GEL: tariffs would have gone up 20% without a reliable link
GUERNSEY ELECTRICITY has reached a settlement with the manufacturer of the subsea power link to France via Jersey that failed and required replacing.
A spokesman for the publicly-owned utility said: ‘The cable replacement project total cost is £30m., which includes the NKT manufacture and installation contract (after commercial settlement) and various other activities associated with cable surveys, UXO (unexploded ordnance) clearance and land-based works.
‘A commercial settlement agreement has been reached between GEL and NKT in lieu of the existing cable’s historic performance as part of this contract.
‘The terms of this settlement remain commercially confidential.’
Guernsey Electricity has said that the replacement cable will be funded by long-term debt using both commercial loan facilities as well as the States of Guernsey bond.
‘By financing the replacement in this way, the impact on today’s consumers in terms of operational and capital costs is optimised,’ said the company’s chief executive officer Alan Bates in its latest annual report.
The same report also set out the impact of the failure of the old GJ1 cable and ‘continuing regulatory uncertainty’ – and how not having a reliable link to France could have seen tariffs jump by a fifth and emissions rocket.
‘The resultant short-term impact on Guernsey Electricity’s performance is at a level with no parallel in its 118-year history,’ said Mr Bates.
‘Strategically, the planned replacement of GJ1 was brought forward from 2030 and an opportunity was taken to secure the installation of a replacement cable in late 2019. This involved completing all the procurement and contractual activities in an extremely short period.
‘The board’s decision to replace was based on the continued risk of supply failure and the impact this would have on customer reliability and affordability.
‘There is a significant opportunity to reduce operational cost by early replacement.’
He added: ‘Without a reliable cable connection to France, security of electricity supply to the island would continue to be adversely affected and the additional cost of generating on-island would be between £11m. and £17m. a year, with an associated 216,000 tonnes of carbon dioxide produced.
‘If these additional costs had to be passed on to customers, it would have resulted in over a 20% increase in tariffs.
‘Even if the cable was repaired again, at a cost of between £5m. to £8m., there was no certainty that it would provide a reliable supply.
‘The board’s view was that this was a totally unacceptable operational and financial position, and the alternative approach of replacing the cable, which provided certainty about security and price of electricity, was the only appropriate way forward.’
