Isle of Man gas bills could increase after interest rate rises

Isle of Man Energy is the island's monopoly gas provider

Gas tariffs could rise in January to allow for the Isle of Man's monopoly provider to manage a rise in the cost of its debt, the regulator has said.

The Communications and Utilities Regulatory Authority (CURA) has recommended a 0.2p per unit increase be applied to Isle of Man Energy bills.

It would equate to an average rise of £16 a year for customers.

The move would help offset a rise in interest rates which had an impact on the cost of the firm's debt, CURA said.

A consultation on the proposed changes has been opened until 13 October.

If implemented, the higher charges would come into force at the start of the next regulatory period on 1 January.

Base rate rise

Under the regulatory framework, which came into effect in April last year, the gas provider is allowed to generate a return that ensures it is capable of being financed.

The authority said the cost of the firm's debt was higher than what was currently allowed in its permitted return.

That was after a rise in the UK base rate created a discrepancy between the assumed cost of the debt after refinancing in March last year and the actual cost when the arrangements were finalised in November.

CURA said its preliminary determination was that the cost of debt factored into the calculations should be increased to reflect that rise from January.

The regulator acknowledged the move would have a detrimental impact on consumers in the short-term, but said that needed to be weighted against the cost of not allowing it to happen.

That could "incentivise" the firm to "reduce the level of investment in its network over time which would also be detrimental to consumers", it added.

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