Manx Utilities is expecting to post a loss of more than £50million this year, as its finance director warns such losses are simply unsustainable.
The now former chair Rob Callister MHK this week appeared at the Public Accounts Committee alongside Manx Utilities chief executive Philip King, finance director Simon Clague and Andrea Littlejohns, head of customer billing, as the Tynwald committee explores the issue of government support for islanders.
Addressing the widely reported excessive profits for energy companies, Mr Clague explained that this is for producers of energy, essentially those who extract fossil fuels and sell them on, not the companies which then sell fuel onto customers.
By contrast to these companies that are making profits, many smaller businesses are still making losses and this includes Manx Utilities, the state-owned body that supplies water and electricity.
Mr Clague said: ‘We probably are going to report an accounting profit for last year, due to the way we have to revalue gas contracts that were open at the end of March, but our underlying loss for last year looks like it’s about the £20m mark, which is a significant number.
‘Our budget for this year, which was set back in March, expected a loss of £50m for this year and the current projections are somewhat above that.’
‘So when people are talking about profits, we are experiencing significant financial losses at the moment and they won’t be sustainable in the long term.
‘But we’ve been trying our best to get a balance between the impact that the increase in tariffs has on our customers and the impact we have on our financial position and it is very tough.’
Douglas South MHK Claire Christian highlighted that for the year 2022/23, Manx Utilities was budgeted £49m to meet the island’s energy needs, but this is currently predicted to reach £76m, a gap which exceeds even the proposed £26m loan from the taxpayer to the taxpayer-owned company.
Mrs Christian asked the board members if that funding was ‘adequate’.
In response to this, Mr Clague said that due to the nature of prices, which continue to swing widely on the open markets, it was a difficult answer to give.
He added: ‘What we are seeing, is high forwarding prices over the winter, generally for the last nine months, the actual prices on the day have come in lower than the forward prices, so the forward price is the best estimate we have for what prices will be, but generally actual prices are coming in below.
‘I think the unpredictable nature of what is going on with Ukraine makes it very difficult to know what prices will be actually be like and I think we are reasonably confident that the £26m will be enough but we can’t give any certainty as it depends on, you could say, geopolitical events and the impact is has on market prices.’
Pushed further by Mrs Christian about what happens if that £26m isn’t enough, Mr Clague said that Manx Utilities would have to talk to the Treasury and then a political decision would have to be made by the Council of Ministers.
He added: ‘We have effectively exhausted our financial reserves, so probably the critical bit for us is how much cash we have in our bank account.
‘We are different from a government department that we’re not part of the global banking arrangement, we have our own accounts and when they’re empty they’re empty, so we have to make sure we have enough money coming in to make sure that we have cash to pay our bills.’
Responding to a question from committee chair Daphne Caine MHK, Ms Littlejohns also told the committee that Manx Utilities is already hearing from customers that say they can’t pay their bills.
She said: ‘This isn’t anything new for Manx Utilities. We’ve handled this support for our customers for years, it’s just that the volume has gone up.
‘Those support packages are ways to understand your bill, what you get per unit of electricity, and how we can offer flexible payment options for customers.’
Mr Clague also told the committee that the £26m loan, from the taxpayer, will, alongside interest payments, cost islanders ‘around £17 a year on an average household bill’ over the next 20 years.