States Tenants: Utility Charges Increase

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A decision made 23 August 2011 regarding:

Decision Reference: MD-H-2011-0079
Decision Summary Title :	DS - Increase in utility charges to States tenants – October 2011		Date of Decision Summary:	18 August 2011
Decision Summary Author:	Finance Director		Decision Summary: Public or Exempt? (State clauses from Code of Practice booklet)	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:
Written Report Title :	WR- Increase in utility charges to States tenants – October 2011		Date of Written Report:	18 August 2011
Written Report Author:	Senior Management Accountant		Written Report : Public or Exempt? (State clauses from Code of Practice booklet)	Public
Subject: Increase in utility charges to States tenants – October 2011
Decision(s): The Minister approved a 9 per cent increase in charges for gas heating and hot water to States tenants with effect from 3rd October 2011.
Resource Implications: Financial: Increase in revenue of £440 per week which will be fully offset by equivalent increases in the cost of supply.
Action required: Finance Director to notify the Treasurer of the States, notify affected tenants and Income Support of the changes.
Signature:		Position: Minister
Date Signed:		Date of Decision (If different from Date Signed):

States Tenants: Utility Charges Increase

Date of report 18th August 2011

REPORT FOR THE MINISTER FOR HOUSING

Increase in Gas Charges to States Tenants

Purpose

To consider an increase in charges to States tenants who receive heating and hot water by communal gas fired systems.

Background

A total of 474 housing properties are currently supplied either by communal or individual heating systems fuelled by either gas (215) or oil (259). The Department recharges the cost of the utilities to the tenants who receive this service. If the cost of the provision of the heating were not recovered the Department would effectively be giving a hidden subsidy to its tenants.

Gas

Following a review of charges in January 2009 the charge to tenants was reduced by 5%. Tenant charges for gas were later increased by 15% from 4th January 2010, 5% from 1st March 2010, 16.75% from 8th November 2010 and 8.7% from 26th April 2011. On each occasion the increase followed notification of an equivalent increase in charges by the supplier.

The Department has recently received notification from Jersey Gas that, with effect from 1st August 2011, it will be increasing the unit charge for gas by 9%, from 9.09p per unit to 9.9p per unit.

Impact of Proposed Increases

The following tables show the impact on individual property types of the proposed increase of 9% in gas charges.

Accommodation	Bedrooms	Current Charge	Increase	New Charge	Number of Units
		£	£	£
Bungalow	2	21.81	1.96	23.77	1

Flat	1	19.50	1.76	21.26	26
	2	22.48	2.02	24.50	114
	3	24.00	2.16	26.16	43

House	2	24.00	2.16	26.16	1
	3	25.52	2.30	27.82	7
	4	27.00	2.43	29.43	1

Maisonette	3	24.00	2.16	26.16	22

					215

Oil

Charges to tenants for oil heating were last increased in April 2011 following a review of oil costs. An increase of 22.8% was applied to the charges made to tenants. Whilst the price of oil has risen since that time the increase is approximately 3.7% over the period. The global oil markets have recently shown a reduction in the price of oil and as a result this reduction is expected to flow through to supplies made to the Department. As a result, and whilst the cost of oil will continue to be under review, the Department is not intending to change the charge to tenants at this time.

Heating Replacement Programme

The Department is currently replacing existing fossil fuel systems with electric heating for which the tenants will pay the utility company directly for the power they consume. Since the last change in prices in April 2011, 277 tenants have had their departmental heating charges removed largely as a result of this programme, (208 units from gas and 69 from oil). This programme will continue for the remainder of 2011 and into 2012 and it is anticipated that a further 53 units will be transferred from gas heating in advance of this increase in gas charges taking effect.

Compliance with Financial Directions

Financial Direction 4.1 requires that any increases in charges should normally be limited to 2.5% and increases above this level must be referred to the Treasury and Resources Minister for approval. However, the Treasurer of the States, under delegated authority from the Treasury & Resources Minister, has granted an exemption to this requirement where the increase in charges made by the Department is directly offset by an increase in the costs in supply of the utility service. (TR-2010-DD24).

Recommendation

That the Minister;-

Approve the increase in utility charges to States tenants by 9% for gas heating with effect from the 3rd October 2011.

Housing Department

Report Prepared By: -

Jason English

Senior Management Accountant

……………………………… Date: 2011

Report Checked By: -

J C Hamon

Finance Director

……..………………………. Date: 2011

Authorised By: -

Carl Mavity

Director Strategic Development

………………………………. Date 2011