Channel Islands Competition and Regulatory Authorities: Annual Report 2014.

STATES OF JERSEY

CHANNEL ISLANDS COMPETITION AND REGULATORY AUTHORITIES: ANNUAL REPORT 2014

Presented to the States on 15th May 2015 by the Minister for Economic Development

STATES GREFFE

2015   Price code: D  R.56

ANNUAL REPORT

2014

FOREWORD

This is the third annual report of the Channel Islands Competition and Regulatory Authorities (CICRA) and is presented to Jersey's Economic Development Minister and Guernsey's Commerce and Employment Department pursuant to provisions set out in the Competition Regulatory Authority (Jersey) Law 2001 and The Regulation of Utilities (Bailiwick of Guernsey) Law, 2001. It also fulfils the requirements of the obligations on CICRA as set out in the Islands' competition laws and sector specific legislation.

What is CICRA?

The Channel Islands Competition and Regulatory Authorities (CICRA) is the name given to the Jersey Competition Regulatory Authority (JCRA) and the Guernsey Competition and Regulatory

Authority (GCRA). The JCRA was established under the Competition Regulatory Authority (Jersey) Law, 2001, and the GCRA was established under the Guernsey Competition and Regulatory Authority Ordinance, 2012.

By working together, sharing resources and expertise between the islands, CICRA's aim is to ensure that consumers receive the best value, choice and access to high quality services, in addition to promoting competition and consumers' interests.

CICRA's functions

Competition

CICRA is responsible for administering and enforcing competition law in Jersey and Guernsey. The aim of this legislation is to prevent consumers being harmed by anti-competitive or exploitative behaviour in the market (such as price-fixing or abuse of market power).

Advisory

CICRA can be called on to advise Jersey's Economic Development Minister and Guernsey's Commerce and Employment Department on matters of economic regulation and competition. During 2014 we advised on ferries, marine fuel and the future regulation of the Ports of Jersey in Jersey, primary health care in Guernsey and aviation fuel on a pan-Channel Islands basis.

Economic regulation

In common with many other jurisdictions, Jersey and Guernsey have decided to structure particular previously States-run businesses as separate companies – which are, with the exception of Sure in Guernsey, wholly-owned by the States. In Jersey's case this decision was taken in respect of the telecommunications and postal businesses now run by JT and Jersey Post. In Guernsey's case this decision was taken in respect of the telecommunications, postal and electricity businesses now run by Sure, Guernsey Post and Guernsey Electricity. CICRA is responsible for the economic regulation of these sectors.

Who we are

CICRA is led by a joint board. The board consists of a Chairman, three non-executive directors and two executive directors. In addition, at 31 December 2014 CICRA had eight staff and offices in Jersey and Guernsey.

How to find out more

More information on CICRA and its activities can be found on the website www.cicra.je or www.cicra.gg.  

CHAIRMAN'S STATEMENT

The Channel Islands Competition and Regulatory Authorities (CICRA) is, by any standards, unusual. In effect it is the "trading name" of two legally separate bodies, the Jersey Competition Regulatory Authority (JCRA) and the Guernsey Competition and Regulatory Authority (GCRA). CICRA has a single board, staff and organisation but operates under two different, but broadly similar, laws and two different political-sponsoring departments. It is a prime example of pragmatic working together between Jersey and Guernsey, to the benefit of both islands, through sharing resources and thereby reducing costs. However such an arrangement is not without its challenges as, while the islands share many characteristics, there are, at any one time, differences in priorities and approaches accentuated by different political cycles.

In 2014 CICRA had the benefit of a fairly stable political environment in both islands and was able to concentrate on its mainstream regulatory and competition policy work. The elections in Jersey in November 2014 were followed by a re-alignment of ministerial responsibilities so the JCRA now comes within the remit of Senator Philip Ozouf as Assistant Chief Minister and Assistant Economic Development Minister. There is no reason to believe that this should present any difficulties for CICRA; indeed putting regulation and competition policy closer to the centre of government may well mean a better alignment with other policies.

Like any good regulator CICRA has to take changing market conditions into account. Electronic communication has provided increasing competition to postal services, demand has declined and the nature of the service has switched from "urgent mail" to parcel delivery. This requires a much lighter regulatory touch, which has been duly implemented by CICRA, with a resultant reduction in resources and lower regulatory fees. In Guernsey the political wish has been for a lighter regulatory touch on electricity (which is not a regulated activity in Jersey) and again CICRA has responded.

Telecommunication services play a vital role in people's lives and in business. The mobile phone has become indispensable and fast broadband is almost regarded as a human right. Expenditure on business and residential telecommunications services has soared. Providing modern telecommunications services in two relatively small islands is challenging as there are limited economies of scale and a reduced incentive for a significant number of competitors compared with larger communities. Quite properly telecommunications now accounts for the major part of CICRA's work – 60% in 2014.

The Chief Executive's report documents the work in 2014 in detail. In particular, significant progress has been made on leased lines, bringing 4G services to the islands and introducing competition in the provision of landline services; the benefits of these developments will reach customers in 2015. A key innovation by CICRA was conducting opinion surveys on telecommunications customer satisfaction. The first results were published in September and showed that there was significant scope for improvement in a number of areas. Customer satisfaction in respect of some operators fell well short of acceptable levels. The impact of the first set of results demonstrated their efficacy so CICRA has committed to conducting the surveys every six months for as long as they are considered valuable.

CICRA has continued its programme of work on competition issues, handling mergers that require approval, investigating ferries, marine fuel and the future regulation of the Ports of Jersey in Jersey, primary healthcare in Guernsey and aviation fuel on a pan-Channel Island basis.

CICRA is a tiny organisation and is dependent on its non-executive board members being more directly involved in some projects than would be normal and on its staff team to operate across a wide range of areas. Recruiting suitable staff is difficult in both islands and, increasingly, CICRA is using outside consultants albeit with extensive executive input.

Early in 2014 Peter Neville resigned as a board member. Hannah Nixon, then with Ofgem but subsequently appointed Managing Director of the new UK payments regulator, was appointed to replace him. Hannah Nixon, Regina Finn and Philip Marsden all are highly qualified in regulatory and competition issues and their expertise is invaluable to CICRA. In February CICRA's Chief Executive Andrew Riseley resigned as he wished to return to his native Australia. The previous Deputy Chief Executive Michael Byrne, was appointed to replace him and the other Executive Director, Louise Read, took on a wider role across the whole organisation. A number of other appointments were made and the new staff team quickly became an effective unit.

I am grateful to my fellow board members and the executive team for a good year's work in challenging circumstances.

Mark Boleat

CHIEF EXECUTIVE'S REPORT

CICRA's achievements during 2014 reflect our broad and challenging remit.

We place the interests of consumers at the heart of what we do to make markets in the Channel Islands work better and deliver good outcomes that benefit the islands.

We have delivered a great deal for islanders during 2014 despite our relatively small size  and  I am  grateful to my team and  the support of my board in delivering an extensive work programme over 2014.

Telecoms

Over 2014 CICRA worked closely with telecoms operators before reaching a decision to require JT in Jersey and Sure in Guernsey to open up access to their networks. This will allow other operators, for the first time, to offer the full range of landline services. This is a significant development for all consumers. From mid 2015 it will improve choice and remove a long-standing obstacle to fairer competition in the marketplace. We expect consumers to see the benefits of this decision by CICRA, with telecoms operators able to offer full bundled packages, i.e. landline, mobile, broadband and multimedia services to their customers. Through the exercise of that choice available to consumers we anticipate a market that is more responsive and delivers better value to islanders.

During 2015 consumers will see a significant step change in the functionality of mobile devices through 4G mobile services in the Channel Islands. We recognised that to deliver the best outcome for islanders this major project would involve designing and implementing a small island solution aimed at choosing the telecoms operators who would best utilise the spectrum needed to support this technology. The successful completion of that process is testimony to the synergies that can be achieved by operating on a pan Channel Island basis between Guernsey and Jersey that benefit consumers across the islands and reduce the costs of

providing services across two jurisdictions. The outcome of CICRA's work will be a healthier, more competitive mobile market, with world-class services supporting a range of needs of businesses and households as our reliance on portability of telecoms services grows.

CICRA is mindful of the issues faced by consumers and where it has powers to do so will intervene on their behalf. A particular area that has affected mobile users is exposure to data charges when they roam outside the Channel Islands. This can leave them facing bill shock', i.e. receiving an unusually large bill for using their mobile device. CICRA took the opportunity, as part of the introduction of 4G to place significant obligations on mobile providers providing these services. JT, Sure and Airtel are now required to provide the same level of protection to Channel Islanders using 4G services that is available to European mobile users roaming within Europe. This includes limits on roaming charges and caps on per unit data charges accompanied by appropriate information and advice.

