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The Guernsey Competition & Regulatory Authority has approved Guernsey Electricity's request to increase its unit charges by almost 5%.
The cost passthrough of 4.8% will come into effect on 1 September and is intended to recoup £7.8m for GEL over three years.
The GCRA said the price rise is "reasonable" as it is based on "uncontrollable" changes in the price of oil imported by GEL since April last year.
"This tariff rise is to allow GEL to recover historic uncontrollable costs of £7.6m related to importation and generation of electricity, which are primarily related to the price of oil and exchange rate movements," said a spokesman for the regulator.
Pictured: This tariff increase is unconnected to the installation of a new electricity cable last year.
"The period to which the costs to be recovered relate is April 2019 to March 2020. This unit tariff change applies to unit tariffs charged by GEL and not any unit tariffs paid by GEL to other parties."
Alan Bates, Chief Executive of Guernsey Electricity, said they had held off introducing the tariff increase during the peak of the corona virus crisis.
“The increase was scheduled to be implemented in April but due to the potential effects of the pandemic, we agreed with the regulator to delay the change to help our customers through this period.
“This is only the second increase since 2012 and equates to an additional £50 per year for an average Economy 12 customer. It will be in place for three years.”
Pictured: Guernsey Electricity has £44m drawn down in debt, Deputy Peter Ferbrache told the States.
Financial forecasts which were revealed last month indicate that this cost passthrough is just the first of three tariff increases customers will have to cope with in the next 18 months.
Deputy Peter Ferbrache, who heads up the States' Trading Supervisory Board, which is GEL's shareholder, said the utility had tens of millions drawn down in debt and are going to have to "underinvest in capital projects because they do not have the money."
He predicted that GEL will have to request a second tariff increase linked to capital cost recovery for the new electricity cable to France - calculated to be 2.2% based on final project costs and then a further cost passthrough in 2021 to compensate for debt incurred in 2020.
Mr Bates stressed that this tariff increase was unconnected to the installation of a new electricity cable last year.
He said there needs to be progress towards a "smoother and more transparent tariff evolution for the future."
"This was raised at the recent States Meeting on the Energy Policy, in which it was highlighted that the lack of substantive regulatory activity on price controls since 2011 has led to a tariff structure that is not fit for purpose, is misaligned to the drivers of cost change and has had an impact on both the market and electricity consumers.
“We are mindful of the effect of these large increases and are aware that it is hard for our customers to plan or budget for the increases. We are working to find more pragmatic ways to recover costs in future. This would, ideally, mean rises that are smoother, more manageable and incremental.
“We fully support that as Guernsey develops its recovery plan from the Covid19 crisis, the island will require a new approach to tariffs that balances affordability for customers along with the ability for Guernsey Electricity to invest in its infrastructure.”
Pictured top: Inside Guernsey Electricity's power station.
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