04 January 2017
The Assistant Chief Minister, Senator Philip Ozouf, has published an independent report today (4 January 2017) that assesses for the first time the reasonableness of gas prices in Jersey.
Oxera report on the Jersey gas market
Written by economic consultancy Oxera, the report was commissioned by the Competition and Regulation Unit for a fee of £25,000, reflecting the scale of Jersey Gas’s business, which achieved a turnover of £12.5m in 2012 and an after-tax profit of £1.8m. Oxera have provided a detailed, expert analysis of the reasonableness of gas prices in the Island, using a framework that sets out the factors expected to drive Jersey’s future gas prices.
The report was commissioned to meet objectives set out in the Department’s action plan following recommendations in a 2015 review of Jersey’s regulatory and competition framework overseen by Professor Sir John Vickers. The 2015-18 Strategic Plan also emphasised a commitment to ensuring that competition helps to contain prices in key markets in the Island, including those for energy.
The report concludes that, while retail prices have not declined as sharply as wholesale prices in recent years, the gap between retail and wholesale gas prices is partially explained by declining volumes and increased investment expenditure, both of which would be expected to drive up retail prices relative to wholesale prices.
Based on these findings and on a 2015 report from the Channel Islands Competition and Regulatory Authority (CICRA), the Government of Jersey does not consider there to be sufficient justification for regulating gas prices in Jersey at this point in time.
Senator Ozouf said “When compared to other fuels, gas prices do appear to be high. However, the expert analysis in Oxera’s and CICRA’s reports clearly show that regulation would not have solved previous price issues. Given that there is no justification for imposing regulation on businesses, we have taken the decision not to do so, thereby saving additional costs that would in all likelihood have been borne, at least in part, by consumers.
“I will be taking action in the New Year to ensure that energy markets continue to work in Islanders’ interests. I will be working with CICRA and Jersey Gas, and I will continue to champion the consumer choice agenda, working with the Consumer Council to ensure that Islanders can easily access information on energy prices. Also, I will be consulting with the Housing Minister, the Environment Minister and the Assistant Minister for Economic Development to consider how homeowners and tenants can be supported to secure optimal deals on energy costs.”