NIE told rise in average bill must be smaller

NIE wants to increase bills to invest in the electricity grid

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The Competition Commission has told Northern Ireland Electricity (NIE) it cannot raise its prices by as much as it wanted to over the next five years.

NIE controls the power grid in Northern Ireland and its charges account for about 20% of a typical household electricity bill.

It wanted to raise bills by about £25 a year up to 2017.

However, the commission has ruled that the increase should only be around £5 a year.

That will now be put out to consultation.

Analysis: John Campbell, business editor

The biggest disagreement between NIE and the regulator was on how much should be spent on upgrading the grid over the next five years.

NIE wanted £776m while the regulator said that £396m would be enough.

The Competition Commission has come in with a figure above the regulator's, but it's not yet clear by how much, although NIE won't get anything like it wanted.

The commission has also effectively told NIE to cut its profit margins. It says the company's rate of return will be "considerably lower" than in the past.

This cut in profit margin means the commission's ruling is even tougher than the settlement proposed by the regulator - tougher to the tune of £69m over five years.

That is clearly not the result NIE was hoping for and will be seen as some vindication for the tough line taken by the former regulator Shane Lynch.

NIE said it needed the money for investment in the grid but the commission said its ruling "strikes the right balance" between the company and consumers.

In April, the Competition Commission was called to settle a dispute between NIE and the utility regulator.

NIE wants to increase substantially the amount of money spent upgrading its infrastructure.

However, the regulator said the plans would add too much to bills and then referred the matter to the commission.

NIE had been strongly critical of the regulator on the issue.

Martin Cave of the commission said they had been able to increase the amount of money that could be put into investment in the grid compared to what the utility regulator had proposed, but also came up with a much smaller rise in bills compared to that proposed by NIE.

In a statement, NIE said: "We welcome the publication of the provisional determination and will submit our response by the due date, 29 November 2013.

"The Competition Commission will be holding further hearings to discuss responses to the provisional determination during December and we expect the final determination to be published in February 2014."

The utility regulator said it welcomed the publication of the Competition Commission's determination.

"The detailed determination will be made available shortly and we will consider the findings carefully and engage further with the Competition Commission during the consultation period," a spokesperson said.

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