Time is right to reform utility regulation

You rightly observed that this is a '... real test of the States' ability to mix public sector values with commercial interests'. I could not agree more. One of the core objectives for Treasury's Supervisory Sub-Committee will be to balance the financial returns from our trading assets with the role they play in supporting the island and its social, economic and environmental objectives.

Any suggestion that the companies are being deregulated could not be further from the truth. However, the Treasury and Commerce and Employment departments do not believe that the current model, designed for profit-maximising privately-owned utilities in the UK, is an appropriate model for Guernsey. What they are proposing is an alternative and more cost-effective form of regulation.

A previous review of utility regulation in Guernsey by the independent Regulatory Policy Institute (RPI) questioned the existing CICRA regulatory arrangements in terms of value for money for the consumer. As your newspaper has reported, the cost of CICRA's fees to GEL alone between 2010 and 2014 was in excess of £500,000 and GEL incurred over £600,000 more in compliance costs. With an average of around 29,400 customers over that period, that amounts to over £37 per electricity customer. This is a significant sum for many working households and consumers. The sub-committee estimates that its annual running costs will total under £50,000, to be recovered from the four companies for which it has oversight responsibilities (GEL, GPL, Aurigny and Jamesco 750), resulting in substantial savings for GEL and GPL and, more importantly, their customers.

The RPI recommended that Treasury should take on a more proactive role as shareholder and its sub-committee has been established to do just that. The sub-committee has already put in place and published clear shareholder objectives and key performance indicators (KPIs) for the companies.

It is now monitoring and will publish their performance against these KPIs, with a focus on ensuring the businesses deliver cost-effective and innovative services which are responsive to their customers' needs and that they operate efficiently and responsibly in the best interests of the community.

The objectives include:

• Guaranteed customer service standards that the companies must meet;

• A requirement to undertake periodic reviews of their efficiency;

• In the case of Guernsey Post, a requirement to maintain its universal postal service obligations;

• In the case of Guernsey Electricity, a target to reduce its average tariffs.

Treasury has recruited three experienced business leaders to advise its sub-committee. They have a broad mixture of skills and experience, including strategic direction, relevant regulated industries, operational efficiency and performance reviews. As a former chairman of both National Power and the UK Government's Sustainable Energy Policy Advisory Committee, I have to challenge the suggestion made by some of your correspondents that we lack sufficient or relevant experience. We have taken on the role on a voluntary, unpaid basis and, being Guernsey residents and neither politicians nor civil servants, our sole focus is the long-term interests of islanders. We also have access to the same external benchmarking resources that has previously been used by CICRA.

Times have changed since the current regulatory model was introduced in 2001. CICRA has removed price controls from Guernsey Post after acknowledging that significant changes in the postal market meant they were no longer warranted. CICRA itself has also suggested moving to a less active system of regulation for Guernsey Electricity, also based on a form of benchmarking. Given all the above, both departments feel the time is now right for the more substantive reform of the existing regulatory model that they are now proposing to the States.

SIR JOHN COLLINS,

Member,

Supervisory Sub-Committee,

Treasury and Resources.