Treasury plans to write off £95m of Manx Utilities’ £570m debts under proposals to go before this month’s Tynwald.

Writing off about a third of the authority’s debts to Treasury will allow both the water and sewerage rate to be frozen next year - and any increase in electricity tariffs capped at 2%.

It will also pave the way for the introduction in 2018 of a new long-term pricing framework that aims to be fairer and more transparent.

Treasury Minister Alfred Cannan said: ’Utility charges have a major impact on household budgets, business costs and the wider Manx economy.

’This government is committed to ensuring the Isle of Man remains a special place to live and is an attractive proposition for industry.

’Treasury’s proposals will shield consumers, including low-income households, from big increases in charges for electricity, water and sewerage, improve business confidence and strengthen the regulation around utilities pricing.’

Manx Utilities, created by the merger of the Manx Electricity Authority and Water Authority, carries historical debts of £260m in bonds and £278m in Treasury loans.

The borrowing has been used to fund investment in essential infrastructure, including the construction of Pulrose power station, the sub-sea cable and gas pipeline.

Dr Alex Allinson, chairman of Manx Utilities, said: ’The Treasury proposal is a realistic, affordable and pragmatic way of dealing with the high level of historical debt.’

The move follows an independent review conducted by National Economic Research Associates, which found Manx Utilities’ net debts are almost 100 per cent of its asset value.

It also found the electricity charges are 10-15 per cent higher than in Britain, the water charge is relatively high and the sewerage rate relatively low.

The consultants said that Manx Utilities’ current financial plan would keep the company on track to meet its borrowing commitments when they fall due - but its review also identified concerns about the potential burden of charges on customers.

NERA concluded that writing off £95m of the debt would allow the water rate to be frozen for five years and the planned increase in the sewerage rate brought in over an extended period of 10 years.

Mr Cannan pointed out that ’nothing is for free’ and writing off £95m would mean that Manx Utilities would no longer pay Treasury £6.5m annually towards the capital budget.

Subject to approval of the Treasury motion, Manx Utilities will return to Tynwald with a new long-term pricing strategy within the next 12 months. This will take into account any proposed changes resulting from government’s review of the rating system.