Competition Commission rules in favour of Phoenix Gas
- 3 August 2012
- From the section Northern Ireland
The Competition Commission has ruled that the Utility Regulator was not justified in attempting to place a new price control on Phoenix Gas.
The company refused and the regulator referred the company to the commission.
The commission said while some adjustment was reasonable, the regulator was not justified in acting the way it did.
The decision could end up costing consumers up to £10 a year more in their gas bills.
In 2011, the Utility Regulatory told Phoenix Gas that it was adding new price controls onto the terms of its operating licence.
The company objected on the basis that the price controls had already been agreed during previous negotiations in 2007.
The matter was then referred to the Competition Commission for adjudication.
On Friday it said while some adjustment was reasonable, the regulator was not justified in acting the way it did and risked damaging confidence in the regulatory system.
The commission said its decision was guided by the long-term interests of customers and was concerned that the company's long-term investment decisions could be affected.
Phoenix Gas said it welcomed the commission's ruling.
"We were unable to accept the Utility Regulator's proposal, which proposed to reduce the regulated asset value of Phoenix Natural Gas by more than £80m," a statement said.
"We believed this proposed action was likely to have serious adverse consequences for the continued development of the natural gas industry throughout Northern Ireland, preventing consumers from making considerable fuel savings by switching to natural gas."
Professor Martin Cave, chairman of the Phoenix inquiry group and competition commission deputy chairman, said: "Our decision has been guided by the long-term interests of customers, who would benefit from further expansion of the gas network in Northern Ireland.
"By trying to change elements of the price control which Phoenix Gas had valid cause to believe had been previously agreed, the Utility Regulator's proposals risk damaging confidence in the regulatory system, which in turn could inhibit future investment".
"Such investment is particularly important to fund any future expansion of the gas network in Northern Ireland, where the majority of customers use oil rather than gas, even though it is far more expensive. A typical household converting from oil to gas can save £1,000 a year."
"Whilst we are very conscious of anything that impacts on household and business bills, we have had to weigh this up against the goal of developing the gas industry in Northern Ireland."
Phoenix Gas said it would continue to engage with the Competition Commission leading up to publication of their final decision paper in the autumn to ensure the best possible outcome for all stakeholders in the natural gas industry in Northern Ireland in the longer term.
The regulatory body had argued that not introducing the new controls could cost customers up to £10 a year in their bills.
Regulator Shane Lynch said they wanted to slash the cost of gas for big business users.
The regulator's proposed controls would have saved about 50 of the biggest firms around £10,000 a year.
Phoenix argued the proposals would have reduced their ability to invest in the network.
The company warned it if the new controls were introduced, it could push prices up because their cost of borrowing would rise as a result.