Friday 26 May 2023
The States' Trading Supervisory Board (STSB) has given approval for Guernsey Electricity to increase its revenues 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.
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.
"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," he said.
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.
The STSB's full decision notice and the findings of the tariff and efficiency benchmark reviews can be found at www.gov.gg/GELtariffdecision.
