The States’ Trading Supervisory Board has given approval for Guernsey Electricity to increase its charges by 13%.
The rise, which is below the 14.25% increase that the company had requested, will be split between the charge per unit and the daily fixed standing charge. The difference customers will see in their bills will therefore depend on how much electricity they use.
The additional revenue is required to fund essential investment in the island’s electricity infrastructure and offset the escalating cost of electricity import and generation arising from the market volatility caused by the Russian invasion of Ukraine. In the past 12 months, those costs incurred by the company have increased by £3.3 million above what it had forecast in 2022.
The States’ Trading Supervisory Board (STSB) President Deputy Peter Roffey said the increase was “regrettable but unavoidable”. It was driven by the urgent requirement for investment, following years of under-funding, so while the timing was unfortunate, any delay risked creating more issues in the future.
He said: “It is a 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.”
In deciding on a lower increase than Guernsey Electricity had requested, the STSB had considered the impact on consumers “in particular during the current economic climate”, and the need for the company to continue focusing on improving productivity.
Deputy Roffey said: “However a rise is unavoidable. We recognise the timing is bad, but to put it off could simply store up even greater challenges in the years ahead. The STSB has therefore acted responsibly in approving an increase, although not to the level that Guernsey Electricity had requested, which will require the company to continue focusing on improving efficiency.”
In determining its decision, the STSB commissioned an independent assurance review of the company’s application and the financial models underpinning it, and a separate independent tariff and efficiency benchmarking review. It also considered the results of a public consultation, which was carried out by Guernsey Electricity earlier this year.
The tariff and efficiency 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.
In its decision notice, the STSB concluded: “The Board’s primary consideration has been the pressing need to continue correcting historic levels of under-investment in the electricity network.
“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.
“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.”
Under the STSB’s zero dividend policy for Guernsey Electricity, any surplus generated by the company will be reinvested in the long-term interest of islanders.
Karl Brouard (pictured), Guernsey Electricity’s Chief Financial Officer, said: “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’