Jersey Electricity announces 9.5% tariff increase from 1 January to meet generation costs following cable link loss

Electricity prices in Jersey will rise by 9.5% from 1 January 2013 - the first above-RPI increase for four years. The rise is necessary to help meet the extra costs of oil needed to generate electricity at La Collette Power Station following the permanent loss of one of Jersey's two French supply cables, Normandie 1, in June.

The rise has been forecast for some months and is comparable to recent increases in UK electricity prices, where five of the Big Six suppliers have raised electricity prices by between 6% and 11% this winter on top of last year's average 16% increase. It still means, however, that the average price of electricity in Jersey remains around 6% lower than the EU average and lower than comparable islands.

Though the project to lay a third interconnector to France has been on-going for eight years now due to a complex planning process, Normandie 1, laid in 1984, came to the end of its life on 17 June before the third cable could be brought into service. Jersey Electricity is awaiting final planning permission in France, before orders can be placed with equipment suppliers and the cable is now expected to be in service early 2015. Until then, limited imports have to be supplemented by local generation.

Jersey Electricity has always maintained investment in La Collette Power Station for security of supply in the event of disruption to imports. However, the amount of generation required in addition to Normandie 2's capacity to meet winter demand will be significant and costly. JE expects to use in the region of 24 million litres of oil in the next year depending on customer demand.

Jersey Electricity customers have largely been sheltered from the rising and volatile prices of oil and gas since Normandie 2 was installed in 2000 as the proportion of electricity consumed in Jersey is almost all from imported sources. Islanders used more than 650million units of electricity in 2010-11, 96% of which was from lower cost imported sources. This is set to temporarily change significantly over next two years with associated costs.

JE CEO Chris Ambler said: 'This rise is regrettable but unavoidable. We have become accustomed to extended periods of price stability due to the tremendous access we have had to supplies of lower cost, low carbon power made possible by our importation strategy and our submarine cable links. Normandie 1 has served the Island very well since 1984 and we have been planning its replacement for a long time.

'The £60 million project to install a third cable along a different route to enhance security has been on-going for eight years. It is extremely unfortunate that planning delays outside our control have meant the loss of Normandie 1 before Normandie 3 has been commissioned. Due to the specialist nature of manufacturing this large capacity cable, we now expect commissioning to be 2015 but we are doing all we can to advance the project.

'In addition, we are exploring the feasibility of a fast track replacement of Normandie 1 along its existing routing to restore importation capacity faster. In the meantime, a great deal of work is on-going at La Collette to ensure security of supplies this winter - that is our top priority.

'We have already begun hedging oil purchases and we have kept this 2013 rise to the minimum necessary to cover these oil costs while not jeopardising crucial investment to safeguard supplies and meet increasing demand in the future.'

The last major price rise was 24% at the start of 2009 following a two-year price freeze.  Underlying wholesale market rate rises, coupled with a decline in the value of Sterling, led to JE's overall cost of power purchases to rise by 40%. Since then, electricity prices were cut by 5% at the start of 2010 and frozen for successive winters until the below-inflation 2.9% rise was applied this past May.