Jersey Electricity Plc: Financial Report and Accounts 2014 – Investment to Power a Sustainable Future.

INVESTMENT TO POWER A SUSTAINABLE FUTURE REPORT AND ACCOUNTS 2014

R.47/2015

CONTENTS

DIRECTORS, OFFICERS AND  CONTENTS PROFESSIONAL ADVISERS

NON-EXECUTIVE DIRECTORS

Geoffrey Grime FCA (Chairman)

Clive Chaplin BA

Michael Liston OBE FREng, BSc, CEng, FIEE, CIMgt John Stares BSc, FCA

Aaron Le Cornu BSc, ACA

RICITYT BILITYA

EXECUTIVE DIRECTORS

Christopher Ambler BA, MEng, CDipAF, CEng, MIMechE, MBA (Chief Executive) Martin Magee CA (Finance)

SECRETARY

Peter Routier BSc, FCIS

REGISTERED OFFICE

Queen s Road, St. Helier , Jersey

PLACE OF INCORPORATION Jersey

AUDITOR

POWER BANKERS

Deloitte LLP, PO Box 403, 44 The Esplanade, St. Helier , Jersey UTUREBROKERS

GYR ITY

Royal Bank of Scotland International Limited,

71 Bath Street, St. Helier , Jersey

NTS 2014

Canaccord Genuity Wealth Management,

38-39 The Esplanade, St. Helier , Jersey

REGISTRAR

Computershare Investor Services (Jersey) Limited,  Queensway House, Hilgrove Street, St. Helier , Jersey

CHAIRMAN S STATEMENT

 ENERGY CHIEF EXECUTIVE S REVIEW

GROUP PURPOSE

This year we undertook an important and valuable Company- wide work stream, which has become known internally as our Purpose, Vision and Values (PVV) programme, to re-focus our staff on why as a company we exist our purpose; where

we are going our vision; and how we will work together

to get there our values. We held a total of 28 workshops encompassing the entire business with the aim of enabling every employee to truly understand where they fit in and the important role they play in helping us fulfil our purpose and achieve our vision by working together for the common good.

As sustainability is such a cornerstone of our business ethos, we also took the opportunity at the workshops to discuss what sustainability means to all who work for Jersey Electricity and why it is so important.

These workshops proved a resounding success. Staff engagement and interactions were excellent, with scores of outputs on how we can better align what we do day-to-day with our longer term vision. Many of these suggestions have already been implemented, while the bigger ticket items are being worked on.

PVV was also a pillar of a Staff Seminar. As well as updating and informing staff of how we are performing, the Seminar reinforced PVV by cascading and consolidating what we have already achieved.

So what does PVV mean to Jersey Electricity?

GROUP PURPOSE CHIEF EXECUTIVE S REVIEW

Our purpose:      Our priorities Why do we exist? • Deliver Normandie 1

capital investment on time Our business purpose is broa  

and to budget

community by sourcing, gener  

• DeliverSmartSwitch Smart

trading, distributing and supplying energy

Metering programme

safely, affordably, securely and sustainably

We are proud of our impor • Deliver St Helier West today in the community but the energy we use  primary substation

today must be sustainable so future generations  investment

are able to meet their energy needs, too. W • Facilitate (with Guernsey must understand our customers needs better         Electricity) the Channel

than ever before and deliver the ser       Islands Electricity Grid by need in the optimum way. W         installing the next Jersey- the trade-off between affordability and security        Guernsey link

risk and cost.

• Grow market share through Energy Solutions and JEBS;

What does sustai   winning fuel switch and

mean? developing new technology

partnerships

Sustainability defines how we    • Optimise/enhance aims and reflects our responsi          La Collette Power Station various stakeholders as well a            

environment and doing this      

It means protecting people; lo         Our values customers and our staff. It mea        

environment and helping to co    Our values reflect our change and preserve our uniq     corporate personality. They generating profit to invest in in   describe our standards and will ensure security of supply a      expectations of how we will on . Lastly, it means economy,     work together in pursuing money; providing affordable e    our goals.

the economy and individuals s  • Safety

• Customer focus

• Teamwork

• Responsibility

• Excellence

• Reliability

 We continue to win  

over 90% of new load  as developers choose  electricity  

ENERGY GROWTH

Though the 6% drop in unit sales can largely be attributed to a mild winter compared with colder than average temperatures in 2012/13 relative to 2013/14, as we have anticipated, energy efficiency measures are adding pressure to electricity demand which until recently has shown a consistent upward trend since Jersey Electricity was formed in 1924.

We have no doubt that low carbon electricity remains the energy of the future and we continue to work hard to ensure sustained, underlying growth over the long term. The installation of Normandie 3 restores our low carbon credentials which no competing fossil fuel can match. Importing power also gives us the competitive edge on affordability and, importantly, price stability.

Going forward, the cornerstone 80% carbon reduction target set out in Pathway 2050: An Energy Plan for Jersey , which the States of Jersey have now ratified, can only realistically be achieved by displacing the use of fossil fuels with electricity. Transportation is also a huge, if so far untapped, market for electricity in Jersey.

However, the Energy Plan poses threats as well as opportunities for electricity as energy efficiency measures and the application of low energy products gathers momentum. Our strategy is to embrace energy efficiency, create exceptional value for consumers by helping them get the best out of their energy needs and use this to displace the use of fossil fuels with cleaner, more competitively priced electricity.

This year we commissioned a study on load growth, which has identified a number of significant growth opportunities. We have subsequently created a small, specialist team from existing resources, Energy Solutions, to focus on these areas and develop partnerships

with new technology providers to create key opportunities and grow our share of the energy market.

