Conflict of interests in Alderney's tidal energy project must be resolved

I refer in particular to Mr Wordsworth's response late last month to the Chief Pleas of 14 September, in which he attempted to defend Acre's recent actions, most notably the questionable loans he and the other commissioners have made to ARE. There have, almost needless to say, been many eyebrows raised over the seeming conflict of interest caused by the fact that the regulatory authority – Acre – has seen fit to lend money to ARE, the entity it is supposed to be overseeing.

Ah, but Mr Wordsworth has a rebuttal to that. 'The fact that Acre (the regulator) currently holds a loan note in ARE (the licensee) is not a conflict of interest,' he writes. 'Until ARE submit an application for consent to deploy tidal turbines then there is nothing for the regulator to regulate.'

I hear a hair being split. Are we to believe, as Mr Wordsworth suggests, that the 'licensee' (ARE) of the tidal energy around Alderney – something licensed from the States and Acre – has no relation to Acre? If not, why then is there a regulator if there is nothing to be regulated? And if there is no relationship between Acre and ARE, why is the latter paying licence fees (aka 'block fees') to Acre?

And, more perplexing, why is a regulator – sorry, an entity that is regulating no one – lending money to anyone? And worse than that, why is it lending money to the company that, through its licence fees, pays any expenses or salaries (£361,624 in 2015) that the commissioners may be collecting?

Stay with me – there is worse to come.

Mr Wordsworth then goes on to claim that: 'It is incorrect to say that the loan note 'arose from ARE's inability to pay the block fees',' adding that 'Acre made a conscious decision to roll 18 months of block fees into a loan note which carried an attractive rate of interest and, more importantly, can be converted into equity in ARE if the SOA (States of Alderney) believes that is in the best interests of the people of Alderney.'

In other words, Mr Wordsworth and his fellow commissioners have made a 'conscious decision' to become a bank (with no explanation as to why they made this decision). A bank that decided it would just hand over hundreds of thousands of pounds, seemingly on a whim.

This, however, does not square with Acre's 2015 financial statement, which was included the September 2016 billet. In there, the Commission states that: 'As a result of the very significant level of expenditure on the Fab Link surveys during 2015 the Commission has agreed to draw up and accept a loan note for the 2015 block fees.'

Does 'a result of the very significant level of expenditure' not strongly suggest that ARE, perhaps stretched for cash, was unable to pay the money? Or is Acre doing this out of the goodness of its heart? Or can I hear more hairs being split? Again, mind-boggling.

Mr Wordsworth then goes on to address conflict-of-interest. Interestingly, despite his insistence that Acre is not regulating ARE and that there is no conflict of interest, he then baldly admits that it exists.

'Acre already has a major conflict of interest,' he states, 'that has nothing to do with the loan note; namely, that 100% of Acre's income comes from a commercial agreement administered by Acre on behalf of the SOA with the entity that it will regulate if a tidal energy consent application is received. This is highly irregular but, in the case of Alderney, completely unavoidable.'

Highly irregular, indeed. This despite the Acre website's claim that the commission will 'operate in an impartial, efficient and professional regime to regulate renewable energy.'

Adding insult to injury, Mr Wordsworth then goes on to say that, 'Managing these conflicts on a small island with very limited resources, a tiny government and a miniscule civil service is part of everyday life.'

That, as they say, is a pathetic cop-out, a weak rationalisation that is not rational.

He then adds: 'We are happy to receive suggestions as to how this conflict of interest can be avoided.'

Well, I have one:

First is that Mr Wordsworth should never have accepted this position. Why in Heaven's name is he heading a commission that has licensed and is receiving money from a company, ARE, run in large part by the best man at his wedding, one Declan Gaudion? In other words, Mr Wordsworth's commission is being paid for in part by his best pal, Mr Gaudion, who is the Alderney lifeboat coxswain and ARE's executive director and co-founder.

While both men would no doubt say – and which may in fact be true – that they are upstanding and can easily separate their business and personal relationships, the problem is obvious. It is called optics. Conflict of interest is not just to be avoided, it has to be seen to be being avoided. This clearly is not the case here.

It is essential for the reputations of everyone – Messrs Wordsworth and Gaudion, the States, the Gambling Commission (which relies on an excellent standing to attract business to the island) and more – that such stark variances from accepted and acceptable practice are averted.

Beyond this, it seems to me outrageous that the States sanctioned Mr Wordsworth's appointment. The obvious course of action would have been to go off-island to find the commissioners, seeking out disinterested parties with the knowledge to effectively manage and regulate Alderney's tidal energy. Instead, because of the States' lack of competent oversight, both in regard to Acre and, now, the Fab Link cable (50% owned by ARE) and the possible power converters that will blight the Mannez area, we are faced with a medley of possible insider dealings, lack of transparency and potential breach of trust.

