NI electricity prices: Competition body ruling means smaller bills

The Competition and Markets Authority examined plans to raise prices to upgrade the power grid

Domestic electricity bills in Northern Ireland are to be reduced slightly, after a competition watchdog overruled Northern Ireland Electricity's plans to increase prices by £25 a year.

The Competition and Markets Authority examined plans to raise prices to upgrade the power grid.

NIE's charges account for about 20% of a typical household electricity bill.

The CMA said they had "struck the right balance" between keeping bills down and allowing investment in the network.

Bills will fall by a total of about £10 by September 2017.

The determination, published on Tuesday, comes about a year after the commission was called in to settle a dispute between NIE and the Northern Ireland Utility Regulator over how much should be spent on the power grid over the next five years.

Start Quote

We've undertaken a major redesign of NIE's price control conditions and the new model will provide much greater incentives for the company to avoid unnecessary expenditure and to invest efficiently”

End Quote Prof Martin Cave Competition and Markets Authority

NIE had argued that the ageing network infrastructure required extensive investment, in particular because the government's electricity policy involves connecting more wind farms to the grid to meet renewables targets.

In its final determination, the CMA, formerly the Competition Commission, said NIE's maximum regulated revenue should be 6.42% less than the Utility Regulator had initially recommended.

It said the measures it had outlined would involve a "major redesign" of the framework used to set NIE's prices.

Utility Regulator chief executive Jenny Pyper said: "This final determination will deliver over £1bn of investment by NIE at no additional cost to consumers."

Refund

NIE said it fully supported the view contained in the ruling that the Northern Ireland regulatory framework should be more like those in Great Britain, where it is overseen by Ofgem.

Analysis

This is a result for the domestic customer.

At the outset, Northern Ireland Electricity had wanted to hike charges by about £57 a year.

Now they are actually getting a saving, albeit a small one.

It means NIE will have to make do with less money from customers, but still have to improve the local grid with investment.

The outcome is a victory for the Utility Regulator who first challenged the proposed price hike.

NIE has accepted this verdict and climbed down from a threat of legal action.

The new price controls apply from October 2014 to September 2017.

The commission also ruled that NIE would have to refund customers who were overcharged after the previous price control period was extended beyond its original end date of March 2012.

Prof Martin Cave, Competition and Markets Authority deputy chairman, said: "Not only will customer bills fall as a result of our determination, but they should also receive a refund as a result of the readjusted charges.

"We've undertaken a major redesign of NIE's price control conditions and the new model will provide much greater incentives for the company to avoid unnecessary expenditure and to invest efficiently."

He added: "We believe the new price control will give NIE better incentives to be more efficient whilst investing in the network, which will ultimately benefit customers, and also provide a robust framework for future price controls and regulation."

The Competition and Markets Authority took over the functions of the Competition Commission on 1 April.

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