There is ’little doubt’ that gas tariffs ’will increase in the short-term’.

That’s according to the Communications and Utilities Regulatory Authority, the island’s gas market regulator, which declined to agree to a second price rise in December.

In a statement, it said: ’Gas prices are currently around four to five times higher than average due to the current global energy crisis and the conflict in Ukraine, as a result Manx Gas will likely need to increase gas tariffs in order for it to be able to continue to supply gas in the short term.

’Unfortunately, due to the extreme volatility in the international markets it is very difficult to predict what tariff may be on April 1, but the authority will be working to ensure as much information as possible is available to consumers.

’Once market stability returns and wholesale gas prices do begin to reduce, the regulatory regime that is being proposed will see that these savings will be passed on to gas consumers in a timely manner.’

It comes as CURA announced that new gas sector regulations will be laid before Tynwald at the March sitting. The introduction of these regulations follows CURA’s ’Roadmap to Regulation’ which was set out in April 2021. The regulations ’will establish a framework that is fair, transparent, and non-discriminatory and attempts to best balance the interests of all stakeholders and to provide stability for consumers and certainty for investors and are in line with international best practice’.

changes

The key changes that the regulations will bring are:

l The authority will be capping the revenue that can be earned by Manx Gas.

l Any earnings above this amount must be repaid back to its tariff customers in the following period in the form of a tariff adjustment, and vice versa.

l Manx Gas will set its own tariffs, but must do so within parameters set by the authority.

l Tariffs will be fair and transparent and will move up and down in line with wholesale costs.

These regulations will show how much of the tariff is going towards maintaining the network, how much is going to the company and how much is being used to pay for gas.

Should Tynwald approve the regulations, the new regulatory framework would take effect from April 1.

In advance of this, the authority will be publishing further information about how tariffs are made up.

In its statement, CURA said: ’The regulations are an important part of ensuring continuity of supply; and keeping costs reflective of the actual cost of supplying gas to the premises.

’The authority will shortly be publishing its final determinations, which set out the permitted return, customer categories, and how costs are to be allocated by the company.

’The regulations will remain in force for a period of five years to ensure stability for consumers and to provide certainty for future investment in the gas network’.

regulation

The authority’s chief executive officer, Ivan Kiely, added: ’This regulatory framework is the next step in bringing independent regulation that is in line with international best practice to our island.

’It is unfortunate that timing of introducing these regulations coincides with the economic disruption caused by the global pandemic, but also the unfolding events in Ukraine over the past few days which is adding to the uncertainty surrounding commodity gas prices. However, we believe this is the right thing to do.’

He added: ’These regulations will help us to manage the risk to the public gas supply caused by the turmoil in the international markets and ensure continuity of supply.

’I think there is little doubt that tariffs will increase in the short-term, though it is not possible as yet to say by how much as the wholesale markets are incredibly volatile.

’All of us at the authority understand the concerns that consumers will have, and empathise with customers who are already struggling with the rising cost of living.

’This is a difficult situation and unfortunately there is little that can be done to prevent a global energy crisis from impacting on our island.

’In the longer term, gas consumers will benefit from this regulatory framework and we have longer term plans to introduce tighter regulatory controls on the gas supplier.’