Electricity standing charges set to rise by more than 35%

The States’ Trading Supervisory Board approved the utility looking to raise revenues by 10% – less than the 12% Guernsey Electricity was asking for.

While usage charges are only rising by 5.5% for standard tariffs, standing charges are set to increase from £49.50 to £68.25 per quarter from 1 July. The increase was permitted to handle rising import and generation costs, and fund essential investment in maintaining the local network.

STSB president Peter Roffey said the move followed years of under-funding.

‘It is a regrettable that Guernsey Electricity had to apply for such a significant increase in tariffs, but this is a nettle that had to be grasped,’ he said.

‘We have fortunately avoided the crippling increases in energy bills that have been seen elsewhere. However we are still playing catch up after years when there was no increase in base tariffs under the previous regulatory regime.

'It kept bills artificially low, and starved Guernsey Electricity of the funds to adequately invest in the network. Customers now are having to pay the price of that, so we do not repeat that mistake and burden future consumers.’

The increases are weighted towards the higher standing charge, which can penalise customers who use little electricity, as they pay the same per meter as customers with much higher consumption.

However, currently about 90% of GEL’s income from electricity sales comes through charging customers for the amount that they consume, not the standing charge.

The cost of importing or generating this electricity only represents around 50% of the company’s total annual expenditure. The rest is spent on maintaining the power station and mains distribution network.

Electricity prices have been rising sharply in the UK, but GE’s forward pricing contracts had protected local bills. But as they expire, import prices have increased.

A benchmarking exercise last year found that electricity bills in Guernsey were among the lowest in the British Isles in 2022.

Between 2021 and 2024, the company will have spent more £30m. in maintaining and upgrading the local network, much of which has been financed through borrowing. In its decision notice, the STSB said reducing debt remained ‘a commercial imperative’, but any increase in tariffs had to be balanced against the impact on consumers during a period of relatively high inflation.

Deputy Roffey said that the 10% revenue cap would be sufficient to enable GEL to deliver its "base-case" capital investment programme and would mean ultimately that it would no longer have to take on additional debt to fund that programme, a year later than the company wanted.

STSB has also set an efficiency target that is expected to save customers more than £1.65m. over the next four years.

Under the STSB’s zero dividend policy for Guernsey Electricity, any surplus generated by the company will be reinvested in the long-term interest of islanders.

GEL CEO Alan Bates said that 'kicking the investment funding can further down the road by borrowing more is not a sustainable option'. Today's costs needed to be recovered from today's customer, he said.