However, Senator Lyndon Farnham said that bringing in price regulation should not be ‘undertaken lightly’, adding that the government believes in a free market as well as ‘strong competition and strong regulation’.
He made the comments in response to a question raised by Deputy Kevin Lewis in the States yesterday asking what action the minister was taking to prevent gas prices rising beyond the reach of people on low incomes.
His remarks follow the news that Jersey Gas is changing its billing structure for domestic central heating from next month.
The company has previously said that the new billing structure would not increase the revenue that Jersey Gas received and that it would make it easier for customers to budget for the gas they use throughout the year.
Addressing States Members yesterday, Senator Farnham said that it was not currently proposed to introduce price regulation to the sector.
He added: ‘Formal price regulation is a significant step that would require the States to use exceptional powers contained within the law and should not be undertaken lightly, particularly because it would have costs associated with it that could ultimately be borne by the consumer.’
Yesterday Senator Philip Ozouf, who has responsibility for competition, said he did not believe that the Channel Islands Competition and Regulatory Authorities’ recent review of the Island’s gas market, which found that there were no reasonable grounds to suspect that it was breaching competition law, would give consumers ‘comfort’.
Senator Ozouf has since ordered the States Economic Adviser to meet the watchdog to agree additional analysis.
He added that if, following a second look at the sector, there was evidence to show that gas prices were unreasonable then he would bring forward ‘full price regulation of gas’.
During the States sitting Senator Farnham echoed those sentiments and said that the government would consider introducing price regulation if further work done by CICRA in conjunction with officers from his department uncovered evidence that the gas company was making excessive profits.
‘The government has taken action by commissioning this review,’ he said.
‘Ultimately, that would be the decision of this Assembly.’
SENATORS Philip Ozouf and Lyndon Farnham are right to call for another look at gas prices. In March, ministers agreed terms of reference for a detailed review by the Channel Islands Competition Regulatory Authorities of the energy market, looking into whether the open market was working properly for the benefit of consumers.
What was published last month was anything but a detailed report. It ran to 16 pages, with the consumer watchdog concluding that there were ‘no reasonable grounds’ to think that the market was not working in the interests of consumers.
It is hard to believe that CICRA could come to such a clear finding given the caveats which pepper the report. It says that the information received from Jersey Gas showed no evidence of excessive margins ‘based on the information provided’ (the watchdog did not use its powers under the law to force disclosure, but relied on voluntary submissions) and admits there is ‘no obvious comparator for benchmarking’.
It is not difficult to see why some ministers are so unimpressed with the watchdog.
Senator Ozouf, whose ministerial portfolio includes competition, has said that the report does not begin to give consumers reassurance that they are getting value for money – particularly those on low incomes.
Yesterday, Senator Farnham said that ministers would only use powers available to them under competition and gas legislation to intervene in the market in exceptional circumstances. He said that it would be better if a solution could be found through the operation of the free market.
That sounds a lot like wishful thinking.
In theory, households have the option of switching from gas to electricity – which is relatively cheap in Jersey when compared with prices across Europe – but the cost of changing supply can run into thousands, a captial outlay many cannot afford or even consider when in rented accommodation.
It might have been an exceptionally warm November, but, with winter finally here, many Islanders are facing the anxiety of how they will pay the high cost of heating their homes this year.
There is another concern. A footnote to a 2012 CICRA report stated that 90 per cent of new domestic heating contracts were being won by the JEC and that many were switching from oil and gas to electricity.
With Jersey Gas’s market share apparently reducing, is this shrinking pool being milked before the company’s owners back out of the market?
And could that be a motive for the new gas-pricing structure which has left so many angry and confused?
