Chief Executive’s Review

Optimism on the road to net-zero

Chief Executive Chris Ambler leads the development of Jersey Electricity’s strategy, as agreed by the Board, as well as its implementation. In a turbulent year for energy markets, he remains confident that strategy continues to deliver for the business, Jersey Electricity’s customers and Jersey’s net-zero carbon ambitions.

Having weathered the storm of the COVID-19 pandemic over the previous two years, the global energy crisis, precipitated by the prolonged war with Russia in Ukraine, has this year presented significantnewchallengestoenergy companies and Jersey Electricity is no exception. As well as the tragic humanitariancostoftheconflictin Ukraine, global energy prices have soared, and security of supplies has come under threat. As a stark illustration of this, at 30 September 2022, the forward baseload electricity prices for the calendar year 2023 were around €500/MWh, approximately 10 times historical levels.

Our strategy

Despite this, Jersey Electricity has shown great resilience in these turbulent times and we remain confidentinourstrategyfor achieving our Vision which aims to help the Government of Jersey and the Island itself achieve its net-zero carbon target of 2050. Our key strategic initiatives are outlined on pages 8-9 and our progress on each, along with the value we create for the community and our shareholders, is detailed throughout this report.

Pricing

Providingaffordable,secureand sustainable supplies of electricity now and into the future, is our primary objective. Our strategy and our integrated business model have served the Island well. We have been able to maintain stable and competitive energy prices over this period without the need for Government subsidies seen in the UK. This is substantially due to our forward hedging and risk management policies in both power procurement and foreign exchange purchases. We import 95% of Jersey’s electricity requirements from EDF in France and our hedging has delivered enormous value to the households and businesses, protecting the local economy and our customers from what would otherwise have been much higher price rises. Weimplementeda4%tariffrise from 1 January 2022 and further 5% increase from 1 July 2022 at which timeweannouncedafurther5%tariff increaseeffectivefrom1January 2023, to give our customers some degree of certainty for the coming winter period. Even with these price increases,ourstandarddomestictariff is less than half that of the UK. Noting that UK prices are already enjoying the benefitofUKGovernmentsubsidies, we estimate Jersey’s prices are around a third of UK pre-subsidised prices (based on previously determined Ofgem estimates).

Financial performance

The result is Energy revenues at £89.7m were marginally lower than the £89.8m achieved in 2021. Lower unit sales of electricity (613m this year v 639m in 2021) were attributed to a mild winter, slower cannabis industry sales and reduction in home working as the Island came out of the worst of the pandemic. An easing of consumer spending also saw revenue in our Powerhouse retail business decrease 6% from £19.8m in 2021 to £18.7m and profitsdecrease23%from£1.5mto £1.2m, remaining at a resilient level and still higher than pre-pandemic

£89.7m

Energy revenues 2022

levels. Revenue in the Property business at £2.3m was the same as last year. JEBS, our building services business, maintained revenues at £3.4mandprofitabilityat£0.3m,while revenue in our other businesses at £3.3m, was also in line with last year.

Climate change

Despite the turbulence created by the pandemic and the energy crisis, Jersey Electricity and the Island have good reason to be optimistic about the future. The recent trauma in energy markets further emphasises the importance of clean energy in the energy trilemma that includes affordabilityandsupplysecurity,and weareevenmoreconfidentofthe important role we play in the Island’s fightagainstclimatechange. The publication of the Government’s Carbon Neutral Roadmap in May 2022 sets out the milestone and policies for delivering net-zero by 2050. This presents huge opportunities for growth for the Company, particularly in the high-emitting sectors of heating and road transport, which together represent more than 80% of overall Island carbon emissions. We expect thisgrowthtoalsobringbenefitsto consumers in the form of even better, morecost-effectiveservicesanda moreefficientenergysystem. Our electricity system is very well invested for the future, and we are making great progress in innovating new products but we also know that additional investment is needed in the network to meet the increase in both peak demand and annual consumption, and to replace certain aged assets. New technologies and the digitalisation of our business will have a critical role in the future to help direct and optimise its capital investments and create efficienciesthroughoutthebusiness and we have greatly increased our resources in this area. ‘Jersey Electricity has shown great resilience in these turbulent times and we remain confident in our strategy for achieving our Vision and helping the Government of Jersey achieve its net-zero carbon target of 2050.’

Customer focus

New technologies are also helping us to put customers at the heart of the energy system by providing new services and helping customers make decisions to save energy and costs. Our energy saving app My JE was recognised Island-wide by winning the Digital Jersey Technology Award for Sustainability. We have presented it on an international stage at the World Utilities Congress in Abu Dhabi this year and we have continued its development with important upgrades. We are developing similar tools targeted at business customers and have made good progress with these this year. A new cloud-based Customer Relationship Management tool provides the latest in customer service technology enabling us to improve our engagement through various channels to understand and better meet customer needs. A new digital asset management system has also been implemented and is helping us materially improve performance.

Renewables

The global energy crisis has kept us focused on the issue of energy sovereignty. The Carbon Neutral Roadmap and the Bridging Island Plan support more on-Island renewables and we have continued to progress utility and commercial scale solar PV while also continuing our research intooffshorewind,whichweare confidentcouldhaveanimportantrole inJersey’senergysystem,benefiting from reducing costs of installation and higher yields. One 4MWp solar PV site in the Parish of St Clement is in Planning and we have reached landowner agreement for a further 3MWp site on the North coast at Sorel. These and two other ground based sites, could bring on-Island solar generation to around 15MWp. We are hopeful these will receive good support from the community and authorities particularly in the current challenging energyclimate.Onoffshorewind,we have held constructive discussions with the new Minister for the Environment and, as a consequence, we are continuing our research and assessments.

Our people and culture

Our people are key to our success and to the delivery of our Vision. We need the right talent in the right place at the right time to enable Jersey to achieve its net-zero ambitions. We must recruit and retain the very best by being an Employer of Choice in Jersey and that means having a diverse workforce and an inclusive culture where everyone feels valued and supported. I am therefore delighted that our work in this area has been recognised by our Diversity and Inclusion (D&I) partners, Inclusive Employers, ‘promoting’ us from ‘Programmatic’ to ‘Established’ following this year’s D&I maturity audit. Along with a strong underlying performance, this is one of many achievements of which I am very proud in this turbulent year and believe that with the continued commitment of our people, we will make better decisions, innovate strongly and execute our strategies for achieving a zero-carbon future and a better Island for all.