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.
Insert the joke about socialists, candles and electricity here.
Brian S.
This is it. Thank you, I had overlooked that one.
Hmm… The Gods of the Copy Book Headings strike again if i’m not very much mistaken.
Back in the 19th century, a far-sighted Russian said that socialism was the feudalism of the future. In the 20th century, less far-sighted Russians demonstrated that socialism was worse than that (or perhaps merely equally bad, if one compares specifically with the reign of Ivan the Terrible*). Now, in the 21st century, Sark is set to prove once more that socialism can make Feudalism look good.
(*And there again perhaps not.
Said by Stalin to film director Eisenstein.)
Sark is taking on the appearance of a small, cooler, oil-free Venezuela
Strangely, Venezuela is also taking on the appearance of an oil-free Venezuela as well.
https://tradingeconomics.com/venezuela/crude-oil-production
The Sarkians lived for a few thousand years without electricity or running water. There shouldn’t be any problems.
I can’t help thinking that if it’s cheaper to run your own diesel generator (as the article suggests) than to buy the mass produced stuff, somebody is doing something very wrong. What happened to economies of scale? Are there perhaps, regulations?
What happened to economies of scale? Are there perhaps, regulations?
I suspect not, the electricity generation is using standard diesel/petrol which is just a big generator, although there is an economy of having one big generator, there are overheads, such as:
* 365/24 “always on”
* backup
* distribution network (pylons, etc)
* billing and administration
Fuel price may be a factor, but I doubt the electricity company could negotiate much of a difference.
Switching to an alternate generation might be cheaper.
One day we will all have 100-year nuclear batteries in our gardens.
According to my math, 52p works out to about 70 US cents per kw/h.
I agree with the author that price controls are a disaster, but man, that’s expensive! electricity.
Runcie Balspune,
So the conclusion is 500 people (presumably a couple of hundred houses) is too few to make central generation economic. I’m sure socialism has an answer to that, and it probably includes banning private generators.
The idea of the “fair price” or the “just price” is ancient – but it is also UTTERLY FALSE.
There is no “just price” or “fair wage” separate from the market price determined by supply-and-demand.
This is not understood by the government of Sark – or by Mrs May in the United Kingdom.
The Barclay brothers are probably saying privately now “if we had taken over Sark [as they tried to do] it would not be the mess it now is” – and that may well be TRUE (I do not deny it).
But the Barclay brothers demanded that Sark have a democratically elected government – they ended “Feudalism” in Sark and created (by their endless demands and court cases) a “modern democratic government” and then lost the elections for that government.
So the Barclay brothers are partly, PARTLY, to blame.
Paul,
The Zombie Rebirth of the ‘just price’ will occur again and again, and the battle of ideas will have to be fought. Examples and reason are available to all, yet people ignore examples and ignore reason, but they cannot for long ignore reality. Let us hope that this teaches them a lesson that, on sober reflection, improves their world views.
And if the people of Sark vote for a wealth tax on living souls, and take 95% of what the brothers own, perhaps after storming their own island and imposing ‘freezing orders’ on their assets, the brothers would doubtless be comforted by the fact that it would be democracy in action.
Oddly enough, today the BBC have posted an article about a remote island community living off-grid in Scotland’s Western Isles, a tough life, but one they are prepared for. Perhaps they could help with some tips, I am not being Sarq-astic.
Go on to youtube and see a real leader – Ronald Reagan;
1st Inaugural Address: President Reagans Inaugural Address 1/20/81
https://www.youtube.com/watch?v=LToM9bAnsyM
We in the UK should bow our heads in shame that we have got what we have got.
I think we’re missing the point here. What I see, reading between the lines (and, in fact, right slap-bang on them, if you look at the letters on the SEL website), is an attempt by the shiny new democratic government to nationalize the electricity company. They want it to close, so they can take control of it. Set the “fair price” way too low, bankrupt the company, then they get their greedy mitts on it, and bingo! Instant revenue. Whack the price right back up again (it’s still “fair”, becuase it’s been set democratically), and milk the suckers for all they’re worth.
They’re devious buggers, politicians. In politics, the old maxim is reversed: never attribute to incompetence what can be attributed to malice. (See also UK-EU negotiations.)
Sam D,
The Regulator is independent of the Chief Pleas, by statute, section 2. He is not part of this plan.
Perish the thought that the politicians might contrive a situation where Atlas shrugs and walls away selling the company for £1 (as has been mooted) and avoids more debts. And should the ‘community’ take over electricity, perhaps the Commissioner will no longer be needed.
