States Tenants: Utility Charges Increase

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A decision made 9 March 2011.

Decision Reference: MD-H-2011-0023
Decision Summary Title :	DS - Increase in utility charges to States tenants – April 2011		Date of Decision Summary:	23rd February 2011
Decision Summary Author:	Finance Director		Decision Summary: Public or Exempt? (State clauses from Code of Practice booklet)	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:
Written Report Title :	WR- Increase in utility charges to States tenants – April 2011		Date of Written Report:	23rd February 2011
Written Report Author:	Senior Management Accountant		Written Report : Public or Exempt? (State clauses from Code of Practice booklet)	Public
Subject: Increase in utility charges to States tenants – April 2011
Decision(s): The Minister - approved the increase in charges for gas heating and hot water to States tenants by 8.7% with effect from 18th April 2011. approved the increase in charges for oil heating to States tenants by 22.8% with effect from 18th April 2011.
Resource Implications: Financial: Increase in revenue of £730 per week for gas and £1,340 per week for oil, which will be fully offset by equivalent increases in the cost of supply.
Action required: Finance Director to notify the Treasurer of the States and to notify affected tenants and Income Support of the changes.
Signature:		Position: Minister
Date Signed:		Date of Decision (If different from Date Signed):

States Tenants: Utility Charges Increase - April 2011

Date of report 23rd February 2011

REPORT FOR THE MINISTER FOR HOUSING

Increase in Gas and Oil Utility Charges to States Tenants

Purpose

To consider an increase in weekly charges to States tenants who receive heating and hot water by communal gas and oil fired systems.

Background

A total of 751 housing properties are currently supplied either by communal or individual heating systems fuelled by either gas (423) or oil (328). The Department recharges the cost of the utilities to the tenants who receive this service. If the cost of the provision of the heating were not recovered the Department would effectively be giving a hidden subsidy to its tenants.

Gas

Following a review of charges in January 2009 the charge to tenants was reduced by 5%. Tenant charges for gas were later increased by 15% from 4th January 2010, 5% from 1st March 2010 and 16.75% from 8th November 2010. On each occasion the increase followed notification of an equivalent increase in charges by the supplier.

The Department has recently received notification from Jersey Gas that, with effect from 10th February 2011 it will be increasing the unit charge for gas by 8.7%, from 8.36p per unit to 9.09p per unit.

Oil

Charges to tenants for oil heating were last increased in December 2010 following a review of oil costs. Prior to that charges to tenants for oil was last changed in April 2009 and at that time it was reduced by 5%.

Between April 2009 and September 2010 oil prices had risen by a total of 49.6%, from 29.04 pence per litre to 43.42 pence per litre. The last general review of charges had been undertaken by the Department in January 2010 and given the fluctuations of prices in the market for oil and changes in consumption levels, it was considered appropriate at the time not to adjust the price to tenants. Between January and September 2010 oil prices increased by a further 18% and it was, at that time, felt appropriate to pass on the price changes to tenants.

Since the review conducted in September 2010 oil prices have risen by a further 22.8% and in order to ensure that the cost of supply is recovered this cost should be passed on to the end users.

Heating Replacement Programme

The Department is currently replacing existing fossil fuel systems with electric heating for which the tenants will pay the utility company directly for the power they consume. Since the last change in prices in November 2010, 130 tenants have had their departmental heating charges removed largely as a result of this programme, (10 units from gas and 120 from oil). This programme will continue for the remainder of 2011 and into 2012.

Impact of Proposed Increases

The following tables show the impact on individual property types of the proposed increase of 8.7% in gas and 22.8% in oil charges.

Gas Charges

Accommodation	Bedrooms	Current Weekly Charge	Increase	New Weekly Charge	Number of Units
		£	£	£
Bedsit	0	13.81	1.20	15.01	1

Bungalow	2	20.06	1.75	21.81	1

Flat	1	17.94	1.56	19.50	159
	2	20.68	1.80	22.48	180
	3	22.08	1.92	24.00	51

House	2	22.08	1.92	24.00	1
	3	23.48	2.04	25.52	7
	4	24.84	2.16	27.00	1

Maisonette	3	22.08	1.92	24.00	22

					423

Oil Charges

Accommodation	Bedrooms	Current Weekly Charge	Increase	New Weekly Charge	Number of Units
		£	£	£
Bedsit	0	11.56	2.64	14.20	6

Bungalow	1	15.02	3.42	18.44	1


Flat	1	15.02	3.42	18.44	49
	2	17.31	3.95	21.26	54
	3	18.48	4.21	22.69	4

Hostel	1	15.02	3.42	18.44	1

House	1	16.20	3.69	19.89	1
	2	18.48	4.21	22.69	65
	3	19.65	4.48	24.13	82
	4	20.80	4.74	25.54	26

Maisonette	2	17.31	3.95	21.26	36
	3	18.48	4.21	22.69	3

					328

Compliance with Financial Directions

Financial Direction 4.1 requires that any increases in charges should normally be limited to 2.5% and increases above this level must be referred to the Treasury and Resources Minister for approval. However, the Treasurer of the States, under delegated authority from the Treasury & Resources Minister, has granted an exemption to this requirement where the increase in charges made by the Department is directly offset by an increase in the costs in supply of the utility service. (TR-2010-DD24).

Recommendations

That the Minister;-

Approve the increase in weekly utility charges to States tenants by 8.7% for gas heating and 22.8% for oil heating with effect from 18th April 2011.

Housing Department

Report Prepared By: -

Jason English

Senior Management Accountant

……………………………… Date: 2011

Report Checked By: -

J C Hamon

Finance Director

……..………………………. Date: 2011

Authorised By: -

Carl Mavity

Director of Strategic Development

………………………………. Date 2011