should be addressed to improve effectiveness and fairness of risk management in the Northern Irish energy industry.

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