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Atlas shrugs as Sark faces the shocking truth about price controls

The island of Sark, a small, remote Channel Island, with a population somewhere around 500, part of the Duchy of Normandy and the Bailiwick of Guernsey, but almost entirely autonomous, noted for not having any cars, having been one the last feudal jurisdictions in the World and having had very low taxes, is currently in crisis over its electricity supply. The problem can be summed up in two words ‘price control’. Sark is taking on the appearance of a small, cooler, oil-free Venezuela (or perhaps a preview of Corbyn’s – or even May’s- UK in 2022). It even has the example of France, home of ‘égalité‘, the guillotine and generally poor economic ideas (and some excellent ones), a few miles away over the choppy Channel.

It will no doubt not surprise almost all our readers that Sark, having in recent years had democracy foisted on it, has got a legislature (28-strong) that seems to think that it has solutions to problems. The islanders have also found that as the price of electricity has risen in recent years, and as people have not been happy with the sole supplier to the Island, they have been generating their own power. Falling demand has led to higher unit costs for the supplier, which creates a vicious circle.

Enter the Commissioner established and authorised, nay, required, under the The Control of Electricity Prices (Sark) Law, 2016 to look into the price of electricity and to set a ‘fair and reasonable price’.

Looking at his powers more closely we see that they are in fact, nothing short of miraculous, under Section 13:

Determination of fair and reasonable price.
13. (1) Following completion of an investigation under this Law, the Commissioner shall, determine whether a price which is charged by a regulated electricity supplier for the supply of electricity is, or is not, fair and reasonable.

(2) In determining whether a price is, or is not, fair and reasonable the Commissioner shall take all material considerations into account, including without limitation the following matters –
(a) the cost of generating and distributing the supply of electricity, including the cost of –
(i) acquisition and maintenance of any plant and equipment,
(ii) fuel and other consumables, and
(iii) labour, required to generate the supply,
(b) the replacement cost of any plant and equipment required to generate and distribute the supply,
(c) the quality and reliability of the supply of electricity and the economy and efficiency with which the supply of electricity is generated and distributed,
(d) the margin of profit obtained by the regulated electricity supplier,
(e) the margin of profit obtained by such other electricity suppliers, generating and distributing a supply of electricity in similar circumstances in such other islands or territories, as the Commissioner thinks fit,
(f) the entitlement of the regulated electricity supplier to receive such reasonable return, as the Commissioner thinks fit, on the value of assets (including plant and equipment and working capital) operated or used by the supplier for the purpose of generating and distributing the supply, and
(g) any representations made in response to a request given under section 14, or otherwise.

Funnily enough, he is not expressly directed to consider the laws of economics, or supply and demand. You can see where this is going I am sure. So why can’t the fools on Sark? How many thousand of years and examples will it take? Here we have the closest thing to a laboratory for economics, 500 or so ‘lab mice’, and yet we already know how it ends. Here is his consultation paper.

So cutting to the chase, a price control has been issued, and the Island’s sole electricity provider intends to close on 30th November 2018, as they are losing £20,000 a month supplying power at the ‘fair and reasonable‘ (and that’s official) price. May I introduce here, the Managing Director of the Sark Electricity Company Ltd, Mr Atlas Shrugger (I jest), his name is… Mr Gordon-Brown (David being his first name), and his company wishes to challenge the commissioner’s decision.

SEL was to mount a legal battle against the commissioner move this December.

However, a review of the company’s financial affairs by its independent auditors found that although the company could withstand the temporary £20,000 loss per month caused by a new 52p price for electricity, SEL could not afford to mount the legal case at the same time.

Back in December, the tariff was set at 69p per unit.

‘We have already suffered through a 40% decline in consumption caused by Sark’s economic collapse and we cannot cut our costs any further,’ said SEL managing director David Gordon-Brown.

‘A 25% price cut for a company that has already lost £65,000 this year is obviously unmanageable.

‘Attempting to operate the company under these conditions would be a breach of my responsibilities as a company director.’

He said if Chief Pleas wanted the company to continue providing power, it would have to provide for the cost of fighting the commissioner order.

‘We cannot operate the company at a loss over £20,000 a month under the new pricing scheme nor can we find the money necessary to fund the legal fight.’

He added that if Chief Pleas did not come to the table as a financial backer in time, it would be required to shut down, leaving the island without water or electricity.

This, I understand, is because the cost of a legal challenge (in this tiny island) to the Regulator would be in the region of £250,000, and Mr Gordon-Brown has asked the Chief Pleas (the Parliament of Sark) to fund a legal challenge to the body established by the Parliament, as obviously, his company can’t afford that sort of money. Can anyone else see the obvious short-cut here, the one that doesn’t involve legal fees?

Mr Gordon-Brown was reported last December as saying:

David Gordon-Brown, the manager of Sark Electricity, says the recommendation by the island’s first electricity regular to reduce electricity prices tells “a story of betrayal”.
For the past eight years the people of Sark have been betrayed by a committee of incomers with so little understanding of Sark that they expect Electricity Prices here to be comparable to their experience in the UK.

Now the Company has been betrayed by a commissioner with so little understanding of Sark that he expects the costs of producing electricity here to be comparable to his experience in the UK.

The commissioner is doubtless a dedicated and decent chap, committed to fulfilling his statutory duty, he is only following the law and only giving orders, safe, as it happens, in his home in Long Buckby, Northamptonshire, England.

But has the Commissioner considered economies of scale, transportation costs, economic law and reality? Does he have to?

The situation now is that the Electricity Company is shutting down on 30th November 2018, and they supply water.

I have to say that all those who voted for those who voted in this law, and those who voted it in and implement it, are quite simply, fully deserving of their adumbrated trip back to the Stone Age. I would propose evacuating from Sark all those who opposed it, or were too young (or insane) to know better (i.e. under 16), and leaving the rest to enjoy their new, low prices. To keep us safe from contamination, we should establish an an air and sea blockade, and air-drop a copy of Bastiat’s writings so that they may learn the error of their ways. Socialism (or price fixing) is just slow-motion cannibalism. It looks like Sark is heading that way, by choice. But as the BBC reported, they did have this terrible problem:

In August 2018, Sark Electricity was forced to lower its price by 14p to 52p per kilowatt hour (kw/h) after the island’s electricity price commissioner found the cost “neither fair nor reasonable”.
Despite the reduction, Sark residents still pay significantly more than the 17p per kw/h in nearby Guernsey or the UK the average of 14p.

Meanwhile over in Jersey, the press speculate about the evacuation of the island.

Asked if there was a real possibility of people having to leave Sark, Mr Raymond -(deputy chairman of Sark’s Policy and Finance Committee)- replied: ‘Not if we can get our contingency plans in place.

‘They are in the development stage at the moment so I can’t give out too much detail, but it will involve consolidating around certain centres – making sure there are certain buildings that have power so people can congregate there. It really is a war-time mentality. Do you really expect people to be living like this in the 21st century?’

Yes, I do, because if they are socialist dickheads implementing their plans, they will eventually get what is coming to them, good and hard.

In the mindless leftism department

In today’s edition of the mindless, knee-jerk leftism department, Reuters reports that Oxfam is upset that Singapore has low tax rates, apparently because this somehow creates “inequality”. Note that Singapore also has a notably low poverty rate, and that poor people in Singapore are better off than in almost all of the other countries on earth, and (given Oxfam’s purported original mission) poor people in Singapore eat pretty damn well, but as Singapore doesn’t mindlessly tax people for no reason, we are apparently to think of it as a terrible place.