Electricity costs are not falling fast enough in the North, says the industry watchdog who is carrying out a price review. The review could have a major impact on Viridian's subsidiary, Northern Ireland Electricity (NIE).

Mr Douglas McIldoon, the director general of the Office for Regulation of Electricity and Gas, (Ofreg) maintains there is a price divergence issue in Northern Ireland, which NIE is vigorously rejecting. Mr McIldoon accepts that electricity tariffs have fallen in recent years in the North but says the fact remains that they are falling faster everywhere else.

He believes Ofreg has a responsibility to electricity consumers to highlight that Viridian's dividend to shareholders is increasing every year and this is mainly driven by its core business, Northern Ireland Electricity.

"Ofreg's key objective is to achieve a reduction in the price of electricity in Northern Ireland and we are not keeping up with relative price decreases across the rest of Europe. There is significant price divergence, for example, between Northern Ireland and the rest of the United Kingdom. On average, the cost of electricity in Northern Ireland is 44 per cent higher than it is in other regions," Mr McIldoon said.

NIE has rejected the charge that there is a "systemic divergence" in the North's electricity prices when compared with Britain, the Republic and the rest of the European Union. It says that when each country's regulatory cycle is taken into account, no systematic divergence exists. NIE also claims there was an infrastructure deficit in the North at the time of the privatisation of the electricity industry and that prices are inevitable while the deficit is made good. But Mr McIldoon believes the debate over price divergence is a central issue in the current price control review.

Industry analysts have warned that the outcome of the price review process is likely to have a significant impact on Viridian's regulated profits.