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NIE steps up battle with Ofreg

Northern Ireland Electricity said yesterday it would seek a judicial review of its regulator's refusal to accept the Monopolies and Mergers Commission's proposals on electricity price controls. The move marks the latest stage in a simmering row between the company and Ofreg, the regulator, which is demanding much larger price cuts.

NIE said it had made its decision "with regret" and admitted that the prolonged period of uncertainty was unwelcome for both shareholders and customers.

It follows an unprecedented move by Douglas McIldoon, the director general of Ofreg, to overrule the MMC's report and press ahead with licence changes that would lead to bigger price cuts.

Northern Ireland's decision to go to the court is also unprecedented and will act as a test case on whether the MMC is the final arbitrator in disputes between privatised utilities and their regulators.

NIE said yesterday: "The director general referred the matter of NIE's price controls to the MMC for resolution and the MMC rejected his original proposals. The MMC's conclusions were quite specific - addressing both public interest issues and the needs of the company to go forward. NIE believes that the director general has no right to disregard these conclusions."

The matter will go before the High Court in Belfast by the end of next month. It is likely to be six to eight weeks before a ruling is made and if the matter goes to appeal it could push the final outcome into next year.

Under proposals made by Mr McIldoon, the revenue capability of Northern Ireland Electricity would have been reduced by pounds 36.5m over the next five years. The company complained that this would hamper its ability to invest in the network and extend it to more remote parts of the province. Electricity bills are high in Northern Ireland but NIE blames this on the high cost of generation.

The company said yesterday: "If you're going to have a system of arbitration in which the MMC acts as the referee then the referee's decision should be final." It said the director general's challenge to the integrity of the MMC process "is inherently very damaging to the prospects of an orderly system of regulation".

The regulator had no further comment yesterday, saying Mr McIldoon was on leave. The MMC also declined to comment.

Northern Ireland Electricity's shares closed 8.5p higher at 444.5p.