Electricity tariffs will probably have to rise each year to fund the Manx Utilities Authority and service its debts, Chief Minister Allan Bell admitted.
Electricity tariffs are to rise by an inflation busting 2.2 per cent on average from April - adding £24 a year to the bill for the typical domestic consumer.
The Manx Utilities Authority has also announced a 2.2 per cent increase in the water rate to 313.97 pence in the pound and confirmed that a 61.29 pence in the pound sewerage rate will replace the widely criticised flat rate toilet tax.
Mr Bell said: ‘I absolutely understand the challenges facing the community at the moment in terms of the cost of living.
‘We have held prices on electricity but there was a small increase last year and now a smaller one this year. The board has done an excellent job in trying to contain costs while making provision to service the various debts facing the authority.
‘We have to recognise, though, that those pressures are not going to get any easier. If we want to maintain the viability of the energy provider we have to make sure it’s properly funded.’
As announced in the budget, departments and statutory boards will start paying loan interest again to help replenish the capital fund. ‘That is having some impact as well. It’s a combination of factors,’ Mr Bell said.
He said the merger of the water and electricity authorities seems to be working. ‘There’s lots of synergies to be squeezed out. The authority is going in the right direction.
‘Unfortunately, in the short term at least tariffs will probably go up each year to fund it,’ he added.
The now-scrapped toilet tax was due to rise to £100 in April. But the MUA said analysis of the existing rating database indicated that about 70 per cent of ratepayers will pay less than £100 for the sewerage rate.
MUA chairman Alfred Cannan MHK said: ‘I am well aware of the financial pressures that exist for many consumers and we are doing our very best to keep prices at the lowest levels possible.
‘As many of our customers know we have a high level of debt servicing costs which impact on our ability to react as quickly as we would like to changing gas prices.
‘Our electricity prices were frozen for three consecutive years and Manx Utilities is ahead of its merger business plan. We will be monitoring very carefully the impact of the lower gas and oil prices on the business and I hope this can be reflected in future tariffs if feasible.’
Unit price changes for electricity range from 0.9 per cent for industrial unit tariffs to 1.5 per cent on domestic unit tariffs.
The typical domestic customer, using 3,900 units per year, will see bills rise by about £24 - made up of a £12 annual increase in the standing charge, £9 increase in units used, and £3 due to the reduction in the early payment discount from 2 per cent to 1.5 per cent.
Tariffs rose on average by 2.5 per cent last year with the prompt payment discount cut from 2.5 per cent.