[BBC News] Prices rise for Manx electricity

[Chinahand]

I think I am more sceptical about the ability of the IOM to run large scale capital projects than Ai droid - but I think things are more complicated than what P.K. rants about.

 

Wha....

Sorry, should have explained better - I just think the IOM is worse at Capital Projects than the UK - for the reasons outlined. Which links in with Skeddan's comments about consultants and that these projects aren't large in the grand scheme of things.

 

No they're not - and that is the problem - if you are a consultant in electrical generation, or whatever, then the IOM projects are piddling, they don't fit - they involve basically as much paperwork and signing off etc, but for much smaller units.

 

People who can run a budget for a movie - there are thousands of them from Hollywood to Bollywood, but finding people who can install Megawatts, or cables, or pressure reduction stations - they're big boys and the overheads etc don't squeeze well into IOM sized bottles.

 

In the long run I'm not too concerned - we'll build a new cable - hopefully to Ireland - and have two cables and efficient gas powered generation on Island. In hindsight we probably should have done the second cable first - it would probably have fitted the lumps and bumps in the cash flows better. But the Island really shouldn't underestimate the advantages bringing Gas to the Island now - in fact it may well have been a once in a life time event.

 

Tapping a pipeline being built means we could share overheads - putting in a spur to an already completed pipe - basically impossible.

 

The MEA siezed that opportunity - that was the personality of the men involved. It is a sad fact that they are hated on this Island because of it - I find that attitude crab like and dangerous for our prosperity.

[Tugger]

The MEA siezed that opportunity - that was the personality of the men involved. It is a sad fact that they are hated on this Island because of it - I find that attitude crab like and dangerous for our prosperity.

 

I'm not sure that the hatred for them is related to the pipeline, is it?

[Chinahand]

The majority of the overspend was the Pressure Reduction station and the spur pipe. Neither of these were in the original cost calculations. The chairman will always rue the day he claimed the powerstation had come in on time and on budget - he was approximately correct, but that was only one segment of the project.

 

The gas and PRS side had been (approximately) thought about in the planning stage, but the assumption was that Board Aearein (can't spell) would build it and then charge an additional surcharge on the gas they supplied. Planning issues and how to finance it made this impossible, so the costs moved over to the MEA to bear up front.

 

Finance-wise a single cash flow or one spread out overtime doesn't make alot of difference, but cash flow wise it meant an extra £50 odd million - IIRC - was needed. That gap in the piggy bank is basically what this fuss is all about.

[ai_Droid]

Sorry, should have explained better - I just think the IOM is worse at Capital Projects than the UK - for the reasons outlined. Which links in with Skeddan's comments about consultants and that these projects aren't large in the grand scheme of things.

 

Think you've misrepresented me a bit, probably as a result of the spat with PK. I disagree mostly with his 'you deserve your politicians' type of stuff. Like you said, the biggest mistakes were the miscalculations on the original spec, by the time the loans thing came along it was too late. But blaming our elected officials and therefore us for electing them is daft. These folks aren't in the business of building power stations, they take advice and act on it, like any of us do when operating outside our area of expertise.

[P.K.]

What is more expensive are executives and managers in public authorities, often of very middling ability, who are eager to be able to put being in charge of some big project on their CV and so boost their career.

Been there, done that, got the scar tissue...

 

I never ceased to be amazed at the vast amounts of public money that seem to be under the control of a public servant who has never been anywhere else in their entire career. Major projects really do highlight the differences between the public and private sector and the people that work in them.

 

I think I am more sceptical about the ability of the IOM to run large scale capital projects than Ai droid - but I think things are more complicated than what P.K. rants about.

 

The IOM is small, as a result there will always be lots of redundancy in any capital project that we attempt to install - its simply distorting to compare the costs of projects in the UK put in to support populations in the millions with a project in the Island - the IOM project is always going to seem hugely more expensive - per capita, per KW, per therm, or whatever

Me having a "rant" about anything - yeah right....