Electric transport is another growth area that we continue to encourage and facilitate. The number of registered EVs in Jersey now tops 100. With more manufacturers, particularly the more prestige marques, coming to market we can only see EV ownership increasing. We have already expanded our public EV charging capacity to ensure full coverage and now have a total of 18 public charging points, mainly centred in St Helier s five multi-storey car parks.

We still see the initial costs of EVs in Jersey as prohibitive and continue to lobby the States of Jersey to incentivise EV take-up with financial support mechanisms as, indeed, our neighbours Guernsey have recently agreed to do.

ENERGY GROWTH CHIEF EXECUTIVE S REVIEW

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2014 versus 2013 Fuel of choice for the States

Our unit sales of 621 million for the financial  Having fuel switched 1,800 States tenanted  year were 6% down on the previous year s 663  homes in the previous two years, our Building  million due to a combination of temperatures  Services business (JEBS) and new Energy  being unseasonably mild this past winter and  Solutions team are turning to the main States  the corresponding period last year being  of Jersey buildings by developing compelling  particularly cold. The total number of customers  proposals to fuel switch several of their larger  on supply at year-end was 48,941, an increase  commercial buildings, such as high energy  

of 318 on last year. consumption swimming pools and leisure  

We have continued our growth initiative to  centres, as new technologies come to market.  encourage the use of high efficiency, lower cost  The opportunities for the States of Jersey to  off-peak heating across our customer base. This,  reduce their energy costs are significant, and  in turn, helps to reduce peak electricity loads,  we are hopeful that the new Government will  which is a significant driver of infrastructure  embrace an active partnership with us to  costs. Our discounted tariffs Comfort Heat,  enable these.

Economy 7 and Economy 20, introduced to  

give households flexible, lower cost alternatives  

to fossil fuels, continue to be popular. Domestic  

customers on these tariffs increased by over 2%  

on last year to 15,578.  

Our peak load for the year was 139MW recorded  on 3 February 2014, at 9.30pm. Our all-time  record remains 161MW set on 2 February 2012.

Fuel of choice for developers

We continue to win over 90% of new load  

as developers choose electricity for heating.  Although the total number of new developments  is beginning to increase after the economic  slowdown, these are often being built in smaller   phased stages. Electric heating options  

are flexible, easy and relatively low cost to  install, clean and safe. Electricity is generally  the preferred fuel for new energy efficient  building designs and electricity remains very  competitively priced in Jersey compared with  other jurisdictions and competing fuels.

MAINTAINING AFFORDABLE ELECTRICITY AND PRICE STABILITY

With continued pressure on household and business budgets, as well as the enormous scrutiny in the UK of energy prices, we are acutely aware

of the importance of maintaining a competitively priced electricity supply. Notwithstanding the loss of importation capacity in 2012 and subsequent 9% and 1.5% tariff rises in 2013 and 2014 respectively, arising from increased on-Island generation from oil, our benchmark tariffs remain lower than many countries and islands, a fact noted in Jersey Consumer Council s October 2014 publication Energy Matters .

We aim to keep standard domestic tariffs within 10% of the EU Average, a goal that we have consistently outperformed in recent years. This is a particular achievement given the limited scale of our network coupled with the investment needed to maintain supply security from a more isolated network. Our prices at the year-end were at around 11% lower than the EU standard tariff for domestic customers on average.

As well as competitive absolute prices, our 1.5% tariff increase in April this year was materially smaller than every electricity and gas price increase across the year in the UK. In addition, while heating oil prices have eased in Jersey, they have come off historically very high levels;

for example over the last five years electricity prices have increased by just 8% net compared with oil and gas price increases of 42% and 60% respectively. This performance reflects our focus on tariff stability, and not just absolute prices.

Going forward, with Normandie 3 in service, we expect importation levels to revert to pre-2012 levels of around 90-95% of total Jersey annual consumption. We have wound down our hedged oil position that was put in place off the back of a new risk management process to recognise the far greater volumes of oil we consumed on-Island. Our hedge book on power and foreign exchange remains strong over the next two to three years and we continue to take advantage of the favourable wholesale power prices in Europe. Now Normandie 3 is in service, the cost structure of the business will shift, with a substantial portion of on-Island oil costs displaced and largely offset by higher interest costs incurred to service the capital costs of the new submarine cable.

MAINTAINING AFFORDABLE ELECTRICITY AND PRICE STABILITYCHIEF EXECUTIVE S REVIEW

HOUSEHOLD ENERGY USAGE

Source: UK Energy Saving Trust

We welcome the focus in the Energy Plan on energy efficiency and continue to support many community efforts to help customers manage their consumption and reduce their bills action which simultaneously reduces carbon emissions, the central goal of the

plan. We believe we have had considerable success

in assisting vulnerable customers through Jersey Electricity s seeding and support for the States of Jersey Energy Efficiency Service (Jersey Energy Trust) which has delivered tangible measures to thousands

of households and many community buildings. This approach is far more effective than structuring one-off discounts or subsidies to consumers, since it leads to multi-year benefits and year-on-year savings.

Forecasting future prices is always challenging in the energy sector and we could see wholesale prices kick upwards at some point off the back of economic recovery. However, restored importation capacity, coupled with a strong hedge book, positions the business well over the short term.

We will continue to take a flexible approach to pricing over the short to medium term to maintain competitive and stable pricing levels that ensure we can compete in the local energy market and deliver great value for money for customers.