In that regard, the whole Acre/ARE conflict-of-interest debacle calls into question the States' ability to deal fairly and effectively with the pending decision as to whether the Fab Link cable should be dug across the east end of the island. The evidence so far suggests they are not.

In conclusion, I strongly suggest that the States invite Mr Wordsworth's immediate resignation (and those of the other commissioners if similar conflicts exist) and appoint a truly independent body in the manner outlined above. In addition, the loan note between Acre and ARE should be torn up and the money, which belongs to the people of Alderney – not Acre or ARE – be returned immediately. If ARE truly is not short of cash, as Mr Wordsworth maintains, that should not present a problem.

Further, authorities beyond Alderney should be called in to investigate the whole ARE/Acre/Fab Link fiasco, which has all the trademarks of the goings-on common in a banana republic. The island can surely do better than this.

MATTHEW DIEBEL,

139, East 94th Street,

Apt 6B,

New York,

NY 10128-1761.

Editor's footnote: Acre's chairman, Mr M. G. Wordsworth, responds: Thank you for allowing me the opportunity to reply to your correspondent from New York.

The debate surrounding the tidal power project and the Fab Link is possibly one of the most important issues that Alderney will face for at least a generation. It goes to the heart of what the island is, should be or could be. However, this debate is unlikely to be advanced very far by abusive and vitriolic rants of the type indulged in by your correspondent.

The temptation is to ignore letters of this nature. However, there are many people seeking to understand all the issues in a measured and intelligent way and on their behalf, I have tried to provide a detailed and comprehensive response to all the points that your correspondent has raised.

I believe that your correspondent is angry and upset because there are proposals for an HVDC interconnector cable ('Fab') to potentially be laid across land close to his family's holiday house and in addition, he is concerned that several years later that there might be a convertor station constructed in Mannez Quarry, in very close proximity to the house.

If this is the case, then I am unclear as to why this has anything to do with the Alderney Commission for Renewable Energy ('Acre') or with myself personally.

Fab is a trans-national HVDC interconnector that plans to transmit carbon sourced and nuclear generated electricity from France to the UK. There is no renewable energy component to Fab. As a result, Acre, whose only remit is to deal with renewable energy, has had nothing to do in any way, shape or form with anything concerning Fab, the easement agreements and the potential route of the cable across the island.

In a similar vein, Alderney Renewable Energy Ltd ('ARE') were granted an option to take a lease over Mannez Quarry as the potential site for an electricity convertor station by the States of Alderney ('SoA') in 2010. Again this was absolutely nothing to do with Acre. The approval of the siting, design and construction of any convertor station will be the responsibility of the SoA Building and Development Control Committee presumably guided by the Land Use Plan. Your correspondent might be right to be angry in regards to what he perceives as a lack of due process in such matters. It is not for me to comment. However, could I perhaps request that he directs his anger towards those individuals and institutions that do have responsibility for these decisions rather than towards those of us who have absolutely no responsibility at all.

If I could move on to some of the detailed points raised by your correspondent.

The Chief Pleas is a time honoured forum and those who speak are entitled to full and proper answers to their questions. Acre has gone to some considerable lengths to provide each speaker with very detailed answers to the points that they raised. All the responses given were factually, technically and legally correct and not, as your correspondent seems to believe, 'the splitting of hairs'. The various documents that govern the renewable energy

Statutes, Ordinances, licences and commercial arrangements are quite complex and the only way for questions to be properly answered is to be absolutely specific and technically correct in a way that I think your correspondent has misconstrued. I hope to illustrate this point in the following paragraphs.

One of the greatest causes of confusion and contention in the debate so far is that people cannot understand why Acre is involved in both regulatory decisions and commercial decisions (which are being perceived as conflicts of interest). The reason for this is that when the SoA entered into these arrangements with ARE in 2008 it made a decision to incorporate both the commercial aspects of any renewable energy project and the regulatory aspects into a single document for which Acre was given responsibility. With the benefit of lots of hindsight this approach was fundamentally flawed and has led to many of the issues and confusions that we are all debating at the moment.

The ruling document is the 'Agreement and Licence Under Part II Section 9 of the Renewable Energy (Alderney) Ordinance, 2008' ('the Agreement') which runs to 69 pages.

This document incorporates both the commercial arrangements with ARE that were negotiated and agreed by the SoA (block fees, AEL payments, generation fees etc.) as well as licensing framework that was established by Statute and Ordinance. Why anyone thought that this was a good idea is not clear – I wasn't involved at the time. The Agreement states on page four that Acre in going about its duties would be acting either: '(i) in exercise of the powers granted to it by resolution of the States of Alderney dated 10 November 2008 pursuant to a power contained in section seven of the Principal Law ('its non statutory function'); or (ii) in exercise of the powers granted to it under the Principal Law and Ordinance ('it's statutory function').'

