Guernsey Electricity forced to slash standby charges for on-site generation

Saturday 27 April 2019

The island's competition watchdog is forcing Guernsey Electricity to more than halve its standby charges for customers using on-site generation such as solar panels.

The Guernsey Competition and Regulatory Authority has reached the decision, following consultation with the utility and other interested parties, that GE's monthly standby charges should be slashed from £6.86 per kW currently to £3.07/kW. These price changes will come into effect from Friday 3 May.

"The Competition Authority is of the view that the standby charge applied by GEL is high compared to other jurisdictions to the extent comparators can be found and should, as an interim measure, be reduced until a full review has been undertaken on the appropriate level," said a spokesman for the regulator. "This response is proposed as a result of the credible risk to competition in Guernsey's energy market should the present charging structure remain, given the level and unclear basis for the current charges."

In a letter to the regulator after they announced their intention to impose this price cap, Guernsey Electricity’s Chief Financial Officer Julian Turner said the sum itself and the reasoning behind it was “flawed and inappropriate.”

“The £3.07/kW/month charge, adjusted for GST, was calculated specifically for Jersey, not Guernsey, and applies principally to Solar PV, not to Combined Heat and Power (CHP) installations whose cost dynamics are completely different.”

Although its adoption had been suggested as a short-term measure, Mr Turner was concerned that no timeframe had been set out defining how and when this would be completed by. 

“As the charge was calculated for embedded generation in Jersey up to 50kW, we also believe that if the level of charge was to be changed, the charge should reasonably be applied to all embedded generation in Guernsey, not just to units with a capacity exceeding 25kW, for reasons of fundamental consistency with the NERA report whose conclusions HCRA has drawn upon.

Also expressed concerns that the current structure has been given as a barrier to market entry when “there are CHP embedded generation units already in use in Guernsey under the existing arrangements, installed by the company quoted as a new market entrant [the International Energy Group]. 

“In any event, adjusting the standby charge in isolation is inconsistent and does not take account of the full picture,” he said. 

“GEL remains of the view that a full review should take place of all tariffs and their structure to ensure the standby charge is reviewed in context, to ensure all tariffs are fair and reasonable to all electricity customers. GEL has commenced such a wholesale review of all tariffs and considers that a review of standby charges before its finalisation to be imprudent.

“It is also premature to conclude any change of the standby charge until such time that the direction of the island’s energy policy is known, and this is not expected to be released for review until late summer. This policy is also likely to provide direction in terms of security of supply and conveyance, supply and private electricity networks. All of these are matters which are interrelated to the scale of projects now being cited.”