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ENSURING SECURITY AND RELIABILITY OF SUPPLYCHIEF EXECUTIVE S REVIEW

SUPPLY SECURITY STANDARD To meet Jersey Electricity s security standards, the

system is designed to meet:

• A one-in-eight year winter peak demand

• All normal load in the event of the loss of the single largest interconnector with France  

(N minus 1) plus a simultaneous failure of the

largest:

- diesel generator; and

- gas turbine

• 75% of peak winter load for 48 hours from on-Island generation (no simultaneous l ssof on-Island capacity)

• No coincidence of the above

W ENSURING SECURITY AND RELIABILITY OF SUPPLYCHIEF EXECUTIVE S REVIEW

THE STORY UNFOLDS

Pulling a 50-tonne  

plough, with tow  forces of up to 100 tonnes, the Enterprise, assisted by

three tugs, installed the cable at an average of 1.2km  

a day.

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Third  Initial costings Jersey Electricity Desktop feasibility study Major breakthrough as announcement Agreement on route  Consultations with  Simultaneous  Planning  Expected Public Enquiry June interconnector and feasibility Board formally complete. Discussions  of a third nuclear reactor to be built at from French Fishermen s French authorities Jersey installation of  Application due 2011 delayed due to French first discussed.talks with RTEinitiates project.with RTE who preferred Flamanville shows a 400kV substation Committee Local des Environmental Impact Normandie 4  before PrØfet de administration changes and Two routes  northern route. Southern to be built near PØriers. Reinforces Pches and Jersey  Assessment. Technical investigated but la Manche. IFREMER diverted by French considered. route preferred by Jersey southern route credentials. Start of marine Fishermen s Association. and Financial Proposition would jeopardise  Oyster crisis.

Electricity. geophysical and benthic studies. received from RTE.  schedule.

The 32 km journey begins

The Board first sanctioned the N3 project back in 2004. Peter Snape, JE s Project Manager was tasked with two distinct lines of work; technical discussions with RTE over ratings and operational issues and an extensive and complex planning process. This involved 18 different authorities

and departments in France. Planning took nine years to complete. Following planning permission by the PrØfet de la Manche at the end of 2012 and the establishment of a N3 project delivery team, progress has been remarkable, both last year and this the year of the installation itself.

The 7,000-tonne cable-laying barge the Cable Enterprise

arrived in Brest at the start of April, having collected the

35km, 2,500-tonne subsea cable from Prysmian s Arco

Felice plant in Naples in March en route from her previous

the Enterprise was still dependent on high tides to make progress. job in Vietnam.

But the installation moved up a gear in May as improved tides Jersey Electricity Senior Projects Engineer Jerry Willis joined  meant the crew could work around the clock. Engineers from our the 60-strong crew aboard the Enterprise as on-board client  CIEG partners Guernsey Electricity (Francis Murray and Stuart representative for the duration of the installation. After two  Blondel) also joined the vessel to help provide 24-hour client weeks of equipment and anchorage testing in Jersey and  representation.

French waters while final Unexploded Ordinance (UXO)

Pulling a 50-tonne plough, with tow forces of up to 100 tonnes, Surveys were analysed, the Enterprise and her highly skilled

the Enterprise, assisted by the tugs, installed the cable at an

crew were ready to begin their delicate task of laying the

average 1.2km a day. The vessel has a seven-anchor spread, cable from Pirou Plage, Normandy.

with the main pulling anchor No.7 off the bow and six anchors to Weather and tides were critical and with final UXO  port and starboard aiding stability and steering. Around 600m of clearance of the route coming in time to catch the tide,  cable could be ploughed in before the tugs had to reposition the the Enterprise, which is manoeuvred by three large tugs,  anchors and move the Enterprise forward. By 21 May she was the Norne, Zwerver lll and Afon Lliffon, approached the  1km short of the halfway point, 2km from Jersey waters. Armanville beach and grounded out for the landing of the

A particular challenge was traversing the Banc de Chateau a French end of the cable on 19 April.

kilometre-wide sandbank 4km west of Mont Orgueil, Gorey.

The landing was completed in just a couple of hours and the  Working on its operational limits, the plough had to be pulled up Enterprise, with a 1000m exclusion zone around her, was  from 18m water depth to just 2m at the bank s shallowest point able to begin her journey to Jersey. By Monday, 21 April,  and dropped from 2m to 13m depth over a distance of just 100m. 1.5km of cable had been laid and the first 500m buried two  But with that safely negotiated, the Jersey UXO survey team gave metres into the seabed, while the remaining cable on the  the all clear for the Enterprise to begin her approach to Long Armanville beach was buried later that week. At this stage  Beach on 11 June in preparation for landing the cable.

2012  2013 - FEBRUARY 2013 - MARCH2013 - MAY 2013 - SEPTEMBER2013 - NOVEMBER2013 - DECEMBER2014 - JAN 2014 - MARCH

FEB Planning Application submitted.Contracts worth £45m for manufacture and 7km Jersey  Agreement  French groundworks Manufacture and  Manufacture of  Cable Enterprise starts journey Cable Enterprise arrives Naples to JUN Public Enquiry starts. installation of 35km, submarine cable and 7km groundworks signed with GEL preparing route from testing of subsea  Jersey land cable from Vietnam to France. ABB collect submarine cable. First of five SEP  Favourable outcome announced.Jersey landside cable, related network components start between to share cost  Armanville to PØriers cable completed at completed in Gron start manufacture regulators Jersey land cable joint excavations DEC  Final Planning Permission and specialist civil works, signed with Italian cable Gorey and  and capacity of get underway. Prysmian s Arco Felice and cable delivered in Vaasa, Finland. Geophysical start.

