The Isle of Man’s government has agreed to freeze electricity prices until March 2023 to shield residents and businesses from a sharp increase in bills this winter.
The intervention announced on Wednesday will mean local customers are likely to pay some of the lowest electricity prices across the British Isles over the coming months.
Residents had been bracing for a 70% rise in tariffs that would have added another £500 to the average annual household bill from this autumn. That would have taken domestic bills to around £1,236 each.
Under a deal struck between the government of the crown dependency and the island’s electricity provider, Manx Utilities, the increases will instead be added to customers’ bills over a longer period of time from April.
“The aim here is to flatten the curve on the cost of living increases and give households a degree of certainty and time to adjust to what may be a longer-term set of challenges,” the Isle of Man’s Treasury minister, Alex Allinson, said.
The government is funding the price freeze through a £26m loan to the electricity firm, which would be repaid over 20 years. However, that loan still requires formal approval of the Isle of Man’s legislature, the Tynwald.
“Providing a loan with a 20-year repayment means that the costs of record electricity prices expected this winter can be factored into bills over a much longer period, cushioning consumers from what would be, for many, crippling price rises,” Allinson said.
He said the government had explored a number of options to determine the best way to support residents already facing surging costs linked to the war in Ukraine.
Allinson said the price freeze “buys us time, taking us to spring when electricity use is lower.
“We are shielding households, businesses and organisations from what would have been a sharp and sudden increase in electricity costs of between £16m and £26m by March. Instead, people will have that money in their pockets this winter.”
The price cap was announced as part of a broader package of measures that included capping bus fares at £2 per journey for at least three months, ramping up an £8m programme to improve energy efficiency of local homes, and targeted payments for those on low incomes or receiving child benefits.
“These are challenging times but the council of ministers believes this package of support will help everyone in our community, including businesses, while also specifically targeting those who are likely to feel the most pain,” Allinson said.