Increase in Heating, Hot Water and Water Charges.

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A decision made (18/03/2008) regarding: Increase in Heating, Hot Water and Water Charges.

Subject:	Increase in Heating, Hot Water and Water Charges
Decision Reference:	MD-H-2008-0029	Exempt clause(s):
Type of Report: (oral or written)	Written	Person Giving Report (if oral):
Telephone or e-mail Meeting?	N/A	Report File ref:		WR-Increase in Utility Charges May 2008
Written Report – Title	Increase in Heating, Hot Water and Water Charges 2008	Written report - author		Claire Moscrop – Finance Director
Decisions: The Minister agreed to increase the charge for Heating and Hot Water by 18.5% on 12th May 2008. The Minister agreed to increase the charge for Water to all tenants by 3.9% on 12th May 2008 The Minister agreed to increase all Utility and Heating and Hot Water charges by a further 3% on 12th May 2008 to reflect GST.
Reason(s) for decision There are a number of reasons for the decision: To reflect the conditions in the Utility markets In accordance with the “User Pays” Principle as set out in Financial Direction 4.1 To reflect the introduction of GST on Utility costs
Resource implications Financial: The overall net cost of Utilities in 2008 will be £576K which is £110K higher than budget. If the market price changes were not recharged to tenants the net position would be £236K adverse to budget. Manpower: NIL Property: NIL ICT: NIL Law Drafting: NIL
Action required: Director of Finance to notify all tenants and the Social Security Department. Director of Finance to gain approval from the Minister of Treasury and Resources for this increase in utility charges.
Signature: (Minister/ Assistant Minister)			Date of Decision:

Increase in Heating, Hot Water and Water Charges.

REPORT TO THE MINISTER FOR HOUSING

Increase in Heating, Hot Water and Water Charges – May 2008

Purpose of the Report

To request the approval for an increase in Heating, Hot Water and Water charges to take effect from 12th May 2008. The increases in charges will reflect the significant changes in market pricing in addition to the introduction of GST.

Background

The Housing Department re-charges the cost of providing Heating and Hot water to some 1,357 tenants. All of this heating and hot water is generated from fossil fuels purchased by the Department. In addition the Department bulk purchases all water provided to States Rental homes by Jersey Water, recovering this at cost from all tenants on a weekly basis. Therefore, as the market prices of these commodities change the charge made to tenants must change.

The price of fossil fuels ostensibly oil and gas have been increasing steadily over the past 12 months indeed the combined oil and gas price has increased by 55% year on year. In order to minimise the number of changes to our tenants the Housing Department has absorbed a number of recent price increases.

Utility prices will increase by 3% on 6th May 2008 due to the introduction of GST. It is felt that this is also an appropriate time to increase charges in line with recent market changes.

Proposal

It is proposed to increase the charge for Heating and Hot Water by 18.5% on 12th May 2008 to reflect price increases across recent months.

It is proposed to increase the charge for Water by 3.9% on 12th May 2008 to reflect the market price increase effective from 1st March 2008.

In addition, it is proposed that all Utility charges are increased by 3% on 12th May 2008 to reflect the introduction of GST.

This proposal is made in accordance with the “user pays” principle. If Utility prices are not increased to reflect market conditions then we are effectively creating a subsidy to all States Tenants, thus ignoring the reality of the energy market. This position is not sustainable.

Impact on the Tenants

Income Support will increase to reflect GST so those tenants in receipt of income support will receive an increase to compensate for the additional costs arising as a result of GST.

A total of 1357 tenants will be impacted by the increase in the Heating and Hot Water charge. All tenants will be impacted by the increasing in standing Water charge.

Appendix 1 illustrates the impact on specific charges.

Recommendation

The Minister is recommended to approve the increase in Utility charges to take effect from 12th May 2008.

As the impact in 2008 exceeds the States Anti-Inflation target of 2.5% and the RPI(X) of 3.2% the Minister for Treasury and Resources will also need to approve the recommendation.

Claire Moscrop

Finance Director

18th March 2008

Appendix 1