NORTHERN Ireland's electricity regulator, Mr Douglas McIldoon, is on the verge of asking the British Monopolies and Mergers Commission (MMC) to investigate the electricity generation system in the North.
"There is a strong possibility that we will end up with the MMC," Mr McIldoon said.
Any referral to the MMC would argue that the companies which generate power in the North are operating as a monopoly against the public interest.
Electricity prices in the North are 20-30 per cent higher than those in Britain, and both domestic and industrial consumers are unhappy with the level of charges. Northern Ireland Electricity (NIE) currently buys power from the electricity generators under a set of agreements concluded by the British government when NIE was still state owned up to 80 per cent of a final bill is accounted for generation charges.
Offer Northern Ireland, the watchdog body which Mr McIldoon heads, has been in negotiation with the generators for several months in an effort to convince them to voluntarily introduce lower tariffs. However, Mr McIldoon is concerned that these talks could become protracted, and he plans to publish a consultation paper within 10 days which is likely to recommend a referral to the MMC.
Generating companies recognised that there "was a problem" with costs, but the had yet to come to an agreement with him about how to address the problem, according to Mr McIldoon. The reference to the MMC is likely to be under the Fair Trading Act - and would seek to demonstrate that a complex monopoly operates against the public interest.
Offer NI has the power to regulate NIE and the prices which it charges, hut has no control over the generators. However, Mr McIldoon argues that his two central duties - to promote competition and protect the interests of the consumer by pushing for lower prices demand that his attention be turned to the generators.
The regulator has already taken legal advice on the matter and believes that the operation of the generating companies does fall within the MMC's remit. Mr McIldoon has already taken the first steps to prepare the documents required for an MMC referral and will be in a position to normally ask for an investigation by the end of September. The generators "are subject to neither competition nor regulation," he said.
The North's four power stations were sold to the private sector four years ago of £356 million sterling. The British government has bee criticised by its own auditor for selling the stations to cheaply.
The two main generating companies, Transco International, and the US/Belgian joint venture, Nigen, own Kilroot, Ballylumford and Belfast West power stations, which collectively account for 85 per cent of generating capacity.
The main power purchasing agreements drawn up in 1992 are fixed until 2010 and 202 with adjustments included to take account of fuel prices and inflation. The main problem with the system, according to industry sources in the North, is that it takes no account of improved efficiency on the part of the generators.
Each company is paid for power bought by NIE and also receives a set fee for making its plant available for power generation for the grid. This income has been dramatically boosted by improving efficiency. It is thought that the generators have increased their availability by up to 30 per cent over the past four years, but prices have not been lowered to take account of the changes.
One industry source in the North claims that availability payments are so high the generators can cover their running costs with them. "They're breaking even before they even sell a single watt of power, the source said.
