Jersey Electricity Regulatory News (JEL)

24 Oct 2005 07:00

Jersey Electricity Company Limited24 October 2005 JERSEY ELECTRICITY COMPANY LIMITED STATEMENT 24 October 2005 The Jersey Electricity Company Limited, has today issued a statement regardingenergy prices, a copy of which is attached. The pricing policy of the JerseyElectricity Company, in common with most utilities, is to fully recover thewholesale costs of energy from its customers. However, it considers thatcontinuing strong growth in its share of the energy market remains best assuredby tariff restraint. It has chosen to absorb a substantial element of thegreatly increased cost of imported power from Europe, to which it will beexposed when its three year, fixed price power purchasing agreement expires on30 November, 2005. As a consequence, profits in the year to 30 September, 2006will be significantly reduced but are expected to fully recover during 2008. Inview of the level of cover, the Company expects dividends will not be affectedby the forecast reduction in profits. ENDS Attached : Jersey Electricity Company Limited Press Release For further information, please contact Mike Liston, Chief Executive(Tel: 01534 505320) PRESS RELEASE JERSEY ELECTRICITY WARNS STOCK EXCHANGE OF TWO-YEAR HIT TO PROFITS The recent rise of 55 per cent in the cost of electricity imported from Europeis to be largely absorbed by Jersey Electricity over the next two years. The increased cost of power traded on the European electricity market will hitJersey Electricity immediately, when its three year fixed price contract withElectricite de France (EDF) expires in December 2005. However, the Company hasannounced that it will hold prices at their present level until 1st January,2006 and then limit the price increase to its customers to 9.7%. It has alsopledged that despite continuing volatility in the world's energy markets therewill be no further electricity price increase next year. In a formal notice to the London Stock Exchange today the Company discloses thatabsorbing increased costs will significantly reduce profits in its electricitysupply business. Mike Liston, Chief Executive of the Company - of which 62% is owned by theStates of Jersey - said that given the level of cover, dividends should not beaffected by the anticipated profit reduction. He added that the three-yearfixed-price contract with EDF which is coming to an end, had shelteredelectricity users in Jersey from the reality of chaos in the world's energymarkets during that period - oil and gas prices had tripled and this hadaffected the price of electricity traded on the European wholesale markets.Jersey Electricity imports nearly all its power from the European grid under theumbrella of a long-term supply agreement with EDF. Imported electricity is regarded as important from an environmental perspectivebecause of its high proportion of renewable energy which helps to reduce carbondioxide emissions. With gas and oil price rises far outpacing those ofelectricity since 2000 - and with oil prices remaining particularly volatile -it also makes sound economic sense. Jersey Electricity's decision to absorb a substantial element of the cost hikemeans that the increase of 9.7% will make electricity for the average household£1 per week more expensive in 2006 than at present. A similar increase can beexpected in 2007, but the Company hopes then to be able to restore its recordfor not having increased its prices above inflation in any of the past 20 years.Mr. Liston points out that household electricity prices in Jersey are currentlyabout 15% lower than the average across Europe and 7% lower than the UK average. Addressing any concerns about the long-term effect of the impact on Companyprofits, he said 'We invest on average about £10 million each year in order tomaintain the capability and reliability of the Island's electricity supplysystem so our normal profit of around £6 million a year is about right to enableus to manage that. We believe that we can afford to suffer a reduction to theseprofits for the next two years without risking vital investment ininfrastructure. And we can reassure our staff that this situation doesn'tthreaten jobs - we've reduced our workforce by nearly half in the past decadeand we regard present manning levels as right for the business." ENDS For further information, please contact Mike Liston, Chief Executive (Tel: 505320) This information is provided by RNS The company news service from the London Stock Exchange