Monday, 29 December 2008

Senator Breckon Replies - JEC Price Hike

I have received a reply from Senator Breckon, as follows:


Thank you for taking the time and trouble to get in touch regarding the proposed price increase by the JEC.

I should say that as Chairman of the Jersey Consumer Council I have met with some of the company directors and the senior management team on numerous occasions over the years to discuss levels of service and pricing.

I, with a colleague met last with the above on Thursday 25th September, as we had picked up from information contained in a company report that prices would increase by up to 25% from January 2009. The reason for meeting was to seek justification for this increase. We were shown information that demonstrated the European power market in which the JEC were buying (price wise) and that they were buying in Euros - which in itself meant a 15% increase because of the £'s weakness (at that time- since then it has weakened further) They explained that they wanted certainty of price which meant forward purchasing electricity supply at a given price - they explained that as the crude oil price was the driving factor they were purchasing supply in segments for 2009 and "hedging" the Euro against the £ to try to spread the risk and obtain the best deal for Jersey - at that time crude oil prices were still over $100 per barrel - so they are now locked into a deal that does not look very good for them or Jersey consumers as crude is now around $40 per barrel.

At the time of the above discussions I was not aware of company information or profits, recently announced.

Regarding the States holding which equals about 62% of the company - I have felt for a long time that there is a conflict of interest - because the Treasury Minister has a duty to maximise the public return - while on the other hand - the shareholder - the public of the Island - gets walloped with these large increases - so I do not believe that the public interest is best served at the moment also this effects people's very real cost of living - also this feeds into the retail price index and is inflationary so what exactly does the public benefit from this arrangement?

Also because the JEC are a publicly quoted ( on the Stock Exchange) they are limited in what they can disclose to the people of Jersey or publicly say. I am given to understand that the non States shareholders (some are UK institutions) are not content with the dividend they receive and complain if the company do not pass on any price increase in full + I have publicly stated that States should review its interests in JEC, Jersey Waterworks, Post & Telecom and decide how it may best proceed in the PUBLIC INTEREST - for example it may see the JEC as a "strategic asset" and consider buying the rest of it? - then again it may not?

I am not defending the JEC with the above - I am telling it to you how it was told to me.

Please feel free to publish this reply as you see fit

Regards Alan Breckon

A few questions spring to mind, but firstly, I'd like to thank Senator Breckon for his detailed and interesting reply.

  • What is the other States Members' involvement? Do they receive full and detailed, regular reports?
  • Has any States Member examined the terms of the "locked into" deal?
  • Just how definite is this deal and when does it end?
  • What is the current States participation? Do they have any say on the running of the company, on behalf of the public?
  • Should Senator Breckon not have been made aware of the profits, etc, at the meeting?
  • Who was the Treasury Minister at the time and what was his involvement?
  • The current arrangement of 62% States ownership is not working and what is going to be done about it?

Clearly, it is just plain wrong. How can the Treasury Minister aim for the best profits for the company and at the same time the best interests for the consumer?

From January we will all be paying a surplus in our JEC bills, some of which will be pocketed by UK companies. And we have no choice.

So what is going to happen? Will the States buy it or sell it, or seek to improve the conditions for the consumer? Or nothing at all?

4 comments:

Nick Palmer said...

Oil has fallen back to around $40 a barrel but this is only temporary. Peak oil is forecast to start affecting both price and availability in as little as five years time. Oil and energy prices will skyrocket and won't come back down again barring some miraculous new energy source being discovered. The lack of availability of cheap oil-based energy will cause the price of French nuclear/hydro energy to be bid up too.

ratleskutle said...

There are already proven renewable energy technologies and that is what I wish the JEC had invested in.

Even a temporary drop in oil prices means that Jersey consumers are still paying too much and the whole JEC structure needs examining. I've spent 5 plus years studying international environmental policy and I think there are ways to produce and supply power much more cheaply.

On the micro scale I'd like to see solar clubs, with enthusiasts offering advice to householders on setting up their own energy supplies.

Nick Palmer said...

Although some forms of renewable energy, particularly micro-generation, are currently regarded as more expensive than fossil fuelled energy, this is purely because the negative environmental and economic impact "externalities" of fossil fuels are not priced in.

Renewable energy looks much more favourable if the costs of climate chaos and the forthcoming oil price skyrocket, when peak oil hits, are factored in. It should be a no-brainer...

ratleskutle said...

The JEC is now saying that Jersey electricity charges compare favourably with the UK's and Europe's.

2 minutes online at Moneysupermarket.com shows that British Gas and NPower have unit charges of 9.75p and 9.34p compared to the JEC's proposed approx 12.7p per unit, with British Gas working out best overall and NPower easily comparable with a similar standing charge.

Even some of the green powers compare well. But we don't have that choice in Jersey.