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Press Release - 9th February 2011

Mutual Energy Limited, the company which owns and operates the Scotland-Northern Ireland Gas Pipeline, the Moyle electricity interconnector and the Belfast Gas Transmission Pipeline has welcomed the recent publication of a discussion paper by the Utility Regulator regarding the financing of regulated networks. The paper, which was commissioned by the Utility Regulator, was written by specialist economic consultancy, First Economics. It analyses the financing options available to network companies, including traditional cost of capital, mutualisation and other forms of debt financing. The paper assesses the pros and cons of the ways in which regulated companies currently finance themselves and considers whether changes to the regulatory regime can contribute to the lowering of financing costs in future regulatory control periods and ultimately result in lower energy costs for consumers.

The discussion paper concludes that ‘regulators and government have the ability to unlock considerable value for customers if they look together at the financing of networks’. It does, however, recognise that this is not something regulators could implement or take forward on their own.

Commenting on the importance of opening up this issue for discussion, Mutual Energy Chief Executive Paddy Larkin said: “Now is the time to be taking a serious look at the range of options for financing investment in utility networks. The Executive’s Strategic Energy Framework, published last year, suggests that £1 billion of investment is needed in the electricity grid alone to achieve a target of 40% renewables by 2020 so it is vital to look at how this new investment can be facilitated at the lowest possible cost to customers as well as examining how previous investment can be financed in the best interests of consumers. We have long since been advocating the benefits of the mutual model for financing energy infrastructure, whereby all the benefits of the low cost of capital and operational efficiencies are returned to energy consumers”.

He went on to say “The time is right to have this debate; energy customers via the regulator and government are currently committing to substantial and long term costs going onto their energy bills. It is entirely correct that the regulator should ensure that these commitments are incurred and financed at the lowest cost.”

The Utility Regulator is currently inviting stakeholders to respond to the discussion paper with the consultation period ending on Friday 18 February.

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Notes for editors:
1. Mutual Energy is a company limited by guarantee (also known as a mutual) which exists to own and operate energy infrastructure assets for the benefit of Northern Ireland energy consumers. The company does not have any shareholders so all the benefits of the low cost of capital and operational efficiencies are returned to energy consumers

2. The discussion paper is available on the Utility Regulator website (www.uregni.gov.uk) and responses can be submitted to Leigh.Smyth@uregni.gov.uk by Friday 18 February 2011.