Thus, currently Acre is responsible for both administering the commercial aspects of the agreement that are a matter for contract law and regulating any licences that would fall under its statutory powers. As ARE have not yet applied for an Operating Consent to deploy any turbines then in reality Acre has nothing to regulate. Our activities to date have largely involved the administration of the commercial agreement. Hopefully your correspondent can now see why I stated that Acre currently has nothing to regulate.

However, the problems stemming from the co-mingling of the commercial interests and the regulatory consents were recognised over three years ago and, thanks to a lot of work by the law officers to the Crown in St James Chambers in Guernsey over that period, the Agreement has been diligently unpicked and redrafted and two new standalone documents have been created; a commercial agreement that will be between the SoA and ARE (or any other future renewable energy operators) and a separate document that contains the licensing arrangements that will, in the first instance, be between ARE and Acre. These documents have been recently distributed in draft to all parties and are circulating for comments.

As a result, in the future, if these documents are accepted and executed, all matters to do with any of the commercial aspects of the tidal power project (e.g. the deferment of block fees) will be the responsibility of the SoA who are directly accountable to the people of Alderney. Acre will become solely a statutory regulator with responsibility only for the regulation of renewable energy licences (if any exist). These revised arrangements will bring much greater clarity as well as removing many of the potential perceived conflicts of interest. They will also deal with another issue that I raised in the responses to the Chief Pleas; namely, that the various fees would be paid directly to the SoA who could then choose to fund Acre (or a successor body – see my comments below) as it saw fit thereby removing the inherent conflict of a regulator being funded by the entity it regulates.

Acre has nothing to regulate until ARE (or any other tidal operator) submits an application to deploy turbines. At this point a very extensive consultation and evaluation process commences and this is where the real work of the regulator begins. For anyone who wants to research the matter further and get a proper understanding of how the licensing and consents process works there is an 11 page guide on the Acre website (go to www.acre.gov.gg, click on 'Document Library' and then click on 'Marine Licence and Consent Guide'). Acre do not believe that ARE will submit an application for an operating licence before 2018 and nothing that ARE have said or done has led us to believe that our understanding is incorrect. It may even be that the consent application is received much later than 2018 and possibly into the 2020s. It all depends on when somebody manages to develop commercial scale tidal turbines that are operationally reliable and economically viable.

Once the changes are effected as referred to above, Acre will have no responsibility for the commercial arrangements and, as highlighted above, no operating licence applications are anticipated before 2018 at the earliest. Therefore, it is a moot point as to whether Acre needs to exist in its current format. The very long and uncertain timeline clearly brings into question the need for having a statutory regulator staffed and ready to go when there may not be anything to regulate for several years to come. I first became involved in 2005 as one of the original commissioners when Acre existed in shadow format. The expectation of all parties at that time both in Alderney and in other parts of the world was that that tidal power technologies would develop at a much faster rate. If we had known then that the timeline would be so long, no one would have rushed to set up a regulator.

Before we move on from Acre, I would like to address two points raised by your correspondent regarding the Acre commissioners, namely; why aren't we 'going off island to find the commissioners' and what are they paid.

Firstly, 'why aren't we going off island to find the commissioners?' As your correspondent has expressed such strident views, one might have expected that these views were based on a modicum of research given that all the information is in the public domain. For the record, of the three commissioners of Acre, Captain Robert Barton has absolutely no connection with Alderney or any persons based on Alderney and neither does Professor John Sharp. I obviously do have a connection. One might also like to consider the fact that the chairman of Acre has no special voting powers and there is no instance of any Acre decision being made on a split vote which means that every single Acre decision has been supported by the two completely independent (and majority voting) commissioners. My predecessor as chairman also had Alderney connections and similarly had a majority of independent commissioners and again all decisions were unanimous.

Secondly, in his letter your correspondent refers to 'any expenses or salaries (£361,624 in 2015) that the commissioners may be collecting.' The very clear implication in this statement is that this is the amount that the commissioners are claiming in salaries and expenses. The Acre accounts are made public and are freely available either in hard copy or electronically. In reading the accounts your correspondent clearly made it as far as page seven that shows in the income and expenditure account 'administrative expenses of £361,624' but obviously didn't make it as far as page 11 that shows how that amount is analysed. To save everyone else, including your correspondent, having to make the effort, I will provide a summary.