Until CICRA's intervention during 2014, consumers with fixed term mobile telephone contracts had little protection when operators varied the price of their contract in that they did not have the ability to walk away from the agreement. This was clearly unfair. Our decision in 2014 that allowed consumers to take their business elsewhere in situations where their operator altered that contract to their detriment affords consumers important additional protection. The high profile publication of telecom customer satisfaction statistics over 2014, as measured by our survey of their customers, demonstrates how CICRA can give consumers a voice. Through publishing customer views of their telecom providers we sought to encourage providers to raise their standards but to also give recognition of positive customer experience. CICRA is confident that operators will take account of the views of their customers with improvements seen over 2015.

The way businesses connect internally, and with the wider world using telecoms is critical to the success of the Channel Islands' ability to deliver sustainable economic growth. Having listened to concerns expressed by businesses and government we were concerned that the market was not delivering the best value outcomes for consumers. In 2014 we carried out a comprehensive review of the extent of competition in business connectivity markets. The review sought to ensure consumers were appropriately protected either through competition or by regulation. As a result of the review we determined that further regulatory action is required and so during 2015 we will be implementing price controls on various services to ensure the interests of business customers are safeguarded

Post

CICRA believes in reducing the regulatory burden when it is appropriate to do so. Light-touch regulation continues to be appropriate in the postal sector across the Channel Islands in the context of rapid technology substitution and given the low average expenditure by households on postal services. We will continue to monitor the quality of service in postal provision in both Jersey and Guernsey and, to this end, have set targets and published performance by Jersey Post and Guernsey Post against those targets.

Electricity

CICRA has contributed to the ongoing review of the form of regulation appropriate to the electricity sector in Guernsey and has provided evidence to scrutiny committees on security of supply issues.

Ports incorporation in Jersey

Over 2014 preparation for the proposed incorporation of Ports of Jersey was ongoing. CICRA has supported the States of Jersey to develop this workstream and we anticipate this will continue as key legislation is placed before the States of Jersey in 2015.

Competition Law

As the competition authority across the Channel Islands one of our areas of focus is to review markets that don't seem to be delivering the best outcomes for consumers. During 2014 a number of fuel markets were reviewed, including marine fuel, aviation fuel and heating oil. A significant transaction relevant to the Jersey fuel market also received CICRA's approval in 2014, subject to a series of stringent conditions, which we consider puts users of the La Collette Terminal facilities in an improved position compared to what was in place prior to the transaction.

We also completed a review of the primary healthcare sector in Guernsey at the request of the Commerce and Employment Department board. This initial review covered what is a complex and wide range of issues many of which go beyond pure market considerations. The review provides a perspective on some of the issues which we hope will support consideration by the States of a subject that touches on a key aspect of the lives of all Guernsey people.

CICRA considered ten formal merger applications and four exemption applications over 2014. Much of our work on competition law matters is advising and providing informal guidance to individual businesses and institutions. Waste recycling in Guernsey, the ferry service in Jersey, the cap on general practitioner numbers in Guernsey and reporting on margins of heating oil providers in Jersey are all areas where the expertise of CICRA's staff was called on under our competition law remit. We have worked closely with other local consumer bodies such as the Jersey Consumer Council and Trading Standards in both islands to help resolve consumer issues, raise consumer awareness and to provide consumers with the information they need to make informed choices.

CICRA itself

The commitment and expertise of a small team of eight people working across the Channel Islands has been a key foundation on which the work programme for 2014 has been delivered and I am fortunate to have a team of dedicated, professional colleagues working for the benefit of islanders.

Michael Byrne

THE BOARD

Mark Boleat  Philip Marsden  Regina Finn  Hannah Nixon Chairman   Non-Executive Director  Non-Executive Director  Non-Executive Director

Mark has extensive experience in regulatory policy and practice and the handling of complex public policy issues. He holds, or has held, numerous board level appointments in commercial, public and charitable organisations including Chairman of the States of Jersey Development Company and Chairman of the City of London Policy and Resources Committee.

He has strong ties to Jersey having been born and educated in the island. He has written extensively on Jersey and has undertaken three significant reviews for the States of Jersey including one on consumer policy.

Philip is a competition lawyer with a particular interest in abuse of dominance, consumer welfare, innovation incentives and international competition issues.

He is a Deputy Chair of the UK Competition and Markets Authority, Professor of Law and Economics at the College of Europe, Bruges and is co- founder and general editor of the European Competition Journal and the Oxford Competition Law case reporter series. Philip is also a member of the Legal Services Consumer Panel.

Regina has extensive experience in competition and regulatory regimes, including in the telecommunications post, electricity and gas sectors.

She set up and ran the Channel Islands' first economic regulator, the Office of Utility Regulation in Guernsey, from 2001 to 2005, which has since merged with the JCRA to form CICRA.

Regina is also a non- executive Director of Mutual Energy Holdings Ltd, a Belfast based energy company and a Director of Luce rna Partners, a consultancy partnership specialising in regulation and public policy.

Appointed in March 2014, Hannah has extensive experience in economic regulation and competition issues, working across a range of industries in the public and private sectors.

She is currently the Managing Director of the newly established Payment Systems Regulator. Hannah was previously a Senior Partner at Ofgem, the GB gas and electricity regulator, she was also Ofgem's Head of Profession for Economics.

THE BOARD (CONTINUED)

Michael Byrne  Louise Read  Andrew Riseley  Peter Neville

Chief Executive  Director  Former Chief Executive  Non-Executive Director

Michael has extensive experience applying regulation and competition law in the UK energy, media and telecoms sectors.

Michael holds a diploma in Company Direction from the IoD, an MBA, a post graduate qualification in European Competition Law, and a BSc Honours degree in Mathematical Statistics.

Louise is a chartered accountant, with extensive experience of managing finance, personnel and operational aspects of business. She is the Board and Audit and Risk Committee secretary.

Louise was previously the Group Financial Accountant at Jersey Post, and has worked with many of Jersey's businesses during her time at PwC.

Andrew is a competition and regulatory lawyer, who has worked at large law firms in both the UK and Australia, at one of the UK's competition regulators, and in-house at a major UK utility. He has extensive experience in utility regulation, competition law and public procurement.

Andrew's resignation from the board became effective on 5 June 2014.

Peter is the former director general of the Guernsey Financial Services Commission having headed the financial watchdog for over eight years. He is currently chairman of Kleinwort Benson (Channel Islands) Limited.

Peter's resignation from the board became effective on 23 February 2014.

Louise holds a diploma in Company Direction from the IoD, is a fellow of the Institute of Chartered Accountants in England and Wales and holds a BSc in Accounting and Management Sciences from the University of Southampton.

MEETINGS OF THE AUTHORITIES, MEMBER FEES AND EXPENSES

Since 1 August 2012, CICRA has been led by a joint board. The Chairman is appointed concurrently as Chair of the GCRA by the States of Deliberation in Guernsey and Chair of the JCRA by the States of Jersey. Members are appointed to the boards of the GCRA and JCRA by the Commerce and Employment Board and the Minister for Economic Development Department respectively.

Meetings

During 2014, attendance at meeting of the Boards and their Committees was as follows:

Member fees and expenses

The Chairman's and Member's fees are approved by the Minister for Economic Development in Jersey and the Commerce and Employment Board in Guernsey. Each member's fees are split equally between the GCRA and JCRA. There has been no increase in fees since the inception of the Authority in 2012. The following table shows the actual fees paid to each member by the two Authorities.

*Part year only

Michael Byrne and Louise Read are executive directors, i.e. members of each authority and employees of the GCRA and JCRA respectively (as was Andrew Riseley until his resignation). They continue to receive no fees as members of the authorities but do receive remuneration, which is split between the JCRA and GCRA as follows:

* Excludes employer's pension contribution of 13.6%

FINANCIAL STATEMENTS 2014

Consistent with 2013, the Guernsey Competition and Regulatory Authority (GCRA) made an accounting surplus of £1 in 2014, effectively breakeven. The GCRA accounts for income only in order to meet its actual costs during the year. It must also ensure that it receives enough income during the year in each of the areas that it covers – competition law administration and enforcement, and regulation of the telecoms, postal and electricity sectors - to fund them separately, given that cross-subsidisation is not permitted. A working balance and an appropriate level of reserves are maintained at all times, but for the purpose of the financial statements, deferred income adjustments are made to match income with costs.

Overall costs in 2014 were £661k, slightly lower than 2013 (£674k). Expenditure continues to be closely controlled by the GCRA maintaining strict internal guidelines with regard to purchasing and tendering procedures which, combined with appropriate corporate governance in line with best practice, helps to ensure that it is run as an effective and efficient organisation. An audit of policies and procedures is undertaken each year, by independent internal auditors, to ensure that high standards are maintained and that appropriate processes and procedures are in place.

