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City council to create UK’s first municipal energy company

Bristol City Council’s Cabinet is voting tomorrow on plans to be the first council in the country to launch a municipal energy company.

The proposal is to establish ‘Bristol Energy’, as well as a ‘sovereign’ wealth trust, along similar lines as the Shetland Islands. The council is planning to allocate £1.575m in cashflow support to enable the new energy company to start trading this summer. The Cabinet will discuss tomorrow what finance approach will be required to help the new company to break even.

The original proposal was made back in September 2010, and has been developed ever since.

The council is seeking joint venture partners, advertising in UK, US, German and Japanese business papers seeking expressions of interest.

The report to the Cabinet notes: “The fundamental objective of Bristol Energy will be to deliver the triple bottom line of sustainable economic prosperity, reduction in social inequality and improved environmental performance. This will be achieved by: 

  • having a focus on locally generated, low carbon energy, with a mission to be the most environmentally conscious and trusted local energy supplier;
  • providing a fairer deal for households currently on prepayment meters;
  • supporting community investment in renewable and low carbon projects;
  • development of district heating, electrical distribution and broadband/digital networks; and
  • protecting the city’s critical infrastructure, thereby improving resilience.

“As a result, Bristol Energy will be a different type of energy company, being a force for social good not wholly driven by profit, supporting the business of the council and the city and generating a new revenue stream for the council for reinvestment into the city.”

The council itself will be one of the customers of the new company, which expects to provide “far in excess” of the 2.5MW limit above which suppliers must be fully licenced.

The council rejected the alternative option of working in partnership with a licensed supplier to offer gas and electricity to consumers using its own brand (as Plymouth City Council and Cheshire East Council have done with Ovo Energy). It says this would be “at odds with the council’s strategic aims and is therefore not a viable option”.

Bristol already has an Energy Service team, currently funded by £700,000 in grants, including from the European Investment Bank in the form of an ELENA (European Local Energy Assistance) grant, match-funded by £700,000 from the council. The ELENA grant ends in May 2015. The council envisages eventual annual revenue savings of £700,000, once the new company reaches break-even, as it will no longer have to fund the Energy Service team from council funds.

The council is being advised by Cornwall Energy and other consultants.

Its risk management assessment admits that both the impact the probability of many adverse events are ‘high’, notably that the business model is inaccurate, “leading to energy company failure and financial loss to the council”. Its risk control measures mitigate this, it says.

Bill Edrich, director of the council's Energy Service, said: “We’ve been developing plans to launch a different type of energy company in Bristol, and one which would deliver social, economic and environmental benefits. We’re proposing a company designed for the 21st century and there are a number of things that Bristol Energy would offer if the plans are approved.

“Customers would be guaranteed competitive, fair and simple energy tariffs with any profits reinvested back into local communities.

“The company would also provide low-carbon electricity, offering customers cleaner, greener energy with a focus on sourcing power from local places to provide to local people. The company would invest in clean energy across the south west to make the UK’s energy supply more sustainable.

“Most importantly Bristol Energy would look at the bigger picture and deliver initiatives which would help people to use less energy, making people’s homes cheaper to heat and more energy efficient.”

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