Utility Regulator comments on Power NI’s tariff increase

15 August 2019

Power NI has announced an increase of 6.1% to its domestic electricity tariff, which will come into effect on 1 October 2019. This will add £35 a year to the average customer’s bill. As regulator of Power NI’s domestic tariffs, Jenny Pyper, Utility Regulator Chief Executive explained:

“Approving any increase to electricity bills is not a decision we take lightly. It is disappointing that, due to a number of rising costs, Power NI need to increase their domestic tariff. However, we have fully scrutinised every element of the tariff to ensure it reflects the actual cost of supplying electricity to Northern Ireland homes, and is therefore justified.

“Many consumers will be aware that global gas prices are normally a key factor in setting electricity prices. This year however, there are a number of different elements which are contributing to the overall energy cost. These include carbon costs, which electricity generators must pay as part of EU climate change policy. These costs have risen and unfortunately offset, in part, the downward movement in global gas prices.

“An increase in the cost of using the electricity network is also causing the tariff to rise. This includes the impact of an overall drop in demand for electricity from Northern Ireland consumers. The electricity network has fixed costs which must still be paid for, but with this drop in demand, there are now fewer units to spread the cost across.

“Additionally, there are also other wholesale costs which are associated with ensuring the security and stability of the entire electrical system, that have contributed to the increase. For various reasons, these costs have also risen this year but we are hopeful we will see a reduction at the next tariff review.   

“Finally, Power NI have an under recovery from this current tariff year which needs to be collected. This reflects the shortfall between forecast and actual costs which needs to be recovered. However, our system of regulation ensures that Power NI makes no extra profit due to over or under recoveries, and that customers only pay the actual costs of buying and transporting electricity to their homes.”

Jenny commented further:

“Despite this increase, Power NI’s standard domestic electricity tariff continues to be lower than the GB and RoI average. Taking account of the recent change announced in GB to the price cap, annual average bills in Northern Ireland will be £600, compared to £800 in RoI and £700 in GB.   

“As is our usual practice, we will keep the tariff under review. Should the costs decrease, our system of regulation in Northern Ireland allows us to act as soon as possible to ensure that this reduction is reflected in consumer bills. In relation to gas bills, we are positive that we will see a reduction in domestic tariffs in the coming weeks.”

This tariff announcement marks the conclusion of a review undertaken by the Utility Regulator and Power NI, in consultation with the Department for the Economy and the Consumer Council for Northern Ireland.

Further information is available in the tariff briefing paper

ENDS

For further information, please contact Adele Boyle on 07787 279584.

Notes

  • Since 1 April 2017, we no longer regulate Power NI’s tariff for small business customers as this market is now fully open to competition.
  • The EU government changes to the EU ETS scheme (which has seen the rise of carbon prices) is the Market Stability Reserve (MSR). This is the main driver of the increase in the cost of carbon.
  • The bill comparison with GB and RoI is based on annual consumption of 3,200 kWh and based on the average of the standard tariffs of the main suppliers in GB and RoI.
  • As Power NI’s profits are fixed (at around 2%), any over recovery (and under recovery) made due to a change in the forecast costs is passed on to consumers in the next tariff review. This is not the case for non-price regulated suppliers.
  • The monthly monitoring review between the Utility Regulator and Power NI indicated in July 2019 that a number of elements had increased that required a tariff review to be triggered. The tariff has been forecast over a period of 24 months.
  • During this process a thorough review of all Power NI’s costs, including examining forecast costs, was carried out by the Utility Regulator in consultation with DfE and CCNI.  
  • The standard Home Energy tariff will increase to 17.85p per kWh (ex VAT) from 1 October 2019 or 18.74 per kWh (inc VAT).