Guernsey Electricity (GEL) will increase its tariffs by 13% after applying to the States Trading Supervisory Board for permission to do so.
Originally the service provider wanted to amend various elements of its tariffs to create an overall increase of 14.25%, but STSB rejected that cap and – after undertaking its own assurance process – agreed a cap of 13% instead.
GEL 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 additional cost of importing electricity has been estimated by GEL to be £3.3million in the current financial year and this was one of the considerations STSB took on board – along with a need to correct historic levels of under-investment – when making its decision to accept the amended cap increase.
The tariff change will come into effect from 1 July this year.
The President of STSB, Deputy Peter Roffey said the price increase is unavoidable.
“It is regrettable that Guernsey Electricity had to apply for such a significant increase in tariffs, but this is a nettle that had to be grasped.
“The dysfunctional regulatory regime that existed previously starved the company of the funding required to adequately invest in the network over the past decade, and unfortunately it is having to face up that reality now, and play catch-up.”
Pictured: Deputy Roffey.
STSB commissioned an independent assurance review of GEL’s application for a tariff rise to help inform the Board’s decision.
It said its primary consideration has been to continue correcting under-investment in the island’s electricity infrastructure.
“Such investment is needed to maintain and upgrade the network, as an essential part of the island’s social and economic infrastructure, and is required to provide a foundation for the growth in electricity demand as a part of the energy transition anticipated by the Energy Policy,” said STSB.
“Guernsey Electricity’s tariffs have not kept up with the corresponding increases in the rate of inflation over the last ten years.
“That is a consequence of the historic regulatory impasse. As a result, investment in the island’s electricity infrastructure had fallen well below the level needed to maintain the existing asset base and are significantly below the level required to deliver the energy transition.”
GEL's Chief Financial Officer, Karl Brouard, released a statement following the announcement from STSB, which can be read below:
GEL’s electricity tariffs are to rise on 01 July 2023 after approval was granted for a 13% revenue increase by the States Trading Supervisory Board (STSB) and follows an application made earlier this year.
The standing charge for the average local consumer will therefore increase from £30 to £49.50 per quarter.
For the average usage customer on the standard or economy tariffs, both without electric heating, the combined impact of these changes is a rise of around £200 per year per household.
We understand that this comes at a time when the cost of living is increasing for everyone, but we cannot delay much needed investment and upgrading of the network, along with the requirement to maintain the security of electricity supply to the Island. To ensure we meet the level of investment required, we will continue to finance this through additional debt as well as the increase in tariffs.
The other factor which is having a significant effect is the escalating cost of generating locally and importing electricity which has arisen from the market volatility caused by the Russian invasion of Ukraine, coupled with inflation at levels not seen for 30 years. This has pushed up our investment and running costs beyond previously anticipated levels.
In determining the tariff application, the STSB commissioned independent tariff and efficiency benchmarking reviews. It also considered the results of a public consultation carried out by Guernsey Electricity earlier in the year.
The benchmarking reviews found that electricity bills locally were currently among the lowest in the British Isles and Guernsey Electricity performed well compared to their counterparts in Jersey and the Isle of Man.
We understand that this increase will impact on our customers depending on consumption, so to help customers understand increase on their own bills, Guernsey Electricity will be providing a tariff calculator on our website in June.
We would also encourage Islanders who may have concerns paying their bills to contact the Customer Services team and discuss support options such as a tailored payment plan. They can be reached on 200700 or email@example.com’