29 March 2000
ELECTRICITY CONSUMERS TO BENEFIT FROM INDUSTRY AND GOVERNMENT ACTION
Adam Ingram, Minister of State, today announced that the Northern Ireland electricity market is to be further opened up to competition and that £40 million is to be allocated to help reduce electricity bills.
Announcing details of the second phase of market opening, Mr Ingram said: "Following on from the successful initial 26% market opening in July 1999 which resulted in average savings of 10% for some 250 large industrial consumers, the market will be opened up to 30% from 1 April. This will provide a further 100 companies and organisations with the opportunity to access more competitively priced electricity.
"This is good news for industry in Northern Ireland and I am pleased to announce the decision to open up the market still further. With the agreement of the Regulator and the electricity industry the market will be opened to 32% from 1 October and to 35% from 1 April 2001, some two years in advance of the EU Liberalisation Directive timetable. This will provide the prospect of more competitively priced electricity for a further 330 companies by April 2001."
The Minister said that the allocation of the £40 million balance in the Government Trust Fund would also benefit domestic consumers as well as industry.
He added: "An analysis of the proposals submitted for the use of the £40 million has now been completed. Having obtained the necessary legal and competition clearances, it has been decided to allocate £30 million to Nigen and £10 million to BG International to reduce the level of availability payments due under the Kilroot and Ballylumford contracts. This will reduce average prices by about 1.3% in the period up to 2010."
Mr Ingram also welcomed a number of other positive and mutually reinforcing developments on the energy front. These include the recent NIE announcement of stable tariffs for the fourth year in a row, the revision of the Power Station West contract, the BG International plans for Northern Ireland's first Combined Cycle Gas Turbine (CCGT) facility at Ballylumford and the successful outcomes of the auctions for Ballylumford spare capacity and North/South interconnector capacity. Substantial further competitive market opportunities will arise when the Moyle interconnector link with Scotland is commissioned in 2001.
The Minister added: "The good news for consumers is that electricity prices will come down. The decision by NIE, a first in the UK, to abolish standing charges for all standard domestic customers is significant. Other developments include the smooth transition to a more competitive market, the prospect of more environmentally friendly power generation, increased market opening and the £40 million investment. All this combined with plans for strengthened interconnection with the neighbouring systems in the Republic of Ireland and Scotland, represent further positive developments in the industry.
"It clearly demonstrates what can be achieved when industry, the Regulator and Government work in partnership for the benefit of consumers. I congratulate all concerned for their commitment, perseverance and spirit of co-operation in securing this significant package of measures. On the back of this co-operation, electricity consumers can look forward to a more efficient and progressively lower cost industry."
These developments will contribute to the development of a larger 'all island' market, a necessary prerequisite if consumers are to benefit from increased liberalisation and price competition, outlined in the Vision 2010 Energy Action Plan published in July 1999.
Mr Ingram said these developments would complement the work being undertaken by his officials in DETI and their counterparts in the Department of Public Enterprise in Dublin in taking forward the development of a more integrated and cost effective energy sector in the island. "I have also been encouraged by the response of the industry and consumers to Vision 2010, which shows a high degree of consensus on the major components of the Action Plan," he concluded.
NOTE TO EDITORS:
1. ELECTRICITY MARKET OPENING
EU Electricity Liberalisation Directive requires the staged opening up of the NI electricity market. The initial 26% opening in July 1999 provided some 250 larger industrial customers with the opportunity to shop around for most competitively priced electricity. Average savings of approximately 10% were obtained. Department of Enterprise, Trade and Investment (DETI) is announcing today three further phases in market opening 30% (additional 100 customers) from 1 April 2000; 32% (further 100 customers) from 1 October 2000; and 35% (further 230 customers) from 1 April 2001 (two years before the deadline specified in the Directive.) This means that by 1 April 2001 consumers with an annual consumption of 800,000 kilowatt hours will be able to buy their electricity in the competitive market.
2. ALLOCATION OF £40M TRUST FUND
Government announced the provision of a £60m package for electricity consumers in 1995. £20m has been allocated to date. The Regulator on behalf of DETI has consulted the generators and NIE on the best use of the balance of £40m. The detailed proposals submitted have been examined from the economic, legal and EU competition angles. It has been decided to allocate £30m to NIGEN and £10m to BG International to reduce availability payments due under the existing Kilroot and Ballylumford contracts. This will secure reductions of 5% for franchise customers on the cost of the long term contracts and 1.3% in final bills in the period until 2010.
3. REVISED POWER STATION WEST CONTRACT
NIE and Nigen, with the approval of the Regulator, have agreed to reschedule the Power Purchase Agreement covering the two 60MW sets at Power Station West. Both sets were due to come out of contract on 31 March 2001. One will now come out of contract on 31 March 2000 and compete in the new independent market, thereby adding to the downward pressure on prices in the industrial/commercial sector. The second set will continue under contract to NIE until 31 March 2002. All the output from the competitive market set has been sold in a two year deal.
4. REVISED BALLYLUMFORD CONTRACT
The Regulator and NIE have been attempting to reduce Northern Ireland's high generation costs by negotiating voluntary change to the Power Purchase Agreements put in place at privatisation. NIE and BG International are expected to finalise shortly a revised Agreement for Ballylumford. This will involve the construction of a new £200 million 600MW CCGT with 220MW of existing capacity being released to trade in the recently established independent markets in Northern Ireland and the Republic of Ireland.
Main benefits of the BG International proposal will include new generation technology, increased efficiency and improved environmental performance. Premier Power recently auctioned 200 MW of capacity which further contributes to the development of the competitive market.
5. NORTH/SOUTH INTERCONNECTOR CAPACITY AUCTION
The Transmission System Operator in NI, with the agreement of the Regulator, has released 100MW of Interconnector export capacity for auction to permit trading in the independent market between Independent Power Providers and suppliers in NI and the RoI. Firm bids were received for 55MW of capacity.
6. MOYLE INTERCONNECTOR
The commissioning of the Moyle interconnector linking the NIE and Scottish Power networks at the end of 2001 will bring a further 375MW of competitive capacity to the NI market and provide access to competitively priced electricity from GB.
7. DEVELOPMENT OF ALL ISLAND ENERGY MARKET
The Vision 2010 Energy Action Plan published in July 1999 outlined a series of proposed actions - with the support and co-operation of the Irish Government - to assist the development of a more integrated and cost effective energy market on the island. Enhanced competition and increased market liberalisation are expected to deliver benefits - both in prices and consumer choice - for customers North and South.
For further information please contact Anne Morrow at Department of Enterprise, Trade and Investment Press Office on Tel. (028) 9052 9305.