Electricity pricing in NI – more stability and less volatility please

There has been much helpful discussion and commentary in recent months on the subject of electricity pricing in Northern Ireland, and in particular around the steps that can be taken to deliver greater regulated price stability to benefit electricity consumers. 

In recent years we’ve seen a steady rising trajectory in prices across Europe due to continuing volatility in global energy prices. Energy companies are not immune to impact of these rises, and while increasing prices is one of the hardest decisions any energy provider has to make, it’s a decision that we always regret.

However, in Northern Ireland’s electricity market, what we’ve experienced in recent years is a degree of volatility in the regulated price of electricity that is wholly unique to the market and which, ultimately, has resulted in the customer being impacted with significant double-digit swings in the price they pay for electricity.

This is not what we, as Northern Ireland’s second largest energy provider, want to see in the market. Nor is it what legislators and consumers envisaged the onset of competition in the electricity market would bring.

While today, Northern Ireland’s electricity prices are around the EU average for domestic customers, what we’ve seen since October 2011 is one regulated price increase of 18.6% followed by a decrease 12 months later of 14.1%, and then just nine months later another, earlier than usual, price increase of 17.8% to correct the decrease of the previous October.

The reality is that while that 14.1% decrease in the regulated tariff brought short term customer relief it masked the fact that the decrease was simply unsustainable. It moved against market trends in GB and the Republic of Ireland where electricity prices increased at the same time, albeit with rises that were much more modest and that had less customer impact in those markets than the latest price rise in NI.

At Airtricity we said last October the downward move was unsustainable but we had no choice as an energy provider to follow the decrease if we wished to remain competitive and remain in the market.

However at the end of the day, just nine months later, we’ve seen another double-digit increase in the regulated tariff which has simply returned the price we pay for electricity in NI to pre-October 2012 levels. Those levels more accurately reflect current energy price points, but ultimately the customer must repay now for the cut in last year’s regulated price control.

Where’s the customer benefit in that?

It’s little wonder Northern Ireland’s First Minister Peter Robinson recently commented “there must be a better way than going up and down, yo-yoing prices?” so we can have a system that means people can avoid these “crippling increases that makes life so difficult for them” while Deputy First Minister Martin McGuinness said government needs to consider further what more can be done “so this volatility within fuel prices can be arrested”.

At SSE Airtricity, we agree. While we had to follow the most recent price increase, it was a necessary move in order to return our energy prices to a sustainable level. There’ll always be a degree of energy price volatility on global markets, but as a business we want to see an end to the extreme price volatility that has characterised the Northern Ireland electricity market. It doesn’t serve us or our customers well. We have an opportunity to consider how we can avoid future yo-yoing prices and what we can do to call ‘halt’ to further against-the-market tariff movements.

And that’s why we welcome the recent helpful discussion and dialogue.

There is one final point that must not be forgotten in this debate, and that’s the benefits that competition has brought to the energy market, the economy and the consumer. Outside of job creation (we’ve created 90 direct and 60 indirect roles), direct investment (£400m invested across NI since 2008) and community support (around £180,000 each year from our wind farm community funds) SSE Airtricity has delivered real benefit to the consumer through energy price savings that have made a difference where it’s needed – in the household purse.

Since we entered the domestic electricity market in 2010, we delivered customer savings of around £17 million to our 185,000 electricity customers. What’s more, if Northern Ireland’s 778,854 domestic electricity customers switched to Airtricity for our discounted 1 and 2 year products, it would generate consumer savings of almost £55million over the period – equivalent to about £70 per household.

Now that’s a real customer benefit.

* Based on 24-hour credit bill and keypad meter customers switching to Airtricity’s 2-year 15.38% (Year 1) and 8% (Year 2) discounted direct debit and ebill product and to Airtricity’s 1-year 15.38% Keypad discount (discounts against Airtricity Standard electricity unit rates).  See Airtricity.com for more.

About the author

David Manning Director of Corporate Affairs (Ireland)

David Manning is Director of Corporate Affairs for SSE Ireland and is responsible for SSE’s corporate communications, public affairs, community, and research and development programmes in Ireland. Previously Head of Public Affairs for SSE Ireland, David joined the company in July 2008 from the Irish Business Employers Confederation where he was Head of Energy Policy. He has worked in the areas of energy and environment policy for over a decade.

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