Manx Utilities refused Manx Gas forward-purchase over 'credit risk'

Manx Gas is the monopoly supplier of gas to consumers on the Isle of Man

The Isle of Man's utilities provider refused to forward-purchase gas for the island's supplier in October as the company was deemed to be a "credit risk", it has been confirmed.

Manx Gas (MG) chief executive Jo Cox said a request to Manx Utilities (MU) for "hedging was declined".

Hedging is buying gas when prices are lower to cushion any impact of rises.

MU said MG failed to supply requested information to allow it to assess the financial risk of forward-purchasing.

Volatility in the wholesale gas market has been blamed for two recent hikes in gas tariffs on the island.

All of the natural gas purchased for sale on the island by MG is done via MU.

'Free credit'

The amount that may have been saved through hedging at the time of the refusal has not been revealed.

However, Ms Cox confirmed that during 2021 and 2022, it had "delivered a saving of £2.2m", which was 10% of the gross value of the gas.

In a statement, MU said MG "was considered a credit risk" at the time as it failed to supply information that would have enabled MU to "understand the financial risk it was being exposed to following a significant increase in wholesale energy costs".

The decision had been "considered regularly since" by MU's board, "most recently on 25 March", it added.

Ms Cox told Tynwald's Economic Policy Review Committee the "reticence" in MU hedging was that it would give the company "in effect free credit, because they buy forward on our behalf".

"Forward-buying gas is millions and millions of pounds [and] at that time they were concerned that we wouldn't be able to pay that back," she said.

A new regulatory framework approved by Tynwald in March had since given the company "stability", and had opened the door to hedging through banks, she added.