confirmed Tenders being  systems specialists Prysmian Powerlink. RTE later South Hill. Normandie 3. plant, Naples. to Jersey. and Unexploded Ordnance Pre-laying of grapple hooks on Pirou considered and accepted. also award French land cable to Prysmian. (UXO) surveys start. Plage, Armanville, in preparation for

16 Cable Enterprise arrival.

2014 - APRIL 2014 - MAY 2014 - JUNE

Cable Enterprise arrives in Brest for 1 - Improved tides enable installation 29 - Jersey Electricity Chief Executive 11 - Unexploded Ordnance Survey 14-15 - Gradually progresses up the beach 16 - Final cable hand off. 17 - Enterprise leaves Jersey two weeks of testing and mobilisation to become 24/7 operation. Chris Ambler, GEL MD Alan Bates (UXO) team give final clearance with the aid of Spring tides as GPC team Beach anchors released Waters for Rotterdam with 3km preparation. 25 - Cable Enterprise enters Jersey and Prysmian Powerlink General for Cable Enterprise to begin prepare and rig beach for cable landing.and recovered, Enterprise of spare cable to be stored at

19 - Cable installation starts on the Territorial Waters. Manager Renato Grampa, visit the approach to Long Beach. 15 - With a tidal window of four hours, eases away from beach to Dordrecht. GPC beach team pull beach at Armanville. Sub-contractors GPC Ltd install Cable Enterprise during operations.13 - Enterprise starts grounding cable is successfully offloaded in 120 safe water. cable to within 50 metres of the journey to Jersey. duct at Long Beach. out at low tide 1km off Gorey.minutes. 17

22 - Cable Enterprise starts 32km Horizontal Directional Drilled (HDD)  duct under the sand.

ENSURING SECURITY AND RELIABILITY OF SUPPLYCHIEF EXECUTIVE S REVIEW

2014 - JULY 2014 - SEPTEMBER 2014 - OCTOBER

18 - Cable winched through the ducting into 30 - Horizontal Directional  22 - Final section of Jersey 7-21 - Jointing Jersey land 23 - Normandie 3 circuit first  14 - Normandie 2 circuit switched out for

the transition bay. Drilling under dune at Armanville      modifications and refurbishments to the protection 21-22 - GPC team bury cable on beach.for French end of cable to be       and control systems.

28 - Final section of cable at low water mark pulled to their joint bay 16 - RTE grant permission to operate N2 and N3 buried when Spring tides make it accessible. in parallel up to 160MW. La Collette closed down.

  After 32km the

2,500 tonne cable met the ducting inch perfect and was winched through ready for jointing to the land cable  

South Hill Switching Station

Underground from PØriers to South Hill

Of course, the N3 circuit comprises far more than the subsea cable. Extensive land works and equipment installation were on-going on both sides of The Channel long before, during and after the subsea installation, co-ordinated simultaneously in differing locations.

Prysmian UK subcontracted the Jersey civil works to local contractors Jayen Ltd who began work on the 7km route from Long Beach to South Hill Switching Station, St Helier, where N3 connects to our network, in March 2013, trenching and duct laying, to minimise traffic disruption and ease future replacement. The route was chosen to obtain separation from existing 90kV cabling to the north which helps to maintain network security. In addition, pre-installed ducting enables the cable to be pulled through later in longer lengths, reducing

 jointing and preserving the integrity of the cable. Only five joints, excluding connections, were needed on the route.

The 90kV land cable was delivered from Prysmian s factory in Gron, France, in December 2013. Work pulling the cable through started in March 2014 and work jointing the subsea cable to the land cable began on 7 August.

South Hill Switching Station, opened in April 2012,

was designed to be the connection point for N3. Works preparing the facility for N3 s regulator commenced in February 2014 and the installation was completed in August. Correspondingly, at PØriers, an entire new switching station had to be built and equipped on the site of RTE s new 90kV substation. These works and the installation of the 19km French land cable was a turnkey project by RTE with whom our engineers have had a close working relationship since 1984 when our first interconnector was installed.

Once we had reached agreement on the type of equipment to be installed in France, in August 2013, RTE made excellent progress on several fronts. With the entire N3 circuit completed just 21 months after planning consent was given, the project entered the delicate commissioning and

testing phase. Our engineers worked tirelessly on both sides of The Channel for several weeks to ensure the circuit could be successfully switched on by the 23 September, ahead of schedule and crucially before the onset of winter.

N3 has been a triumph of engineering. I am extremely proud of the team that made it possible and I thank them and our contract partners RTE and Prysmian Group for their efforts in achieving this in our 90th anniversary year.

N3 has been  

a triumph of  engineering.  

I am extremely  proud of the  team that made   it possible  

Above: The 400kV substation deep in the French countryside is the connection point for Normandie 3 to the French network. The 19km route to the coast is all underground for added security in the transition.

Below: Here in Jersey, the regulator arrived at South Hill in May and the subsea cable was jointed to 7kms of land cable in the transition bay at Long Beach car park by a specialist team of jointers from Prysmian.

ELECTRICITY SOURCES 2013-2014

ELECTRICITY SOURCES IN %

+1.0% +4.8% 32 rt% JElocally

% h

W

% 8

G

9

-5.8%

Generation Transmission

The successful installation of Normandie 3 has as anticipated, lead to the scaling back of generation at La Collette Power Station but our continued investment in and maintenance of this on-Island generation facility has proved essential this past two years, enabling us to maintain supplies pending the final stages of the N3 project.

Diversity of supply ensures security of supply and our earlier upgrades of La Collette plant, including the £12m project

in 2012 to install two 11MW replacement Sulzer diesel generators, was money well spent an investment in long- term security over short-term profits.

