Keeping the lights on in a Channel Island

A recent electricity price control dispute in the small island of Sark in the English Channel captured the imagination of the media, with outlets such as BBC, ITV, The Guardian, and CNN speculating that the island would have to be evacuated due to an electricity blackout.

Sark has had a single electricity supplier, Sark Electricity Limited, since the 1940s. Electricity is an expensive commodity on the island due to the high fixed costs of electricity generation and electricity supply being spread across a small population of 500 inhabitants.

In August, as part of the first-ever price control determination in Sark, it was decided that the electricity tariff should be reduced by around 20%.

At the reduced level of tariffs, Sark Electricity Limited sustained operating losses, leading to concerns about maintaining supply of electricity on the island. There was risk of an electricity blackout and an evacuation of the island. Sark Electricity Limited appealed the price control determination.

As part of this price control appeal, Oxera was appointed to provide independent expert testimony about setting cost-reflective electricity tariffs. The compelling economics evidence we provided helped to ensure the settlement of the dispute, which occurred just one day before the electricity supply was due to be switched off. The Price Control Order was set aside, and prices were restored to the level prior to the determination. The settlement also included an agreement on future principles governing the regulation of the electricity system.

The Oxera team was led by Principal Sahar Shamsi. The instructing lawyers were delighted with the outcome, commenting:

‘This was the first time price controls had sought to be imposed and consequently the legislative, political and commercial background were extremely challenging. To meet this challenge required Sahar and her team to deploy their world class technical expertise, whilst maintaining sufficient flexibility and resourcefulness to respond to the issues at hand in a way that made sense to a range of stakeholders of varying levels of engagement and sophistication. Our client achieved a truly amazing result which was in no small part due to Oxera’s work.’

Michael Adkins, Partner, Collas Crill LLP

Posted 07/12/2018