IN a recent meeting of the Standing Finance committee it was shown there was a surplus in FIG earnings from electricity of £0.5m relating to the electricity price increase in December 2022.
To understand this figure Penguin News spoke to MLA Roger Spink, portfolio holder for Corporate Government Services including the treasury; and the Financial Secretary Tracey Prior and Head of Policy Amanda Curry-Brown.
Penguin News asked whether the figure was an indication that the calculations behind the decision to significantly increase the cost of electricity was incorrect. Financial Secretary Prior explained this figure showed “revenue was over what we’d budgeted because the price has gone up, but costs have also gone up – so that half a million was just in relation to the revenue so it’s only half the picture.”
The Financial Secretary explained that fuel costs for the Public Works Department (PWD) for the full year were expected to be adverse by £1.3m, and the power station was a significant consumer of fuel within public works – with other facilities such as the quarry also consuming a significant share.
“So, overall for the year we are still expecting that we will have made a loss on electricity production,” the Financial Secretary added.
The Financial Secretary said the suggested rate of electricity to reduce the deficit was above 39p per unit, but MLAs did not wish to increase the cost above 39p – “we did that accepting that would mean we would have a bit more of a deficit.”
Due to this decision, the Financial Secretary added, “we will probably need to hold the price a little bit higher for a little bit longer, because we will need to make a surplus in the future to offset all of the loss we’ve been incurring.”
Asked whether the calculations are accurate to predictions as per the December forecast the Financial Secretary clarified that while figures were immediately available from electricity cards and internal sales to FIG, readings from meters cause a delay to seeing the balance of revenue to expenditure. She said however that early figures indicated “it is not a more positive picture than we were expecting” and FIG was not earning above and beyond predicted earnings from the electricity price increase.
“The good news is that diesel price is coming down and has continued to come down for a number of months” and as such there may be an opportunity to begin to reduce electricity prices.
“But the question is how quickly we can reduce the price and by how much,” the Financial Secretary said.
Penguin News asked whether potential second and third order costs – “domino effect” changes, such as food prices changing due to associated expenses for retailers for example – were to be taken into account in the calculation of electricity cost changes, as it was raised in December that these factors were not investigated prior to increasing electricity prices.
Head of Policy Amanda Curry-Brown stated “we don’t really have evidence that there are significant second order impacts… We’ve had some informal conversations with businesses and nobody is raising that as a specific feedback. (Photo by Mercopress)