A BATTLE could be looming between the Utilities Regulator and power distribution company NIE as it emerged yesterday the firm is to be docked £32 million pounds for changes in its accounting processes that could have led to consumers paying twice for some services.
Publishing the final draft of RP5, the financial plan for the regulated business over the next five years, utilities chief executive Shane Lynch said his office had reached a fair determination which as well as agreeinn capital and operational expenditure, permits the firm to raise extra funds to deal with the collapse in the value of its pension fund which saw the deficit increase from £87 million to £156m in the past year alone.
However, Mr Lynch said his office would be seeking to recover £31.7m as a result of an investigation into accounting processes relating to changes in the way the firm allocated funds as either capital or operational spending.
While the office has not claimed any malpractice Mr Lynch said the regulator had determined that consumers “will not pay twice for operational expenditure that was re-categorised as capital expenditure during the RP4 period.
“To have allowed this would have been inconsistent with the principle of ‘no double counting’ established for the RP4 price control.”
The issues arose in April this year in the early stages of crawing up the RP5 agreement.
An investigation followed in August at which point NIE robustly defended its procedures stating that its accounts had “at all times, been prepared and independently audited in accordance with the conditions of its licence,” and attacking the regulators proposals as retrospective and “contrary to essential principles of good regulatory practice”.
The firm now has four weeks to consider whether or not it will challenge the regulator’s decision through the mechanism of the Competition Commission.
In a statement yesterday it said: “NIE’s plans for RP5 reflect its focus on delivering an electricity network that is fit for future needs and provides value for money for customers.
“We will review the Utility Regulator’s final determination and submit our response by the due date, 20 November 2012.
In a plan dealing with several hundred million pounds, Mr Lynch said it followed an extensive consultation process which had produced an excellent response.
“Overall, our final determination is a balanced outcome,” he said.
“We want to make sure that electricity consumers continue to have a high performing and secure network, which accommodates renewables, at the lowest possible cost.”
“We have put a range of measures in place to deal with uncertainty (in particular for capex requirements and pension costs), to protect both consumers and NIE T&D.”
Key decisions within the price control determination include a capital expenditure allowance of £396 million up 26 per cent from the draft determination.
Special arrangements have also been put in place for approving additional capital expenditure to accommodate the integration of renewable generation and further interconnection, consistent with government plans.
The impact of the plan on the domestic consumer will be minimal, though heavy commercial users will pay more to cover the demands for more investment in that area of distribution.
Network charges presently account for about 20% of the overall electricity bill for a domestic consumer.
With the investments to facilitate renewable and for interconnection included, network charges for domestic consumers will increase by on average around £4 per year or 2.7 per cent. For large industrial consumers, network charges will increase by around £11,000 per year or nine per cent.