Gas price increase does seem ‘a bit odd’, says Chief Minister

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It seems ‘a bit odd’ that Manx Gas encourages customers to save on energy costs and then puts up prices when consumption goes down.=

That was the reaction from Chief Minister Allan Bell MHK after the utility announced it was increasing tariffs by 2.9 per cent and the standing charge by 3 per cent – blaming ‘warmer than average weather patterns’.

‘It’s a strange circle to square,’ said Mr Bell.

The Chief Minister said that the Council of Ministers had agreed a new system of voluntary regulation of the gas sector which he hoped would bring ‘more vigour’ to the price setting process.

Negotations are currently under way, led by the Office of Fair Trading and Treasury into the details of that regulation, including what would constitute an acceptable rate of return.

But Mr Bell said that if voluntary regulation did work, statutory regulation could be brought in.

He said: ‘Energy prices are a very sensitive subject. Government had been following the movement of energy prices very closely.

‘It does seem a bit off that prices have gone up because consumption has dropped as we’ve had a hot summer. If we have a cold winter will prices come down?

‘Most people find the inconsistencies of prices structure in that context very hard to swallow.

‘There is no doubt that people on low incomes across the community are struggling with energy costs.’

Treasury Minister Eddie Teare MHKsaid that while statutory regulation was an option, it would cost £250,000 a year to implement.

He said: ‘I’m very concerned with the general increase in the cost of living for the vulnerable sectors of the community where we have to target our resources as effectively as possible.

‘We did review the regulation of the gas industry and we do have the big stick of bringing formal legal regulation. But the cost of that would be a quarter of a million pounds a year and the consumer would bear the burden of that cost.’

A 2008 OFT investigation concluded Manx Gas was not making excessive profits and an acceptable range of return on capital invested was deemed to be between 8.8 per cent and 12.4 per cent.

Subsequently, Manx Gas has voluntarily adopted the mid-range point of 10.6 per cent as its target.

Mike Ball, chief officer of the OFT, said: ‘Negotiations are ongoing, led by ourselves and Treasury, and the rate of return is definitely part of the negotiations.’

Manx Gas’s increases in all tariffs from September 12 will cost the average domestic customer with gas central heating an extra 6.05p a day. The increase in the standing charge will add a further 0.48p a day, taking the total to 6.53p a day or £23 a year.

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