More than 7,000 Manx Gas customers will lose out under a controversial new charging structure – but the utility’s boss insists they are still getting a ‘pretty good deal’.
Critics suggest the move to hike the standing charge but cut tariffs will disproportionately hit those on lower incomes who can’t afford to use much gas.
But Manx Gas managing director Tony Nicholls insisted the company has done everything it can to protect the vulnerable. He denies it is just out to make more profit or make people use more gas.
The difference in bills will be small, he said, with the most anyone having to pay extra being about £25 a year.
From January 1 next year, the private utility is introducing new banded charges for its 20,000 mainly domestic central heating customers.
The 5,400 customers who use less than 5,000 kWhs of gas a year will be in band A and will see no change to either their standing charge or tariff. Those who use more than 50,000 kWhrs, some 100 customers in total, will also see no change.
But for everyone else, placed in bands B to H, there will be winners and losers in about equal proportion.
Overall, some 63 per cent of 20,000 customers will see either no change or a cut in their bimonthly bills.
But everyone else – more than 7,000 customers – will pay more, although in most cases the difference will be small.
Mr Nicholls said the new charging mechanism was cost neutral - and should the company make excess profit customers would get a refund.
He said: ‘I think it’s pretty good deal for the customer. We have tried to make it as fair as possible.
‘You might reasonably ask if we might still make more profit. But 9.99 per cent return on capital is all we are allowed to earn. If we exceed that we have to pay it back. We are held to account by the OFT.’
Mr Nicholls said the maximum extra anyone would pay is about £20 to £25 a year excluding VAT and the maximum saving similarly £20 to £25 a year.
In band B, for example, the biggest losers will pay an extra £23.22 a year and the biggest winners will save £23.58 a year.
The direct debit discount is also being raised from 2.5 per cent to 3.25 per cent for the new tariffs.
An average band D customer, using 11,250 kWh a year, will see their standing charge increase from the present 16.4998p a day to a whopping 76.4214p a day but their tariff will drop from 8.2242p to 6.2642.
This will mean their standing change will go up from £60.22 to £278.94 but the cost of gas used will fall from £902.09 to £681.82, and their annual bill will fall, with the new direct debit discount, from £962.31 to £960.76.
Manx Gas came under fire in May for scrapping the prompt payment discount for those who don’t pay by direct debit.
It says it is introducing the new charging mechanism to provide more stability and certainty for its shareholders, investors and customers.
At present only 16 per cent of the cost of supplying gas is covered by the standing charge. This will rise to 60 per cent under the new structure.
The effect for many will be to reduce winter bills but slightly increase summer bills.
Under a voluntary regulation agreement with the Office of Fair Trading, Manx Gas is committed not to exceed a figure of 9.99 per cent on its return on capital employed.
Asked if tariffs could rise again, Mr Nicholls replied he was confident that when gas prices are reviewed next June they will go down.
He said that Manx Gas occupies about 40 per cent of the heating market and denied it had lost customers to oil, insisting ‘net, we are up year on year’.
But Onchan commissioner Rob Callister claimed that charges would fall hardest on the most vulnerable including the elderly. ‘All local authority tenants are on natural gas. They’ve no other option for heating. Manx Gas need to justify these charges.
‘Serious questions have to be asked about the OFT - are they looking after the interests of customers, or the interests of a private utility.’
Mr Callister claimed the 5,500 local authority tenants would each end up paying an extra £90 a year - a claim strenuously denied by Manx Gas’s managing director.
Mr Nicholls said any customer who has a difficulty paying their bills should ‘please come and talk to us’.
John Peet of the OFT said: ‘While there will inevitably be some customers who are slightly better off and some who are slightly worse off. The differences are expected to be very small and the new tariff structure is ultimately revenue-neutral based on the data examined by the OFT.
‘Of significant concern to the OFT is the need to protect low volume users, which includes many of the most vulnerable in society. The OFT has been assured that there will be no change at all for central heating customers using fewer than 5,000 kWh and those on cooking only or gas fire tariffs.
‘The OFT was given the opportunity to review the proposals and has usefully done this by making a number of suggestions which Manx Gas has had regard to. The OFT has received assurance that low usage customers’ bills will remain unchanged.’