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P&R cash "would not lead to a freeze in electricity tariffs"

P&R cash

Monday 06 June 2022

P&R cash "would not lead to a freeze in electricity tariffs"

Monday 06 June 2022


A deputy has been told he is too late to prevent increases of between 8% and 11% in household electricity tariffs which are planned from 1 July.

Deputy Gavin St Pier is calling on the Policy & Resources Committee "to step up and take the lead - and quickly" to prevent price rises by States-owned utilities from heaping further financial pressure on family budgets already hit by rising inflation and a growing cost of living crisis.

Deputy St Pier wants the Policy & Resources Committee to "use the States' capital reserve to invest £10.7million as additional equity into Guernsey Electricity" to provide the company with the minimum income it says it needs over the next year to invest in the island's electricity network. 

But the President of the States' committee which oversees Guernsey Electricity and which approved the utility's application to increase tariffs says Deputy St Pier's idea would fail to achieve its aim of protecting household energy bills.

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Pictured: Deputy Peter Roffey (left) says that Deputy Gavin St Pier's proposal to use the States' capital reserve to defer increases in household electricity bills would not work and would be unwise anyway.

"Proper process has been gone through and the changes in tariffs have been approved," said Deputy Peter Roffey, President of the States' Trading Supervisory Board. 

"In the unlikely event of the Policy & Resources Committee injecting cash from the States' capital reserve into Guernsey Electricity's capital spending plans, it would not reverse the decision on tariffs, which has been made according to law. It would not lead to a freeze in tariffs.

"What I suppose it could do is permit Guernsey Electricity to carry out the required £10.7m capital investment without additional borrowing - perhaps even while reducing that debt slightly. While of course that might be welcomed on one level, I think it is unfair on the public purse.

"As a commercial entity, Guernsey Electricity should be able to trade its way to financial stability and invest for the future without taxpayer support, at least in respect to routine capital investment."

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Pictured: Households face above-inflation increases in electricity and waste charges from next month. 

Deputy St Pier has said that Guernsey Electricity and the States' Trading Supervisory Board - and Guernsey Waste, which also has plans for above-inflation price increases this summer - "are making rational and responsible decisions reflecting the market conditions in which their businesses are operating". 

"But these increases in waste and electricity prices by about 9%, falling on the same day of 1 July, are a double whammy for household budgets already reeling from rapidly rising food and other prices," he said. 

"We are experiencing very unusual economic conditions: an inflation shock created by the supply chain disruptions of covid and the war in Ukraine.

"In these conditions, it is our government's job to take what action it can to mitigate or avoid adding local inflationary pressures and risk a local wage/price spiral."

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Pictured: The war in Ukraine is contributing to price rises reaching a 15-year high in the island.

Deputy Roffey said that he shared concerns about households' energy bills and cost of living pressures generally. But he feels that Deputy St Pier's proposal "would not be a wise approach" and would risk prolonging under-investment in the island's electricity network.

"The current correction in tariffs really should have been done far earlier and possibly in a more gradual manner. Guernsey Electricity is now being forced to play catch up," said Deputy Roffey.

"While I agree with Deputy St Pier that this is not an ideal time for any cost increases, deferring them until next year would simply compound that problem and require an even bigger increase to start putting Guernsey Electricity back on the road to financial stability.

"Suggesting the use of the capital reserve to invest in Guernsey electricity infrastructure rather misses the point of why Guernsey Electricity has been unable to carry out sufficient investment in recent years. 

"This is down to the fact that - despite two temporary cost pass throughs - the underlying tariffs have remained unaltered for a decade. This led to Guernsey Electricity going from being a profitable entity to one where revenues fall well short of what is needed to provide both the current service and invest for the future. 

"As a result, the company has also incurred very significant debt and with it the dead cost of servicing that debt. It is running at a loss and the first £2.4m of islanders' bills are used to pay interest on that debt. This has to be addressed."

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Pictured: Deputy Gavin St Pier wants Deputies Peter Ferbrache (left), Mark Helyar (right) and their colleagues on the Policy & Resources Committee to intervene to prevent islanders facing increases in utility bills while inflation is increasing.

The increase in electricity prices from 1 July will be split between the charge per unit and the fixed standing charge per customer. This means the difference in customers' bills will depend on how much electricity they use.

Announcing approval of the proposed increases, the States gave examples of the effect on various customers.

One example customer - on Super Economy 12 without electric heating who consumes 6,400 units per year - will see their annual bill go up by £117 or 10.8%.

A second example customer - with a Super Economy 12 meter and electric heating who consumes 14,400 units per year - will pay an additional £163 a year or 8.8%.

On 21 February, the States reclaimed responsibility for regulating electricity prices after taking the role away from the Guernsey Competition and Regulatory Authority and handing it to the States' Trading Supervisory Board.

At the time, Deputy Roffey told Express that he anticipated Guernsey Electricity making an imminent approach for permission to change prices and tariffs. He said they had changed little for many years and left the company unable to make adequate investment in essential infrastructure.

READ MORE...

Deputy wants islanders protected from waste and electricity price rises

Electricity prices to go up on 1 July

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