In line with the service level agreement between the GCRA and the Commerce and Employment Department (C&E), grant funding for work under The Competition (Guernsey) Ordinance, 2012 continued to be received quarterly in advance. During 2014 a grant of £140k (2013: £140k) was received. In the event that the cost of work undertaken in respect of Guernsey's competition law exceeds the grant the GCRA must inform C&E and make good' the deficit from future grant funding. As at 31 December 2014 the deficit was £15k (2013: £14k).

Income of £1k (2013: £26k) was received in the form of mergers and acquisitions fees. Merger and acquisitions applications and costs are by their nature unpredictable. The fees received are lower than the costs incurred in dealing with matters relating to merger and acquisition. This shortfall of £5k has to be funded from competition law grant funding which is a contributory factor to the continuing funding deficit in that area.

During 2014 £519k (2013: £490k) in fees was received from telecoms licensees and at the year end telecoms licence fees exceeded costs by £51k (2013: £62k), this balance was accounted for as deferred telecommunications licence fee income. Based on budgeted costs the licence fees for 2014 were set at 0.75% (2013:0.5%) of licensable turnover.

Postal licence fees from Guernsey Post continued to be received on a monthly basis. During 2014 £40k (2013: £90k) of licence fees were received and at the year end postal licence fees exceeded costs by £22k. (2013: £60k). This balance was accounted for as deferred postal licence fee income which will be returned to Guernsey Post in 2015.

Electricity licence fees from Guernsey Electricity continued to be received on a monthly basis. During 2014 £40k (2013: £110k) of licence fees were received and at the year end electricity licence fees exceeded costs by £20k (2013: £58k). This balance was accounted for as deferred electricity licence fee income which will be returned to Guernsey Electricity in 2015.

NON EXECUTIVE MEMBERS

Mark Boleat  Chairman

Philip Marsden

Regina Finn

Hannah Nixon   appointed 13 March 2014

Peter Neville  resigned effective 23 February 2014

EXECUTIVE MEMBERS

Andrew Riseley  Chief Executive  resigned effective 5 June 2014 Michael Byrne  Chief Executive

Louise Read  Director

SECRETARY Louise Read

INDEPENDENT AUDITOR BDO Limited

P O Box 180

Place Du Pre

Rue Du Pre

St Peter Port

Guernsey

GY1 3LL

BANKERS

Barclays Private Clients International Limited Jersey International Banking Centre

PO Box 8

St Helier

Jersey

JE4 8NE

REGISTERED OFFICE Suites B1 & B2

Hirzel Court

St Peter Port

Guernsey

GY1 2NH

The Members of the Guernsey Competition and Regulatory Authority (GCRA) present their report and financial statements for the year ended 31 December 2014.

ACTIVITIES

The principal activities of the GCRA during the year were the regulation of the telecommunications, electricity and postal sectors and the administration and enforcement of The Competition (Guernsey) Ordinance, 2012.

RESULTS

There was a surplus for the year of £1 (2013: surplus £1).

MEMBERS

The Members in office during the year and when these financial statements were approved are shown on page 11.

INDEPENDENT AUDITOR

The auditor, BDO Limited, who was appointed in accordance with Section 13(4)(a) of The Guernsey Competition and Regulatory Authority Ordinance, 2012, has indicated its willingness to continue in office.

By order of the Members

Louise Read Secretary

STATEMENT OF MEMBERS' RESPONSIBILITIES IN RESPECT OF THE FINANCIAL STATEMENTS

The Guernsey Competition and Regulatory Authority Ordinance, 2012, (the "Ordinance") requires Members to prepare financial statements in accordance with generally accepted accounting principles which show a true and fair view of the surplus or deficit of the GCRA for the year and of the state of the GCRA's affairs at the end of the year.

In preparing the financial statements the Members are required to:

• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable and prudent;
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the GCRA will continue in operation; and
• state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements.

The Members are responsible for keeping accounting records which are sufficient to show and explain the GCRA's transactions and are such as to disclose with reasonable accuracy, at any time, the financial position of the GCRA at that time and to enable them to ensure that the financial statements comply with the Ordinance. They are also responsible for safeguarding the assets of the GCRA and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Members confirm that these financial statements comply with these requirements.

The Ordinance also requires the GCRA's financial statements to be audited annually by auditors appointed by the States of Guernsey on the recommendation of the Public Accounts Committee and the financial statements to be submitted, together with the auditor's report, to the Commerce and Employment Department. The Commerce and Employment Department, in turn, must submit the financial statements and the auditor's report thereon to the States of Guernsey.

TO THE MEMBERS OF THE GUERNSEY COMPETITION AND REGULATORY AUTHORITY

We have audited the financial statements of the Guernsey Competition and Regulatory Authority for the year ended 31 December 2014 which comprise the Income and Expenditure Account, the Balance Sheet, the Statement of Total Recognised Gains and Losses, the Cash Flow Statement and the related notes 1 to 9. The financial reporting framework that has  been applied  in their preparation is applicable law and  United Kingdom Accounting Standards ('United Kingdom Generally Accepted Accounting Practice').

This report is made solely to the Authority's members, as a body, in accordance with Section 13 of The Guernsey Competition and Regulatory Authority Ordinance, 2012. Our audit work is undertaken so that we might state to the Authority's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Authority and the Authority's members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of the members and auditor

As explained more fully in the Statement of Members' Responsibilities on page 13, the members are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view.

Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Financial Reporting Council's (FRC's) Ethical Standards for Auditors.

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Authority's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the members; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited financial statements. If we become aware of any apparent misstatements or inconsistencies we consider the implications for our report.

Opinion on the financial statements In our opinion the financial statements:

• give a true and fair view of the state of the Authority's affairs as at 31 December 2014 and of its surplus for the year then ended;
• have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
• have been properly prepared in accordance with the requirements of The Guernsey Competition and Regulatory Authority Ordinance, 2012.

CHARTERED ACCOUNTANTS Place du Pré

Rue du Pré

St Peter Port

Guernsey

Date:25 March 2015

FOR THE YEAR ENDED 31 DECEMBER 2014

Notes

INCOME

Telecommunications licence fees Electricity licence fees

Postal licence fees

Competition law grant

Mergers and acquisitions fees Bank interest received

2014  2013

£ £

468,586  427,998 19,873  52,200 18,049  29,644 140,736  131,355 1,250  25,750 12,031  7,297

    660,525  674,244

EXPENDITURE

Salaries and staff costs  373,550  485,889 Consultancy fees  118,670  49,510 Operating lease rentals  37,164  36,206 Travel and entertainment  25,281  15,265 Conference and course fees  9,297  7,544 Depreciation  2,040  3,591 Administration expenses  13,035  13,235 Legal and professional fees  21,236  - Audit and accountancy fee  7,575  9,923 Advertising and publicity  14,833  12,987 Repairs and maintenance  23,136  23,650 Heat, light and water  2,807  3,303 Recruitment  5,782  4,493 General expenses  6,118  8,647

    660,524  674,243

    SURPLUS FOR THE YEAR  5  1  1      

STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES

2014  2013

£ £

Surplus for the year

Repayment from the Public Utilities Regulation Fund (PURF) Release from PURF to finance current year activities  Amounts previously provided for in the PURF

Total gains and losses recognised since last annual report 6

1  1

- (90,451)

- (159,549)

- 184,649

1  (65,350)  

Historical cost equivalent

There is no difference between the surplus for the year stated above and its historical cost equivalent.

Continuing operations

All the items dealt with in arriving at the surplus in the income and expenditure account relate to continuing operations.

The notes form an integral part of these financial statements.

AS AT 31 DECEMBER 2014

2014  2013 Notes  £  £

FIXED ASSETS

Tangible fixed assets  2  2,096  4,136    

CURRENT ASSETS Debtors and prepayments Cash at bank

CURRENT LIABILITIES

Creditors: amounts falling due within one year

NET CURRENT ASSETS

TOTAL ASSETS LESS CURRENT LIABILITIES

RETAINED SURPLUS

3  37,401  16,915 291,092  408,921

  328,493  425,836  

4  130,591  229,975   197,902  195,861   199,998  199,997  

5   199,998  199,997  

The financial statements on pages 15 to 22 were approved and authorised for issue by the members and signed on their behalf by:

Mark Boleat

The notes form an integral part of these financial statements.

