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Northern Ireland Electricity (NIE) must cut its network charges and finance its investment more efficiently, the Competition Commission (CC) ruled on Tuesday.
The regulated network company’s decision last year to reject the price settlement offered by the Utility Regulator for Northern Ireland (UR) backfired. The subsequent referral to the CC (now part of the Competition and Markets Authority) resulted in tougher conditions.
The CC cut the amount of revenue NIE is allowed to raise by 6.42 per cent compared to the UR’s final determination. That will result in a £10 cut to the average annual household bill by the end of the four-year price control in September 2017.
NIE must also refund customers for the higher charges levied while the CC made its assessment, as the previous price control was extended.
In a move with repercussions for UK network companies, the CC also reduced the NIE’s allowed returns to investors. It said the weighted average cost of capital should be 4.1 per cent, down from 4.55 per cent in the UR’s assessment.
Martin Cave, leader of the CC inquiry, said: “We think we’ve struck the right balance between keeping bills down for customers and allowing for the investment necessary to maintain and improve the network. 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.”
NIE welcomed the publication. A spokesperson said it would bring the NI regulatory framework closer to that applied by Ofgem in the rest of the UK, which the NIE “fully supports”.
Jenny Pyper, chief executive of the UR, said the CC’s determination “underlines the importance of our rigorous scrutiny of the NIE price control”. It provides the UR with “additional regulatory tools” consistent with those available to other UK regulators, she added.
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