Of the £361,624 of Acre expenses in 2015, £200,000 comprised the payment to AEL that subsidises electricity bills on the island including those for holiday house owners. £35,000 was a 'management fee' charged by the SoA. Of the balance of £126,624, as note four to the accounts on page 12 states, 'during the course of the year, commissioner's fees of £41,924 were paid to two commissioners, Commissioner Mark Wordsworth, appointed chairman in April 2014 provides his services to the commission without charge.'

With regard to the convertible loan note, there is little to add that has not already been outlined in the fulsome replies to the various questions raised at the Chief Pleas although your correspondent has raised some further specific issues that I will address briefly.

Regarding the 'conflict of interest' answers given in response to the Chief Pleas, I could not have been more clear in explaining why I did not view the loan note per se as a conflict of interest but, interestingly, the way that Acre was funded was a conflict of interest. The fact that your correspondent is incapable of understanding the point I was making and his view that I 'baldly admit that it exists' makes me question whether he has the cognitive bandwidth to understand these issues.

Putting aside the rather puerile suggestion that 'the loan note should be torn up' (obviously it can't be – it's a legally binding document) your correspondent goes on to state that 'the money, which belongs to the people of Alderney – not Acre or ARE – be returned immediately.' Despite the evident lack of research on other matters, to be fair, this is a question to which your correspondent could not have known the answer, as indeed Acre didn't until two years ago. For totally unconnected reasons, Acre had occasion to ask the law officers what might be done with Acre's surplus reserves. The law officers confirmed that the reserves could only be used in the furtherance of renewable energy projects and did not constitute a 'general reserve' that could be distributed to the SoA and used for the benefit of the people of Alderney.

For the record, during the period of the loan note to date, ARE have paid £350,000 to AEL to subsidise electricity on the island. Without the loan note in place these payments might not have been made.

One of Acre's remits (as prescribed by Ordinance) is to act in the best interests of Alderney. This is a matter touched upon by your correspondent when questioning the loan note. In the opinion of Acre what is in the best interests of Alderney is to ensure that the debate on tidal power can be got to a point where everyone who wants to participate in the debate has got enough information to have an educated opinion one way or the other. There may or may not be enough information in the public domain for the Fab debate to be had now (and that debate has clearly started). However, we are definitely not at the point where we can have a debate about whether an offshore tidal power field and the attendant onshore facilities (cable runs, convertor station etc.) are something that the island would want or need. To get to that position, a tidal power operator would need to apply for an Operating Licence with everything that involves and I would really encourage people who are serious in participating in this debate to look at the Acre website (as referred to above) to see what such an application would involve and the very, very rigorous processes that follow. Without such an application all we have to discuss is the fact that one day some turbines (design unknown) might be put somewhere in 100 nautical square miles of Alderney waters (probably the Race), that cables will come onshore somewhere and that they will run into a convertor station (of unknown scale and design) somewhere (possibly Mannez Quarry). We cannot have a debate that may be crucial to many aspects of the future of life on Alderney for generations to come based on those very high level theoretical assumptions. It really is in everyone's interest to get to the point that a detailed operating consent can be submitted by a tidal developer so that the people of Alderney can have a full and informed debate and can say 'yes' or 'no' to tidal power projects and their associated on-island impacts. This is something that Acre has been trying to facilitate.

Three further matters are touched upon by your correspondent:

• Being a member of the lifeboat. Alderney (a small island community of c.1,000 adults) works as it does because many, many people contribute a significant amount of their own free time to help to provide key services that the local government has neither the human resources nor the financial resources to provide. Alderney has an amazing volunteering spirit. The island has a volunteer fire service, ambulance service and lifeboat service. There are groups of people working tirelessly on community service projects, plus the Alderney Week team, the Alderney Wildlife Trust and many groups who organize sports and social clubs for children and others. I apologise if I have forgotten some groups – I’m sure that I will have, precisely because there are so many. These people who give up so freely of their time form relationships as a result of their volunteering. However, I personally believe that it is specious to claim that relationships formed in this way amount to conflicts of interest. I consider it one of the greatest privileges of my life to have served on the Alderney lifeboat and it is obviously very sad that someone might view that service as a cause for abuse and derision.

• In his communication your correspondent also refers to 'a medley of possible insider dealings, lack of transparency and potential breach of trust'. Let’s leave that sort of talk for the lawyers to deal with.

• Finally, who would have thought, in possibly one of the most important debates on Alderney for a generation, that the arrangements surrounding my wedding would be a factor worth including in the debate? However, for those who are remotely interested, I can confirm that I did get married last year and as the 120 guests, that included the president of the States of Alderney, will be able to attest to, the best man at my wedding was my son Robin and not Mr Gaudion as your correspondent alleges. As Kelvin Mackenzie the former editor of The Sun once famously remarked, 'you just couldn’t make this stuff up'.