NIE and Ofreg at loggerheads over price-cutting proposals

A BITTER war or words has broken out between NIE and the British electricity watchdog Ofreg after NIE rejected the regulator's price cut proposals and asked for a referral to the Monopolies and Mergers Commission (MMC).

Under the proposal from the regulator, which was rejected by NIE, electricity bills in the North would have been reduced by an average of £40 a year.

The deputy director for electricity supply at Ofreg NI, Mr Charles Coulthard, said NIE was trying to deliberately raise prices by rejecting his plans to reduce the company's revenues by £300 million over a five-year period.

"I had expected that NIE would be working with me to tackle the problem of Northern Ireland's high electricity costs, they instead have chosen for the first time since privatisation to deliberately seek to increase the price which customers in Northern Ireland must pay for electricity," Mr Coulthard said in a statement yesterday.

But NIE chief executive Dr Patrick Haren angrily rejected the Ofreg statement describing it as "garbage" and "quite disgraceful". Under NIE's proposals, according to Dr Haren, electricity bills in the North would fall initially by an average of £35 per year, rising to £50 by the year 2002.

Commenting on the Ofreg statement, Dr Haren said he "had never heard anything so outstandingly outlandish". NIE unreservedly refuted "the nonsense" of the statement, he added. "Where on earth the man got this ... from is beyond me," Dr Haren said.

In London, shares in NIE lost 8.5p to close at 333.5p after news of the MMC referral and the argument between the company and the regulator.

Mr Coulthard said that he regretted NIE's decision to reject his price control proposals, and was immediately referring the matter to the MMC. The MMC is expected to come to a conclusion on the matter in time for a new price control to be in place for next April.

NIE is proposing a 22 per cent one-off price cut next year followed by a three percent cut in power bills in each of the next four years, a level of cuts which it describes as tough but sustainable.

But Ofreg NI wants prices across NlE's three main businesses cut by an average one-off 31 per cent next April followed by a two per cent cut in annual charges in the following years.

NIE argues that this level of price reductions would not enable it to cover its proper costs and provide a reasonable return to shareholders. The proposals would result in significant reductions in capital expenditure which would materially damage the company's ability to manage its network and meet customer service demands, according to NIE.

Electricity bills in Northern Ireland have traditionally been about up to 23 per cent higher than those in Britain. NIE also blames escalating oil prices and the high prices charged by the independent generating companies charge which NIE claims account for about 60 per cent of customer bills.

Public dissatisfaction over the high cost of electricity in the North has been compounded by criticism at recent NIE annual general meetings of the high remuneration package paid to its directors.

A report released earlier this week showed that NIE's rate of disconnection of customers is over 12 times the UK average.