Commissioner Anthony White has written to conseillers for their views as he considers a new tariff order as problems with the company continue.
Alan Jackson took over SEL in March and has claimed that there are no reserves to fund capital expenditure and some of the equipment urgently requires replacement.
‘There is nothing to stop SEL raising funds externally, from shareholders or banks, to fund capital expenditure. Mr Jackson is choosing not to do so,’ said Mr White in his letter.
‘He is advising you that he “will no longer underwrite SEL’s operational or capital expenditure” and warning that he may reduce supply to 19 hours a day.
‘You may ask how reasonable such a threat is when SEL has the opportunity to raise funds and chooses not to do so?’
Mr Jackson has argued that without statutory wayleaves in place for maintaining the company’s grid, SEL is commercially unviable.
‘It is perhaps surprising that the absence of such legal permissions was not apparent during due diligence enquiries,’ said Mr White. ‘This has, however, come to light following the decision by Mr Moerman to generate his own supply of electricity and his subsequent demand that SEL remove its equipment from the tenement of La Tour.’
The original owner of the electricity system on Sark, Mr Robson, negotiated wayleaves with the landholders on Sark on a voluntary basis. In return for annual payments of around 6d (75p in today’s money) per pole per annum, he was given access to maintain his equipment.
The previous owner of SEL, David Gordon-Brown, let the agreements lapse.
‘It is clear that SEL prospered during the 2010s and was commercially viable during the 2010s, despite the absence of wayleaves,’ said Mr White.
‘There is nothing to stop Mr Jackson seeking to negotiate wayleaves with any customer where a wayleave is required. I am sorry to have to say that his estimate of £175,000 for the legal costs of establishing the wayleaves is absurd. The old wayleaves could serve as a template for new agreements. The website of Scottish and Southern Electricity has templates which are available. It is simple and uncomplicated legal work which does not require the services of highly paid partners of Guernsey legal firms.’
He said that based on the charges paid by UK utilities, the annual costs would be around £1,600 per annum in total for all SEL’s cables.
On 3rd July, Mr White told Mr Jackson that four actual or potential own generators, including Mr Moerman, had informed him that they would rather stay connected to the SEL network, on the basis of a fair arrangement with SEL, rather than through the “buy-back” deal currently available.
Mr Jackson has provided conseillers with the profit & loss account for SEL for January to July 2020. It shows that the company made a loss of £6,365. Compared to the forecasted profit in the last price control order, this would represent a shortfall of around £75,000.
‘However, the operating loss was achieved after a depreciation charge of £39,513, which remains in SEL’s bank accounts. This indicates that SEL still managed to generate cash over the period of over £33,000.’
Mr White believes that SEL is able to maintain its operations within the current tariff cap of 54 p/kWh.