NI Regulator acts on electricity costs

The North's Utility Regulator has intervened to protect electricity consumers from paying twice for some costs.

Chief executive Shane Lynch proposed bills for the transmission and distribution of electricity to domestic consumers over the next five years should remain largely flat before inflation.

He was making the regulator’s final determination on what NIE can charge consumers for the service, which can be referred to the competition commission if it is not accepted. It does not include fluctuations in the price of raw fuels or other power station costs.

Electricity network owner NIE has not broken any accounting law but the regulator reduced by £32m (€39m) the amount the company could allocate to capital spend on matters associated with its equipment.

Mr Lynch said: “We have put a range of measures in place to deal with uncertainty (particularly for capital expenditure requirements and pension costs) to protect both consumers and NIE transmission and distribution.

“Additionally, we have also ensured that consumers do not pay twice arising from NIE transmission and distribution’s change in capitalisation practice during the Regulatory Period 4.”

He added: “Overall, our final determination is a balanced outcome. We want to make sure that electricity consumers continue to have a high performing and secure network, which accommodates renewables at the lowest possible cost.”

NIE said it would review the decision and submit a response next month.

Costs for NIE’s Regulated Asset Base (RAB), equipment like pylons and sub-stations, must be recovered either from the value of the assets or through a special allowance for operating costs like wages, but not both.

The regulator ordered a £32m (€39m) reduction in the RAB.

NIE has a monopoly over the infrastructure like power lines because it would not be efficient to have competition. Instead the regulator works on behalf of consumers and forces prices down like competition would.

A statement from NIE said nothing in the draft determination or the Utility Regulator’s consultants’ report (earlier provisional reviews) establishes that NIE has double-charged consumers for any expenditure.

“NIE’s regulated transmission and distribution charges have been set within the levels contemplated in the RP4 price control settlement, in line with the overall capex budget agreed for the RP4 period and the agreed operating expenditure allowance,” it said.

“In consequence, the Utility Regulator has no sound basis for reclassifying NIE’s expenditure.”

Mr Lynch allowed an increase for domestic consumers of £4 (€5) a year for the cost of the network for domestic consumers, which would have been £25 (€30) before NIE’s proposal was reviewed.

For large industrial customers network charges will increase by around £11,000 (€13,500) a year.

The regulator accepted in full NIE’s proposals for pension costs associated with existing employees. Around 5,000 employees and former employees are on older, more generous schemes which were legislated for when NIE was privatised in 1992.

A hole has been created in the pension fund by stock market volatility since 2000, leaving consumers to fund pension costs of £10.5m (€12.9m) over this five-year spending period. Customers are to make up a total £115m (€141m) of the pension hole, excepting instances where too expensive early retirement packages racked up bills worth £41m (€50m).

When ongoing costs of £10.5m (€12.9m) are added to those associated with the deficit, the total to be paid during this five-year period is £58m (€71m).

An NIE spokeswoman said: “NIE’s plans for RP5 (Regulatory Period 5) reflect its focus on delivering an electricity network that is fit for future needs and provides value for money for customers.”