SEM Chart of the Week
Rise and Fall – regulated price changes afoot
While the electricity market in Northern Ireland boasts more suppliers per customer than in the neighbouring jurisdictions of the Republic of Ireland and Great Britain, Power NI has the largest domestic market share of any single incumbent in these markets, at 56.6%. Its prices remain regulated by the NI Utility Regulator, and will be rising again from October 2019 by 6.1%, as announced last week. This will be the third consecutive increase to Power NI’s charges, after rises in October 2017 and 2018.
The increase this time around is primarily due to increased DUoS charges, on top of a “substantial” under-recovery of these costs in the preceding period, according to the UR. Wholesale price forecasts are lower this year. However, this was another forecast that was too low for the previous period and therefore under-recovered by Power NI. These elements, combined with increased imperfection charges (another under-recovered cost, highlighting the difficulty in forecasting), lead to the overall increase in allowed charges.
This week’s SEM Chart of the Week shows that these changes could be viewed as inopportune timing, with the price caps in place in GB falling from the same date. In GB, despite network costs also rising, the fall in wholesale price is passed on, with no under/over-recovery to deal with.
However, the small increase in NI electricity prices combined with the relatively small reduction in GB prices (after a large increase in April 2019) mean the gap between the regulated maximum charges is bigger in October 2019 (£69/year cheaper in NI) than it was a year earlier (£59/year cheaper in NI).