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Power NI has said it will drop electricity prices by 9.2 per cent from 1 April, in contrast to the UK's big six suppliers which have so far only reduced their gas tariffs in response to falling market prices.
Northern Ireland’s largest electricity supplier said it is able to offer a cut of £50 per year for households and £200 a year for small businesses because it does not hedge its wholesale activity as far in advance as the big six. In addition, the supplier is not burdened by the carbon tax which the big six are required to shoulder.
The cuts come amid strong political pressure on the big six to pass on lower costs as a result of historically low wholesale gas market prices. Most electricity in the UK is produced by burning fossil fuels, with gas generation accounting for around 40 per cent of electricity demand every year, meaning electricity prices are firmly aligned with the fall in wholesale gas markets.
Although the big six gas tariffs have seen modest cuts, none of the largest UK suppliers have passed through lower electricity prices.
Managing director of Power NI Stephen McCully told Utility Week that the company is able to pass on electricity savings because the Irish energy market engages in less long-term forward hedging.
He said: “In Northern Ireland, Power NI buys wholesale electricity from the all-island pool known as the Single Electricity Market (SEM), where opportunities to hedge over a longer time horizon are more limited.
“Thus, we have been able to take advantage of, and secure, lower wholesale electricity prices earlier and are able to pass on the savings to our customers.”
In addition, Power NI is exempt from the government’s rising carbon price floor which is set to move from its current rate of £9.55/metric tonne of carbon to £18.08/mt from 1 April.
A trader told Utility Week that for players in the UK power market this would mean “a jump of around £3 on a gas-fired power plant cost and around £8 on a coal unit per MWh.”
A recent Which? report said the failure of retailers to align their prices with wholesale costs has cost consumers an equivalent of £145 per household on standard energy tariffs.
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