Gas customers have to benefit from fall in wholesale prices
IN THE last year we have seen Brent Crude oil prices fall from nearly US$110 per barrel down to USD$48, around 43% of its value. There is a link between the cost of oil and gas energy supply. This has meant that everywhere else in the UK domestic gas heating costs have fallen across the board. Every leading domestic gas provider has cut its supply costs to its users, some more than once. It's partly linked to the nature of a competitive market where consumers have a choice.
So what has that meant for the Guernsey consumer over the same period?
The common tariff is the Super Economy 24, which accounts for the vast majority of domestic consumers' costs. That has actually increased by over 7% along with the daily standing charge increase of nearly 3%. When questioned about these charges, vague statements like forward contract prices are actually quite weak. Or perhaps is it one of either two things:
First, a complete failure by management when compared to any of the UK suppliers in terms of price management, or, more likely, the single gas-source supplier's advantage combined with no effective gas regulator in Guernsey, which for a private company like Guernsey Gas can only be described as utopia – and a disaster for consumers.
There is no doubt the local government has some responsibility here to the public. It is allowing, through almost no control, a power supplier to effectively rip off local consumers without fear of interference from the States. Is anything likely to change? Sadly no, unless a formal States review of the supplier and how it works in the market is commissioned.
PETER HOBBS
Editor's footnote: John Davies, director, Guernsey Gas replies:
The unprecedented falls in wholesale energy prices during 2014 provided a rare opportunity for Guernsey Gas to re-negotiate the forward purchases that were in place for 2015.
For a number of years, the wholesale price of energy had seen significant increases. In order to reduce tariff volatility, we forward purchase our gas supplies and had done so for 2015. This is very common practice within the industry and the sudden fall in prices at the end of 2014 was not something which we or other energy companies could have predicted.
With prices continuing to remain unusually low, we were able to 'unwind' our 2015 position and blend it with future forward purchases. The result was that we were in a position to reduce our tariffs.
This was a complex process but it was a unique opportunity that, in the interests of our customers, we did not want to miss. As a result of this, tariffs were reduced by 3.5% from 23 March 2015 and as we have purchased the majority of our requirement, we don't expect there to be any significant changes to tariffs in the following 12 months.
