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PriceStabilityandAffordability

Price Stability and Affordability

Creating value for our customers starts with fair, affordable electricity prices. Global events over the past year have meant achieving this, while providing sustainable, low-carbon power and supply security, have made this more challenging than ever. Finance Director Martin Magee reports on why Jersey consumers have fared better than in many jurisdictions.

Maintaining competitively priced power has always been a key focus of Jersey Electricity and we continue to perform well against other jurisdictions in an ever-increasingly turbulent market.

The unprecedented increases in European wholesale electricity prices seenattheendofthelastfinancial yearhaveintensifiedthroughout2022. Although prices were rising before the onset of the war with Russia in Ukraine,theon-goingconflicthassent

‘Our hedging policies have so far sheltered Jersey customers from material double-digit price increases seen elsewhere’

energy costs soaring, threatening supply security throughout Europe and creating a global energy crisis. At year end, the forward baseload electricity prices for 2023, at c€500/ MWh, were around 10 times the level seen historically in markets. Since the beginning of 2021, 31 UK energy companies have ceased trading due to soaring wholesale prices, and only Government intervention of billions of pounds of subsidies averted a proposed 80% year-on-year increase in retail energy prices in October when Ofgem was due to raise the regulated price cap to £3,549. The new Energy Price Guarantee limits this to £2,500 a year for an average domestic dual fuel bill, but this has now been reduced from two years to just six months and will be scaled back to £3,000 in April 2023, prompting a further 20% rise in prices. Jersey is not immune to these market forces, but our hedging policies have so far sheltered Jersey customers from such material double-digit price increases.Weimplementeda4%tariff rise from 1 January 2022 and further 5% increase from 1 July 2022. Even after these rises are considered, we continue to benchmark well against other jurisdictions.

Ourstandarddomestictariffrate* (the rate by which we benchmark against the EU and other jurisdictions) continues to be around half the level a UK consumer is paying and around one third of pre-subsidised prices in the UK, a third lower than the Isle of Man, a quarter lower than Guernsey and 10% lower than the EU14 average, noting that this latter metric has yet toreflecttherecentupturninenergy markets. We announced a further 5% tariffincreaseeffectivefrom1January 2023,whenwelastincreasedtariffsin July 2022 to give our customers some degree of certainty for the coming winter period. It is also worth nothing that unlike other jurisdictions, where Governments are heavily subsidising electricity process, no such measures have been applied in Jersey.

31

UK energy companies ceased trading since 2021

We imported 95% of the electricity requirements of Jersey from Europe this year. Our current supply framework agreement with EDF in France runs until the end of 2027 and combinesafixedpricecomponent with a market-related mechanism that allows us to lock in some price certainty over a rolling three-year period. The goal is to provide our customers with a market-based price but with a degree of certainty in a volatile energy marketplace. Our electricity purchases are materially, albeit not fully, hedged for the period 2023 and 2024 and for an element of the period 2025-2027. This hedging has protected customers from what would otherwise have been much higher rises to date, and greater rises in the future.

We also enter forward currency contracts on a three-year rolling programme to reduce exposure, and toaidtariffplanning. We believe we can continue to maintainanytariffrisesatan affordablelevelwithoutGovernment intervention in the short to medium term. In today’s turbulent world it is difficulttopredictwhatthelongerterm forecast will be for energy prices. Even if the war in Ukraine ended quickly, it is extremely unlikely energy prices will revert to pre-pandemic levels,sowewillcontinueourefforts to help our customers reduce costs by energy saving measures wherever we can.

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