 

Sure in the grand scheme of things this wasn't a huge project. But there are certain things you have to do irrespective of the project size. Which means, of course, that for some aspect of project management the size of the project is actually an irrelevance.

 

The majority of the overspend was the Pressure Reduction station and the spur pipe. Neither of these were in the original cost calculations. The chairman will always rue the day he claimed the powerstation had come in on time and on budget - he was approximately correct, but that was only one segment of the project.

 

The gas and PRS side had been (approximately) thought about in the planning stage, but the assumption was that Board Aearein (can't spell) would build it and then charge an additional surcharge on the gas they supplied. Planning issues and how to finance it made this impossible, so the costs moved over to the MEA to bear up front.

 

Finance-wise a single cash flow or one spread out overtime doesn't make alot of difference, but cash flow wise it meant an extra £50 odd million - IIRC - was needed. That gap in the piggy bank is basically what this fuss is all about.

So the gas and PRS side had been "approximately" thought about in the planning stage? Not how I heard it. So how would you describe that to the SC on the MEA for example - a guess, an oversight, incompetance, whatever? As I posted earlier on Basic Project Management - Golden Rule #1 - never never never base decisions on anecdotal evidence. I personally hope it's incompetance (bad enough in itself) because I suspect that had the true full cost been known at the outset the project may not have gone ahead at all. Of course, what added to the cost was the way the MEA lot (in a show of what to me looks like pure arrogance) took the loan from Proffitts' division of Barclays Bank at a higher interest rate than it needed to be. The reason given for this was that involving Tynwald would have instigated a costly (I once heard it described as fatal) delay. Oh really - so where is the evidence for this? Oh dear, there isn't any. Basic Project Management - Golden Rule #1 - never never never base decisions on anecdotal evidence.

 

Fortunately on the Select Committee for the MEA is a very experienced investigating officer. We shall see....

 

As to "you get the government you deserve" Ai Droid it is a very very old maxim. I'm not sure who originally coined it and it would be nice to know but I'm astonished that so few on here seem to have heard of it. I blame the education system - or rather the lack of...

[Skeddan]

The gas and PRS side had been (approximately) thought about in the planning stage, but the assumption was....

 

wrongly defined scope, spec, requirements, risks, costs, controls..... someone only 'approximately' thought about this, and made assumptions at the planning stage. Like I said, flaws in the planning stage are typically the cause of project disasters.

 

Chinahand - as you say there are thousands of production managers who can handle a feature film. They don't 'approximately' think about who is responsible for what, and don't make assumptions, and make sure everything is sewn up tight as can be. If it is a 'don't know'/'can't be sure' then contingency plans are made. Ones which will ensure everything will happen if Plan A falls through. Money is then allocated to take care of this in the budgeting stage. (And you put at least 30% of your budget into an additional general contingency fund).

 

If there was an agreement that someone else would build it and then charge an additional surcharge on the gas they supplied - and they reneged on this - that's one thing. If there was no agreement, contract, or anything which could be relied upon to make them responsible for this (i.e. civil liability that one could sue them for or obtain specific performance) - well who's responsible for making it happen? It's not rocket science. Just cover all the bases and don't take anything for granted.

 

Sometimes things like this happen so the project will get the go-ahead that it wouldn't have had all the costs really be taken into account. Under-budgeting is a chronic problem and occassionally can be fraudulent - i.e. obtaining public funds through deliberate deception. I imagine this would have gone ahead anyway, and that this is just managerial incompetence. (mainly in entrusting the project management at this planning stage to someone who isn't up to it - maybe a good middle manager in a department, but wouldn't make it in Ealing let alone Bollywood)

[manshimajin]

Getting back to electricity price rise its a shame we can't up anchor and row down to France to get a bit of that 'limited to inflation' price rise...

 

French Electricity Prices Pegged

 

Maybe this is because they have a few nuclear power stations?

 

In the meantime the UK government's advice is to insulate your loft and I am not sure what our lot are recommending - thicker pullovers for the elderly?

