Northern Ireland Electricity rejects regulator's price cap proposals

Northern Ireland Electricity (NIE), the company which owns and operates the country's electricity infrastructure, has rejected proposals for a cap on energy prices for the next five years.

According to NIE, the Utility Regulator's set price controls are inadequate to support the maintenance costs of the national infrastructure, which includes the replacement and repair of poles, pylons and wires.

The price control - known as RP5 - aims to set an efficient level of revenue for NIE between 1 January 2013 and 30 September 2017, which it collects through consumer electricity tariffs.

NIE's application for additional funding has also been disallowed by the regulator.

NIE called the proposals a departure from the 'well established' regulatory system in place for the rest of the UK which place the company under uncertainty, particularly in regards to retrospective adjustments.

Writing to the Utility Regulator, NIE's managing director Joe O'Mahony stressed that the decision to reject the proposals had not been taken lightly. He said: "NIE has worked diligently throughout the price review process in order to provide a robust business plan with extensive and detailed supporting information to facilitate the Utility Regulator to determine a price control that will enable us to provide an adequate service to our customers."

"The allowances proposed by the Utility Regulator fall substantially short of the amounts required to enable NIE to meet its statutory and licence obligations and to carry out the necessary programme of work for RP5 to deliver the level of service customers expect."

Nigel Smyth, the Confederation of British Industry's (CBI's) Northern Ireland director, said the regulator had major challenges to face. He said:

"Northern Ireland cannot afford to have a regulatory system which is out of line with the rest of the UK and where there is more uncertainty. This risks increasing funding costs and undermining investment - ultimately customers will end up paying for this."

"The final decision should be designed around best regulatory practice, be robust yet fair, and demonstrate a high level of engagement. Regulatory outcomes must focus on value and not just cost; deliver realistic efficiency savings and appropriate investment, which can be financed at low costs, in which consumers can have confidence."

NIE now expects the RP5 price control to be referred to the Competition Commission for review.