How do companies set the price NI consumers pay?

It has been three years since choice came into the electricity market in Northern Ireland.

The idea was to keep costs down by making companies compete against each other and offer lower prices.

Although Northern Ireland Electricity (NIE) still maintain the power lines, and make sure that the electricity gets to your house or business, they no longer supply the actual power.

There are three companies that supply electricity to homes in Northern Ireland.

At the end of 2012 Power NI had 78% of the domestic market, Airtricity had 19%, and Budget Energy had 3%.

Power NI's share has been reducing rapidly since competition was introduced, and it may well be as low as 73% now.

It is in the business market that Power NI has taken the biggest hit as large companies with sizeable bills are often more willing to switch supplier to cut costs.

There are also more suppliers of electricity trying to woo businesses, and they have been providing an alternative option since 2007.

At the end of last year Power NI had 49%, Airtricity had 28%, Energia had 12% and Electric Ireland had 11% of the business market.

Generation costs

Many of these suppliers entering the market over recent years have offered attractive price deals to try and persuade customers to switch over from Power NI.

You have probably seen the adverts, or perhaps had a visit from a company representative.

So how are some firms able to charge less for the same electricity?

Around 27% of your bill goes to NIE for them to maintain the lines and telegraph poles operating, and that amount is fixed whichever supply company you choose.

Five per cent goes on VAT, and 60% depends on the generation costs that fluctuate depending on the international costs of oil and gas.

That leaves about 8% of the bill going to the supply company.

This is the area where some companies squeeze the prices - they may have cheaper operating costs, or may decide to take less profit.

However, as the cost of generation has gone up and down over recent years, all the main suppliers have roughly followed the trajectory of Power NI.

While the Utility Regulator Shane Lynch says Power NI are completely within their rights to increase the costs, and they actually don't make as much profit as companies who are generating the electricity in the first place, he does recommend shopping around for the best deal.