FOR THE YEAR ENDED 31 DECEMBER 2014

Note Net Cash Outflow from Operating Activities  7

Returns on Investment and Servicing of Finance Interest received

Capital Expenditure and Financial Investment Payments to acquire tangible fixed assets

2014  2013

£ £

(129,860)  (311,786)

12,031  7,297

- (1,796)

Management of Liquid Resources

Movement in one month fixed term deposit account  150,000  (250,000)

––––––  ––––––

Increase / (Decrease) in Cash  32,171  (556,285)

  RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS

2014 2013

£ £

Increase / (Decrease) in cash in year (Decrease) / Increase in liquid resources

Change in net funds Net funds at 1 January

Net funds at 31 December ANALYSIS OF NET FUNDS

1 Jan 2014 £

Cash at bank  158,921 Fixed term deposit account  250,000

–––––––

Total  408,921

32,171 (556,285) (150,000) 250,000

–––––––– ––––––– (117,829) (306,285)

408,921 715,206 ––––––––  ––––––– 291,092  408,921  

Cash flows  31 Dec 2014

£ £

32,171  191,092

(150,000)  100,000 ––––––––  –––––––– (117,829)  291,092  

The notes form an integral part of these financial statements.

FOR YEAR ENDED 31 DECEMBER 2014 1.  ACCOUNTING POLICIES

The financial statements are prepared under the historical cost convention and in accordance with accounting principles generally accepted in Guernsey, incorporating United Kingdom accounting standards.

A summary of the more important accounting policies that the Members have applied is set out below.

1. Interest received

Interest received on deposits held with Guernsey's Treasury and Resources Department was accounted for on a cash received basis. Interest on other bank deposits is accrued on a daily basis.

2. Fixed assets

Fixed assets are stated at cost less depreciation.

Depreciation is provided on all tangible fixed assets at rates calculated to write down their cost on a straight line basis to their estimated residual values over their expected useful economic lives. The depreciation rates used are as follows:

Office equipment  - 20% per annum Fixtures and fittings  - 20% per annum Computer equipment  - 20% per annum Website costs  - 33% per annum

3. Leasing commitments

All leases entered into by the GCRA are operating leases. Rentals payable under operating leases are charged in the income and expenditure account on a straight line basis over the lease term.

4. Grants

Grants received from the Commerce and Employment Department are accounted for in the period to which they relate. The grant received for 2014 was £140,000 (2013:£140,000). £140,736 is reflected in the income and expenditure account in order to match the expenditure on competition law matters during 2014. Any unused funds at the financial year end are either deferred or repaid to the Department. Deferred grant income as at 31 December amounted to (£14,957) (2013: (£14,171)).

5. Telecoms licence fees

Licence fees are set on the basis of cost recovery in accordance with section 6 of The Telecommunications (Bailiwick of Guernsey) Law, 2001. The GCRA's costs are determined on an annual basis and these are recovered by applying a percentage to the licensed revenues of the various licensed telecoms operators on the basis of relevant turnover, or if appropriate an annual fee. The percentage for 2014 was 0.75% (2013: 0.5%).

Fee income is recognised in the period to which it relates. Should fee income exceed costs, the balance is transferred to deferred income. Deferred licence fee income as at 31 December 2014 amounted to £54,411 (2013: £46,271).

6. Postal licence fees

Licence fees are set on the basis of cost recovery in accordance with section 6 of The Post Office (Bailiwick of Guernsey) Law, 2001. The GCRA's costs are determined on an annual basis and these are recovered through charging an annual fee.

The fee for 2014 was set at £40,000 (2013: £90,000).

FOR YEAR ENDED 31 DECEMBER 2014

1. ACCOUNTING POLICIES (CONTINUED)

Fee income is recognised in the period to which it relates. Should fee income exceed costs, the balance is transferred to deferred income. Deferred licence fee income as at 31 December 2014 amounted to £21,951 (2013: £60,356).

7. Electricity licence fees

Licence fees are set on the basis of cost recovery in accordance with section 6 of The Electricity (Guernsey) Law, 2001. The GCRA's costs are determined on an annual basis, and these are recovered through charging an annual fee.

The fee for 2014 was set at £40,000 (2013: £110,000).

Fee income is recognised in the period to which it relates. Should fee income exceed costs, the balance is transferred to deferred income. Deferred licence fee income as at 31 December 2014 amounted to £20,127 (2013: £57,804).

8. Taxation

Under section 12 of The Regulation of Utilities (Bailiwick of Guernsey) Law, 2001 the GCRA is exempt from Guernsey income tax.

9. Expenditure

Expenditure is accounted for on an accruals basis.

2. TANGIBLE FIXED ASSETS

Office  Fixtures  Computer  Website

equipment  and  equipment  costs  Total

Fittings

£ £  £  £  £

Cost

At 1 January 2014  31,108  2,365  22,312  4,125  59,910 Disposals  (9,459)  -  (7,041)  -  (16,500)

_____  ____  _____  ____  _____ At 31 December 2014  21,649  2,365  15,271  4,125  43,410

Depreciation

At 1 January 2014  31,084  2,148  19,348  3,194  55,774 Charge in the year  14  58  1,037  931  2,040 On disposals  (9,459)  -  (7,041)  -  (16,500)

_____  ____  _____  ____  _____ At 31 December 2014  21,639  2,206  13,344  4,125  41,314

Net book value:

At 31 December 2014  10  159  1,927   -  2,096 At 31 December 2013  24  217  2,964  931  4,136

FOR YEAR ENDED 31 DECEMBER 2014

3. DEBTORS AND PREPAYMENTS

2014  2013

£ £

Prepayments  15,076  16,090 Trade debtors  9,251  825 Other debtors  13,074  -

37,401  16,915    

4. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

2014  2013

£ £

Accruals  20,246  44,084 Deferred licence fee income  104,398  173,326 Trade creditors  5,947  12,565

    130,591  229,975

5. MOVEMENT ON RETAINED SURPLUS

Income and Expenditure Account  2014  2013

£ £

At 1 January  199,997  265,347 Surplus for the year  1  1 Other recognised gains and losses (note 6)  -  (65,351)

    At 31 December  199,998  199,997    

6. STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES

The amounts contained with the Statement of Total Recognised Gains and Losses in 2013 reflected a decision taken during the year by the Members to reduce the surplus held within the GCRA by returning amounts to licensees. No similar decision was taken in respect of 2014.

7. CASH FLOW STATEMENT

Reconciliation of surplus for the year to net cash outflow from operating activities:

2014  2013

£ £

Operating surplus

Depreciation

Bank interest

(Increase) / Decrease in debtors

Decrease in creditors

Release of amounts held in Public Utilities Regulation Fund

Net cash outflow from operating activities

1  1 2,040  3,591 (12,031)  (7,297) (20,486)  45,938

(99,384)  (288,668)

- (65,351)

(129,860)  (311,786)    

FOR THE YEAR ENDED 31 DECEMBER 2014

8. RELATED PARTIES

1. Transacting parties

The transacting parties are the Commerce and Employment Department and the GCRA.

Relationship

The GCRA acts independently of the States, but is accountable to the Commerce and Employment Department in respect of its funding for the administration and enforcement of The Competition (Guernsey) Ordinance, 2012, which is also covered by a Service Level Agreement. The Commerce and Employment Department acts as a conduit for requests from other States departments who may request the GCRA to carry out projects. The GCRA reports formally to the Commerce and Employment Board on an annual basis.

Transactions

In  2014,  the  Commerce  and  Employment  Department  provided  funds  to  the  GCRA  to  finance  the administration and enforcement of The Competition (Guernsey) Ordinance, 2012.

Amounts involved

• £140,000  received during the year under the provisions of The Guernsey Competition and Regulatory Authority Ordinance, 2012.

There were no amounts due to the Commerce and Employment Department at the balance sheet date. The accumulated  funding  deficit  at  31  December  2014,  which  has  been  notified  to  the  Commerce  and Employment Department as required under the service level agreement, amounted to £14,957 (2013: deficit £14,171).

2. Transacting parties are:

The transacting parties are the GCRA and the Jersey Competition Regulatory Authority (JCRA).

Relationship

The GCRA and the JCRA work together under the aegis of the Channel Islands Competition and Regulatory Authorities (CICRA) sharing a board, resources and expertise between the islands, whilst retaining their own separate legal identities.

Transactions

The  GCRA  and  JCRA  share  resources  and  expertise  and  recharge  each  other  for  expenses  incurred (including staff costs) on a no gain no loss basis.

