Economic regulation has been much in the news recently. In January, we published our price control determination on Phoenix Natural Gas Ltd (PNGL). In April, we published our price control proposals for the electricity network company, NIE T&D.
Both of these price controls reflect the ‘bread and butter’ of economic regulation. At their heart is a careful balancing act. On the one hand, there is the protection of short- and long-term interests of consumers by, for instance, keeping bills as low as possible. On the other hand, there is a need to protect investors by ensuring that they get a reasonable return on their investment.
Consumers are concerned about their energy bills and tell us that keeping utility bills down is the most important thing that our regulation should be focusing on. A survey of businesses earlier in the year found that 80 per cent of these companies had concerns about energy costs. Northern Ireland also has the highest rate of fuel poverty in the UK amongst its domestic consumers.
We continue to take steps to place downward pressure on consumer bills. Our PNGL price control determination will reduce prices for all consumers. For larger business users, hospitals and schools, this will lead to reductions in gas bills of thousands of pounds per year for at least the next 30 years. The NIE T&D draft price control determination is focused on ensuring that electricity consumers continue to enjoy a quality service at a reasonable price.
Consumers have also told us they want to be able to choose their utility supplier, and we have worked vigorously to make choice a reality. We will continue to encourage competition, and look forward, for instance, to the opening of the retail gas market in the ten towns’ area in the autumn.
Finally, we have recently published a range of measures that will further enhance consumer service across a number of areas, including clarity of customer billing.
The utility industries that we regulate in Northern Ireland are worth over £3 billion.
We are committed to the future development of the utility infrastructure and want to facilitate further investment. Independent regulation provides reassurance to investors that they will be treated fairly. This is one of the main reasons why we are independent.
Building the future is a key theme. We foresee ongoing capital investments in energy and water to reduce Northern Ireland’s exposure to international fuel prices, to meet new environmental challenges, and to maintain a quality service. Our role is to ensure that these investments are efficient such that consumers pay a reasonable price.
Our PNGL price control identifies further investment in infrastructure and new connections. We have, in our NIE T&D proposals, accorded special treatment for investment in the grid to facilitate renewable generation and interconnection. We are committed to working with the Department of Enterprise, Trade and Investment to advance the extension of the natural gas network to the west of Northern Ireland.
We monitor closely the financial health of regulated companies. Our clear commitment to investors in regulated companies is two-fold: utility companies will receive a rate of return commensurate with the risks they are taking and consumers will pay back in full the cost of efficient investment.
In conclusion, while consumers and investors may appear to have conflicting needs, they have much in common. Both want to have modern and high performing utilities. Even more importantly, both want to be treated fairly.
Our job as the independent economic regulator is to protect consumers. To achieve this outcome, we must also protect investors. In the end, everyone must win.
Shane Lynch is Chief Executive of the Northern Ireland Authority for Utility Regulation.