13.08.18
Portsmouth wastes £2m ditching controversial energy firm amid fears of even more losses
A south-coast local authority will go ahead with plans to scrap its fledgling energy company after it was deemed to be too expensive— losing at least £2.5m of public money in the process.
In an announcement, Portsmouth City Council said the wholly-owned company, Victory Energy, “would have needed millions” of pounds of taxpayers’ money and was not predicted to pay it back for up to eight years.
The firm— which has yet to begin operating— was believed to potentially generate up to £5m in annual profit after a start-up investment by the local authority.
It was approved by the previous Conservative-controlled authority, but now Portsmouth says the money spent “has been and is gone,” with the Lib Dems taking the decision to cut the council’s losses.
A special Cabinet meeting of the Liberal Democrat-run authority last week found that abandoning the firm could cost between £2.5m and £3.5m, but costs could be much greater in the future if the plans went ahead.
This is after a PwC assessment of the plan found that the success of the energy firm would rest on 144,000 customers signing up to the scheme.
In July 2017 a report to the Cabinet found that the company would require a total of £3.8m of investment from the council— yet PwC’s current estimate is that it is likely to be more than £15m, with no guarantee market changes would not scale up the costs even further.
Leader of the council Gerald Vernon-Jackson said the authority is “not willing to take such a great risk with taxpayers’ money.”
He added: “The strength of the business model is the council’s backing of the company, however that assumes the council backing equates to an open chequebook where we would bankroll whatever the company needs and that is not a position we are willing to take. It is not the role of a council to be effectively acting as a hedge fund and playing roulette with public money.”
Cllr Vernon-Jackson noted that the plans for Victory would see it operating in a different way to other energy companies, targeting people who have never changed their supplier.
“It is just too big a risk for us to take with the city’s money with no guarantee of it ever being fully repaid,” he commented. “It is one thing to be entrepreneurial but another to be cavalier with public money.”
Cllr George Fielding of the Porstmouth Labour group said Vernon-Jackson “bottled it” on Friday night, noting that the council was “washing £1m down the drain.”
He said: “The Victory Energy proposal had the potential to benefit both residents with a locally-based energy supply and also generate money in the public purse for local services.
“Under the watch of the Tories and Lib Dems budgets to local authorities have been slashed, meaning under-resourced and overworked council officers have had to come up with new ways of making money to fund vital services in our city.”
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Image credit: Geograph