Amounts involved

• £246,975  invoiced during 2014 by the GCRA to the JCRA
• £122,445  invoiced during 2014 by the JCRA to the GCRA

Amounts due to and from the Jersey Competition Regulatory Authority at the balance sheet date

2014  2013

£ £

Amounts due to the JCRA from the GCRA  5,124  8,435 (included within trade creditors)  –––––––  –––––––

Amounts due by the JCRA to the GCRA

(included within trade debtors)  19,259  825 –––––––  –––––––

FOR THE YEAR ENDED 31 DECEMBER 2014

9. FINANCIAL COMMITMENTS

At 31 December 2014 the GCRA had annual commitments under non-cancellable operating leases as set out below:

Buildings

2014  2013

£ £

Operating leases which expire:

Not later than one year  17,758  -

In more than one year but less than five years  -  35,516

Later than five years  -  -

  17,758  35,516 ––––––  ––––––

The operating lease held by the Guernsey Competition and Regulatory Authority in respect of Suites B1 & B2 of Hirzel Court, St Peter Port, Guernsey expires in June 2015 and the landlord has requested vacant possession. In December 2014, the GCRA signed non-binding heads of terms to lease office accommodation at La Plaiderie Chambers, La Plaiderie, St Peter Port, Guernsey. In accordance with the provisions contained within the service level agreement in place between the GCRA and the Commerce and Employment Department the GCRA sought and obtained the Department's consent to enter in a six and a half year lease, at a cost of £54,000 per annum, including service charge and parking. This was duly signed in February 2015.

CORPORATE GOVERNANCE GUIDELINES

The GCRA is an autonomous body and independent in its decision making from the States of Guernsey. But under powers in section 3 of The Guernsey Competition and Regulatory Authority Ordinance, 2012 (The "Ordinance"), the Commerce and Employment Department "may, if it considers it desirable in the public interest to do so, and after consulting the GCRA, give to the GCRA written guidance on matters relating to corporate governance, that is to say, matters relating to the system and arrangements by and under which the GCRA is directed and controlled". The following are the Corporate Governance Guidelines as agreed between the Department and the GCRA.

What is Corporate Governance?

"Corporate Governance is the system by which business corporations are directed and controlled. The corporate governance structure specifies the distribution of rights and responsibilities among different participants in the corporation, such as the board, managers, shareholders and other stakeholders, and spells out the rules and procedures for making decisions on corporate affairs. By doing this, it also provides the structure through which the company objectives are set, and the means of attaining those objectives and monitoring performance." – OECD April 1999

Constitution of the GCRA

The GCRA is a statutory body corporate established under Section 1 of the Ordinance. The governing body is a Board of Members which directs regulatory, licensing, financial, operational and strategic policies of the GCRA.

Functions of the GCRA

The functions of the GCRA are as set out in Section 4 of the Ordinance and may be summarised as follows:

1. To advise the Department generally in relation to the administration and enforcement of competition legislation and the related practice and procedures.
2. To advise the Department generally in relation to competition matters, and in particular:
   1. The abuse of or suspected abuse of a dominant position by undertakings
   2. Anti-competitive practices or suspected anti-competitive practices of undertakings
   3. Mergers or Acquisitions of undertakings.
3. Subject to the provisions of The Competition (Guernsey) Ordinance, 2012, to investigate:
   1. Any abuse or suspected abuse of a dominant position by an undertaking
   2. Any anti-competitive practice or suspected anti-competitive practice of an undertaking
   3. Any merger or acquisition of undertakings.
4. To administer its office and undertaking.
5. To determine the fees payable and costs and expenses recoverable in respect of the exercise of its functions, including interest and penalties payable in the event of default.
6. Any other functions assigned or transferred to the GCRA by legislation or Resolution of the States. Constitution of the Board

Paragraph 1(1) of Schedule 1 to the Ordinance requires that the GCRA shall consist of a minimum of three members, one of whom shall be the Chairman.

Members of the Board are appointed by the Department after consultation with the Chairman. Vacancies which arise on the Board are filled through the use of an open and transparent process. A vacancy is usually advertised and once a suitable candidate is identified, a recommendation is made to the Department.

CORPORATE GOVERNANCE GUIDELINES (CONTINUED)

Under the provisions of the Ordinance, the appointment of the Chairman is a matter reserved for decision by the States of Guernsey on the recommendation of the Department.

On appointment, a member will receive an induction to the work of the Board and the GCRA. This includes an opportunity to meet all members of staff.

Under the provisions of Paragraph 2(2) of Schedule 1 to the Ordinance, members are appointed for a period not exceeding five years and upon expiry of such a period are eligible for reappointment.

Operations of the Board

The Board sets strategic policy and the implementation of these policies is undertaken by the Executive.

The Board has eight scheduled meetings a year and holds additional meetings when circumstances require it. Under the provisions of paragraph 6 of Schedule 1 to the Ordinance, the quorate number of members to hold a Board meeting is the nearest whole number above one half of the number of members. Currently, therefore, the quorate number is four. The Chairman or person presiding over the meeting has no vote unless there is an equality of votes, in which case he or she has a casting vote.

In advance of each meeting, members are provided with comprehensive briefing papers on the items under consideration. The Board is supported by the Board Secretary who attends and minutes all meetings of the Board.

Paragraph 13 of Schedule 1 to the Ordinance empowers the Board to delegate by an instrument in writing any of its functions to any of its members, officers or employees named or described in the instrument, including to a committee of members, officers and/or employees. However, the Board is not authorised to delegate this power of delegation, nor the function of considering representations concerning a proposed decision against which there is a right of appeal, any obligation to submit a report to the Department, nor to determine the Chief Executive's minimum term of office.

The GCRA publishes an annual work programme detailing a number of annual objectives and prepares annual budgets. These are finalised in the last quarter of each year and may incorporate, amongst other things, any strategic issues raised by the Board, and comments received during consultation with key stakeholders including the Department. This is considered by the Board prior to the start of the financial year.

The Board monitors the performance of the GCRA against the annual objectives and budget through reports at its regular Board meetings.

The Chairman makes recommendations to the Department in respect of fees paid to members. Committees of the Board

Paragraph 5 of Schedule 1 to the Ordinance enables the GCRA to establish committees.

During 2014, the Board established one committee, an Audit and Risk Committee. The members of this committee comprise the non-executive members and are appointed by the Board.

CORPORATE GOVERNANCE GUIDELINES (CONTINUED)

The key duties of the Audit and Risk Committee are:-

• To review annually the GCRA's application of corporate governance best practice;
• To review the mechanisms for ensuring the effectiveness of the GCRA's internal controls;
• To review and agree the internal auditor's annual work plan, monitor and review the effectiveness of any internal audit work carried out and review all reports from the internal auditors, monitoring the Executive's responsiveness to the findings and recommendations.
• To meet the internal auditors at least once a year, without the presence of the Executive.
• To consider certain matters relating to the external audit of the GCRA's annual financial statements (including reviewing those financial statements prior to their consideration by the Board).

The members of the Audit and Risk Committee at the balance sheet date of 31 December 2014 were Philip Marsden (Chairman), Regina Finn, Hannah Nixon and Mark Boleat. The Executive is expected to attend the meetings of the Audit and Risk Committee in an advisory capacity.

Openness, Integrity and Accountability

The GCRA abides by the principles of openness, integrity and accountability – and those standards which are widely recognised as being applicable to public service, and to the conduct of all involved in public life. In the discharge of its duties, the GCRA will ensure:

• That subject to the appropriate level of confidentiality, it maintains an openness in its public affairs, in order that the public can have confidence in the decision-making processes and actions of public service bodies, in the management of the GCRA's activities, and in the Board members and staff of the GCRA itself;
• That it maintains at all times an appropriate degree of integrity in the conduct of its affairs. Integrity comprises both straightforward dealing and completeness. The GCRA bases its integrity upon honesty, selflessness and objectivity, and high standards of propriety and probity in the stewardship of its funds and management of its affairs;
• That it is fully accountable in the application of the public funds with which it is entrusted and that these are properly safeguarded, and are used economically, efficiently and effectively.

The three fundamental principles, defined above in terms of public sector bodies, have been refined to include the findings and recommendations of the Nolan Committee on Standards in Public Life. The GCRA will make its best efforts to abide by Nolan's seven general principles that underpin public life, namely: selflessness, integrity, objectivity, accountability, openness, honesty, and leadership.

Audit and Accounts

While the GCRA is an independent body, it is accountable for its overall performance to the States of Guernsey through the Department.

Section 13(3) of the Ordinance requires that the GCRA shall keep proper accounts and proper records in relation to those accounts and prepare in respect of each year, and submit to the Department, a statement of account giving a true and fair view of the state of affairs of the GCRA. These accounts shall be audited annually by an auditor appointed by the States on the recommendation of the Public Accounts Committee and submitted, together with the auditor's report to the Department.

The Department will in turn submit the accounts to the States in the form of an Annual Report which also details the work that the GCRA has undertaken during the relevant year.

General Conditions regarding States Grant Funding

The GCRA complies with the general conditions set out by the Department which apply to external bodies in receipt of grant funding.

