Business
Consultation on Gas Profits and Debts
CURA said not doing so would incentivise the firm to reduce the level of investment in its network
The Communications and Utilities Regulatory Authority is consulting on whether Isle of Man Energy should be allowed to take on more debt and increase the return it is allowed to generate.
Under the current framework the Public Gas Supplier may generate a return that is based on ensuring that the business is financeable.
The return is primarily determined by the weighted average cost of capital (WACC) which is applied to the company’s asset base.
CURA said: ‘Based on the information provided the Authority has determined that the allowed cost of debt should be increased from the previously determined 4.30% to 6.35%.
‘The increase primarily reflects the increase in UK interest rates between the original determination date of March 2022 and when the refinancing was finalised in November 2022.’
Alongside this, the return allowed on the network business will increase from its current level of 5.45% to 6.48%, raising everyone’s tariffs by 0.2p per unit, equal to £16 a year per customer. based on current gas consumption.
CURA said: ‘Taking both of the above points into consideration, it is clear that in the short-term there would be a detrimental impact on consumers as the tariffs they are charged would marginally increase. However, this must be weighed against the cost of not allowing the increased cost of debt.
‘By not allowing for the increased cost of debt the authority would not only be undermining its own credibility (as it would be contrary to publically stated positions), it would incentivise Manx Gas to reduce the level of investment in its network over time which would also be detrimental to consumers.’
CURA is accepting responses by October 13, but it warned that the purpose of this consultation ‘is not to be a referendum, but an exercise to gather sufficient evidence with which to make the most informed decision possible’.
