STSB testing the waters on commercialising utility

States Trading Supervisory Board president Peter Roffey asked senior officials to reassure employees after the board’s vice-president, Charles Parkinson, told the States Assembly that proposals to commercialise Guernsey Water would probably be published before the end of the year.

‘We are putting something out to staff to explain that we are early in this process and that they, and their representatives, will be fully consulted before we take anything to the States,’ said Deputy Roffey.

‘A final decision has not been made, but it’s fair to say the board is warm to the idea of commercialising unincorporated trading assets and sees Guernsey Water as the most straightforward and seamless to commercialise.

‘I think it would take several years. It must not take five or 10 years. Once you decide something like that, you have got to move at the quickest speed which is safe. But I would think it could take two years, possibly as long as three years.’

Guernsey Water is currently run in effect as a department of the States. Commercialisation would turn it into a business wholly owned by the States but without political involvement in operational issues, which is the current status of Guernsey Electricity and Guernsey Post.

Deputy Roffey said that commercialisation would make Guernsey Water ‘more nimble, agile and responsive’ and potentially allow it to borrow at lower rates of interest if the States merged its trading companies into a single group, which is another idea being studied by the board.

Guernsey Water recorded losses in each of the past four years and has forecast not returning to profitability in the short term. During that time, it has tried to keep down customers’ bills and has increased charges by less than the rate of inflation.

Deputy Roffey denied that the utility’s losses were driving his board’s proposal for change and warned that the need for essential investment in the water and waste water network would inevitably require higher user charges in the years ahead, whether or not the utility was commercialised.

In the States Assembly, Deputy Parkinson said he was leading a review of ‘three trading assets as possible candidates for commercialisation’. He named two, Guernsey Water and the Ports. The Guernsey Press understands that the third was States Works.

But the board anticipates proposing only one commercialisation – Guernsey Water – before the States term ends in June next year.

Deputy Roffey admitted that he would have preferred his vice-president not to have revealed the board’s thinking on Guernsey Water at this week’s States meeting.

‘I had my head in my hands thinking “oh my goodness, if anyone has tuned in to the States in their Guernsey Water van, they will be wondering what on earth this means for them”,’ he said.

‘There is still a long way to go, not least because we need to talk to stakeholders.

‘We need to talk to the Policy & Resources Committee to see if we can persuade them that this is the right direction to move in. That is going to be in weeks rather than months.’

The last independent review of Guernsey Water, carried out by the Wales Audit Office in 2006, concluded that commercialisation would not be worthwhile.

‘Guernsey Water is currently performing well when compared to many of the UK water companies, all of which are private sector organisations,’ it said.

‘It is difficult to see how pursuing commercialisation to introduce a private-sector culture would add anything of greater value.’

Deputy Parkinson told the States Assembly that the commercialisation of the harbours and airport was ‘not out of mind’ and was ‘something which in principle we [the board] would like to do’, but he added it was for ‘further down the line’ because of the Ports’ finances.

‘You can’t simply incorporate a company and then set it free when it has quite clearly got an unsustainable financial position, which there would be a grave risk of with Guernsey Ports,’ he said.

The STSB is also responsible for two other unincorporated trading divisions of the States – the dairy and waste operations.