FINANCIAL STATEMENTS 2014

Consistent with prior years, the Jersey Competition Regulatory Authority (JCRA) made an accounting surplus of £1 in 2014, effectively breaking even. The JCRA accounts for income only in order to meet its actual costs during the year. It must also ensure that it receives enough income during the year in each of the areas that it covers – competition law administration and enforcement, and the regulation of the telecoms and postal sectors – to fund them separately, given that cross-subsidisation is not permitted. A working balance is maintained at all times but, for the purpose of the financial statements, deferred income adjustments are made to match income with costs.

Overall costs in 2014 were £1,092k, £112k lower than 2013 (£1,204k).

Expenditure continues to be closely controlled by the JCRA maintaining strict internal guidelines with regard to purchasing and tendering procedures which, combined with appropriate corporate governance in line with best practice, helps to ensure that it is run as an effective and efficient organisation. An audit of policies and procedures is undertaken each year, by independent internal auditors, to ensure that high standards are maintained and that appropriate processes and procedures are in place.

In line with the service level agreement between the JCRA and the Economic Development Department (EDD), grant funding for work under the Competition (Jersey) Law 2005 continued to be received quarterly in advance. During 2014, a total of £380k was received in cash. In addition the JCRA obtained approval from EDD to release £80k of deferred grant income during the year. There was deferred grant income carried forward at the year end of £95k (2013: £133k) of which £94k related to competition law funding and £1k related to ports incorporation funding (2013: £132k related to competition law funding and £1k related to ports incorporation funding.

Income of £86k (2013: £68k) was received in the form of mergers and acquisitions fees. There was no deferred income relating to applications for approval of mergers and acquisitions that were on-going at the year end (2013: £2k).

During 2014 £644k (2013: £854k) of telecoms licence fees were received. At the year end telecoms licence fees exceeded costs by £80k (2013: £28k), this balance was therefore accounted for as deferred telecommunications licence fee income. Based on budgeted costs, the Class III and Class II licence fees for 2014 were set at 0.75% (2013: 0.95%) of regulated turnover.

During 2014, £45k (2013: £96k) of postal licence fees were received. At the year end there was deferred postal licence fee income of £21k (2013: £61k).

(Incorporated in Jersey, Channel Islands)

NON EXECUTIVE MEMBERS

Mark Boleat  Chairman

Philip Marsden

Regina Finn

Hannah Nixon   appointed 13 March 2014

Peter Neville  resigned effective 23 February 2014

EXECUTIVE MEMBERS

Andrew Riseley  Chief Executive  resigned effective 5 June 2014 Michael Byrne   Chief Executive

Louise Read  Director

SECRETARY Louise Read

INDEPENDENT AUDITORS BDO Limited

P O Box 180

Place Du Pre

Rue Du Pre

St Peter Port

Guernsey

GY1 3LL

BANKERS

Barclays Private Clients International Limited Jersey International Banking Centre

PO Box 8

St Helier

Jersey

JE4 8NE

REGISTERED OFFICE 2nd Floor Salisbury House

1-9 Union Street

St Helier

Jersey

JE2 3RF

MEMBERS' REPORT

The Members of the Jersey Competition Regulatory Authority (JCRA) present their report and financial statements for the year ended 31 December 2014.

ACTIVITIES

The principal activities of the JCRA during the year were the regulation of the telecommunications and postal sectors and the administration and enforcement of the Competition (Jersey) Law 2005.

RESULTS

There was a surplus for the year of £1 (2013: surplus £1). MEMBERS

The Members in office during the year and when these financial statements were approved are shown on page 27.

INDEPENDENT AUDITOR

The auditor, BDO Limited, who was appointed in accordance with Article 17 of the Competition Regulatory Authority (Jersey) Law 2001, has indicated its willingness to continue in office.

By order of the Members

Louise Read Secretary

STATEMENT OF MEMBERS' RESPONSIBILITIES IN RESPECT OF THE FINANCIAL STATEMENTS

The Competition Regulatory Authority (Jersey) Law 2001 (the "Law") requires Members to prepare financial statements in accordance with generally accepted accounting principles which show a true and fair view of the surplus or deficit of the JCRA for the year and of the state of the JCRA's affairs at the end of the year.

In preparing financial statements the Members are required to:

• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable and prudent;
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the JCRA will continue in operation; and
• state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements.

The Members are responsible for keeping accounting records which are sufficient to show and explain the JCRA's transactions and are such as to disclose with reasonable accuracy, at any time, the financial position of the JCRA at that time and to enable them to ensure that the financial statements comply with the Law. They are also responsible for safeguarding the assets of the JCRA and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Members confirm that these financial statements comply with these requirements.

The Law also requires the JCRA's financial statements to be audited annually by auditors appointed by the Minister for Treasury and Resources and the financial statements to be submitted, together with the auditor's report to the Economic Development Department. The Economic Development Department, in turn, must submit the financial statements and auditor's report thereon to the States of Jersey.

TO THE MEMBERS OF JERSEY COMPETITION REGULATORY AUTHORITY

We have audited the financial statements of the Jersey Competition Regulatory Authority for the year ended 31 December 2014 which comprise the Income and Expenditure Account, the Balance Sheet, the Cash Flow Statement and the related notes 1 to 10. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards ('United Kingdom Generally Accepted Accounting Practice').

This report is made solely to the Authority's members, as a body, in accordance with Article 17 of the Competition Regulatory Authority (Jersey) Law 2001. Our audit work is undertaken so that we might state to the Authority's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Authority and the Authority's members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of the members and auditor

As explained more fully in the Statement of Members' Responsibilities on page 29, the members are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view.

Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Financial Reporting Council's (FRC's) Ethical Standards for Auditors.

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Authority's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the members; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent misstatements or inconsistencies we consider the implications for our report.

Opinion on the financial statements In our opinion the financial statements:

• give a true and fair view of the state of the Authority's affairs as at 31 December 2014 and of its surplus for the year then ended;
• have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
• have been properly prepared in accordance with the requirements of the Competition Regulatory Authority (Jersey) Law 2001.

CHARTERED ACCOUNTANTS Place du Pré

Rue du Pré

St Peter Port

Guernsey

Date: 25 March 2015

INCOME AND EXPENDITURE ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 2014

Note

INCOME

Telecommunications licence fees

Postal licence fees

Ports of Jersey incorporation grant

Competition law grant and other income from EDD Mergers and acquisitions fees

Bank interest

Sundry income

2014  2013  

£ £

564,384  825,673 23,851  34,914 42,710  11,589 374,859  263,059 85,638  68,000 591  985 191  -

     1,092,224  1,204,220    

EXPENDITURE

Salaries and staff costs Consultancy fees Operating lease rentals Travel and entertainment Conference and course fees Depreciation Administration expenses Legal and professional fees Audit and accountancy fee Advertising and publicity Repairs and maintenance Heat, light and water Recruitment

General expenses

SURPLUS FOR THE YEAR

601,776  636,277 227,133  98,837 54,126  55,377 23,613  15,632 10,357  9,897 8,336  7,970 13,221  15,448 80,031  246,325 9,083  9,004 17,029  14,979 19,200  20,575 3,478  3,556 5,849  40,140 18,991  30,202

       1,092,223  1,204,219

    6  1  1    

Recognised gains and losses

There are no recognised gains and losses other than the surplus of the JCRA of £1 in the years ended 31 December 2014 and 31 December 2013.

Historical cost equivalent

There is no difference between the net surplus for the year stated above and its historical cost equivalent.

Continuing operations

All the items dealt with in arriving at the surplus in the income and expenditure account relate to continuing operations.

The notes form an integral part of these financial statements.

BALANCE SHEET

AS AT 31 DECEMBER 2014

2014  2013 Notes  £  £

FIXED ASSETS

Tangible assets  2  11,700  19,525    

CURRENT ASSETS Debtors and prepayments Cash at bank

CURRENT LIABILITIES  

Creditors: amounts falling due within one year

NET CURRENT ASSETS

TOTAL ASSETS LESS CURRENT LIABILITIES

RETAINED SURPLUS

3  96,800  345,192 4   1,441,335  104,478

  1,538,135  449,670  

5  1,424,382  343,743   113,753  105,927   125,453  125,452  

6   125,453  125,452  

The financial statements on pages 31 to 38 were approved and authorised for issue by the members and signed on their behalf by:

Mark Boleat Chairman

The notes form an integral part of these financial statements.