Meanwhile, the UK government minister responsible for the Channel Islands, Lord Keen, has the most helpful suggestion, that Sark needs a small permanent civil service ‘to provide ‘objective advice’, of course. It turns out that for 6 years there hasn’t been a contested election.
And there has been a collapse in the government’s revenue:
Rather troubling that they got through nearly 5 years of Nazidom, but ruined themselves with democracy.
Why not just order the electricity to flow in a fair and reasonable manner?
Paul Marks
The idea of the “fair price” or the “just price” is ancient – but it is also UTTERLY FALSE.
Just to be picky, I’m not sure I agree. “fair” and “just” are tricky non objective terms for sure, but within the realm of subjectivity one can surely say that a price isn’t “fair” or “just”, for example, the recent pricing of epipens at outrageous prices is surely an unfair or unjust price. (And yes, I fully understand the government interference that facilitated it. But the price is still unjust by many people’s lights.)
However, to say a price is “fair” doesn’t mean it is attainable. For example, if we say everyone has a right to good healthcare regardless of their financial situation, then we are saying that for some people the fair price for healthcare is $0. Clearly though, very few doctors or nurses or medicine makers would work for that price, regardless of how “fair” it is. It might be “fair” or “just” but it isn’t attainable.
I think it is a mistake to suggest that there is no such thing as a “fair” price, because you are in the real of subjective judgement calls, and that is an argument that can’t ever be won. Where one might well be more successful is arguing in the realm of what is attainable, what will work, what will produce an outcome for participants that is better than no outcome.
A free trade does indeed benefit both parties. However, it does not necessarily do so symmetrically, and many people don’t like that. But we need to stay in the realm of “is” not “ought” because you can’t win the the realm of “ought”.
This is surely what Sark has found out, what the price “ought” to be in the judgement of some petty jobsworth, isn’t attainable, it doesn’t work. “is” not “ought” is a lesson for us all to be reminded of.
I think that epithet “those who ignore history are doomed to repeat it” should have a mandatory codicil, “for example, price controls.”
“Just to be picky, I’m not sure I agree. “fair” and “just” are tricky non objective terms for sure, but within the realm of subjectivity one can surely say that a price isn’t “fair” or “just”, for example, the recent pricing of epipens at outrageous prices is surely an unfair or unjust price.”
There is a common confusion between the two virtues ‘justice’ and ‘mercy’. People often talk about justice/fairness when they’re actually describing mercy.
“A free trade does indeed benefit both parties. However, it does not necessarily do so symmetrically, and many people don’t like that.”
That’s one way to define ‘fairness’: that the excess utility of both parties to an individual trade is equal. The problem with it being that it means the ‘fair price’ is different for every individual pair of traders. The market equilibrium approximates the ‘fair price’ in this sense for buyers and sellers at the boundary – where the price is only just enough to induce the one to buy and the other to sell. Everyone else either gets it for less than they would be willing to pay, or is paid more for it than the minimum they’d be willing to sell it for. If you suppose most people value gain over fairness, doing anything else is strategically unstable. Free markets aim for justice (in the long run), and get about as close as is practical.
But generally speaking, it’s mercy people are asking for, not justice. Justice is when you get what you deserve, what you have earned through your own contributions to others. Mercy is when you get what you need but you haven’t earned. The distress people feel at seeing someone suffer for lack of goods and services they desperately need but cannot afford, not having the capability to earn them is a genuine one, and alleviating it is widely considered a virtue – but it’s not the one called ‘justice’.
@Nullius in Verba
What you call “mercy” I’d call “charity.” “Mercy” has a bit too much of a religious undertone to me, and everyone knows what “charity” means.
If you suppose most people value gain over fairness
FWIW, I don’t actually think people do, in general pick gain over fairness. In fact there are a number of studies that would say that fairness is often considered more important.
And there are good evolutionary reasons for this. Cheating and stealing are often beneficial to the perpetrator, assuming they can do so without getting caught, which is usually possible with a modicum of intelligence. However, the net gain to the cheater is smaller than the net loss to society as a whole. So, cooperative species we are, we have evolved (both genetically and memetically) views and mechanisms that punish cheaters more harshly than their cheating would warrant on a purely net gain basis.
To give an example, for most of human history the crime of coin clipping and forgery has been punishable by death, and often gruesome death (hanging drawing and quartering in medieval England.) Why? A small amount of stolen gold would have such a dramatic punishment? Because it debases the currency as a whole and undermines the whole monetary system. So the forger’s tiny gain has a huge cost to society, that is to say, it steals a little from millions.
