Electricity prices: differential between GB and NI has worsened since Single Electricity Market

Mick has already done a piece on the rise in electricity prices in Northern Ireland. In May Jim Allister asked a series of questions about electricity pricing here:

Question: Mr Jim Allister
(TUV – North Antrim)
To ask the Minister of Enterprise, Trade and Investment how the average cost of a household electricity bill in Northern Ireland compares to the average bill in Great Britain.

Answer: The average household electricity bill in Northern Ireland during 2010 is estimated at £496 per annum. This is for a standard credit customer with annual consumption of 3,300kWh of electricity and includes VAT.
This compares with an average bill during 2010 in England and Wales of £431 per annum, and £457 per annum in Scotland for similar customers and annual usage.

Possibly more interesting than the price difference is the effect of the Single Electricty Market between Northern Ireland and the RoI on prices:

Question: To ask the Minister of Enterprise, Trade and Investment (i) for her assessment of whether there was a trend of convergence in domestic prices between Northern Ireland and Great Britain prior to the introduction of the single electricity market on the island of Ireland; (ii) whether the single electricity market divergence has been to the detriment of Northern Ireland customers; and (iii) to detail local electricity prices compared to Great Britain and the Republic of Ireland in each of the last ten years.

Answer: Electricity prices in Northern Ireland have always tended to be higher than those in Great Britain. After many years of significant difference, there was a trend towards convergence in the period immediately prior to the introduction of the Single Electricity Market (SEM). However, in the post-SEM period, there has been a divergence once again. In comparing electricity prices between Northern Ireland and Great Britain it is necessary to take into account the different nature and size of the respective markets along with the different operating costs involved.
The Single Electricity Market (SEM) continues to run the cheapest generators available to meet demand across the whole island, hence minimising overall electricity costs and affording protection to consumers. An independent cost benefit analysis has estimated a net benefit of £45million for Northern Ireland from the SEM, most of which will benefit consumers. The SEM has also delivered greater security of supply for Northern Ireland, and has encouraged new investment in efficient generation on the island. Additionally, the Utility Regulator has been able to cancel unfavourable legacy generation contracts in Northern Ireland, and it is estimated that this will save consumers in excess of £80million over the next 5 years alone. The SEM has also provided greater transparency and therefore encouraged increased electricity supply competition, evidenced by Airtricity entering the retail domestic electricity market in Northern Ireland in June 2010.
In almost all of the last 10 years, domestic electricity prices in Northern Ireland have been higher than domestic electricity prices in Great Britain. Between 2004 and 2007 electricity prices in Northern Ireland were higher than in the Irish Republic. However since 2008, domestic electricity prices have generally been lower in Northern Ireland than in the Republic.
My Department will continue to work with the Utility Regulator and the energy industry to support initiatives aimed at putting downward pressure on retail electricity costs, which along with new electricity interconnection between Northern Ireland and the Irish Republic, and between Great Britain and the Republic, should see greater convergence between electricity prices as, in line with EU policy, greater market integration takes place.

Despite the supposed benefits of the Single Electricity Market there seems to have been a widening of the gap between NI and GB prices since the SEM was introduced. From Jim Allister’s website:

“I also had it confirmed that “there was a trend towards convergence (in NI/GB prices) in the period immediately prior to the introduction of the Single Electricity Market (SEM). However, in the post-SEM period, there has been a divergence once again.” It also revealed that since 2008, domestic electricity prices have generally been lower in Northern Ireland than in the Republic. Now, however, we are heading towards closing that gap

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