La Collette, coupled with our fast-start gas turbines located at our Queen s Road headquarters, offer sufficient locally generated power in Jersey, in excess of our all-time record peak winter demand of 161MW (power levels which the Island demands for only a few hours each year). During

this financial year, with only N2 in service, we generated 15% of our electricity on-Island (compared with 21% last year and only 2% pre-loss of EDF1) and we imported 80% of our requirements up from last year s 75% as a milder winter resulted in a lower demand and a reduced need for local generation. The balance (5%) came from the States-run Energy from Waste plant.

Now we have two supply cables connecting to separate parts of the French grid and a third one planned for 2016/17, the risk of supply disruption is vastly reduced. The last two years, however, have been a clear demonstration of the importance of maintaining on-Island generation. We therefore plan to continue to maintain La Collette as insurance against future importation issues in accordance with our security of supply standards, notwithstanding the cost of doing so. La Collette will be a smaller, leaner and more flexible facility going forward, with an emphasis on fast-start generating plant. As well as an emergency back-up, La Collette has been designed to allow power trading into the French market as and when conditions allow. We hope that participating in such markets could reduce the costs of maintaining the facility in the future.

Since the repair to the Jersey-Guernsey cable (GJ1) in 2012, we, along with Guernsey Electricity (GEL), have carefully monitored the performance of this sole inter-island submarine cable. Regrettably, this year we have observed continuing deterioration in the fibre optics of the cable, which we

believe could lead to the failure of the power system in a similar process to that which catalysed the 2012 fault. As

a result, we have agreed that a pre-emptive repair be performed in January 2015. The repair takes advantage

of the availability of a suitable vessel at relatively low cost when used with the Channel Islands Electricity Grid s (CIEG s) recently developed Power Cable Maintenance Agreement (PCMA) with Dutch cable installation specialists Visser and Smit Marine Contracting (VSMC) now VBMS (VolkerWessels Boskalis Marine Solutions). Jersey Electricity s share of this cost is £1.8m and suitable provision has been made in our Group results. CIEG is presently seeking permissions to install a second cable between the islands as soon as possible.

Distribution

The continued slowdown in the building trade has contributed to a 5% decrease in the number of new services being connected although the number of switching operations has remained the same as the previous year. This reflects the continued emphasis on asset replacement and maintenance

as well as network reinforcement projects.

Overall, we installed almost 6MVA of new transformer capacity, around 27km of new cable, five new substations, 24 refurbished substations and 756 new services. We maintained 154 substations and patrolled almost 21km

of overhead line. Substations under Jersey Electricity s management now number 760.

SmartSwitch

Our Smart Meter project, which was delayed  to more efficiently map usage at the same time as in 2013 due to the uncertainty surrounding the  enabling us to optimise and better maintain our standards in the UK s Smart Meter programme,  distribution network.

has made good headway this year. Our meter

The first phase of our exciting web-based supplier, Secure, has now supplied sufficient

customer interface Smart Account that we have quantities of our new, chosen Liberty Smart Meter

developed with Swiss Post is also complete and to facilitate adequate testing. This has started

undergoing final testing. Used in conjunction with and will continue in the New Year, with full roll-

our new Smart Meters, the Smart Account will out expected to commence in 2015. We now  

enable customers to access  have 10,320 Smart Meters installed.

and view their electricity  Local Data Concentrators (LDC) have been  consumption data, payment  installed in all required substations and we  status and manage their  continue to install and develop our own wide  account online. This web- area network to communicate with LDCs over  enabled platform will also  the distribution pilot cable network and fibre  assist our customers to make  optic network. We have also developed a GPRS  informed decisions on how  solution for communication to LDCs in conjunction  they can save energy and

with our partners Horstmann and Airtel.  save money. This integrated system promises to

transform our metering and billing operations, The Meter Data Management warehouse, which

improve the efficiency of our metering system as will be able to take all the data provided by

well as create new opportunities to add more

the new Liberty Smart Meter and our existing

value to customers.

Horstmann Mainscom Smart Meters, is now

complete. This consumption data will enable us

 We seek to meet

EU legislation and in many cases exceed it

PROTECTING THE ENVIRONMENT AND CONSERVING RESOURCES

We are acutely aware that as a generator,  This year is the first full financial year calling off distributor and supplier of energy, our influence  power under our new 10-year supply agreement on the environment is significant. By making  with EDF. This arrangement guarantees that all

 sustainability part of our business ethos,  imported electricity is generated exclusively from we do everything possible to make sure that  low carbon, nuclear and hydro-electric sources. influence is a positive one. We strive to reduce  Although it will be next year before we will enjoy our environmental impact through three main  the full benefits of Normandie 3 (N3) and return channels; one, by helping our customers reduce  to full import capacity, 40% of our total imports of their impact on the drivers of climate change by  546GWh this year came from pure hydro-electric supplying them with low carbon power; two,  sources.

by helping them reduce their overall energy

The result is that our average carbon emission consumption by using it more efficiently; and

level this year was 144 g CO2e/ kWh compared three, by improving our own business activities to

with last year s level of 225 gCO2e/ kWh

reduce our indirect impact on the environment.

notwithstanding the restricted imports and additional oil-based on-Island generation. Next year, with the benefit of N3 in service, we expect this figure to significantly reduce further.

We work closely with the main European electricity industry group, Eurelectric, as well

as other small island electricity companies,

to respond to changes in EU environmental legislation on Best Available Techniques for Power Stations. Where possible and practical for an island system, we seek to meet EU legislation and in many cases exceed it.