CASH FLOW STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2014

Note Net Cash Inflow / (Outflow) from Operating Activities  7

Returns on Investment and Servicing of Finance Interest received

Capital Expenditure and Financial Investment Payments to acquire tangible fixed assets

2014  2013

£ £

1,336,586  (357,822) 782  985

(511)  (5,210)

Management of Liquid Resources

Movement in one month fixed term deposit account  (300,000)  300,000 –––––––  –––––––

Increase / (Decrease) in Cash   1,036,857  (62,047)

  RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS

2014 2013

£ £

Increase / (Decrease) in cash in year Increase / (Decrease) in liquid resources

Change in net funds Net funds at 1 January

Net funds at 31 December ANALYSIS OF NET FUNDS

1 Jan 2014 £

1,036,857 (62,047)

300,000 (300,000) –––––––– ––––––– 1,336,857 (362,047)

104,478 466,525 ––––––––  ––––––– 1,441,335  104,478  

Cash flows  31 Dec 2014

£ £

Cash at bank – JCRA current accounts

Monies held in respect of commitments given by telecoms operators

Total cash at bank

Fixed term deposit account Total

104,478  (63,238)  41,240

- 1,100,095  1,100,095

–––––––  ––––––––  –––––––– 104,478  1,036,857  1,141,335

- 300,000  300,000

–––––––  ––––––––  –––––––– 104,478  1,336,857  1,441,335    

The notes form an integral part of these financial statements.

FOR THE YEAR ENDED 31 DECEMBER 2014

1. ACCOUNTING POLICIES

The financial statements are prepared under the historical cost convention and in accordance with accounting principles generally accepted in Jersey, incorporating United Kingdom accounting standards.

A summary of the more important accounting policies that the members have applied is set out below

1. Interest receivable

Interest on bank deposits is accrued on a daily basis.

2. Fixed assets

Fixed assets are stated at cost less depreciation.

Depreciation is provided on all tangible fixed assets at rates calculated to write down their cost on a straight line basis to their estimated residual values over their expected useful economic lives. The depreciation rates used are as follows:

Leasehold improvements  – shorter of remaining length of lease or expected useful life Computer equipment  – 33% per annum

Website  – 33% per annum

Fixtures and fittings  – 10% per annum

Other equipment  – 20% per annum

3. Leasing commitments

All leases entered into by the JCRA are operating leases. Rentals payable under operating leases are charged in the income and expenditure account on a straight line basis over the lease term.

4. Pensions

The JCRA provides a defined contribution pension scheme to some of its employees. Contributions are charged in the income and expenditure account as they become payable in accordance with the rules of the scheme.

5. Grants

Grants received from the Economic Development Minister are accounted for in the period to which they relate. The grant received for 2014 was £300,000 (2013: £300,000) in cash. In addition the Economic Development Department approved the release of £80,000 (2013: £nil) from deferred grant income held. Any unused funds at the financial year end are either deferred or repaid to the Minister. Any deficits are funded from future grants. Deferred grant income as at 31 December 2014 amounted to £94,927 (2013: £132,689) of which £93,447 related to competition law funding and £1,480 related to ports incorporation funding (2013: £131,278 related to competition law funding and £1,411 related to ports incorporation funding).

6. Telecoms licence fees

Licence fees are set on the basis of cost recovery in accordance with Article 17 of the Telecommunications (Jersey) Law 2002. The JCRA's costs are determined on an annual basis and these are recovered by applying a percentage to the licensed revenues of the various licensed telecoms operators on the basis of relevant turnover, or if appropriate an annual fee. The percentage for 2014 was 0.75% (2013: 0.95%).

Fee income is recognised in the period to which it relates. Should fee income exceed costs, the balance is treated as deferred income. Deferred licence fee income as at 31 December 2014 amounted to £85,953 (2013: £28,125).

FOR THE YEAR ENDED 31 DECEMBER 2014

ACCOUNTING POLICIES – CONTINUED

7. Postal licence fees

Licence fees are set on the basis of cost recovery in accordance with Article 18 of the Postal Services (Jersey) Law 2004. The JCRA's costs are determined on an annual basis and these are recovered through charging an annual fee.

The fees for 2014 were set at £40,000 (2013: £90,873) for Jersey Post Limited and £1,000 (2013: £1,000) for Class I Operators.

Fee income is recognised in the period to which it relates. Should fee income exceed costs, the balance is treated as deferred income. Deferred licence fee income as at 31 December 2014 amounted to £24,482 (2013: £64,292).

8. Taxation

Article 16 of the Competition Regulatory Authority (Jersey) Law 2001 provides that the income of the JCRA shall not be liable to income tax under the Income Tax (Jersey) Law 1961.

9. Expenditure

Expenditure is accounted for on an accruals basis.

2. TANGIBLE FIXED ASSETS

Leasehold  Computer  Fixtures  Other improvements  equipment  Website  and fittings  equipment  Total

£ £  £  £  £  £

Cost

At 1 January 2014  35,944  66,572  4,125  21,827  3,936  132,404 Additions  -  511  -  -  511 Disposals  -  (32,413)  -  (361)  (2,227)  (35,001)

______  ______  _____  ______  _____  ______ At 31 December 2014  35,944  34,670  4,125  21,466  1,709  97,914

Depreciation

At 1 January 2014  25,279  62,198  3,176  18,396  3,830  112,879 Charge in the year  4,249  2,011  949  1,069  58  8,336 Disposals  -  (32,413)  -  (361)  (2,227)  (35,001)

______  ______  _____  ______  _____  ______ At 31 December 2014  29,528  31,796  4,125  19,104  1,661  86,214

Net book value:

At 31 December 2014  6,416  2,874   -  2,362  48  11,700 At 31 December 2013  10,665  4,374  949  3,431  106  19,525

FOR THE YEAR ENDED 31 DECEMBER 2014

3. DEBTORS AND PREPAYMENTS

2014  2013

£ £

Prepayments  23,535  37,167 Trade debtors  72,310  303,680 Sundry debtors  955  4,345

    96,800  345,192

4. CASH AT BANK

Cash at bank includes £1,100,095 (2013: £nil) in respect of financial commitments given as part of telecoms' operators bids to be awarded spectrum to enable the roll out of 4G services in the Channel Islands. The monies will be repaid to operators once they have met their commitments or will be withheld in the event that they do not meet the commitments given.

5. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR  

2014 £

Monies held in respect of commitments given by telecoms operators  1,100,095 Accruals  55,082 Deferred grant income  94,927 Deferred licence fee income  110,435 Other deferred income  - Trade creditors  59,368 Social security  4,475

   1,424,382  

2013 £  

- 67,685 132,689 92,417 1,667 43,002 6,283

343,743

6. MOVEMENT ON RETAINED SURPLUS

2014  2013  

£ £

Income and Expenditure Account

At 1 January  125,452  125,451 Surplus for the year  1  1

    At 31 December  125,453  125,452    

7. NOTE TO THE CASH FLOW STATEMENT

Reconciliation of surplus for the year to net cash inflow from operating activities:

2014 £

Operating surplus  1 Depreciation  8,336 Interest  (782) Decrease / (increase) in debtors  248,392 Increase / (decrease) in creditors   1,080,639

  NET CASH INFLOW / (OUTFLOW) FROM OPERATING   1,336,586 ACTIVITIES  

2013 £

1 7,970

(985) (191,791) (173,017)

(357,822)

FOR THE YEAR ENDED 31 DECEMBER 2014

8. RELATED PARTIES

1. Transacting parties

The transacting parties are the Economic Development Minister and the JCRA.

Relationship

The JCRA acts independently of the States, but is accountable to the Economic Development Minister in respect of its funding for the administration and enforcement of the Competition (Jersey) Law 2005 which is also covered by a Service Level Agreement. The Minister acts as a conduit for requests from other Ministers who may request the JCRA to carry out projects. The JCRA reports formally to the Minister on an annual basis.

Transactions

In 2014, the Economic Development Minister provided funds to the JCRA to finance the administration and enforcement of the Competition (Jersey) Law 2005 and also to advise on the possible future regulation of the Ports of Jersey.

Amounts involved

• £132,689  brought forward as deferred grant income, as agreed from 2013
• £380,000  received in competition law funding during the year
• £42,780  received and receivable to provide advice on the possible future regulation of Ports of Jersey
• £80,000  released from deferred grant income as agreed with the Economic Development Department

Amounts due to the Economic Development Department at the balance sheet date

2014  2013

£ £

Deferred grant income (included in creditors)  94,927  132,689 –––––––  –––––––

2. Transacting parties

The transacting parties are the JCRA and the Guernsey Competition and Regulatory Authority (GCRA).

Relationship

The JCRA and the GCRA work together under the aegis of the Channel Islands Competition and Regulatory Authorities (CICRA) sharing a board, resources and expertise between the islands, whilst retaining their own separate legal identities.

Transactions

The JCRA and GCRA share resources and expertise and recharge each other for expenses (including staff costs) on a no gain no loss basis.

