East Surrey Holdings plc today published a letter which its Chairman Mr Barrett had sent to Angela Smith, the Minister in charge of the Northern Ireland Department of Enterprise Trade & Investment.
In his letter, Mr Barrett asked the Minister as a matter of urgency to ensure that the Northern Ireland Authority for Energy Regulation “operates within the parameters of regulation of utilities”.
The Authority will not publicly comment on the specifics of this letter, but wishes to make thefollowing statement for the purposes of clarifying certain facts. This should be read in conjunction with its Press Release of yesterday*.
The Authority is an independent statutory body which must operate within the terms of its legislative framework.
The Authority’s principal objective in respect of gas is “to promote the development and maintenance of an efficient, economic and co-ordinated gas industry in Northern Ireland” and it is required to fulfil this objective having regard to “the need to protect the interests of consumers of gas”.
During 2004 the Authority was discussing with Phoenix Natural Gas Ltd the modification of conditions in its gas conveyance licence. In August 2004 it outlined a proposed agreement with Phoenix as to the modifications that might be made. Further discussions then took place as to the detailed development of that proposal.
Before modifying licence conditions, the Authority has a legal duty to publish them in draft, consult the general public and all other interested parties, and have regard to any representations made to it.
When the recommended offer to acquire East Surrey Holdings plc was announced, discussions with Phoenix had not been concluded. No draft modifications had been inalised, published or consulted upon. Therefore no new licensing arrangements were or could have been implemented.
The valuation placed by the market on East Surrey Holdings plc is information which is relevant to the Authority’s duties and which it cannot ignore. The Authority needs therefore to consider how that information should affect any proposals which it may ultimately make, and on which it would consult, for the modification of the Phoenix licence.
It is normal regulatory practice, for which there are other precedents within UK regulation, for such information to be taken into account.
This information will be relevant to the Authority’s considerations whether or not the proposed acquisition of East Surrey Holdings plc proceeds.
If and when it makes final proposals to modify the Phoenix licence, the Authority will aim – having regard to it statutory duties and to all of the information available to it – to strike an appropriate balance between the interests of gas consumers and of shareholders for the purpose of promoting the long term growth and maintenance of the gas industry in Northern Ireland.
The Authority has expressed to Phoenix its willingness to discuss these matters at any time at which Phoenix is prepared to do so.
Notes for Editors
1.OFREG (the Office for the Regulation of Electricity and Gas) supports the Northern Ireland Authority for Energy Regulation (NIAER) the regulator of the Electrcity 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. The Authority’s statement dated 18 August 2005 set out the following key facts -
- the proposed August 2004 agreement between the Authority and Phoenix was an agreement in principle;
- it was aimed in large measure at addressing Phoenix’s concerns over its ability under the 1996 licence to recover its investment;
- it contained changes which would be of substantial benefit to shareholders;
- the details of any draft licence amendments had not been agreed when the Terra Firma takeover announcement was made and in particular limited progress had been made on developing two components of the agreement which might have benefited customers;
- there had been no public consultation on the proposed August 2004 agreement prior to the announcement of the takeover; and
- responses to a subsequent consultation on the proposed takeover raised concerns about the appropriate balance of interests.
For further information contact Terry McErlane at Weber Shandwick Telephone 028 90761007 or 07770886911