APPENDIX I
GOVERNMENT RESPONSE
Letter to the Chairman of the Committee
from the Secretary of State for Northern Ireland
I have read with interest the Committee's report
on the impact of the 26 December 1998 storm on electricity supplies
in Northern Ireland. The Committee is to be congratulated for
producing a comprehensive and balanced overview of a matter of
major importance to electricity consumers. Security of supply,
particularly during the festive season and the winter months generally,
is an entirely legitimate expectation of today's consumers, domestic
as well as industrial. I have no doubt that the report will prove
helpful to NIE and BT in finalising the action which requires
to be taken to ensure that the widespread disruptions to power
supplies and the allied failures in providing accurate supply
information to consumers over the Christmas 1998 period are not
repeated.
I am pleased to enclose the Government observations
on the one recommendation in the report which falls within its
remit. I trust that the Committee will find the response helpful.
Northern Ireland Electricity plc and the Regulator will respond
to those recommendations which relate to their responsibilities.
Marjorie Mowlam
4 October 1999
Government Observations
Introduction
The Government welcomes the Committee's Report. It
provides a most helpful contribution to the debate in Northern
Ireland on the steps which require to be taken to ensure that
the widespread disruptions to power supplies and the allied failures
in providing accurate supply information to consumers over the
Christmas 1998 period are not repeated. Government fully supports
the expectation of consumers— domestic, commercial and industrial—that
all possible measures are taken to maintain supplies during periods
of adverse weather.
Following the restructuring of the electricity industry
in the early 1990s the role of Government in this area is strictly
limited. Statutory responsibility for the protection of consumers
in respect of continuity of supply and quality of support services
rests with the independent electricity Regulator.
The Government has considered the Report in this
light and has the following comments to offer on the Committee's
one recommendation specific to its responsibilities. The number
refers to the relevant paragraph in the Committee's Report.
Recommendation addressed to Government
71. We therefore consider that the scope for
using some of the £40 million to improve the resilience to
storm damage of the overhead electricity supply network in Northern
Ireland should be investigated. We recommend that, before any
of the £40 million is allocated to reducing generation costs,
a thorough study be carried out of the case for investigating
some, at least, of that sum in strengthening the resilience to
storm damage of the overhead supply network.
The scope for using some of the £40 million
balance in the Government Support Fund for electricity consumers
to improve the resilience to storm damage of the overhead electricity
supply network in Northern Ireland has been investigated as requested
by the Committee.
It may be helpful to recall the background to the
establishment of the Government Support Fund which originally
stood at £60 million. The clear conclusion of the public
consultation exercise in Autumn 1995 was that the money should
be used to (i) reduce electricity bills for all consumers and
(ii) support additional energy efficiency measures.
The Department of Economic Development appointed
external consultants to appraise a number of competing proposals
for use of the £40 million, including the Committee proposal
and a proposal from the Regulator to allocate the money to buy
down existing generating capacity in Northern Ireland. The consultants
have now reported to the Department and have concluded that the
use of the money to improve the resilience of the overhead network
would not represent best value for consumers. The consultants
have endorsed the Regulator's proposal as the most sensible use
of the money in the present circumstances.
The Department also consulted the Regulator and NIE
on the Committee's proposal. The Regulator does not believe that
a Government subvention is necessary to enable the required strengthening
of the overhead network to be carried out. NIE, for its part,
is not seeking a contribution from public funds to deliver its
£38 million Action Plan announced on 4 February 1999. The
Action Plan includes proposals to accelerate improvement to, and
refurbishment of, the high voltage overhead network. The Chairman
of the Consumer Committee for Electricity has also written to
the Department to record her committee's support for the Regulator's
alternative proposal.
After careful consideration, and taking into account
the above factors, Government has concluded that using some of
the £40 million as proposed by the Committee would not represent
best value for consumers. Government is minded, as outlined in
the Department of Economic Development consultation document "Vision
2010—Energy Action Plan" issued in July 1999, to allocate
- subject to obtaining the necessary legal and financial clearances
- the £40 million balance to buy down existing generating
capacity.
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