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£1million threat if Sark Electricity doesn't get its way

£1million threat if Sark Electricity doesn't get its way

Friday 10 January 2020

£1million threat if Sark Electricity doesn't get its way

Sark Electricity has asked that a legally enforced price cap on the cost of power be delayed, threatening a £1million legal bill for the island if it doesn't get its way.

The business said it wanted Sark's Electricity Price Control Commissioner to wait until Guernsey Electricity had finishing valuing it before pushing its prices down.

When the Commissioner tried to set a price control order at the end of 2018, SEL's Director David Gordon-Brown threatened to shut off his power station entirely - but that was when the matter was already in court. Now, he has set another, which was meant to take effect as of the 1 January.

But this time, Mr Gordon-Brown is threatening to start fresh legal action rather than charge a lower price to his customers from the end of January - 54p per unit rather than over 80. This is despite the fact the entire reason he is having to charge such sky-high prices in the first place is because he is transferring the businesses' legal bills on to his customers.


Pictured: David Gordon-Brown is no longer in Sark and is living in Canada, but he says putting the price down to 54p a unit would bankrupt him.

"The object of the law was to make sure we were not making an excessive profit. However, once the commissioner saw that we were actually making almost no profit, he chose not to report this to you and instead reinterpreted the law to authorize him to reduce the price by telling us how to run the company," Mr Gordon-Brown said.

"It is remarkably easy to justify a low price if you simply ignore most of the costs. However, a company cannot run without covering its costs, this will only bankrupt the company. According to company law, a company's director cannot knowingly run the company into bankruptcy. As you can see, the Price Control Order puts SEL in a position of being forced to go to court to challenge it."

Mr Gordon-Brown said any court battle would likely cost around £1million this time, and threatened Sark's residents with having to pay that bill no matter the outcome, because it would either be part of their power costs, or their tax bill. 

"There is a prospect of avoiding the cost altogether," Mr Gordon-Brown's letter said. He confirmed that GEL were currently heading up a valuation process of his business, which he claimed meant it was "very likely" they would eventually buy him out.


Pictured: Mr Gordon-Brown claimed Guernsey Electricity were valuing SEL right now, but also suggested it was "very likely" it would make the purchase at the end of that process.

"If they decide to purchase the company and use their Economy of Scale, they should be able to meet the Commissioner’s price or even get below it. This would make the entire £1 million cost unnecessary," he said.

"If Chief Pleas [the island's government, ed.] decide that they will purchase instead, they will want to honour their commissioner’s price which would also make the £1 million a waste of money. In light of this, SEL has asked Chief Pleas to discuss this with the Commissioner and to ask him to delay his price control order until Guernsey Electricity have had a chance to finish the valuation."

There is no evidence so far to suggest that it is "very likely" GEL would want to purchase SEL when it completes the valuation, something reflected in an open letter from Sark's Electricity User Group responding to Mr Gordon-Brown.

The group said they were "puzzled" by the SEL Director's claims, and also confirmed they were happy to pay the reduced fee of 54p.


Pictured: Sark's Electricity Prices are potentially the highest in the world, but Mr Gordon-Brown denies he could make a profit charging anything less. 

"The process by which the price has been set by the Commissioner shows us that its is perfectly reasonable to expect electricity to be delivered to us at 54p. The determination process and price control order appear to us to have considered every cost component incurred in your providing electricity for the island. You have failed to make it clear to us why you do not accept the content and conclusions of the determination and price control order, or on what grounds you feel justified in threatening your customers with the prospect of legal confrontation," the letter said.

"We are unaware of any imminent indication that Guernsey Electricity is considering Bailiwick wide electricity distribution, or whether Sark's Chief Pleas have reached any immediate agreement to purchase your generation and distribution business. However, we see this as developing policy for the future of your business, and not a reason to put off charging your customers a fair and reasonable price."

Despite it being nearly two years since this entire conflict started to come to a head, Mr Gordon-Brown ended his original letter saying the only way they could avoid passing costs on to the Sark tax payer was if they were given time to find a viable solution. 

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