6.8% electricity rise on way

If confirmed, as appears very likely, the increase will be in place for three years from July to allow Guernsey Electricity to recover £9.8m. in uncontrollable costs primarily related to oil prices and exchange rate movements between April 2017 and March this year.

Among five responses received to the non-statutory consultation on the proposal was one from Sure arguing the rise would have an impact on competitiveness and profitability for the telco and Guernsey as a whole.

Another individual response called for an investigation into GE’s ‘huge losses’ from FX trading.

In its decision notice, the Guernsey Competition Regulatory Authority said: ‘It is not good practice to second-guess regulated entities’ hedging practices based on hindsight, and losses made as a result of hedging are not necessarily an indication of poor decision-making, given that hedging usually aims to exclude both upside and downside risk.

'Hedging against adverse price movements over periods significantly in excess of one year is also not easily achievable.

'As such, the GCRA does not consider a consideration of GEL’s hedging practices to be relevant to the current cost pass-through claim.’

In the face of concerns about the totality of this and other cost of living rises islanders face, particular on lower income households, the regulator said that the cumulative effect of a range of taxes and charges with different aims lies outside its remit.

‘The GCRA believes that such aggregate effects fall more properly to the States of Guernsey for consideration.

'With regard to the individual impact of this price change on different sectors of society, the GCRA bases its decision-making in part on the assumption that the user of utilities pays for services at a price which reflects the cost of those utilities.

'Where the reasonable cost of such utilities causes undue hardship, this is a policy matter which also falls to the States of Guernsey for consideration.’

It said that analysing the request showed that the recent cable fault with Jersey only had a relatively small impact, while commodity prices and exchange rates were much greater.

GE has agreed with the States' Trading Supervisory Board that any profits in this three year period would be retained and not paid to the States.

‘In any future full review of tariffs the GCRA will require evidence of improving efficiencies in the operations of GEL and should any such review show that this pass-through amount was materially excessive it could be recovered in the course of future price controls.’

The GCRA said it is ‘inclined to find’ that the maximum unit tariffs charged by GEL should be increased by 6.8% for three years from 1 July.

The regulator will now progress to its statutory notice of proposed decision.

‘While the GCRA considers any decision made as part of the pre-statutory process to be the starting point for later parts in the process and as a statement of its current expectations, this decision is not binding on any party until such time as it has been included in the statutory notice of a final decision.’