PRESS RELEASE – Proposed Privatisation of Sark’s Electricity
At public meetings held this week, presented by Chief Pleas Sustainable Reasonably Priced Electricity
(including Broadband) Policy Development Team (P.D.T.) the residents of Sark have been presented with an
ambitious and bold vision for electricity provision on Sark. During these presentations the PDT stated that Chief
Pleas will be able to provide access to electricity at 36.5p per unit, down from 59p, a price that will no doubt go
a long way to reducing the local costs of living and running a business on the Island of Sark.
Whilst the Chamber of Commerce welcomes an initiative with the clear objective of improving economic
opportunities for the Island, we have some reservations over the assumptions that support this substantial
proposal.
Vice President, Alan Jackson said “The presentations appeared, to me, to be optimistic. Not only in its medium
to long term consumption expectations and exposure to the risk of a cable failure, but also in its shorter term
funding requirements. I must be fair and say that the P.D.T. did state clearly during their presentation that they
‘do not have access to solid data from Sark Electricity, however, their calculations are based upon expert
assumptions’.
At this point though, in business terms, we cannot apply any meaningful stress test to these assumptions. To my
mind, it is too early for Chief Pleas to ask residents for guidance on next steps until we can better understand the
modelling used. It was clear from the presentation that a great deal of effort has been put into arriving at the
conclusions and, whilst I know that the entire community is grateful to the P.D.T. and Mr Derek Lickorish for
their personal investment of time and energy into this crucial opportunity, the presentations do raise questions
that we cannot yet answer.”
Cost of Supply
Units Consumed
Purchase Price
Cost of Cable per
of Electricity from Gsy Unit (£6m + 3% int)
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
£0.09
£0.09
£0.09
£0.09
£0.09
£0.17
£0.13
£0.11
£0.10
£0.08
Total
Business turnover Cost of supply
at 36.5p per unit
£0.26
£0.22
£0.20
£0.19
£0.17
£730,000
£912,500
£1,095,000
£1,277,500
£1,460,000
-£513,600
-£558,600
-£603,600
-£648,600
-£693,600
Staff
Wages *
-£175,000
-£175,000
-£175,000
-£175,000
-£175,000
Balance
£41,400
£178,900
£316,400
£453,900
£591,400
* Estimated number based on 3 Technicians, 1 Trainee, 1 Administrator and 2 Directors
“A high level assessment based on 2m units per annum, as mentioned by P.D.T. would indicate available cash
to deal with business expenses, after cost of supply and wages, of only £41,400 per year; this being based on a
President: Dawn Manger
Website: www.sarkchamber.org
Vice-President: Alan Jackson, Secretary: Lorraine Southern, Treasurer: Tony Le Lievre
Council Members: Tony Ventress, James Penney, Andrew Gordon-Brown
purchase price from Europe of 9p per unit which I believe to be reasonable with a wholesale price from Europe
of 5p per unit. If the purchase price were to hit 12p per unit then the available cash drops into negative numbers.
Given that we would still need to retain a fully functioning Power Station on Sark for back-up and emergencies
with the necessary staff resources to maintain and run it at a moment’s notice, deliver investment and maintain
the existing grid and buildings, cover systems costs, legal and accountancy fees, pay for insurance on the £6m
cable, manage depreciation on assets and a raft of other expenses; only £41,400 seems to me, exceedingly
ambitious. More so when you consider that there is no allowance within this figure to buy what must be an asset
heavy company; every £1m pound of which would cost an estimated £60,000 per annum to fund over 25 years.
Personally, on these numbers, I would have considered at least 45p per unit with some form of rebate scheme
implemented at the end of the second year which could repay customers dependent on profits. This would allow
the new company to build capital and ensure that repayments could be more assured.
It is clear from the presentations that the expectation is that consumption will dramatically increase following a
reduction in price to 36.5p per unit. T&R in Guernsey have stated clearly that our community will need to
provide a business case proving viability and the local Chamber will welcome the opportunity to sit down with
stakeholders, work with government to create such a business case and explore what local businesses could do
to make this vital growth curve a reality. Chief Pleas have been ambitious with this project and we encourage
them to continue in this vein and expand on the proposed concept. This is a real opportunity for our community
to look at a long term Island Development Plan. Working with all local stakeholders to encourage investment
and expand our economy is the only way that we could ever justify this level of investment and clearly the
P.D.T. will have had this in mind when preparing this proposal. While stakeholder engagement of this nature
will be unpopular to some; this common goal could be a healthy catalyst of unity for our entire community.
As an independent Jurisdiction, there is a real opportunity to look at our local legislation in an effort to
encourage new businesses to take advantage of such a cable link. Whilst this is the beginning of what will no
doubt be a lengthy consultation period, initial areas that we would wish to see further detail on would be:
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The purchase price of Electricity to Sark was presented at the wholesale price of circa 5p. The
purchasing power of Sark, compared to Guernsey for example is not substantial. Can the P.D.T. confirm
what the indicative purchase price is and whether it has been secured in principle?
