Outraged residents reject mandatory deposits

Monday 04 January 2021

A proposal that would have seen Sark Electricity request deposits from customers in order to maintain their energy supply was dismissed, after it was met by dismay and outrage by islanders.

The idea was part of the company's proposals to Sark's Electricity Prices Commissioner, Dr Anthony White, who has rejected the idea following public consultation.

It would have required customers to pay the company £250 each in order to secure their electricity supply - a practice that was deemed to be "unreasonable" for customers who have always paid their bills on time.

An alternative arrangement has been implemented which instead requires customers with recent missed payments to pay a deposit. 

"I do not believe it is reasonable for SEL to require deposits from existing customers with a history of paying their bills on time," said Dr White. "However, I will allow SEL to require deposits from customers who have not kept their accounts to SEL’s 30 day terms over the previous twelve months.

Pictured: SEL is the island's only electricity supplier, however the price of electricity on a small island risks making the business unsustainable. 

"New customers, who are unable to provide standing order or equivalent may be required to pay a deposit of five months’ monthly usage charge. I recommend that the funds be kept in a client account and not used for operational or investment purposes.

The possibility of this happening incited fear among some residents, with one viewing it as a "bad sign" that the company is “running out of money and the investment fund has evaporated.”

"We absolutely reject the notion of providing a deposit for SEL. We are not in the business of funding their business for free. Furthermore, should any deposit become mandatory then it would have to go into an interest bearing ring fenced account controlled by an independent financially approved person or institution, repayable when supply of electricity ceases to the individual concerned.

"We would not be happy to have our money at risk of being lost should SEL take our deposit and then go bust or be taken over by another party who would not honour any repayment. The rough sums suggest SEL will have £125k of free finance under their proposal which is a significant capital input in the context of Sark Electricity.

"Taking a deposit doesn’t happen in the UK, it only happens in some other jurisdictions for bad payers and it shouldn’t happen here. It would be particularly hard on the poorer members of our community. For the richer members of the community it is yet another incentive to go off grid."

19 of the 25 respondents to a public consultation commented on SEL’s proposal to request deposits from its customers. 16 opposed the idea and 9 of those said they would flat out refuse to pay any such charge. 

"You may not be able to regulate the size of deposits but you have to ensure that deposits are kept separate from operating income of SEL in a segregated bank account," one homeowner told Dr White.

Pictured: 2020 electricity sales (in orange) have fallen well below forecasts (in grey). 

"Deposits should not represent a windfall for the company and should, instead, be recorded as a liability in the company’s accounting records. Deposits should only be accessed by the company if, for example, a customer fails to pay their monthly bills."

The overall proposals - which can be found in further detail HERE - have been designed to help SEL become more financially sustainable and also claw back lost revenue from 2020. Dr White believes they represent a "fair" balance between the company and the consumer's interests. 

"The maximum prices I have set should allow SEL to earn an appropriate profit and recover half of the shortfall, or “under-recovery”, that occurred during 2020 on account of consumption of electricity being lower than anticipated."