We use the DEFRA 'Environmental Reporting Guidelines: Including mandatory greenhouse gas emissions reporting guidance to voluntarily report our Green House Gas Emissions, in line with the Companies Act 2006 (Strategic and Directors' Reports) Regulations 2013, and our assessments are reviewed by an independent third party.

ENVIRONMENT | RENEWABLES CHIEF EXECUTIVE S REVIEW

VIRONMENT

CES

These reportable Green House Gases are: Renewables

• Carbon dioxide (CO2)

• Methane (CH4) Jersey Electricity remains committed to exploring whether and

• Nitrous oxide (N2O) how new renewable technologies could be deployed in Jersey

• Hydrofluorocarbons (HFCs) that may simultaneously benefit the Island community and

• Perfluorocarbons (PFCs) economy as well as have merit for the Company.

• Sulphur hexafluoride (SF6) We believe tidal stream and barrage technology is some way The individual quantities of these emissions are converted  from commercial viability and still high risk. However, from into a carbon dioxide equivalent, the standard unit for  the extensive work completed so far, we are clear that Jersey benchmarking carbon footprints. has a considerable offshore wind resource and accessing

this is both lower risk and closer to being economically Following a British Safety Council 5-Star environmental  viable. However, significant work must be done to capture pre-audit in 2012, we have taken steps to implement an  this opportunity and our ability to access the necessary EU Environmental Management System (EMS) which our Health,  financial support could be time limited given the pace of Safety and Environmental Engineer is dedicated full-time to  development in the UK and on the Continent.

applying throughout the business, aided by our Facilities

Management Team. Our first full audit will be in 2015. We continue to work closely with States of Jersey officers and

politicians to help develop a partnership model that might Energy saving measures and the installation of the largest  unlock this potential resource. In particular, we welcome the photovoltaic (PV) array in the Channel Islands at the  recent approval by the States of the Energy Plan which sets Company s headquarters have resulted in a reduction in  out a clear commitment by the States to explore large scale electricity consumption from 5,000 units a day to around  renewables. With new States Members in place, we look 3,300 - a 30% saving on the site. We have at the same time  forward to developing this further in the coming year.

reduced our water consumption by around 35%. This year we

have also installed a more sophisticated metering array that  In the meantime, we continue to explore other renewable separates supplies, helping us target specific areas for further  technologies in parallel, including small scale onshore wind, reductions. We have also extended LED lighting throughout  as well as solar photovoltaic technology. While the scale of our Retail store and Distribution block as we work towards  the opportunity for onshore wind in Jersey is limited due to the our overall target of a 50% combined reduction in water and  lack of suitable land and planning issues, we are more bullish energy use by 2015.  about the prospects of deploying solar PV. This technology is

not viable without subsidy and has other issues but it could We have introduced voluntary environmental initiatives  play a role in our on-Island power generation portfolio since in which staff have undertaken beach cleans under the  our security of supply standards require Jersey Electricity to guidance of the Island s leading professional ecological  maintain a given level of on-Island generation capacity. consultancy. We hope to build further on this and other

related activities by staff in the coming years.

OF OUR RESIDENTIAL

CUSTOMERS

 WERE EITHER SATISFIED

OR VERY SATISFIED

 WITH COMFORT LEVELS

CUSTOMER SERVICE STANDARDS

We are conscious that as the sole supplier of electricity in Jersey we have a huge responsibility to continually challenge ourselves to deliver great value. Our customers rely solely on us and that

is why meeting their present and future needs

is at the heart of everything we do. Customer satisfaction with our services, product choice and competitive pricing - and being able to demonstrate that satisfaction - is crucial to maintaining our position and defending ourselves against detractors.

Customer focus is one of our six core values: We listen to our customers and seek to understand and respond to their needs, treating them the way we would wish to be treated, with respect and honesty.

Our Customer Charter and revised Service Standards, introduced in April this year, set out

a series of promises and commitments on what customers can expect from their interactions with us. This includes all areas of the business and not just our dedicated, highly experienced Customer Care Team.

Following on from these twin initiatives we have this year launched a new, specially designed Microsoft Customer Relationship Management System (CRM) to more robustly measure our performance and track our interactions against the Charter and Service Standards. All three are inextricably linked to our Purpose, Vision and Values work, encouraging greater customer focus, excellence and reliability, while streamlining our interactions with customers in a seamless way.

The system, designed for us by Corefocus

and Jendev, links customer interactions of all departments. The new software integrates with our core enterprise system Navision giving us a much clearer view of how we are performing.

Any customer enquiry is logged with a unique

 case reference number, at points throughout

the Company. Though Customer Care deals with over 90% of enquiries, now, when they pass on a query they can t immediately address, the relevant department is also measured against these criteria.

To provide further insight into our customers

needs and assess how we can further improve

our services and performance we work with a specialist analytics company to undertake an

annual market research study of both domestic and  commercial customers. This year s overall customer  service average rating of 7.60 is deemed very  good . It is an improvement on the previous year  and places us higher than several high-profile  benchmark organisations.

The overall customer service average rating  encompasses:

• Clarity of bills

• Speed of response in dealing with a technical problem

• Helpfulness in dealing with telephone enquiries

• Helpfulness of showroom staff

• Support in bill payments

• Regular advice on energy conservation and

• Regular information on Jersey Electricity as a company  

While our overall rating is important, the primary  survey results comparing electricity heating against  oil and gas heating, as well as our service quality  and delivery of our general electricity supply, are  particularly useful in support of business planning,  marketing and resource allocation which, overall,  help us to enhance customer service.

