The Manx Utilities Authority chairman has defended the use of ’hedging’ to make advance purchases of natural gas.

Dr Alex Allinson was questioned in the House of Keys, over the spending of £47 million on gas supplies.

The issue was raised by Julie Edge (LibVannin, Onchan), who was concerned that some purchases were made at a higher rate in 2015-16 than if the MUA had waited.

She said: ’The lowest point in the market that year was around 1.2 pence per unit and we purchased £47 million at almost its highest point.’

Dr Allinson replied: ’The £47 million refers to £24 million for purchase of natural gas now, and the remainder for the future.

’Hedging is a way of trying to even out price volatility and what we have at Manx Gas is a very efficient energy trading department which looks at a number of things, including possible future gas prices.

’In a very unstable world it is very important that energy supplies are hedged so that we can guarantee both the supply and the price of that supply to customers, including Manx Gas, so we have that energy stability.’

Earlier, Dr Allinson had explained how £47 million came to be spent in one year by Manx Utilities, which is responsible for electricity supplies.

’Manx Utilities spends up to £24 million per year for the purchase of natural gas and so a waiver was sought in the amount of £47 million to purchase for the current and future needs,’ he said.

A further £2 million was spent that year buying in wholesale electricity from the UK - something the MUA does when it works out cheaper to do that than produce its own.

’The majority of electricity supply to consumers is generated from natural gas at the power station in Pulrose,’ he said.

’This infrastructure enables the efficient generation of electricity on the Isle of Man, but requires significant quantities of natural gas to be purchased.

’The gas is purchased through a route-to-market agreement that allows Manx Utilities to purchase natural gas based on the current United Kingdom market price.’

Dr Allinson said that about a quarter of the natural gas imported was bought by Manx Gas, which spent £4.7m on it in 2016/17.

He added: ’Manx Utilities purchases gas from the UK gas market on the instructions from Manx Gas on an execution-only basis.

’We make no mark-up or margin on these prices and we make no money from Manx Gas for doing this, because under the current agreement any charges we charge Manx Gas could be easily passed onto the consumer.’