During the March 23 LegCo meeting, Councillor Lawson Henry brought attention to the significant economic impact of high utility prices on St Helena, and pointed to a faulty business model and unreasonably high administration costs within the island’s only utility company.
Connect St Helena, Ltd is the island’s sole water, electric and sewage company. Connect has had a 10-year signed monopoly over the island’s utilities since 2013, and receives a weighty annual SHG subsidy.
Despite Connect’s promises to reduce electricity prices once renewable sources had been established, no such reductions have occurred. Wind and solar power sources have been established, but so far Connect has managed only to prevent large increases.
Councillors have seen various businesses and individuals fall into debt recently due to Connect bills – for an island with an economy struggling through a new era of globalisation and much lower tourist numbers than predicted, this is especially significant.
For instance, Councillor Henry blamed Connect for the recent near-closure of the St Helena Fisheries Corporation, which is the producer of one of the island’s main exports, as it was the utility costs that caused the Corporation’s debt and the subsequent government bail-out.
“Utility prices are arguably the greatest barrier to achieving the economic development that we are all working so hard to bring about,” said Councillor Dr Corinda Essex.
“This house believes that it is in the best interests of St Helena that responsibility for the management of the island’s utility services – meaning electricity, water and sewage – is subject to closer direction and control by St Helena Government and resolves that an urgent assessment of the advantages and disadvantages of such an action should be undertaken to inform appropriate action,” read the title of the motion.
SHG had control over the island’s utilities in the recent past. But after the 2010 signing of the Memorandum of Understanding between the UK Government and SHG (which set out conditions for the release of Airport Project funding), SHG needed to reduce its staff numbers before construction could begin.
Connect St Helena therefore formed in 2013 as part of the Divestment Programme that saw utilities transferred from SHG control to the private company.
Since then, Connect has operated with minimal SHG oversight, but receives a substantial SHG subsidy each year (initially the figure was over £600,000).
Councillor Henry criticised the privatisation and said no review had been conducted since Connect St Helena was formed to show if it was producing value for money.
“This is where I see the problem lies,” Councillor Henry said. “SHG creates these situations and there is never any follow-up action.”
A review would be valuable to the public, as St Helena has no Freedom of Information law and it is therefore exceedingly difficult to get insight into Connect’s use of SHG funds.
From the documentation Councillor Henry had viewed, he said the lack of utility tariff reductions could likely be linked to the extremely high administration costs occurring within Connect: he put the figure at £1,244 million in admin costs alone. He pointed out that this figure contributes to high tariffs, and said a different business model was needed to bring utility costs down.
All elected members stood and gave their support to the motion, with many expressing deep concerns in the high costs of electricity that are hindering the local economy.
“A growing proportion of our population is experiencing fuel poverty, in particular the elderly and large families with low income who are really having to struggle to pay for electricity and water,” said Coucillor Essex, who seconded the motion. “This situation is unacceptable and cannot be allowed to continue.”
Councillor Essex went as far as to propose direct control of utilities when speaking to the motion.
“It is my firm belief that all options for alternative models must be examined, including that of the utilities returning to direct management by St Helena Government,” she said.
Electricity is currently priced at 30p per unit for domestic users for the first 1000 units, and then at 46p per unit. Businesses are charged 46p per unit.
For water, domestic users pay £1.16 for the first 15 units, and then £1.53 per unit. Businesses are charged £3.01 per unit.
With minimum wage only just reaching £3.05 per hour, the pricing is significant.
“I hope members will support this motion, as not to do so would be to accept the status quo of our people and businesses being in utilities poverty,” Councillor Henry said. “This situation cannot go on any longer; it is simply not an option.”
The motion passed with all members voting in favour and an assessment will now be drawn up to analyse the current situation and see how changes could best be made.