Published Friday, 03 August 2012
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The regulator, Shane Lynch wanted to slash £74 million pounds off the value of the company -a move which would have meant a small cut in bills for consumers.
However the Competition Commission on Friday sided with Phoenix saying the plan would discourage investment in the gas network.
Average household gas bills in Northern Ireland will increase by around £2 a year if the provisional ruling is finalised.
The utility regulator referred an appeal by Phoenix Natural Gas Ltd (PNGL) to the Commission in March following the company's decision to reject its two-year price control determination covering 2012 and 2013.
The company is the owner and operator of the natural gas distribution network in the Greater Belfast area and Larne.
The utility regulator's original proposed changes would have reduced household bills by £10.
Chairman of the Phoenix Inquiry Group and CC deputy chairman Professor Martin Cave said: "Our decision has been guided by the long-term interests of customers, who would benefit from further expansion of the gas network in Northern Ireland.
"By trying to change elements of the price control which PNGL had valid cause to believe had been previously agreed, the utility regulator's proposals risk damaging confidence in the regulatory system which in turn could inhibit future investment."
The chairman said it could also increase Phoenix's costs in the long run due to higher costs in financing which would ultimately affect customer bills anyway.
"Such investment is particularly important to fund any future expansion of the gas network in Northern Ireland, where the majority of customers use oil rather than gas, even though it is far more expensive," Mr Cave added.
A Phoenix spokesman said the company would continue to engage with the Competition Commision leading up to the final decision.
"Phoenix believes that the Competition Commission's involvement in this process will lead to a more stable regulatory environment for Northern Ireland, which will benefit consumers and investors alike."
Consumer Council chief executive Antoinette McKeown said weak regulation has failed the consumer.
"Whilst this is an interim decision from the Competition Commission, the outcome is clear - as a result customers will be paying higher charges than they would have been had the Utility Regulator taken a different decision," she said.
She added that the higher charges will last until 2046.
"Whilst this does not help consumers today, the Consumer Council recognises the fact that the Competition Commission took into account the benefits of further investment in the gas network and the risk of damaging investor confidence in reaching their decision."