So, like I say, we do value fairness over gain, oftentimes, because we are evolved and trained to be like that for not insubstantial reasons. So when someone seems to “unfairly” gain in an asymmetric but free transaction, all that genetic and memetic programming kicks in.
However, as Scotty used to say, “you canna change the laws of economics”, or he would have had he been that other great Scot, Adam Smith.
“What you call “mercy” I’d call “charity.” “Mercy” has a bit too much of a religious undertone to me, and everyone knows what “charity” means.”
Fair enough – “charity” is probably clearer. Although it has plenty of religious overtones too. I could suggest that “charity” is the act that you perform when you express “mercy”, but I don’t have such strong feelings over the matter that I’m going to argue. Neither word is perfect – they both have lots of contextual baggage attached.
“However, the net gain to the cheater is smaller than the net loss to society as a whole.”
Tragedy of the commons, yes?
“To give an example, for most of human history the crime of coin clipping and forgery has been punishable by death, and often gruesome death”
Such a punishment would hardly be necessary if nobody was ever tempted to do it!
“So, like I say, we do value fairness over gain, oftentimes, because we are evolved and trained to be like that for not insubstantial reasons. So when someone seems to “unfairly” gain in an asymmetric but free transaction, all that genetic and memetic programming kicks in.”
Trained to, yes. Threatened with a gruesome death if we don’t, yes.
Hence the socialist view. It would work of course if everyone willingly supplied according to their means, so that everyone could receive according to their needs. But people don’t, they’re selfish, so they must be threatened with gruesome death to make them cooperate. Socialism is the memetic training that we’re wired by our genetics to invent.
However, to your general point – yes, we do have a sense of fairness (whether from nature or nurture I leave to the debate) and we feel guilty about taking more than our fair share, even if we’re sure we won’t be caught. People will often do the right thing and try to be fair, or be charitable and generous, even when they have little enough themselves. Humans are not always selfish, and it’s not entirely because of threats or social training. We’re not just automatically selfish. Both justice and mercy (or charity if you prefer) are parts of human nature too.
But there’s enough cheating going on that a society built on the assumption that everyone will be fair and generous is strategically unstable. A society of doves is much nicer to live in, but it fails because hawks take it over. We need a cooperative strategy that works even when people are selfish.
What I was trying to say was that there is a distinction between justice – which involves a balance between what one does and what is done to one – and all these other virtues. We have a certain feeling of outrage when a virtue we know we’re supposed to adhere to is violated – and we tend to express that feeling in language that uses ‘justice’ or ‘fairness’ as a placeholder for the virtue we really mean. But it’s not always what we actually mean, and it can cause confusion and inconsistency if we try to parse it more precisely as if it was actually justice we were talking about. I wasn’t trying to say that we have no virtues that can override our selfishness.
Arthur C. Clarke once said “Any sufficiently advanced technology is indistinguishable from magic”
It seems much of the population has regressed such that even basic 19th/20th century technology (or earlier) is now magic.
Electricity comes from a socket in the wall. No connection to power stations.
Food comes from a plastic tray in Tesco/Lidl. No connection to farms and agriculture.
It will be interesting to see how much coverage the media give to this direct experiment in stupidity. Of course, the Electricity Company will be the villain, it goes without saying.: business is aklways wrong.
Popcorn at the ready….
NB I am a great fan of the similar and nearby Alderney, which has similar electricity cost issues. Small scale diesel generators are more expensive than coal, gas, nuclear. And? Accept it, pay for an alternative, or do without.
Small scale diesel generators are more expensive than coal, gas, nuclear.
Depends on the scale. Energy can be made efficient by scaling up, but it can also be saved by scaling down, which is best described as turning it off when it is not needed, exactly what individual generators will do.
A small population like Sark probably has long periods during the 24 hour cycle when no or very little electricity is being used, in this case the “turn it off” option probably pays dividends above its inefficiency, compared to the big generators and their overheads.
There is probably better technology to replace the big aging generators they have at the moment, but that requires investment, and as Sark has a record of pissing off generous investors, that is unlikely to happen.
Refrigerators
WiFi routers
POS tills
Petrol pumps
Shop lighting and security
Navigation equipment at harbour
Police and mobile phone radio base stations
….
All 24×7
Though none necessary in the New Stone Age. Welcome. We hope you enjoy the stay. It will be short.
Refrigerators – not 24/7
WiFi routers – not 24/7
POS tills – not 24/7
Petrol pumps – cars are banned
Shop lighting and security – not 24/7 (security? really? have you seen the level of crime?)
Navigation equipment at harbour – is there a harbour? navigation equipment is on the boats anyway.