CUSTOMER SERVICE STANDARDS CHIEF EXECUTIVE S REVIEW

OF OUR RESIDENTIAL

CUSTOMERS

WERE EITHER SATISFIED OR

VERY SATISFIED

WITH RUNNING COSTS

Running costs

As household incomes have remained fairly static in Jersey over the past four years, not surprisingly, energy price and affordability remain customers main concern. Of those surveyed, customers using electricity as their primary heat sources were most happy with their running costs, with 58%, an increase

of 5% on last year, either satisfied or very satisfied compared with 30% of gas users and 43% of oil users. 46% of gas users and 29% of oil users were dissatisfied or very dissatisfied with their running costs compared with just 20% of electricity users.

Comfort levels

When it comes to heating comfort levels, there  was little change in satisfaction levels from  previous years, 80% of electricity users, 59% of  gas users and 69% of oil users said they were  either satisfied or very satisfied with their  system.

Customer service and  technical support

Similarly, little change was seen between the  three fuel types in the satisfaction levels for  customer and technical support service.

In addition, the customer experience visiting us in person has been greatly improved with a newly refurbished and modernised Customer Care and Business Reception area at our Queen s Road headquarters.

Also, many small customer focused outputs  Our new modern Customer Care reception

from our Purpose, Vision and Values  is a window for electric workshops have already been implemented,  heating options while enabling staff to make a difference from the  our new CRM system

ground up. helps advisers channel enquires.

OVERALL CUSTOMER SERVICE RATINGS 2009-2014 SOURCE: ISLAND ANALYSIS

Solutions team is already a          

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and proprietors    

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Jendev  Jersey Energy

Jendev, a Microsoftfi certified Dynamics NAVTM Jersey Energy and its Guernsey office, Channel Partner specialising in software development for  Design Consultants (CDC), our Building and small utilities, is a key in-house asset for Jersey  Environmental Design Consultancy, has Electricity and continues to be an important  maintained a strong market position in 2014. It element of the Group s portfolio.  returned profits ahead of expectations and has

secured significant, high value commissions for The sale of Foreshore to telecommunications

the year ahead. Staff have worked closely with company Sure (Jersey) Ltd, (which relocated all

new and existing clients, continually improving of its Jersey-based staff to the Queen s Road site),

the service and maintaining Jersey Energy s precipitated a move to a new office for Jendev s

reputation as a leading consultancy within the team. The opportunity was also taken to refresh

Channel Islands. This, in turn, has led to repeat Jendev s branding as the unit moves forward

business.

through a period of renewal and repositioning.

Jendev s new logo and strapline Powerful Billing  To stay at the cutting edge of building design Solutions clearly reinforces its core focus on  technology, investment in staff training and utility billing. development is crucial. To this end the business

has further developed its skills in 3D modelling Jendev has played a crucial role in Jersey

and visualisations with

Electricity s major Smart Metering project

stunning results that have

SmartSwitch. Preparations for the roll out of

led to new opportunities

Smart Meters and its related infrastructure have

and commissions.

included automation of the meter change-out

process, with data being transferred to and from  In addition, a new

hand held devices in the field. This project has  strategic alliance with a large off-Island

also included development of a data warehouse  consultancy practice has enabled Jersey

to enable aggregation and analysis of electricity  Energy to secure appointment for several large consumption data both at an Island-wide level  projects due to commence in 2015. This will and for individual customers.  help develop the business and its processes,

enabling it to offer services for larger projects Jendev serves external utility customers in

going forward.

Guernsey, the Isle of Man and the UK and again

achieved revenues of over £1m this financial year.

Once re-launched, Jendev will seek sustainable

growth in export markets via the Microsoft

Partner Network. Apart from Jersey Electricity s

SmartSwitch project, Jendev will play a leading

role in the upgrade of Jersey Electricity s enterprise

system, Navision, next year.

Property

Our Property business comprises the Queen s Road Retail Park in Jersey, which includes a B&Q store and a large medical centre, as well as legacy residential property, originally built to house staff. Last year we reported that we were in active discussions with a major UK retailer, which we subsequently announced was SportsDirect.com. We were delighted to sign

a new tenancy agreement with SportsDirect. com for around half of the ground floor space used previously by our own retail business. In

addition, with the sale of our shareholding in  offshore data hosting business Foreshore to Sure,  the local telecoms operator decided to relocate  

its Jersey office to our Queen s Road site with  

a resultant increase in leased floor space and  rental income. Overall, the business saw profits  fall slightly from £1.6m to £1.4m, excluding the  impact of investment property revaluation, largely  reflecting movements in tenancy arrangements. Our investment property portfolio was revalued upwards by £0.1m to £20.5m this year.

£20.5m (+£0.1m)

INVESTMENT PROPERTY PORTFOLIO

The Production Team which marked five years without a Lost Time Accident (LTA) in January - a significant achievement considering the nature of their work and increased workload since La Collette was re-mobilised in 2012

HEALTH AND SAFETY

Safety is one of our six core values and a subject we take very seriously: We do everything safely and responsibly or not at all nothing is more important than the safety of the public, our customers and our staff.

We are immensely proud of our Health and Safety culture.

We employ over 330 people across the Powerhouse and

La Collette Power Station, with many engaged in hazardous activities and we contract a number of third parties to carry

out work. Contractors in particular can pose significant Health and Safety risk if not properly managed. Our Normandie 3 project posed risks on land and at sea and I am delighted that this major project, involving many international contractors and other parties, was successfully completed without incident.

