Viridian Group, owner of Northern Ireland Electric (NIE), has accepted the revised electricity price controls proposed by industry regulator OFREG.
"This price control seeks to bring into closer alignment the interests of customers and investors," said Mr Harry McCracken, NIE managing director. "This is an objective we fully support."
An initial price regime, suggested by regulator Mr Douglas McIldoon last March, prompted NIE to issue warnings that it might have to cut 300 jobs and reduce emergency cover. The proposals also helped to send Viridian shares tumbling to a four-and-a-half-year low. The group rejected this regime and requested that the regulator revise its proposals.
NIE, with 1,500 staff, intended spending £289 million sterling (€451 million) on operating costs but OFREG limited that figure to £182 million. Mr McCracken said at the time that the proposals jeopardised NIE's improving service quality and, if the company was stripped of resources, standards would inevitably fall.
The revised proposals cover the five years from April 1st, 2002, and are a positive alternative for Viridian as the price reductions are more back-ended over the period. The cut in prices in the first year will be 3.6 per cent, a far more manageable reduction than the 16.7 per cent previously proposed.
"This news is very positive for Viridian and bears out our view that the share price can appreciate on the removal of regulatory and dividend risk," the company said.
Given that the company's forecasts anticipate an 18 per cent decline in NIE's profits, OFREG's alternative will prompt a forecast upgrade.
Viridian said it "expects to maintain the current level of dividend in real terms", which suggests the group expects growth in line with inflation.
Electricity prices in the North are 40 per cent higher than the average price in Britain and businesses criticised NIE, claiming the prices had a negative effect on business. OFREG's proposals are aimed at reducing the average electricity bill in the North by £27 per year.
Under the new agreement, NIE will be able to invest £227 million in the local electricity infrastructure, while customers receive a year-on-year reduction in price over the next five years.
"We welcome this aspect of the agreement, which will enable NIE to make a long-term commitment to customers and Northern Ireland society," Mr McCracken said.
