Electric prices could jump by 7%

Thursday 21 February 2019

Guernsey Electricity will be putting their prices up by between 4% and 7% in the near future to pay for the replacement of the Guernsey/Jersey power cable.

The local utility will have to borrow approximately £30m. to pay for the replacement, which they deem necessary after it has run into more than a handful of faults over the last five years.

The GJ1 cable is supposed to last 25 years, and after being installed in 2000, there is still six years before Guernsey Electricity were expecting it to reach its use by date. But since 2012 the cable has been having faults, with the most recent in October 2018 causing an island wide power cut, so now the company have decided replacement is the most cost effective course of action.

Mr Bates said GEL were surprised at the number of faults the cable has had since it was purchased, particularly in light of its 25 year supposed life span. When asked if they were going to look to claim compensation, he said they were "in talks with the manufacturer". 

Guernsey has never fully recovered from last year's October fault, as GEL Chief Executive Alan Bates revealed that when they fixed the issue, they immediately discovered at least one more. Speaking about why Guernsey Electricity said they had put the cable back on line, he said: "That repair was a complete success, so in terms of that repair joint at Greve de Lec, it was fully operational. Unfortunately when we turned it back on we saw that there was another problem in another location - we identified another area of concern. 

"So when they were talking about continuing monitoring, we restricted that power out to find out what exactly that issue was. So it was a completely separate issue." 

Mr Bates confirmed Guernsey Electricity was in talks with the manufacturer of the cable, as they believed there was an inherent issue with the product they had purchased at the turn of the century. And while he did not say there was no chance of compensation, they will still need to pay for the new, replacement cable in the meanwhile. The cost of that investment will - at least in part - be handed over to the customers.

GEL haven't put tariffs up since 2012, and that has "really eroded profitability as a business", according to Mr Bates, but the new price rises are not yet set in stone: "It depends on how long we are recovering that money, and we are mindful that we don't want tomorrow's customers to pay for today's costs, and likewise we don't want today's customers to pay for capital investment of the future, so there is a bit of a mix there. 

"In the UK we have seen lots of increases around 10% or more, so this is less than 10%, so we would think, depending on how long, between 4% and 7%." 

The island's power station has been generating two thirds of its electricity since the October fault at Greve de Lec. 

Mr Bates added: "We have taken a couple of months to say 'well, is it worth replacing or repairing', because we were looking to see if there were more issues a long the line - we can do that using the fibre optics in the cable. Repairs are going to cost anywhere between £5m. or £10m., or is it worth replacing. 

"It was put in in 2000, so its 18 years old now, we wouldn't expect it to have failed this many times, but it could just have three or four issues, and if you fix them it could be good for another 10 or 15 years. What we have done with this investigation is say, actually, is it not good value to keep repairing it, is it actually better to bring the replacement forward by five to 10 years."

The Channel Islands Competition and Regulatory Authorities is responsible for partly controlling GEL's prices and the regulatory body has commented on the current situation.

CICRA Director, Tim Ringsdore, said: “Guernsey Electricity Limited has discussed with CICRA the current cost pressures faced by the business and in particular those costs which have increased that might be classified as unavoidable. GEL is in the process of identifying the nature and scale of those and if CICRA is able to independently verify that then there is the prospect of price rises needed to meet those costs. From our discussions this process is likely to take place over the short term given the extent of the cost pressures GEL has brought to CICRA’s attention.”

The two areas GEL are looking to raise funds for are the recovery of historic costs incurred through the current tariff arrangements and also preparing for their future investment plan. As Mr Bates put it, both forward and backward thinking. 

Pictured top: Alan Bates over the power station on the Bridge.