Falklands Legislative Assembly members share differing views on electricity price increase
Written for the December 2, 2022 issue of Penguin News. Printed under the headline “MLAs split on electricity rise - PN asks their views”.
STANDING Finance Committee (SFC) revealed on September 28 that members were split 4-2 in favour of increasing electricity price per unit almost 30%. As such Penguin News reached out to MLAs for their views on the rise.
MLAs Gavin Short and Leona Roberts confirmed they were the two MLAs who voted against the increase in electricity costs in SFC.
MLA Short said on the matter: “As inflation, most of which is imported, has swept the world, it was my contention that the unit price of electricity was one area where we did have control and could have acted in a different manner.”
He added he accepted that electricity prices had to rise but “it was the how - how much and when that I disagreed with” and that while a support package was set up he felt, “this increase is doing nothing more than pouring fuel onto the bonfire of inflation here.”
He added he felt: “The increase as voted through was nothing short of brutal.”
MLA Roberts also expressed concerns that, “such a dramatic increase would not only put an immense and immediate shock into the system, hitting households and businesses extremely hard, but would also substantially add to the growing cost of living, as businesses will have to seek to cover their higher energy costs by passing them on to the consumer.”
She added she was, “very worried for individuals and families, particularly lower and middle-earners who will see a greater proportion of their income swallowed up by energy costs.”
MLA Roberts said she voted against the increase for concern “for small/medium-sized businesses which may simply not be able to either absorb or pass on costs without becoming unviable. When individuals have less money in their pockets, they are forced to cut back their spending and that can create further repercussions across the board. It’s also true that higher energy prices will impact FIG’s own operating costs, with more ramifications.”
Both MLA Roberts and Short expressed concerns about second and third order consequences of the electricity price increase, where an initial change can affect other matters down the line - such as increases of prices for goods and services; or stricter budgetting by individuals due to higher cost of living affecting businesses who operate beyond essential services.
Penguin News requested information from FIG about whether any investigation or analysis was done into the second and third order effects of the proposed electricity cost increase.
The Paper was informed by FIG “detailed economic modelling was not carried out by Government Officers for a variety of reasons, not least that such an analysis would be complex, subject to many variable and would be unlikely to provide a reliable estimate of the impacts, as the estimated indirect cost impacts would be highly influenced by individual businesses pricing decisions.
“For example, the outcome of the analysis would be different if it were assumed 1) the business absorbed some/all of the increased costs vs 2) they passed along all costs spread across all products vs 3) they increased costs of targeted products.”
It was added that FIG delayed the increase in electricity price “to ensure that the Household Power and Fuel Allowance was ready in place in for those who are eligible to access it.”
Eligible households were encouraged to apply at https://www.falklands.gov.fk/socialservices/income-support
MLA Short criticised the lack of analysis of later effects of increasing electricity price, stating “Whilst there were figures supporting the increase, there had been (as far as I am aware) no proper economic analysis of just what a whopping increase like this would mean further down the line.”
MLA Short stated he felt that the effect “has to feed into the rising inflation figures locally as businesses pass this on to consumers and of course there is the increase to wages and pensions a bit further down the line - which by the way I have no problem in nailing my colours to the mast now and will be supporting.
“All this should have been looked at by an economist and a report prepared by them for consideration at SFC.”
In addition to responses from the MLAs who voted against the electricity price rise, a number of other Members gave their views.
MLA Teslyn Barkman stated that while she supported the increase she felt her view had not yet been publicly reflected.
“RPI in Stanley is not an adequate tool to monitor household increases across our country and the effects of cost of living increases,” MLA Barkman said, “however, the FIG Policy team have done a lot of good work on this in a short period of time with available data from the Census and other areas of consultation. We have taken a targeted approach with our cost of living work so that middle and low income households are supported.”
She added that this had been done “to absorb the fuel and power effect with targeted spend of tax payers money rather than pay for the complete offset across the economy, which would use more money from the treasury at a time when costs to maintain Government services and national infrastructure are also increasing.”
MLA Barkman added that she hoped the “unprecedented” increase was short-lived but “If this global crisis sustains, and if the targeted work is analysed to not be having the supporting effect I shall push for necessary and rapid adaptations.
“This is something my colleagues have expressed also and I trust they will all stand by that.”
MLA Mark Pollard said “My view has always been that it is right to use targeted intervention to alleviate pressure on those most affected. So I agree with the current [support] measures put in.”
MLA Pollard added that he was out of the country at the time of the vote, but said “if I was here I would have not voted to put the cost up.
“The main reason for this is that I feel that we have so few levers to make an impact on inflation in the Falklands.
“Much is out of our control, but the price of electricity is not.
“The rise will feed directly back into the basket of goods, it will also indirectly inflate goods as businesses look to recover the costs. Further down the line when we put our wages up to reflect the increases in inflation then the private sector will likely follow and put their goods up again to recover that cost as well.”