As well as project work, our reliance on La Collette has meant steam, diesel and gas turbine assets have had to be safely operated and maintained throughout the year, activities that represent some of our most material risks in our business. I am therefore delighted to report that our Production Team marked five years without a Lost Time Accident (LTA) in January. This is a significant achievement considering the nature of their work and increased workload since La Collette was re-mobilised in 2012. Regrettably, our company-wide zero LTA record of three years had to be reset in June after two employees suffered injuries that required hospital treatment. Fortunately, the injuries were not major and the people involved made a full recovery.

These events are a reminder that we must never be complacent

as our work places us at an increased level of risk to accident every day. Our approach is to be flexible and risk based

in the assessment and implementation of Health, Safety and Environmental (HSE) considerations. The HSE team also monitors key developments, legislation and best practice in areas relevant

to us, taking guidance, where necessary, from the Health and Safety Inspectorate in Jersey and the UK s Health and Safety Executive. We take every opportunity to learn from the mistakes of others. We use the accident reports of UK Trade Associations applicable to generation and network operations to identify unknown hazards and risks in our business and take action to ensure such incidents do not happen in Jersey Electricity.

Our culture is to ensure all staff are fully competent in the work we ask them to do by offering focused and often nationally recognised training, complemented by supervised on-job experience. All employees are trained to recognise their

own limits of competency and apply that to the flexible work culture. They are also expected to proactively identify hazards and take action to mitigate those hazards so that the risk of injury or damage is removed or reduced to an acceptable

level. Help is always on hand from the HSE team to support hazard identification and risk mitigation. The team works

with Senior Management to develop strategies for addressing issues in a timely manner. Safety representatives are appointed champions within operational teams to help create the conditions and culture for safe working among all staff and contractors. This year 198 staff attended a total of 14 different courses related to health and safety.

Each year we produce a HSE plan that identifies our aims and determines how they will fit in with our business objectives. Governance is provided by various HSE committees and includes a forum for direct and unfettered communication between myself and Safety Representatives.

Our commitment to health and safety was recognised for the third year running in September when we were presented with the Jersey Construction Council s Health and Safety Award. This followed last year s  British Safety Council (BSC)  Sword of Honour and the BSC  5-Star Audit in 2012. Our next  audit is scheduled for March  2015 and I hope we retain

those Five Stars. My thanks go to all staff but particularly our Safety Representatives for their commitment, passion and professionalism in helping Jersey Electricity create such a positive HSE culture.

HEALTH AND SAFETY CHIEF EXECUTIVE S REVIEW

SUSTAINABILITY IN THE COMMUNITY

Sustainability defines how we achieve our aims as a business and reflects our responsibility to all our stakeholders. We support the community above and beyond our business activities and we focus that support on sustainable initiatives related to the environment, healthcare and education, especially initiatives which have a long-term benefit.

Though we have long been corporate sponsors of the

National Trust for Jersey this year we made a substantial donation to the Trust s Save PlØmont Campaign to clear the north coast headland of a derelict holiday camp and restore

it to its natural state by removing and replacing old, yet in-service electrical infrastructure, including a substation and cabling. The restoration of PlØmont will benefit Islanders today and future generations.

We were glad to be able to repay the community in Grouville in some small way for their co-operation during the install of Normandie 3. BeachAbility enables people with mobility problems to access beaches by the provision of specially designed balloon-wheeled wheelchairs and we were therefore delighted to join the Chefs Tenants of Grouville

in funding such a facility at Long Beach where N3 comes ashore.

This year we also participated in the Community Public Access Defibrillator Cabinet scheme. We also supported

St John s Ambulance Annual Schools First Aid Competition as well as the Jersey Hyperbaric Treatment Centre. Other healthcare-related charities that receive our on-going support included Jersey Hospice Care, Teenage Cancer Trust, After Breast Cancer Care, Headway, Macmillan Jersey, Urology Foundation, Cancer Research, Jersey Oncology Unit and Family Nursing and Home Care.

We are also corporate sponsors of Durrell, the wildlife trust, Jersey Heritage, Genuine Jersey Products Association and

the Jersey Construction Council. In supporting Genuine Jersey we are supporting local producers and craftsmen who put local, sustainably produced products and services at the heart of their enterprises. As sponsors of the JeCC Sustainability Award, which was won by Morris Architects for the second

successive year for another energy efficient refurbishment

of the States housing, this time La Collette High Rise, and the Jersey Enterprise Environmental Award, which was won by Creepy Valley Adventure Park, we are recognising and rewarding those businesses that strive to preserve and protect our Island environment.

We also support our schools and students through Trident, Advance To Work, Undergraduate Work Experience and our own Apprentice Scheme. The Jersey Electricity Bursary Award Scheme is an extension of our commitment to the Island s youth.

Our staff, individually and collectively, raise a great deal of funds in support of local charities which the Company have matched. This year a monthly Staff Charity Draw has encouraged the collection of around £3,000 for staff- nominated charities. A team of 10 came third in a round- Island sports relay, raising over £1,000 for the drug and alcohol dependence charity, the Silkworth Group and

our Charity Committee does marvellous fund-raising work throughout the business.

To us, sustainability means meeting our responsibilities, professionally and socially, over the long-term by investing in our people, our community, our environment and our business.

SUSTAINABILITY IN THE COMMUNITYCHIEF EXECUTIVE S REVIEW

Top clockwise: Presenting the BeachAbility wheelchair, backing staff with the Across Group taking people to Lourdes, Jersey Enterprise Environmental Award, some of our Silkworth Challenge team, the annual Jersey Swimarathon, St John Ambulance Annual Schools First Aid Competition

 Investing in our  

people, our  community, our  environment  and our  business  

OUR PEOPLE CHIEF EXECUTIVE S REVIEW

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