Presentation given by Richard Williams, Head of Energy Policy at the Consumer Council NI, to the NICVA Centre for Economic Empowerment Masterclass on Energy Markets in Northern Ireland. This presentation covered the level and drivers of NI energy prices, how well the local markets function for consumers, the role of competition and the Utility Regulator in ensuring supply and price control.

1. Energy Markets in Northern
Ireland
NICVA
17th October 2014
Richard Williams
Consumer Council

2. NI domestic
Electricity and Gas Prices – compared
• Domestic electricity price is:
 10% less than RoI
 3% more than GB
 3.8% more expensive than the EU 15 Median
• Domestic gas price is
 3% less than GB
 16% less than RoI

3. Industrial and Commercial
NI has some of the highest electricity prices in Europe especially for large
users

4. Domestic Price Increases
• Electricity 61% increase since 2007
• Gas bills in the Greater Belfast area
have risen by 38% since 2009

5. Electricity Bill
• Generation 50-60%
• Network (NIE) 20-25%
• Suppliers costs including profit 10-15%
• Renewables and levies 10%

6. Price drivers
Wholesale cost of electricity:
 International fuel price
 Purchasing strategy and forward prices
Network costs:
 Constraints on network
 Moyle Interconnector £14m in Oct 2011
 Tyrone to Cavan Interconnector- £7m per year
 Getting renewables onto the grid- RP5 - £223m and counting

7. The Utility Regulator
• Implement NI government policy
• Protect consumers
• Promote competition
• Maintain a viable industry
• Encourage sustainable investment
• Protect consumers by:
 Price regulation
 Framework of rules

8. Price Controls
Monopoly networks -
• NIE
• firmus energy
• Phoenix Natural Gas
• Operating expenditure
• Capital expenditure
• Profit (Rate of Return)

9. Price Controls
Dominant supplier-
• Power NI (electricity)
• firmus energy (gas in the 10 Towns)
• SSE Airtricity (gas in Belfast)
• Operating expenditure
• Capital expenditure
• Profit

10. NI energy market compared to GB
• GB circa 25 million electricity customers - NI 786,000 electricity customers
• 80% of NI households have no access to natural gas - 68% use Home Heating Oil
• Less than 20% of GB households are off the natural gas grid
• 42% of households in NI are in fuel poverty- much higher than GB
• Much higher use of Pay As You Go Meters in NI
 89% in the Ten Towns Gas area
• No price regulation in GB since 1998 with Big 6 competing with each other
• In NI competition since June 2010 but Power NI has 85% of domestic customers
and has regulated price tariff
• Switching rates dropping in NI and GB

11. Lessons to be learnt from GB
• ‘sticky customers’ left on the worst tariffs
• Complex tariffs leave non savvy consumers behind and
discourage switching
• Delays in the switching process in GB have put customers
off switching
• The lack of transparency in the price of energy in GB has
created great mistrust of the industry
• The GB market has been plagued with misselling

12. The Consumer Council
•
• Informing and empowering consumers to proactively
engage with the competitive energy market to get the best deal
• Championing and protecting the interests of
consumers to the energy industry
• Ensuring public policy reflects the needs of
today’s and tomorrow’s consumer.
Our work is informed by:
• Research
• Dealing with and learning from complaints

13. Full regulation v Unfettered competition
Homogenous product Innovation
Essential service The market ensures supply
Transparent Opaque
Lowest sustainable price Drives price down
Protects vulnerable Leaves vulnerable behind
Consumer protection Consumers left unprotected
Regulated competition - best of both worlds?

14. Thank you
Richard Williams
Consumer Council