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Who shoulders the burden?

Last updated on 11/05/2016

Could complaints by large firms that they shoulder an unfair burden of network charges and other levies result in higher bills for homes and small businesses? On the face of it, business hasn’t a case for a rejigging of costs. Big users of power pay far less for power than the domestic sector. Typically the figure is about 60% of the household rate. But, and it’s a claim borne out by the facts, they do pay a far higher proportion of the domestic rate than their counterparts do in Great Britain and in the Irish Republic. Large Energy Users (LEUs) in the South only pay around 40% of the domestic price. Effectively what that means is that, according to the CBI, big business is paying 20% to 25% more for their power here than elsewhere in the British Isles. In contrast to ordinary consumers who pay roughly the EU average for power, LEUs pay some of the highest prices in Europe. 

But just because the prices are high doesn’t mean the cost burden is unfair. Business has an answer for that one. Their representatives point out that in a Single Electricity Market on this island, with the same wholesale starting prices, end costs should be roughly the same but as we’ve seen they are not. Consumer prices are lower here than in the Republic but for business it’s vice versa. 

Network and other costs, which create the differential between North and South, have to be divided up and applied objectively. Up here it’s NIE which calculates the sharing of the network burden. It has no incentive in working out the figures other than to be accurate. So what explains the conundrum that LEUs pay a greater proportion of network costs than their counterparts in the Republic and, more importantly, how is the issue going to be resolved? Hard to say. But if costs are eased for business, homes will have to pay more. Otherwise it would mean subsidies being introduced into the electricity market and that’s against EU rules. Politicians would be extremely unwilling to see domestic power bills rise but if it’s proved the cost sharing is unfair, they may have no choice but to stand by as the Energy Regulator sanctions an increase.

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