Regulator critical of long NIE contracts

Electricity regulator Mr Douglas McIldoon has accused the electricity industry in Northern Ireland of "hoodwinking" its customers. Mr McIldoon was launching the publication of a series of proposals which he said were intended to redress the wrongs done to consumers during the privatisation of the local industry in 1993.

He said that there was no valid reason why the cost of electricity generation in Northern Ireland should be more than 40 per cent higher than in England and Wales. He argued that it could be cut by more than 20 per cent without denting the profits of the generating companies.

Mr McIldoon said he accepted that contracts given to generators at the time of privatisation were legally binding. The contracts Northern Ireland Electricity (NIE) has with Kilroot and Ballylumford cannot be cancelled before 2010 and, in Kilroot's case, could run until 2024.

But he said that the structure of the industry now meant that customers carried the risk of inappropriate investment decisions and lack of competitive pressure. They could end up paying for inefficiency through a high cost of capital and the demands of shareholders for equity payments.

In his report, the regulator recommended:

The establishment of a "capacity procurer", who would provide core generators with a long-term guaranteed income to minimise the cost of capital.

Technology changes, reducing the fuel bill and cleaning the environment at Ballylumford, Kilroot and Coolkeeragh.

Refinancing of the Kilroot and Ballylumford stations.

Increased competition, by allowing all generators to compete to supply all customers.

The freeing of NIE from the responsibilities and commercial risk associated with longterm contracts.

Mr McIldoon's report was welcomed by NIE, which called on him to focus all his efforts on reducing generation costs.

"There has been a misconception for some time that it is NIE which is responsible for high electricity prices in Northern Ireland," a spokesman said. "The truth has always been that the overriding reason was the high price of generation."