Historic debts, dating back in part to the unauthorised loans affair, have left Manx Utilities in a weak financial position.

Meawhile, our domestic electricity prices are 10 to 15% higher than in the UK and way above those in countries across Europe, with only Alderney and Guernsey having bigger bills.

Last week, Treasury Minister Alfred Cannan announced a major shift in government policy on tackling the MUA’s debts, lifting the burden a little from the consumer, recognising that household incomes can only be squeezed so far.

’It’s one thing having a spreadsheet but quite another to deal with fundamental core issues while improving the lives of our people and attracting people and businesses to the island,’ he remarked.

Treasury’s proposal, to go before this month’s Tynwald sitting, is to write off £95m from the MUA’s debts.

That’s a third of the money owed to the Treasury and a sixth of the £570m total debt.

That debt includes £260m in public bonds that have to be paid back in the late 2020s/early 2030s and £270m in the consolidated loan fund.

So why has Manx Utilities got so much debt?

It had arisen over time to fund major infrastructure investment including £185m of commercial bonds to fund the construction of Pulrose power station and £105m of extra costs of that project together with network improvements like the subsea interconnector.

A further £109m was spent on the IRIS sewerage network and the Meary Veg treatment plants and regional treatment plants.

Some £75m of commercial bonds were secured to fund the construction of two new water treatment plants and water network improvements.

Then there is £50m that’s been spent on routine on-going maintenance and finally, the £14m investment in pipelines to provide natural gas to Manx Gas’s distribution networks. The cost of these pipelines is charged to Manx Gas through a leasing arrangement.

Consultants NERA brought into review the MUA’s financial position concluded its 20-year financial plan to deal with the debts was sound - and would allow the authority to meet its borrowing commitments as they fall due.

But the review also identified concerns of the potential burden of charges on customers and the current weak financial position of the MUA.

Its debt to asset ration, at 99%, is far higher than other energy companies in the UK and way beyond the required level of 80%.

NERA also found an imbalance in cost recovery, with the water service over-recovering the costs and sewerage under-recovering.

Average water bills are higher than anywhere else in the British Isles but the average sewerage charge is relatively low compared to across.

Electricity bills are 10 to 15% higher than in Britain, although recent increases across will have reduced that gap.

The consultants concluded that writing off £95m from the consolidated loan fund would bring the debts in line with other British power companies - and increase financial resilience.

They suggested as a result, domestic water bills could be frozen for five years and increases in the sewerage rate brought in over an extended period of 10 years.

Treasury have opted not to go that far.

Its motion to Tynwald will included a freeze on water and sewerage bills next year pending the MUA bringing forward a new pricing structure.

Electricity tariffs meanwhile, will rise by no more than 2% - although there is no specific recommendation on this for Tynwald to consider.

The write-off will come at a cost, however, with a reduction in payments by the MUA into the government’s capital fund by £140m over 20 to 25 years.

Mr Cannan insisted there would be no impact short-term but if in the medium term there is an increase in current levels of capital spending, the capital fund will have to be topped up for reserves.

MUA chairman Dr Alex Allinson said: ’We are concerned at the increase in customer charges. But we also need to be viable and pay off that debt.’