Ofreg proposals to 'inject vigour' in electricity market

Wholesale electricity users in Northern Ireland could see their bills come down dramatically, if proposals from the energy regulation body Ofreg, calling for the liberalisation of the electricity market, are ratified.

In a consultation paper published yesterday, the Director General of Electricity Supply calls for the development of competition in the wholesale electricity market, and the trading of energy via interconnectors. Wholesale electricity consumption accounts for about 35% of the local market.

The paper, 'Generation and Supply Competition in Northern Ireland: Power Procurement, Interconnection and the Competitive Market', sets out proposals designed to "inject fresh vigour into Northern Ireland’s competitive market", by considering the further liberalisation of the wholesale electricity market.

Such a move could allow full competition between independent generators, energy imported via interconnectors and the generation under contract to NIE Power Procurement Business.

Pricing has been a major problem for businesses in the province as, according to the assembly's Enterprise, Trade and Investment (ETI) Committee, Northern Ireland has the highest prevalent electricity prices in Europe. The existing tariffs are a "direct consequence" of fixed inflation-proof long-term contracts, placed at the time of privatisation in 1992 that remain effective until 2010-2012.

Ofreg believe that these "high electricity costs impose a serious competitive disadvantage on Northern Ireland industry". Ofreg also highlighted the north's lack of efficient indigenous power station capable of competing with other regions as a contributing factor.

The report adds: "This situation is fundamentally anti-competitive and results in higher prices for both franchise and eligible customers."

The scale of comparatively high pricing in the province and the extent to which it affects private customers was also highlighted in the ETI Committee's report to the Department of Trade.

The ETI Committee found that 170,000 Northern Ireland households experience fuel poverty owing to low incomes, high fuel prices, little fuel choice and an inability to afford energy efficiency measures. According to the committee, if the present average of £2 per customer invested each year in energy efficiency projects overseen by the Energy Saving Trust were increased to £5 per customer per annum, it "would provide £3.25 million that should be earmarked for the removal of fuel poverty".

This is believed to be a level at which – with adequate numbers of well-trained personnel for building remediation work – it would be possible to eradicate fuel poverty in Northern Ireland in 10-14 years.

If this fund were matched by the UK Treasury in recognition of the reduction in costs to the health service, fuel poverty in Northern Ireland could be eliminated in 5-7 years

Respondents are asked to comment on the issues discussed on the Ofreg paper by Thursday September 12.

(GMcG)