Amounts involved

• £246,975  invoiced during 2014 by the GCRA to the JCRA
• £122,445  invoiced during 2014 by the JCRA to the GCRA

Amounts due to and from the Guernsey Competition and Regulatory Authority at the balance sheet date

2014  2013

£ £

Amounts due to the JCRA from the GCRA  5,124  8,435 (included within trade debtors)  –––––––  –––––––

Amounts due by the JCRA to the GCRA  19,259  825 (included within trade creditors)  –––––––  –––––––

FOR THE YEAR ENDED 31 DECEMBER 2014

9. FINANCIAL COMMITMENTS

At 31 December 2014 the JCRA had annual commitments under non-cancellable operating leases as set out below:

Buildings

2014  2013

£ £

Operating leases which expire:

Not later than one year  -  -

In more than one year but less than five years  64,686  64,886

Later than five years  -  -

64,686  64,686

10. PENSION COMMITMENTS

The JCRA provides a defined contribution pension scheme (the Public Employees Contributory Retirement Scheme) for some of its employees. The assets of the scheme are held separately from those of the JCRA in an independently administered fund. Contributions of £41,134 (2013: £62,793) were charged in the year. There were no unpaid contributions at the year end.

CORPORATE GOVERNANCE GUIDELINES

The JCRA and the Economic Development Minister (the Minister)

The JCRA is an autonomous body and entirely independent in its decision taking from the States of Jersey. But under powers in Article 10(1) of the Competition Regulatory Authority (Jersey) Law 2001 (the "CRA Law"), the Minister, "may give to the Authority written guidance, or general written directions, on matters relating to corporate governance, that is relating to the systems and arrangements by and under which the Authority is directed and controlled". The following are the Corporate Governance Guidelines as agreed between the Minister and the JCRA.

What is Corporate Governance?

"Corporate Governance is the system by which business corporations are directed and controlled. The corporate governance structure specifies the distribution of rights and responsibilities among different participants in the corporation, such as, the board, managers, shareholders and other stakeholders, and spells out the rules and procedures for making decisions on corporate affairs. By doing this, it also provides the structure through which the company objectives are set, and the means of attaining those objectives and monitoring performance." – OECD April 1999

Constitution of the JCRA

The JCRA is a statutory body corporate established under Article 2 of the CRA Law. The governing body is a Board of Members which directs regulatory, licensing, financial, operational and strategic policies of the JCRA.

Functions of the JCRA

The functions of the JCRA are set out in Article 6 of the CRA Law which states:-

1. The JCRA shall have such functions as are conferred on it by or under this or any other Law or any other enactment.
2. The JCRA may recognise or establish, or assist or encourage the establishment of, bodies that have expertise in, or represent persons having interests in, any matter concerning competition, monopolies, utilities or any matter connected with the provision of goods and services to which the JCRA's functions relate.
3. The functions of those bodies shall include one or more of the following –
   1. the provision to the JCRA of advice, information and proposals in relation to any one or more of those matters;
   2. the representation of the views of any one or more of those persons.
4. The JCRA may, on request by the Minister, provide the Minister with reports, advice, assistance and information in relation to any matter referred to in paragraph (b).
5. The JCRA shall have power to do anything that is calculated to facilitate, or is incidental or conducive to, the performance of any of its functions.

Constitution of the Board

Article 3 of the CRA Law requires that the JCRA shall consist of a Chairman and at least two other members. The appointment of Board Members is undertaken by the Minister after he has consulted with the Chairman. Vacancies which arise on the Board are filled through the use of an open and transparent process. The Minister follows the procedures recommended by the Jersey Appointments Commission – a body set up by the States of Jersey to oversee certain public sector appointments. A vacancy is usually advertised and once a suitable candidate is identified, a recommendation is made to the Minister.

Under the provisions of the CRA Law, the appointment of the Chairman is a matter reserved for decision by the States of Jersey on the recommendation of the Minister. The Minister must notify the States of the appointments.

CORPORATE GOVERNANCE GUIDELINES (CONTINUED)

On appointment, a Member will receive an induction to the work of the Board and the JCRA. This includes an opportunity to meet all members of staff.

Under the provisions of the CRA Law, Members are appointed for a period not exceeding five years and upon expiry of such a period are eligible for reappointment.

Operations of the Board

The Board sets strategic policy and the implementation of these policies is undertaken by the Executive.

The Board has eight scheduled meetings each year and holds additional meetings when circumstances require it. The quorate number of Members to hold a Board meeting is three, two of whom must be Non- Executives, with one acting as Chair.

In advance of each meeting, Members are provided with comprehensive briefing papers on the items under consideration. The Board is supported by the Board Secretary who attends and minutes all meetings of the Board.

Article 9 of the CRA Law empowers the Board to delegate any of its powers to the Chairman, one or more Members, or an officer or employee of the JCRA or a committee whose member or members are drawn only from the Members, officers and employees of the JCRA. However, the Board is not authorised to delegate the power of delegation or the function of reviewing any of its decisions.

The JCRA publishes an annual business plan detailing a number of annual objectives and prepares annual budgets. These are finalised in the last quarter of each year and incorporate, amongst other things, any strategic issues raised by the Board, and comments received during consultation with key stakeholders. This is considered by the Board prior to the start of the financial year.

The Board monitors the performance of the JCRA against the annual objectives and annual budget through reports at its regular Board meetings.

The JCRA has agreed a policy on travel with the Economic Development Department.

The Chairman makes recommendations to the Minister in respect of fees paid to the Non- Executive Board members.

Committees of the Board

Article 7(1) of the CRA Law enables the JCRA to establish committees.

During 2014 the Board had established one committee; an Audit and Risk Committee. The members of this committee comprise the Non-Executive Directors and are appointed by the Board.

The key duties of the Audit and Risk Committee are:-

• To review annually the JCRA's application of corporate governance best practice;
• To review the mechanisms for ensuring the effectiveness of the JCRA's internal controls;
• To review and agree the internal auditor's annual work plan, monitor and review the effectiveness of any internal audit work carried out and review all reports from the internal auditors, monitoring the Executive's responsiveness to the findings and recommendations.
• To meet with the internal auditors at least once a year, without the presence of the Executive.
• To consider certain matters relating to the external audit of the JCRA's annual financial statements (including reviewing those financial statements prior to their consideration by the Board).

CORPORATE GOVERNANCE GUIDELINES (CONTINUED)

Whilst the Audit and Risk Committee's Charter includes the consideration of the annual appointment of the external auditor, the actual appointment of the auditor is a matter reserved to the Treasury and Resources Minister under Article 17 of the CRA Law.

The members of the Audit and Risk Committee at the balance sheet date of 31 December 2014 were Philip Marsden (Chairman), Regina Finn, Hannah Nixon and Mark Boleat. The Executive is expected to attend the meetings of the Audit and Risk Committee in an advisory capacity.

Openness, Integrity and Accountability

The JCRA abides by the principles of openness, integrity and accountability – and those standards which are widely recognised as being applicable to public service, and to the conduct of all involved in public life. In the discharge of its duties, the JCRA will ensure:

• That subject to the appropriate level of confidentiality, it maintains an openness in its public affairs, in order that the public can have confidence in the decision-making processes and actions of public service bodies, in the management of the JCRA's activities, and in the Board Members and staff of the JCRA itself;
• That it maintains at all times an appropriate degree of integrity in the conduct of its affairs. Integrity comprises both straightforward dealing and completeness. The JCRA bases its integrity upon honesty, selflessness and objectivity, and high standards of propriety and probity in the stewardship of its funds and management of its affairs;
• That it is fully accountable in the application of the public funds entrusted to it and that these are properly safeguarded, and are used economically, efficiently and effectively.

The three fundamental principles, defined above in terms of public sector bodies, have been refined to include the findings and recommendations of the Nolan Committee on Standards in Public Life. The JCRA will make its best efforts to abide by Nolan's seven general principles that underpin public life, namely: selflessness, integrity, objectivity, accountability, openness, honesty, and leadership.

Audit and Accounts

While the JCRA is an independent body, it is accountable for its overall performance to the States of Jersey through the Minister.

Article 17 of the CRA Law requires that the JCRA shall keep proper accounts and proper records in relation to the accounts and prepares a report and financial statements in respect of each financial year and provide these to the Minister no later than four months after the year end. The Minister must lay a copy of the financial statements provided before the States as soon as practicable after he receives the report.

It is also a requirement of the CRA Law that the financial statements are audited by auditors appointed by the Treasury and Resources Minister and that they are prepared in accordance with generally accepted accounting principles.

Other Matters

Under powers granted by Article 10 of the CRA Law, the Minister may, after first consulting with the JCRA and where it considers that it is necessary in the public interest to do so, give the JCRA written guidance, or general written directions, on matters relating to corporate governance which may include matters relating to accountability, efficiency and economy of operation of the JCRA.