On Friday 10 August, Liberal Democrat-run Portsmouth City Council announced that it is to not go ahead with the establishment of its own energy company – Victory Energy – started by the previous administration. According to the council, abandoning the project will cost at least £2.5mn, but it said that losses would be greater if it went ahead with the company.
The decision was taken following a briefing session for councillors that included analysis of Victory Energy’s business plan by PwC, which stated a higher than original estimate of £15.2mn of funding would be required from the council. PwC also highlighted that no guarantee that market changes wouldn’t increase this amount further. Leader of the Council Gerald Vernon-Jackson said the plans assume “the council backing equates to an open chequebook where we would bankroll whatever the company needs”, and added, “that is not a position we are willing to take”.
Despite risks to taxpayer’s money, the number of publicly owned energy companies has been rising in recent years. Robin Hood Energy (Nottingham) and Bristol Energy (Bristol) are key examples of councils pursuing this fully-licenced route. There has also been a wave of white label council suppliers, often partnered by Robin Hood, including RAM Energy, Angelic Energy, CitizEn Energy, Your Energy Sussex, and many others.
First minister of Scotland, Nicola Sturgeon, also urged the idea of a Scottish public energy company late last year saying: “It would give people – particularly those on low incomes – more choice and the option of a supplier whose only job is to secure the lowest price for consumers”.
In the example of Bristol City Council’s energy company, Bristol Energy, total investment was announced to be in the region of £27mn in August 2018. Despite this, the company remains in a non-profit zone, and is not expected to make a profit until 2021.
Nottingham City Council’s energy venture Robin Hood Energy on the other hand has been very successful in delivering low energy prices to consumers. The company is now one of the cheapest in the Midlands and was a consistent low-priced supplier for pre-payment tariffs in June 2018.
Nevertheless, with the “Big 6” still dominant in the energy market and with the cancellation of Victory Energy (and the continued pressures mounting on Bristol Energy), other councils may feel less inclined to undertake similar ventures, despite clear desires to achieve low energy prices for consumers.