Police and mobile phone radio base stations – for all four police officers ??
You miss the point, there is not enough demand 24/7 even with the above, to warrant a central power station that can also supply peak demand, and to be energy efficient and affordable.
Runcie B
Yes, there is a massive robbery taking place in front of everyone’s eyes, in broad daylight, under colour of law, and the perpetrators may have to flee the island, along with their victims. 😥
Seems to me that SEL missed a great ‘offence is the best defence’ response to this.
The day after the Bill was introduced in the *Guernsey* legislature (which apparently has legislative powers over Sark… (yes, we said it was feudal!)) SEL should have disconnected the electrical supply to all 28 [councillors|idiots] houses and to any businesses they own or run.
The Bill is an amazing intrusion into the business affairs of a ‘regulated supplier’. As if no-one could figure out that that meant SEL and *only* SEL. There are even provisions for the issue of search warrants to obtain the private business papers of SEL. SEL should have taken steps to move every piece of paper relating to its business off Sark, and set up its computers as remote terminals to servers off the island, possibly in St.Malo, just to add some more inter-juridictional fog.
And BTW who owns the wires from the plant to the houses? I would have advised SEL not to go Galt but to go Atilla the day after the Bill was introduced, *including shutting down for 24 hours* (as a *safety measure* of course) while taking down the wires servicing the idiots own premises and advising that it intended to shut down permanently if the Bill were passed.
It is unclear whether Sark has anything approaching an expropriation act, but it would seem that SEL was a purely private undertaking before the Act proclaimed them to be the kulaks of Sark. As a private enterprise it could/should be able to deal on a purely consensual basis with its customers. While the councillors are interfering with commercial relations *for their OWN benefit* in that they would receive a reduced price for their service.
The quoted cost for a law-suit seems outrageous to me. I would presume that Sark is a ‘loser-pays’ jurisdiction, so making the 28 idiots individual defendants but NOT Sark as an entity itself, would promote some delusion-shedding among the idiots. And a side-suit, if required, to deny the idiots re-payment or indemnity from Sark itself would further that end, that suit brought by a rate-payer, not otherwise a party.
DC,
AIUI, the regulatory law is fruit of the Sark Chief Pleas, the local parliament, which legislates for local civil matters, but including the absurd powers of the regulator, which has the bullying tone of UK legislation (something I have noticed has spread throughout the Crown Dependencies, Jersey, Guernsey and the Isle of Man since Blair’s time). The law is hosted on a Guernsey legal website. The Bailiwick of Guernsey is peculiar in having Guernsey as the head jurisdiction, with Sark and Alderney having their own jurisdictions with ‘law-making’ powers carved out.
What is worrying is that with a long history of low taxes, and a ratio of 28 legislators to c. 600 residents, c. 1:20, you still get this lunacy.
Quite so Mr Ed.
History only teaches people who understand certain basic principles – and those principles are not taught in the schools and universities (which produce the people who write the laws).
What is taught in the schools and universities is, and I am not exaggerating, madness and evil. Officials are given more and more power – over things that should be nothing to do with government.
We are seeing the final victory of Sir Francis Bacon over Sir Edward Coke.
Law is now just the will of the rulers (as with Thomas Hobbes – the follower of Sir Francis Bacon) with society to be “planned” by these “experts” (as in Bacon’s “New Atlantis”) some 13 or more departments of state – as with Jeremy Bentham (controlling everything) and “mathematical” planning as with Francis Bacon’s follower Sir William Petty.
If Sark is depopulated, as seems to be one intent, will that make it legally “Terra Nullius”?
Or is there a “new and interesting” population just waiting to get their sticky paws on the place?
I think not. Firstly, I suspect all the owned houses and fields would remain owned by those who had abandoned them for quite some time. I doubt the former owners could even renounce ownership and interest, as far as taxes were concerned.
If the absent owners somehow disappeared from the picture, these properties would become Bona Vacantia, not Res Nullius. Everything on it would become (revert to being?) the property of the Duchess of Normandy aka Her Majesty Queen Elizabeth II (in theory, but perhaps alas in practice just ‘the government’). The crown is the ultimate heir in law to all things that were once correctly and fully owned.
In the UK, I very vaguely recall some laws about owner abandonment and long (14 years) occupation giving some kind of squatters’ rights, but I could be wildly misremembering or misunderstanding, and even if I am right those laws may not apply to Sark. (And I suspect the squatters would still have to pay the accumulated ground rent, feu duty or Sarkian equivalent. 🙂 )
Hey! the people of Sark will have the privilege of implementing a modern ideal – living “off grid”.