Comment on Electricity Tariffs P.41/2009.

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A decision made(03/09/2009) regarding: Comment on Electricity Tariffs P.41/2009.

Decision Reference: MD-TR-2009-0151
Decision Summary Title:	Comment on P41/2009: Electricity Tariffs: Regulations under Article 22 of the Electricity (Jersey) Law 1937		Date of Decision Summary:	2 September 2009
Decision Summary Author:	Strategic Investments Manager		Decision Summary: Public or Exempt?	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:	N/A
Written Report Title:	Treasury and Resources - Electricity Tariffs Comments in response to P41/2009		Date of Written Report:	2 September 2009
Written Report Author:	Strategic Investments Manager		Written Report : Public or Exempt?	Public
Subject: Electricity Tariffs: Regulations under Article 22 of the Electricity (Jersey) Law 1937 (P.41/2009) – comment.
Decision(s): The Minister approved a comment on Electricity Tariffs: Regulations under Article 22 of the Electricity (Jersey) Law 1937 (P.41/2009).
Reason(s) for Decision: To enable the Minister’s comment on P41/2009 to be presented to the States.
Resource Implications: Other than those detailed in the report there are no further financial or manpower Implications.
Action required: States Greffe to arrange for attached comments to be presented to the States at the earliest opportunity.
Signature:		Position: Senator P F C Ozouf, Minister for Treasury and Resources
Date Signed:		Date of Decision:

Comment on Electricity Tariffs P.41/2009.

Treasury and Resources

Electricity Tariffs Comments in response to P.41/2009

Electricity Tariffs: Regulations under Article 22 of the Electricity (Jersey) Law 1937

This comment relates to the impacts this proposition has on the States’ shareholding in Jersey Electricity Company (J.E.C.) and other revenues earned by the States from the J.E.C. The comment is made in conjunction with the comment Economic Development will release later this week.

If the current tariffs were reduced by 20%, this would impact the J.E.C.’s profitability in future years. The company estimated that the JEC would suffer reductions in their profits of around £15m per annum on current levels. Therefore 2008 profits of £9.8m would translate into significant losses for future years. Implications are that JEC would then elect not to declare a dividend and therefore the States would not receive any shareholder return on its investment in JEC. (2008 dividend received was £1.8m)

No calculations have been carried out to ascertain the significant impact this proposition would have on the longer term market valuation of J.E.C. and thus its share price. However, it is clear that potential future year losses will negatively impact the Net Asset Value of the company, leading to a decline in the value of the States Investment in J.E.C.

Estimated savings to States departments running costs as a result of the reduced prices are about £1.2m per annum. However the Treasury would suffer £4.7m in lost income; £1.1m reduced taxation income; £1.8m dividend income and £1.8m as a result of J.E.C.’s opportunity to reclaim prior year tax losses.

In summary, the States would suffer an overall net loss in the magnitude of £3.5m per annum, plus, probably a substantial reduction in the value of its shareholding if this proposition is approved.

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