Principles Have to Be Flexible?

Manx Utilities may have deviated from its pricing principles when it set the new tariff for electricity price increases on the island.

David Ashford was asked by Chris Thomas how Treasury is represented on the board and how pricing principles laid down in October 2018 were applied to prices for 2021/22 and 2022/23.

Mr Thomas outlined that the pricing principles talk about the financial sustainability of Manx Utilities and that ‘most importantly, prices should reflect cost recovery and they should be cost reflective’. He asked Mr Ashford if he was happy these had been followed and if the tariffs were ‘risking the financial sustainability of Manx Utilities’.

In his response, Mr Ashford said that the issue of financial sustainability is a matter for the board but did admit that the principles may not have been followed.

He said: ‘As with all these wonderful documents, pricing principles are great in practice (we assume he meant theory) but sometimes it has to be recognised that various different principles can conflict with each other and judgment is then required to consider as to how these conflicts can be reconciled and which principles should take precedence over the other given the circumstances.

‘Considering we are in very unusual circumstances at the moment, particularly in relation to the cost of gas, I think, you know, Manx Utilities’ board has to navigate how it applies those principles in a fair way that ensures that the business is sustainable but then equally that their customers are not put to serious detriment as well.’

Exceptional Circumstances

Mr Thomas, who said when there are exceptional circumstances it is the duty of Manx Utilities to approach the Treasury to set out the issue and offer alternative proposals, in line with the pricing principles, asked the Minister for clarification as to whether this had occurred.

The Minister said: ‘Let’s cut to the chase, I assume what the Hon Member is trying to get to is did the Manx Utilities Authority approach Isle of Man Government in relation to the recent fluctuations we’re seeing around the world and also how did that apply to the decision that has been made in relation to the setting down of tariffs, which is what I assume the Hon Member is drilling down to.

‘In relation to Manx Utilities meeting with Treasury during the setting of tariffs, MU and Treasury officers held various meetings about the level of tariff increase required for 2022/23 and the impact that different tariff increases have on MU’s finances. In addition the chair, chief executive and finance director were asked to attend a meeting of the Treasury Board on February 14, which was an opportunity for them to answer questions which the board might have had regarding any tariff proposals. But in terms of tariff proposals, that ultimately is a decision for the MU board and the MU board made that decision accordingly.’