Embedded finance for Northern Ireland gas network

Ofreg press notice announcing an agreement in principle with Phoenix Gas on future price controls for gas network infrastructure in Greater Belfast and Larne. The idea of a long-term financing structure has also been applied by Ofreg to the gas and electricity interconnectors with Great Britain. Ofreg states that:

The proposed agreement extends the revenue recovery period from 2016 to 2046, so that the costs of network investment will now be recovered over the economic lives of the assets, in line with other utilities. The rate of return on investment has been reduced from 8.5% to 7.5%, reflecting the changed risk profile of the network business going forward. This package will save customers up to £25m.

The notice also claims that this proposal will "remove the possibility of a substantial hike in gas network costs"; it does not disclose how asset renewal or operating cost risks are to be mitigated to achieve this.

This agreement presumably resolves the dispute that had emerged at the time of Terra Firma's take-over of Phoenix.

No timescale is given for the forthcoming consultation on the implementation of the proposal.

For further information or advice please contact Franck Latrémolière.

Filed under Gas, Ofreg, Price controls.

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