THE Northern Ireland electricity regulator, Mr Douglas McIldoon, has warned generators he will call in the Monopolies and Mergers Commission if steps are not taken to reduce bills.
Speaking at a public debate at Queen's University, Mr McIldoon described the local market as "a mess". He said the generating companies controlled a monopoly which was "not operating in the public interest".
Mr McIldoon, who is the director general of the Office of Electricity Regulation (OFFER), said because the companies were not subject to regulation or adequate competition, the public could perceive them as "parasites".
"The theory is that you have a number of power stations which make money by selling electricity to NIE [Northern Ireland Electricity]," he said, "and they all compete with each other. NIE says it will buy from whoever is the cheapest, and the market sets the price. But that doesn't happen. The generators have long term contracts and are paid for being available. If power is not wanted, they still get paid £160 million."
Mr McIldoon said, in effect, each power station had a monopoly, and that competition was clearly impossible in such circumstances. He said in the first two years following privatisation the cost of producing and delivering one kilowatt hour of electricity had fallen by around 20 per cent, but during the same period the price of electricity had gone up by over 20 per cent.
"Our prices will diverge from the Republic and Britain, and we will increasingly come under pressure from companies who can't afford to operate in Northern Ireland. There is one company which has a plant in Northern Ireland and one in England, and its power bill in Northern Ireland was £126,000 higher than at the English plant. Next year it will be £216,000 higher and the gap is going to widens".
He said he might have to refer the whole industry to the Monopolies and Mergers Commission, which could decide that the existing structures would have to be changed.
"The government, the EU, and the regulatory bodies are unanimous about the need for competition to increase efficiency and drive down prices. It would be astonishing if the MMC, having been called in, were to allow the present arrangements to survive unreformed."