During the presentations the point was made that there would be business opportunities for island
residents to provide Electrical and Telephone installation services. This suggests that these, presumably
profitable aspects of the Sark Electricity operation, are not being included within the purchase. Can the
P.D.T. explain why these are being excluded when this would reduce profitability and likely increase the
unit cost to the end user?
Sark Shipping this year made a profit of £53,000. The P.D.T. stated during a presentation that the circa
£33,000 loss of revenue from transporting fuel could be handled by the company. This suggests that it
will simply generate the revenue elsewhere. Will this not simply increase freight and / or ticket prices to
local residents and visitors, or is Sark Shipping planning to ring fence the loss to income when
considering its future profit requirements?
There has been concern raised within Chief Pleas that local businesses should be able to produce their
own electricity. Indeed, there are businesses today with the potential to produce their own electricity
through diesel and / or PV. Would a resulting Sark owned Company impose monopoly rules as are in
place with Sark Shipping or would Island businesses and private individuals be able to use this ‘new’
Sark Electricity Co. as a back-up provider and / or make use of a buy back tariff?
President: Dawn Manger
Website: www.sarkchamber.org
Vice-President: Alan Jackson, Secretary: Lorraine Southern, Treasurer: Tony Le Lievre
Council Members: Tony Ventress, James Penney, Andrew Gordon-Brown
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How does Chief Pleas anticipate dealing with any potential deficit in cost over consumption after the
P.D.T. categorically guaranteed no increases to Sark taxation as a result of this endeavour? Have the
States of Guernsey agreed to shoulder any possible ‘in period’ losses?
In the presentation, much was made of the hope for increased consumption to secure the long term
requirements of this initiative. In the example given from the Isles of Scilly, consumption increased
dramatically following connection to the UK grid. However, for the Isles of Scilly, this provided
electricity at UK rates (circa 14p today). What plans have the P.D.T. considered to drive this increase?
Has the P.D.T. considered the impact to local suppliers of other fuel sources if there is usage transfer
from oil and gas to electricity and if not will they be meeting with them?
In all of this, the Island should remember that we have an existing provider of Electricity who has been
doing so for many decades. Whilst we pay a bill today for our electricity, engines still had to be
purchased and cables laid before a single penny could be charged to local consumers. Over the years
Sark Electricity has invested heavily in our supply of electricity and all of our businesses have been built
on the back of its investment. This project has the potential to result in some form of quasi “compulsory
purchase” as a result of societal pressure. This is of potential concern to business owners. Can we have
assurances from all stakeholders that a genuine attempt will be made to recognise fair market value?
We are all rightly excited by this opportunity for cheaper electricity. However, putting in a £6m cable is not
something that Sark can walk away from once it is done; the cable cannot simply be pulled up and sold on.
Further, to buy the company without then installing the cable will simply increase operating overheads and
leave Sark in a potentially worse position on electricity pricing. Finding a solution that delivers, within the
financial constraints of local electricity consumption will not be easy. Whilst we genuinely applaud this
endeavour and agree entirely that this investigation must take place, we encourage extreme caution in using
assumptions, after all, only 8 weeks ago Guernsey Electricity announced a £5m cost for a preventative repair on
a cable. As a community, this scale of investment must be affordable under all circumstances and not simply a
best case scenario. The Sark Chamber of Commerce looks forwards to working with Chief Pleas and its external
stakeholders as they prepare a business plan for onward submission to Treasury and Resources”
Please contact our Secretary [email protected] if any of you as business owners or professionals think
that Sark Chamber can offer any assistance or support for your business.
Regards
Sark Chamber of Commerce
Sark Chamber of Commerce
The Chamber Council has been asked to make it clear that although
Andrew Gordon-Brown is a member of the committee, he did not
contribute to this Press Release.
Sark Chamber Committee Members are:
President – Dawn Manger, Group Manager of Sark Estate Management.
Vice President – Alan Jackson, Principle of Veneti.
Secretary – Lorraine Southern of ESMD
Treasurer – Tony Le Lievre of Empire Builders
President: Dawn Manger
Website: www.sarkchamber.org
Vice-President: Alan Jackson, Secretary: Lorraine Southern, Treasurer: Tony Le Lievre
Council Members: Tony Ventress, James Penney, Andrew Gordon-Brown
Council Member – Tony Ventress, retired
Council Member – James Penney of Avenue Stores
Council Member – Andrew Gordon-Brown of Sark Electricity Ltd
For Immediate Release to:
Channel Television to [email protected]
BBC Television to [email protected]
Guernsey Press to [email protected]
BBC Radio Guernsey to [email protected]
Island FM to [email protected]
Sark Life to [email protected]
Sark Newspaper to [email protected]
Guernsey Now Magazine to [email protected]
Guernsey Gallery Magazine to [email protected]
Business Brief Magazine to [email protected]
Contact Magazine to [email protected]
Chief Pleas to [email protected]
President: Dawn Manger
Website: www.sarkchamber.org
Vice-President: Alan Jackson, Secretary: Lorraine Southern, Treasurer: Tony Le Lievre
Council Members: Tony Ventress, James Penney, Andrew Gordon-Brown