News broke this week that Northern Ireland consumers are facing an imminent hike in electricity prices, possibly in the order of 20%. At the time of writing, there has been no official announcement, and while I cannot confirm the percentage, I would not be surprised to hear it will be a significant double-digit increase. I would not be stupid enough to suggest it can be stopped, because some 20 yearsago, we changed the way we organised our electricity supply chain in a way that makes such dramatic price changes possible.
In the old days, there was one, monolithic body, who took care of everything, generating electricity in our power stations, transmitting and distributing it through the grid, and supplying it to the light switches and power points in our homes and businesses. In the late 1980s, the monolith was felled by the desire to introduce competition, which was sold as something that would give the consumer choice, a development that itself would force the new suppliers to be more efficient, user-friendly and cost-effective.
That was the principle. In practice, Northern Ireland is too small to maintain real competition throughout the electricity supply chain, even with interconnectors to other regions and nations. We have managed to introduce competition at the start and end of the chain, in generation and supply, although at the supply end, NIE (now Power NI) still holds a huge chunk of the domestic market. But there is no competition for the bit in the middle - and no prospect of any, unless you think someone is going to invest the eye-watering amounts of money required to install an alternative set of pylons and underground cables. Hence the need for a Regulator, who acts as a sort of substitute for competition.
With that free market model, it is inevitable that any rise in the cost of raw materials is passed on to the end user; it is what businesses do to remain profitable. I also accept the rising cost of wholesale gas is largely behind the incoming price rise - as it was previously for an even bigger hike from Phoenix Gas earlier this year. But to leave it at that would be lazy, thoughtless and, for a MLA, a dereliction of duty.
As a member of the Enterprise Trade and Investment Committee at Stormont, I believe strongly that I need to exercise a challenge function of behalf of the voters and taxpayers, so I repeat here the question I have been asking industry experts since the May Elections: Is the domestic consumer better off under the new privatised arrangement than they were 20-plus years ago?
Interestingly, no one has convinced me that you, the consumer, are better off. The nearest thing to an answer has been to point to the security of supply, in other words, the number of times power cuts occur. That figure is down dramatically on 20 years ago, but that begs the question - would it have happened anyway? Is it directly and exclusively down to privatisation, or does new technology explain a lot?
And while raw material prices also explain a lot, is that the full picture? It seems to be a little known fact that part of the price we pay for our electricity includes an amount to make good a shortfall in NIE's pension pot. I am not arguing that retiring workers do not deserve the full pension plan they signed up for - they are. I am simply wondering if the full responsibility for the gap lies with the consumer. It would be useful if someone took a forensic look at the history of NIE's pension scheme from privatisation to present day. That might be a good start in analysing if the consumer should be better off than they are under the current regime.