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Electricity dispute to be referred to MMC

Northern Ireland Electricity yesterday threw down the gauntlet to the industry regulator by asking for its dispute over a tough new price formula to be referred to the Monopolies and Mergers Commission. During the day a furious row developed between the two sides as the watchdog, Offer (NI), accused the company of trying to put up prices to consumers.

Offer said it would refer the dispute to the MMC immediately. Offer's deputy director general, Charles Coulthard, said he was disappointed the company had "chosen for the first time since privatisation to deliberately seek to increase the price which customers in Northern Ireland must pay for their electricity".

Dr Patrick Haren, NIE's chief executive, said he was furious at the comments: "That is an absolutely and utterly disgraceful statement to put out. We are not proposing to put bills up. If this is what passes for dialogue then it's obvious why we need to go to the MMC."

The decision to go to the MMC will be watched closely by other utilities threatened with savage price curbs, including the National Grid and British Gas, though analysts said the detail of the issues involved was different. Northern Ireland Electricity's shares yesterday fell 8.5p to 334p.

The five-year price regime would cut average household bills in Northern Ireland by pounds 40 from next April. To achieve this it would slash NIE's transmission, distribution and supply charges by 31 per cent or pounds 68m in the first year, and permit them to increase by no more than inflation minus 2 percentage points in the following four years.

The price regime covers 40 per cent of domestic bills. The other 60 per cent is accounted for by four privately owned generators, who have been threatened by Offer with an MMC reference over their charges.

NIE had offered to cut its prices by 22 per cent at a cost of pounds 45m with a slightly tougher formula for the following four years. Yesterday the company claimed the proposals were against the public interest because NIE would not earn enough cash to cover its costs.

Dr Haren said: "We believe the MMC will want to look at our real operating costs and our problem with the regulator is that we believe he doesn't properly understand those costs."

Electricity analysts agreed the company had a reasonable case for the MMC. One said: "NIE is tiny. They can't make those savings unless they slash jobs and sub-contract everything to outside companies."