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FOCUS: Why is Guernsey Electricity £16million in credit?

FOCUS: Why is Guernsey Electricity £16million in credit?

Friday 26 May 2023

FOCUS: Why is Guernsey Electricity £16million in credit?

Friday 26 May 2023


Questions about Guernsey Electricity’s financial situation, its billing system and its approach to tariff price hikes have been swirling around the island, on social media and through anonymous tip-offs to the media.

An anonymous letter allegedly penned by a “group of concerned GEL employees” made its way into our inbox earlier this week, while today's 13% price hike announcement has also served to intensify public discussion about the operations of the provider.

Express decided to ask GEL, and the political committee responsible for its regulation, to shed some light on the questions that have been raised...

Firstly, a recap: why are prices going up?

GEL says it has proposed the increase to meet additional costs in importing electricity caused by the war in Ukraine and to continue with its base investment of £10.7million per annum in maintaining the island’s core infrastructure. 

The increase is also needed, according to GEL, to help it rebalance its fixed and variable tariffs “to better reflect the fixed and variable costs of the company” and meet other increases in operational expenditure.

The tariff increase triggered by the above reasons was also put to consultation in advance of its approval by STSB. 

Questions have been raised over this process. One reader letter submitted anonymously to Express went so far as to query whether the price rises were pre-determined and the process was therefore a "sham".

Were the price hikes a foregone conclusion?

When Express asked about this, the President of the States Trading Supervisory Board came out in defence of the Board and its regulation of Guernsey Electricity.

Suggestions of conflicts of interest that may hinder STSB from doing its job were also flatly denied.

“The suggestion that the STSB has any conflict of interest in regulating electricity tariffs fundamentally misunderstands the relationship between the STSB and Guernsey Electricity,” said Deputy Peter Roffey. 

“The STSB represents the shareholders, and the sole shareholders of the company are the people of Guernsey. So, our single purpose in this exercise is to see the best outcome for the public. With this in mind we will always seek to limit tariffs to the lowest levels which permits proper capital investment in order to secure the long-term interests of electricity consumers in Guernsey. 

“In assessing Guernsey Electricity’s tariff application, the STSB commissioned an independent expert to carry out a detailed review of the company’s proposals.” 

Deputy Peter Roffey

Pictured: Deputy Peter Roffey,  President of the States Trading Supervisory Board.

Deputy Roffey said several factors – including the commission of a further review of GEL’s capital investment strategy and an independent efficiency review and tariff benchmarking – together ensure that STSB “has discharged its duties diligently and efficiently”. 

Additionally, a spokesperson for GEL said: “We absolutely refute any claim that the tariff change is a foregone conclusion. 

"The decision resides entirely with the STSB and is independent of Guernsey Electricity. The STSB also considers Guernsey Electricity’s application to change tariffs annually.”

What about GEL's financial situation?

Other questions have been raised about GEL's current credit/debit level.

It had been rumoured that GEL holds an exorbitantly high level of credit (money owed to the customer, both commercial and private) and that the utility group is also owed a significant sum of money from customers (once again both commercial and private).

Following questions from Express, GEL confirmed that its credit/debit level is currently £16million in credit and £6.3million in debit. 

Contextualising those figures, a GEL spokesperson said: “With regard to balances, the nature of quarterly electricity billing produces a build-up of customers’ debits and credits. The credit balance is as a result of the accumulation of monthly standing order receipts which are subsequently credited against a customer’s quarterly electricity bill to cover the electricity units consumed in the preceding three-month period. If the standing order is not sufficient to cover the units consumed, then this will contribute to a debit balance. 

“Many customers choose to pay by standing order as it enables them to budget more effectively through regular, consistent payments. This allows for a credit balance to develop during the period of lower electricity consumption in the summer to be used against higher consumption in the winter."

shutterstock_1244262004.jpg

Pictured: "The credit balance is as a result of the accumulation of monthly standing order receipts which are subsequently credited against a customer’s quarterly electricity bill to cover the electricity units consumed in the preceding three-month period," GEL said.

The spokesperson continued: “Customers receive balance alerts on their electricity statements notifying them of large credit (or debit) balances and are advised to contact Guernsey Electricity to either increase or decrease their standing order amount to a more appropriate level. Where a customer has a credit balance, we will provide a refund at their request. The overall level of credit and debit balances varies predominantly due to seasonality, with a build up during the summer period which reduces during the winter period. Therefore, in the 2021/22 financial year ending 30 September 2022, the credit and debit balances stood at £16m and £6.3m respectively.”

Express asked for comparable credit/debit statistics from the Jersey Electricity Company and were told that those kinds of figures aren't immediately accessible. 

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