‘Tariff increase does not look good for us’
GUERNSEY Electricity admits it has a perception problem with inflation-busting tariff increases coinciding with the end of independent regulation of its prices.
This time last year, deputies took control of tariffs away from the Guernsey Competition & Regulatory Authority and handed them to the States Trading Supervisory Board, which also acts as Guernsey Electricity’s shareholder.
At that time, tariffs had remained largely unchanged for many years.
Since then, they have gone up by an average of 9%.
Guernsey Electricity is proposing another increase averaging 14% this year, and has warned of further rises of at least 7% over each of the next few years.
Control of tariffs was removed from the GCRA after the States and the utility company criticised the regulator for keeping prices too low to allow essential investment in the island’s electricity network. The GCRA maintained that independent regulation of tariffs remained necessary to protect consumers.
But Guernsey Electricity’s chief executive Alan Bates admitted that the perception did not look good for the utility.
‘While it’s great that we can start passing some of these costs through [to current consumers], that legacy is not a great position for us to be in.
‘We can’t fail to invest. We would then see worsening reliability and more faults, because the infrastructure and equipment are old.
‘Because we couldn’t increase profitability in the business, we had to do it by debt. We have put a big burden on tomorrow’s customers so that we could keep the lights on for today’s customers.’
Tariff changes proposed by Guernsey Electricity now require the approval of the States’ Trading Supervisory Board. The company insisted the board was not an easy touch.
‘I’d like to reassure customers. The scrutiny we are receiving from the STSB is as vigorous as it was from the regulator [the GCRA],’ said Mr Bates.
‘A lot of the same individuals are involved in scrutinising that. We have also now put in more formal efficiency benchmarking, leading to an efficiency review, and also tariff benchmarking, so that customers can be assured we’re not a million miles away from other places.’
Karl Brouard, the company’s chief financial officer, insisted the STSB was ‘very robust’ with applications to increase tariffs. Benchmarking with other jurisdictions was done independently.
