Treasury’s ‘missing’ cash pile is now up to £75m.
Friday 22nd May 2009, 2:30PM BST.
TAXPAYERS could be called on to make up a potential multi-million pound shortfall in Guernsey Electricity’s capital reserves.
A Guernsey Press enquiry has identified a £25m. difference between what was expected to be held in Treasury’s cash pool for the company’s capital spending in 2013 and what is now expected to be there – nothing.
The discrepancy was revealed after the department delved into the cash pool to find out how much money was there – which led to the discovery of the £50m. error in its capital prioritisation report.
Treasury’s projection is based on data supplied by the company and has added fuel to a disagreement between Guernsey Electricity and the regulator, with GE arguing recently that the price control set in 2007 meant electricity prices were artificially low and would diminish its reserves to the point that prices would have to rise.
And it also calls into question whether Treasury as shareholder has been rigorous enough in assessing Guernsey Electricity’s spending plans.
‘In 2007, the Office of Utility Regulation set a price control for GEL that was based on a policy of ensuring the company has sufficient funds to meets its capital expenditure requirements for the foreseeable future, known as the “save to spend” policy,’ said OUR director-general John Curran.
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Well whoever it was who said before the 2008 election that the States accounts were not fit for the purpose was spot on.
Why has it taken over a year to find out the truth? How wasn’t the truth found out in the economic modelling exercises carried out in the last year?
It’s not petty cash that is missing, but a quarter of the total income of the States for a year.
Electricity prices will shoot up. Where have all the reserves that were built up by GE gone?
Scary.
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I presume Guernsey Electricity employ professionals to prepare and audit their annual accounts? Why wasn’t this picked up sooner? Whoever is responsible should (at the very least) be sacked on the spot.
As for Treasury and their “projections”, I simply despair. These people are supposed to be experts at this sort of thing – I wouldn’t trust them to organise a queue in a chip shop.
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Nothing surprises me these days, sad really.
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Both the headline and most of the content of this front page article are ill informed rubbish.
It is quite clear that the Press editorial position places dogma above facts.
The practice of grabbing at straws and writing them up as fact before thoroughly investigating and researching the true position is doing Guernsey a great disservice.
The “Opinion” item is even worse – but we don’t have an opportunity to comment on that!
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I just have one thing to say…. It is about time we generated our own electricity then who could they turn to for more money..This Island just gets worse by the day have the states not noticed the world is in recession? Oh and by the way what happened to the promises of having CHEAPER electric when we cabled up to France!!
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CD – This has nothing to do with G E’s accounts, it is the difference between projections made in 2006 and now as to the cash balances of G E in 2013. The reason why there is a shortfall of £25m in G E’s figures is simple; the OUR has adopted a fundamentally flawed view in their reasons to exclude depreciation as an expense when setting prices. I forcefully pointed this out to them at the time during the public meetings but they, like the proverbial ostrich, stuck their head in the sand and, it seems, it is still there.
As a result of priuces being set too low G E has made substantial operating losses and will continue to do so. £25m can easily disappear in seven years. The OUR should have nothing to do with a States owned utility only those in the private sector or, better still, thrown on the scrapheap of misbegotton States initiatives.
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The GE accounts for year ending 31 March 2008 confirm Cher Eugene’s appraisal.
The reserves with States Treasury in 2008 were £16.34 million compared with 2007 were reserves with States Treasury were £19.69 million.
Elsewhere there is a net cash movement from Sttaes treasury of £3.35 million.
Add the £3.35 million to what was left in 2008 ad we have the total for 2007.
If the drawdown of GE funds continues in like manner, it is easy to see that, as the GP say, the GE reserves with States Treasury will be “nothing” by 2013.
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