REPORT TO THE MINISTER FOR HOUSING
Increase in Heating, Hot Water and Water Charges – May 2008
Purpose of the Report
To request the approval for an increase in Heating, Hot Water and Water charges to take effect from 12th May 2008. The increases in charges will reflect the significant changes in market pricing in addition to the introduction of GST.
Background
The Housing Department re-charges the cost of providing Heating and Hot water to some 1,357 tenants. All of this heating and hot water is generated from fossil fuels purchased by the Department. In addition the Department bulk purchases all water provided to States Rental homes by Jersey Water, recovering this at cost from all tenants on a weekly basis. Therefore, as the market prices of these commodities change the charge made to tenants must change.
The price of fossil fuels ostensibly oil and gas have been increasing steadily over the past 12 months indeed the combined oil and gas price has increased by 55% year on year. In order to minimise the number of changes to our tenants the Housing Department has absorbed a number of recent price increases.
Utility prices will increase by 3% on 6th May 2008 due to the introduction of GST. It is felt that this is also an appropriate time to increase charges in line with recent market changes.
Proposal
It is proposed to increase the charge for Heating and Hot Water by 18.5% on 12th May 2008 to reflect price increases across recent months.
It is proposed to increase the charge for Water by 3.9% on 12th May 2008 to reflect the market price increase effective from 1st March 2008.
In addition, it is proposed that all Utility charges are increased by 3% on 12th May 2008 to reflect the introduction of GST.
This proposal is made in accordance with the “user pays” principle. If Utility prices are not increased to reflect market conditions then we are effectively creating a subsidy to all States Tenants, thus ignoring the reality of the energy market. This position is not sustainable.
Impact on the Tenants
Income Support will increase to reflect GST so those tenants in receipt of income support will receive an increase to compensate for the additional costs arising as a result of GST.
A total of 1357 tenants will be impacted by the increase in the Heating and Hot Water charge. All tenants will be impacted by the increasing in standing Water charge.
Appendix 1 illustrates the impact on specific charges.
Recommendation
The Minister is recommended to approve the increase in Utility charges to take effect from 12th May 2008.
As the impact in 2008 exceeds the States Anti-Inflation target of 2.5% and the RPI(X) of 3.2% the Minister for Treasury and Resources will also need to approve the recommendation.
Claire Moscrop
Finance Director
18th March 2008
Appendix 1
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