GUERNSEY Electricity has suffered a higher than expected annual operating loss of £795,000. Customers can expect to pay more for their power from April.

It blamed the loss on prices being kept artificially low at a time of rises in world energy costs.

The company is now exposed to the volatility in the energy market after the fixed price deal on the cable contract expired in December.

‘The whole thing was caused by the increase in wholesale price on 1 December when the three year contract with EdF came to an end. Effectively on that day our costs went up by 55%,’ said managing director Ian Watson.

‘That was the primary cause. To shield us against that, the Office of Utility Regulation gave an interim price control, which meant a fairly small increase in prices by 5.5% on 1 January. It’s the combination of those circumstances that have caused the operating loss.’

He added that in the short term the company was happy with the situation.

‘One of our policies as a board is to keep prices as stable as possible,’ said Mr Watson.

There was no intention to raise them in one go.

‘In the short term it’s sustainable, but in the long term we’ll be looking and planning for the next price control with the OUR.’

GE chairman Ken Gregson said the key issue was that the deficit did not reflect the whole year, but just eight months because of the protection offered by the cable link contract.

‘It isn’t sustainable in the long term,’ said Mr Gregson.

Mr Watson said that controls became more important with the increases in world energy prices.

‘We’re now looking for the next price control, which should happen for us to be able to effect a price increase probably on 1 April 2007.’

It was too early to comment what that might be, he said.

The contract with EdF to provide power through the cable link lasts until 2012, but there were price breaks within it.

‘We’re open to the world market and the only way of mitigating that is by buying ahead,’ said Mr Watson.

The opportunity to produce power on-island through oil generators gave the company more buying options.

In the 12 months up to 31 March, 78% of the island’s electricity came from the cable link, down from 84% the year before.

On-island generation doubled. At times it is now more economical to use that method.

Over the year the company recorded a profit of £362,000 once other income and exceptional items was accounted for. That included a payment of more than £250,000 from the liquidators of BCCI, the failed bank in which the former Electricity Board had invested.

Turnover was up by 5.6%, at £29.4m, and revenues from the sale of electricity rose by 5.3% to £26.6m.

Mr Gregson said that the company continued to perform well.

‘If you look at the financial figures as a whole, the underlying performance is very strong,’ he said.

‘The growth in electricity sales, the performance of our non-core activities and the tight rein on controllable costs are all very positive signs. We also recorded our best reliability, service standards and health and safety, all excellent achievements.’