Opinion Piece: Richard Williams, Head of Energy at The Consumer Council

in Energy

Energy “Price Cap” already exists in Northern Ireland

Last week, Ofgem, the energy regulator in Great Britain (GB), and the UK Government unveiled plans to introduce a “price cap” on energy bills in order to protect consumers from excessive prices.  Meanwhile the Prime Minister, Theresa May, has described the GB energy market as “broken”.

 

Fortunately, the Northern Ireland (NI) energy market is very different to that of GB, as we have tariffs that are regulated by The Utility Regulator. This price protection, or “price cap” exists on both domestic electricity and natural gas.

 

Across NI, Power NI operates a regulated electricity tariff, and in gas, SSE Airtricity offers a regulated tariff in Belfast, Larne, East Down and Strabane, whilst Firmus offers a regulated gas tariff in the network from Londonderry, to Antrim, and down to Warrenpoint.

 

These regulated tariffs are actively scrutinised by The Utility Regulator to ensure that they reflect the true underlying cost of supplying the energy, plus what they deem as a “fair” profit margin of around 2%. This regulatory scrutiny ensures that Northern Ireland already has the price protection for vulnerable consumers who are unwilling or unable to switch, that the UK Government and Ofgem are now looking to introduce for GB.

 

The only safeguard price cap that GB currently has is for pre-payment meter customers and they are paying around 12% more than pre-payment meter customers in NI on the Power NI regulated electricity tariff.

 

In addition, consumers in NI also can benefit from competition. For example, in electricity, Power NI’s tariff acts as a “price to beat” for the other four suppliers (Budget Energy, Click Energy, Electric Ireland, and SSE Airtricity) to compete against. This choice currently enables NI domestic customers, who were on the most common tariff and have switched, to save £111 each year[1].

 

In 2015, The Utility Regulator undertook a review of the NI energy market. One of the options it considered was to remove price regulation in Northern Ireland. We should learn from the mistakes of the GB energy market, and maintain the regulated tariff protections in Northern Ireland. To build on the Prime Minister’s broken comment, in Northern Ireland in terms of the domestic energy market, The Consumer Council’s message is, “if it ain’t broke, don’t fix it”.

 

 

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