Getting the right prices for domestic consumers
Our role in protecting consumers
Protecting domestic consumers is at the heart of what we do. Our job involves reviewing the tariffs of suppliers who are dominant in their market. In electricity we regulate the prices of Power NI and in gas we regulate the prices of SSE Airtricity (in the Greater Belfast area) and firmus energy (in the Ten Towns area).
We make sure that consumers pay no more than the cost of providing the service (with a reasonable return for the company).
For all of the other electricity and gas suppliers we do not set the prices but these suppliers compete against each other as well as the price regulated suppliers. In a competitive market, suppliers are under pressure to keep their costs, and hence their prices, down to win new customers and keep their existing ones. We also price regulate other elements of the tariff (wholesale and network costs) and are always working to help everyone get a better deal.
Understanding the make-up of your bill
In order to explain the costs of energy bills it is important to understand the elements that make up your bill.
(1) Wholesale costs
This represents the generation and the raw cost of energy. For electricity the costs are generated from the Single Electricity Market (SEM) which operates across the island of Ireland and is regulated by us and the Commission for Energy Regulation (CER) in RoI.
This element makes up the largest percentage of our energy bills. In the electricity market wholesale costs account for about 60% of the domestic price. In gas, although this varies per network area, wholesale costs account for about 55% of the price.
Wholesale costs are not only fundamental in how they drive the prices, but they are also extremely volatile.
(2) Networks and policy costs
This represents the costs associated with transporting electricity and gas from generators to the final consumer. Networks costs also include a number of energy costs that arise because of government policy.
In the electricity market network and policy costs make up around 30% of the domestic price. In gas, although this varies by network area, network and policy costs make up about 35% of the price.
Network and policy costs are added onto the price of each unit of electricity and gas which is consumed. The total network costs do not vary by large amounts year on year, however if consumption levels fall the network charge per unit of energy consumed will rise. The network element of these costs is price controlled in both electricity and gas.
(3) Supply costs
Supply costs are those needed to run the individual companies who supply and bill the end consumers. This part of the price is makes up around 10% of the final electricity and gas bills. This part of the bill is regulated by us for the dominant suppliers (Power NI in electricity, firmus Supply and SSE Airtricity in Gas). In order to successfully compete and gain/retain customers, the other suppliers try to keep their supply costs down.
The choices you have in deciding on your supplier
The electricity and gas (in the Greater Belfast area) markets have been open to competition to domestic customers since 2007 and 1996 respectively. However, there were no competing suppliers in the electricity or gas domestic markets until 2010.
The Ten Towns area opened to gas competition for domestic and small business customers in April 2015 and there is currently only one domestic supplier in this area.
The dominant suppliers (Power NI in electricity, firmus Supply and SSE Airtricity in Gas) continue to be price controlled. As competition grows, and consumers shop around for better deals, we continue to review the supply market to make sure it works in the best interests of consumers.
Table 1 shows the list of available suppliers (as of October 2016).
Table 1 Suppliers in the retail market
In summary (as of October 2016) there are six domestic suppliers in the electricity market and two domestic suppliers in the gas market although not all of these suppliers are certified to operate in all sectors.
Regulated Tariff Electricity
In February this year Power NI announced a 10.3% reduction in its regulated tariff for domestic and small business consumers with this taking effect from April 2016. This price drop was attributed to a fall in national and international wholesale energy costs. The Power NI regulated tariff was reviewed again at the end of August and it was decided that there was not to be any movement in the regulated tariffs for the forthcoming winter period.
Regulated Tariff Gas
Similar to the Power NI electricity tariff review, the UR undertook an assessment of the regulated gas supply tariffs for domestic and small business users in the Greater Belfast and Ten Towns distribution areas in February 2016. This resulted in a 10.2% decrease in the SSE Airtricity Greater Belfast regulated supply tariff and a 7.7% drop in the firmus supply Ten Towns regulated supply tariff. A review was undertaken of both SSE Airtricity and firmus supply tariffs in August which resulted in no change for the regulated tariffs
How to get the best deal this winter – top tips
Given the number of suppliers in the market there’s an opportunity to shop around to get the best deal:
- Be aware of the suppliers in your area
- Consider the tariff you are currently on, if you are on a standard variable tariff it is likely that you are not on the most competitive deal
- Check out other tariffs - the Consumer Council for Northern Ireland (CCNI) has recently developed an Energy Price Comparative Tool which outlines the electricity and gas tariffs available from every supplier in NI.
Another factor that greatly determines the size of your bill is how much energy you use. Investing in energy efficiency measures can also help you reduce your bill this winter. Please refer to your supplier for further advice.