The States have the power to act

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From Lyndon Farnham.

I RECENTLY wrote to all States Members asking them to request the JEC to hold or reduce the proposed 24 per cent increase in their tariffs which have become effective from 1 January 2009.

May I first set the record straight in relation to your correspondent, David O’Byrne, who stated that I, along with Senator Alan Breckon, supported bringing the company back into public ownership?

At this stage I do not. I am, however, concerned that a lack of competition or regulation in this market may present challenges moving forward, especially for the consumer. If there was competition or proper regulation in the electricity market, would the JEC still have been able to impose such large increases?

Closer inspection of the most recent preliminary announcement of annual results (September 2008) and previous financial statements of the JEC, lead to some further interesting questions:

• Can the JEC explain exactly what is causing the substantial rise in the price of imported power?

• Given the current cold weather, it is likely that unit sales will grow significantly in 2008/2009. Will the extra profit from this additional growth be used to reduce tariffs?

• he preliminary announcement of annual results issued in September 2008 state that from 1 January 2009 energy prices have been fully hedged to guarantee price stability for 2009. Does this mean that supply was purchased at a time in 2008 when energy prices were considerably higher than they are now, contributingto the 24% tariff increases?

• If so, why should the consumer pay for the (albeit well intentioned) error in judgment of deciding to hedge at the wrong time?

• ower importation levels rose to 96% in 2008 from 89% in 2007. They state that in 2007 a short-term fall in oil prices made it financially advantageous to generate power rather than import it. Given the current low cost of oil, can this not be repeated in 2009?

• Due to the high European prices that we are now paying, could we not sell our electricity to the French?

lIn recent years dividends to shareholders have risen exponentially – would it not have been prudent to issue slightly lower dividends and to build up cash reserves to ensure that large tariff increases could be offset?

• The JEC have undertaken a series of investments in subsidiaries, including Newtel, leading to losses and write-offs of many millions of pounds. How does this benefit the consumer?

• The JEC have been paying a peppercorn rent to the States of £1,000 per annum for the La Collette site for many years. Is this still the case? And if so, why?

Although I am yet to hear from the majority of States Members, correspondence from the Chief Minister suggests that if Members felt that the increases were unjustified, the appropriate way to deal with this would be through the Jersey Competition and Regulatory Authority. I have to disagree.

I proposed that the States should use its influence, as the major shareholder, to open dialogue with the JEC and to request that tariffs are held or the level of increase is reduced. If this proves unsuccessful, then the Electricity (Jersey) Law revised in 2006 has provision, where it appears to the States to be necessary to do so in the public interest, for the States to determine the tariffs to be made by the JEC in respect of the electricity it supplies.

If the States were to deal with the supply of power with the same zeal with which it has introduced competition to the telecoms market and encouraged competition in almost all sectors of the economy, then all may benefit. Until such time, the JEC will remain a largely unregulated monopoly.

Chant de la Mer,

Mont Rossignol,

St Ouen.

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