Regulator comments on Competition Commission Determination on Phoenix Natural Gas Price Control

Commenting on the publication of the Competition Commission’s final determination on the Phoenix Natural Gas Ltd (Phoenix) price control, Utility Regulator Chief Executive, Shane Lynch, said:

“We welcome the Competition Commission’s confirmation that the current Phoenix licence conditions were not operating in the public interest and needed to be changed.  Gas consumers will now benefit to the tune of £19.2m* as a result of the Utility Regulator not accepting Phoenix’s proposals for the next price control period.

“We also welcome the Competition Commission’s decision that domestic and business gas consumers should not pay twice for business rates incurred by Phoenix. This endorsement of the principle of ‘no double counting’ is consistent with our recent decision for Northern Ireland Electricity (NIE), to make an adjustment of £32 million so that consumers do not pay twice.

“Phoenix’s proposals would have increased domestic bills by around £24 per year. The Utility Regulator’s final determination would have reduced domestic bills by around £1 per year.  The Competition Commission’s final determination will increase domestic bills by around £11 per year for 2012 and 2013.  For large businesses, this will add tens of thousands of pounds to their annual gas bill.
“We also note that the overwhelming majority of third parties** from Northern Ireland, who responded to the Competition Commission’s consultation, disagreed with its conclusion on the treatment of outperformance.  This included the Consumer Council, large businesses and public sector gas users who argued that the Competition Commission’s provisional determination was not in the interests of NI consumers.

“We will now carefully consider the detail of the Competition Commission’s final determination and any implications for the next Phoenix price control, which will be implemented from 2014.  More generally, and consistent with our principal statutory objective and the principles of good regulation, we will continue to work with DETI and other stakeholders to promote the economic development of the gas industry in Northern Ireland.  In doing this, we will both protect consumers and ensure that efficient investment is adequately rewarded.”

* The £19.2m is made up of a £13.6m reduction to the Total Regulatory Value (TRV) and a £5.6m reduction to Phoenix’s operating cost proposals for 2012 and 2013.

**Age Concern, Belfast Health and Social Care Trust, Bombardier, Bryson Energy, Centre for Progressive Economics, ContourGlobal Solutions (Coca Cola), The Green Party, Manufacturing NI, Mutual Energy, NEA NI, Consumer Council for Northern Ireland, Patsy McGlone MLA and Thompson and Sons. A full list of responses to the Competition Commission’s consultation is available here