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OFT Chairman to Meet Manx Gas Protesters

Monday, 18 September 2017

The Chairman of the Office of Fair Trading will listen to the concerns of those staging a protest against Manx Gas charges. Martyn Perkins MHK will be at Central Government Offices on Tuesday 19 September to meet protesters.

Manx Gas’s profits have, since 2015, been regulated via an agreement with the OFT, Treasury and Department of Economic Development (DED). The agreement places a ceiling on the amount of profit Manx Gas, a private company, can make.

As a result of the agreement, gas bills are, on average, 6.5% cheaper than they were two years ago.

The agreement is based on the relationship between profits and the capital value of assets used to produce them – known as Return on Capital Employed (ROCE). This measure is widely used by those regulating in a monopoly environment.

Under the agreement, Manx Gas sets its tariffs and standing charges but, prior to changing them, must provide the OFT with evidence that it remains within the ROCE margins.

The agreement, which is legally binding on all parties, runs for an initial four years and can then be reviewed.

Mr Perkins said:

‘I note the concerns of those planning this gathering and will meet them in person to receive the details of the protest. Whilst I have no doubt that there are those finding it difficult to pay gas bills, the OFT regulates Manx Gas in the interests of the consumer.’

‘The agreement works by fixing Manx Gas’s overall profits, ensuring it can’t exploit its natural monopoly in the gas supply market. Provided Manx Gas does not exceed its agreed level of profitability, it is free to operate its business on a commercial basis. The split between tariffs and standing charges is a commercial decision for Manx Gas.’

Mr Perkins said:

‘I can assure consumers that Manx Gas is not using the level of standing charges to increase its profits. When its pricing restructure took place in 2016, Manx Gas provided considerable data to the OFT in order to demonstrate that the increase in the standing charge was offset by a reduction in the gas tariff and is therefore revenue-neutral in order to comply with the regulatory agreement.

He added:

‘After 2018 there is an opportunity to review or even terminate the regulatory agreement and the signatories to the agreement – the OFT, DED, and Treasury – will begin detailed discussions well in advance. Regardless of what is decided, the priority of the OFT is to protect consumers.

‘I have personally invited Manx Gas to give a presentation to Tynwald Members and this is scheduled for later this year.’

For a copy of, and more information about the regulatory agreement between Manx Gas, the OFT, Treasury and DED, see the OFT webpage.

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