[triskelion]

Huh? The UK is trying to build nuclear power stations, and has been for years now. The difference is that France went much more fully into a nuclear-based infrastructure, whereas most other places farted about the edges.

 

The UK Government recommends insulating the loft because you can save more money that way than pretty much any other way (in terms of energy). The IoMG's position is about the same.

[Gladys]

'Cept the IOM Govenrment will pay you a 75% grant without any means testing, whereas the UK will only make a contribution to those on low incomes, benefits etc.

[Sebrof]

Huh? The UK is trying to build nuclear power stations, and has been for years now.

 

Another unsupported and inaccurate statement from Triskelion.

 

The UK has ONLY JUST, in the last year or so, come around to the idea that nuclear energy is the only feasible way to provide power in the long term for England. Scotland and (to a lesser extent Wales) have a lot of hydro capacity, but England has very little potential for hydro, even in the Lakes. Now that oil has almost run out, England's future is nuclear.

 

S

 

Editted to add this link: http://www.guardian.co.uk/environment/2007...nuclearindustry

[manshimajin]

Insulating the loft is OK if you have one. What do you when you have attic rooms? I have double glazing but am not sure what to do about the roof that does not involve ripping down all of the attic ceilings.

 

Incidentally heard an advocate of wind power on the Beeb the other day saying that energy prices would need to increase by a further 10% to justify wind farms. I thought in the old days they used to say it would be cost justified when oil got to $60 per barrel.

[Joe Public]

I'm not an accountant, but after a quick google and an interesting read.

 

http://www.gov.im/lib/docs/mea/meaaccounts200607.pdf

 

Am I right in saying that the MEA runs at a loss and total debt is over 400 million and rising?

[thesultanofsheight]

Am I right in saying that the MEA runs at a loss and total debt is over 400 million and rising?

 

Yes, and if you get your arse down to Ridgeway Street they'll also do you a dishwasher 50% off with interest free credit for 12 months !!!! Who cares about the £400m - 50% off and interest free!

[Joe Public]

Am I right in saying that the MEA runs at a loss and total debt is over 400 million and rising?

 

Yes, and if you get your arse down to Ridgeway Street they'll also do you a dishwasher 50% off with interest free credit for 12 months !!!! Who cares about the £400m - 50% off and interest free!

 

Yeah, but I can't afford to run it.

 

400 million? No wonder they're after our pensions.

[Sebrof]

I'm not an accountant, but after a quick google and an interesting read.

 

http://www.gov.im/lib/docs/mea/meaaccounts200607.pdf

 

Am I right in saying that the MEA runs at a loss and total debt is over 400 million and rising?

 

The accounts make interesting reading.

 

The company and its subsidiaries lost £5.4 million BEFORE interest. After interest they lost £27.5 million. The government then gave them an interest rebate (paid for out of our taxes), and this brought the loss down to £14.3 million. This loss has been transferred to the Asset Replacement Reserve (ARR).

 

The ARR is a fund that the MEA builds up each year to enable it to pay for new plant to replace what has worn-out. This fund is now negative, which isn't clever, and the whole MEA operation is actually insolvent. I hope the directors of the MEA have obtained a guarantee from the government to cover its liabilities, because in normal circumstances it is illegal to operate an insovent company unless you know you can pay the debts.

 

The electricity supplied by the MEA cost £54 million to produce in 2007 (exc. interest), and they sold it for £48 million. So on its core business, the MEA lost £6 million, BEFORE taking account of interest of £22 million. Include the interest, and the loss becomes £28 million (I am talking about electricity only). So what cost £72 million to produce, was sold for £48 million.

 

In other words, the real cost of electricity is a full 50% more than we are (or were) being charged for. Part of the shortfall was met by a (small) profit on peripheral activities (like dishwasher sales), part by the government interest rebate, and the remainder will have to be paid for by consumers in the future.

 

And all this was in 2007, before the oil price rises. I dread to think what the situation is now. The recent 16% rise in the tariff is a drop in the ocean.

 

S