Viridian has been asked to explain why electricity costs in the North vary so widely from corresponding tariffs in Britain, Ireland and the rest of the European Union.

The energy regulator in Northern Ireland, Mr Douglas McIldoon, believes the current review of Viridian subsidiary NIE's transmission and distribution price control must also address the problem of the continuing "divergence" of electricity prices in the North.

Mr McIldoon yesterday published a new review of NIE's current operations, which will be used to establish new price controls for the company's price and distribution business in 2002.

Mr McIldoon believes the review document sets out a number of issues which must be addressed in Northern Ireland.

"The central issue to be addressed in this price review is the cause of divergence.

"The Office for Regulation of Electricity and Gas (Ofreg) is concerned that the cost gap between NIE and the average price in Britain has widened from 17 per cent to 44 per cent in a very short space of time," Mr McIldoon pointed out.

According to Ofreg, NIE has sought to argue that the price differentiation is due to three factors including a higher "natural" gap in prices between Northern Ireland and Britain than was acknowledged at the time of NIE's privatisation in 1992/93.

NIE also claims there was an infrastructure deficit in the North at the time of privatisation and that it was inevitable prices would rise while that deficit was repaired. Finally, the company argues that maximum growth is higher in Northern Ireland than Britain, which results in increased costs.

But Mr McIldoon said his office was not satisfied that any of these arguments provided a credible justification for the price difference.

Viridian maintains that the price divergence is a function of the significant investments that the company must make to provide a reliable electricity infrastructure.

"Generation costs remain the overriding factor in influencing the disparity in electricity costs in Northern Ireland," it added.