ELECTRICITY bills in Northern Ireland are to be cut by £40 a year for domestic customers and business will also benefit from lower costs. This follows a year long investigation into Northern Ireland electricity's (NIE) price control.

Mr Douglas McIldoon, director general of Electricity Supply for Northern Ireland, said yesterday that NIE had made considerable profits in the past few years and it was time this was passed on to the consumer.

The company's pretax profits increased from £64.7 million in 1992/3 to £107.4 million last year. Electricity prices in the North are currently 23 per cent above the UK average. Mr McIldoon's proposals will take 12.5 per cent off the average bill and 6 per cent for large industrial users. He said that NIE's balance sheet was strong enough to absorb the reductions.

However, in a statement the company said it is concerned that his current proposals will have "substantial implications" for the resources available to maintain the appropriate levels of "network reliability and quality of customer service" and for the true capital investment needs of the system in Northern Ireland.

Shareholders should be aware that the proposals would have a very significant impact on revenues from 1997/98, said a company statement. The profits warning from NIE following the publication of the offer price proposals led to a sharp fall in NIE shares on the London stock market. From an overnight level of 406p, NIE shares dealt down to a low of 353p before closing down 41p on the day on 365p.

Analysts expressed surprise at the extent of the price review proposed by the regulator, with one analyst suggesting that the review would wipe out a third of NIE's revenue and that dividend growth may fall to 7 per cent in the short term, compared to the previous expectation of 12 per cent dividend growth.

Analysts believe that NIE is likely to take its case to the Monopolies and Mergers Commission, if it cannot agree a price review with the regulator. Mr McIldoon has given NIE until August 30th to say whether or not the proposals are acceptable.

Mr McIldoon said the largest proportion of electricity prices in Northern Ireland arise from generator costs and it is "paramount" that these are reduced. He said he would now be turning his attention to this area.

"I have already said I would be looking for significant savings in generator costs, failing which I would refer the generator companies to the Monopolies & Mergers Commission. This remains the position." He said the other way in which electricity bills can be reduced is through the promotion of energy efficiency.

The cut was welcomed by the Northern Ireland Consumer Committee for Electricity. "This is good news for customers. Northern Ireland Electricity and its shareholders have made huge profits since privatisation and its is high time that customers shared these benefits," said committee chairman Ms Joan Whiteside.

The regulator, she said, has balanced the need for NIE to function with reasonable profits as against the need for customers of a monopoly public utility to enjoy the lowest possible prices.

However, she pointed out that when a number of factors are taken into consideration, including rising generator costs, a £10 million NIE under recovery, rates reviews on NIE and generators, the actual reduction will be considerably less than £40.