The cost of electricity will go up from 1st July, after the Guernsey States’ Trading Supervisory Board (STSB) approved an application from Guernsey Electricity to raise tariffs to increase revenue by 9%.
The increase will be split between the charge per unit and the fixed standing charge per customer. This means the actual difference that customers will see in their bills will depend on how much electricity they use.
For instance, Super Economy 12 customers that do not have electric heating, who on average consume around 6,400 units a year, will see their average annual bill rise by £117, from £1,085 to £1,202 – an increase of 10.8%. Customers with a Super Economy 12 meter and electric heating on the Superheat tariff, who currently consume on average 14,400 units a year, will see their average annual bill rise by £163, or 8.8%.
The additional revenue is required to fund much-needed infrastructure investment to manage an anticipated increase in electricity demand as the island transitions towards more renewable energy and away from the use of fossil fuels for transport and heating.
Guernsey Electricity (GEL) has identified a minimum requirement to invest £10.7 million a year between now and 2025 to maintain and improve the local supply network. This will be funded through a combination of current revenues and debt finance – the latter ensuring future customers contribute towards the investment made in the infrastructure they will benefit from.
In its decision notice, the STSB concluded: “Current levels of investment in the island’s electricity infrastructure fall well below the level needed to maintain the existing asset base and are significantly below the level required to deliver the energy transition.
“Whilst highly conscious of the impact of increased charges on consumers at any time, but in particular during the current economic situation, the Board has nevertheless determined that the most important factor to be addressed in determining the application is the pressing need to start correcting current 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 support the anticipated growth in electricity demand as part of the energy transition anticipated by the Energy Policy.”
The increase will see a rise in both the unit price of electricity and the quarterly standing charges, which together make up customer bills. This will begin to rebalance the amount of income which Guernsey Electricity receives from each element.
Currently, around 96% of the company’s revenues comes from the per unit charge, even though the cost of generating or importing electricity only makes up around half of the total cost of supply, with the fixed cost of maintaining the electricity grid making up the rest. As a first step in addressing this, the revised tariffs will increase the proportion raised through the standing charge from 4% to approximately 7%.
The STSB said this is consistent with the Energy Policy agreed by the States in 2020, which stressed the importance of cost-reflective tariff systems across all forms of energy supplies.
This would ensure that as more islanders install renewable energy sources, Guernsey Electricity is not left overly reliant on just income from unit sales to meet the fixed costs of maintaining and upgrading the electricity network.
If that was to happen, those most adversely affected would be customers who are either unable to or cannot afford to adopt micro-renewable technologies, such as solar PV. That includes islanders in rented accommodation or apartments who can also be limited from investing in such equipment.
Under the tariff plans, GEL is being allowed to increase the revenues it raises from energy sales by a capped amount of 9% to fund its investment plans. This means that once the new tariffs are applied, any income above the revenue cap will be offset against any future tariff applications. Even after this rise, tariffs will have increased by less than inflation since the last general change in 2012.
In determining its application, the STSB commissioned an independent review of the tariff proposals, and a separate independent review of the company’s proposed investment programme. It also considered the results of a public consultation, which was carried out by Guernsey Electricity earlier this year.
Under the STSB’s zero dividend policy for Guernsey Electricity, all profits generated by the company will be reinvested in the best long-term interest of islanders.
