Responding to the price increase announced by Phoenix Natural Gas, Ofreg has today stated that in its view the tariff increase is necessary to reflect the price Phoenix must pay for its gas.
The regulator is also announcing today its intention to put in place from next year a formal control on Phoenix’s supply prices, so that in future the regulator will not simply be consulted on price rises. Ofreg’s proposal for a supply price control is likely to include a formal obligation on Phoenix to buy gas efficiently on wholesale markets.
Iain Osborne (Ofreg Chief Executive) commented:
“This news is clearly another blow to gas consumers, and particularly those who struggle to pay their bills. Ofreg has been working with Phoenix and the Consumer Council in recent weeks to understand what is driving this tariff increase, and as a result this rise is around a quarter lower than Phoenix’s initial proposal.
“We are satisfied that the price rise announced today represents a reasonable adjustment.”
“Some commentators are suggesting that the commissioning of additional supply infrastructure in Britain will lead to lower wholesale gas costs over the coming year. If so, Ofreg and Phoenix have agreed that the reductions will be passed on to consumers. In addition a formal supply price control would ensure that only reasonably incurred costs can be passed on to customers. Ofreg is also committed to developing supply competition, which should provide consumers with a choice of supplier and help to reduce their gas bills”.
Notes for Editors
1. OFREG (the Office for the Regulation of Electricity and Gas) is the operating name of the Northern Ireland Authority for Energy Regulation (NIAER) the regulator of the Electricity and Gas industries in Northern Ireland. NIAER’s powers are derived from the Electricity (Northern Ireland) Order 1992, the Gas (Northern Ireland) Order 1996 both as amended by the Energy (Northern Ireland) Order 2003.
2. Under the relevant legislation, transmission and distribution (together known as conveyance) and the supply of natural gas are licensable activities in Northern Ireland. Phoenix was first granted a licence in 1996, at which point it started to build its new gas network. The Phoenix gas network now covers approximately 230,000 of the 300,000 properties in the area covered by its licence and more than 90,000 of those properties are currently connected to the network. Phoenix currently operates under price controls for network charges, but not for supply prices.
3. In October 2005 Kellen Acquisitions Ltd (an investment vehicle for Terra Firma Capital Partners Ltd) formally gained control over Phoenix Natural Gas, which had previously been owned by East Surrey Holdings Ltd.
4. Ofreg is currently in negotiations with Kellen Acquisitions Ltd over arrangements concerning a new financial structure for Phoenix. This will place Phoenix on a more stable, long term financial footing ensuring stable long term distribution charges for Phoenix customers.
5. Following the retirement of Mr Douglas Mc Ildoon on 31 March 2006, the roles of Chairman and Chief Executive have been separated. The Department of Enterprise, Trade and Investment appointed Mr Peter Matthews as Chairman of the Authority on 1 April 2006. Mr Iain Osborne became the new Chief Executive of Ofreg on 15 June 2006.
For further information contact Conall McDevitt, Weber Shandwick Tel: 028 90764911, 07770 886933