Harry Fone is the Grassroots Campaign Manager for the TaxPayers’ Alliance.
New research by the TaxPayers’ Alliance has revealed the shocking amounts of taxpayers’ cash that has almost literally gone up in smoke due to underperforming investments in energy companies by local authorities. Thanks to the work of our superb research team we revealed that 13 energy companies in receipt of council investment had a net loss of over £74 million between 2016-17 and 2019-20. Of these eight were council-owned and their losses totalled £114 million in the same period.
Perhaps not unsurprisingly, three of those companies are now either in administration or liquidation; Bristol’s BE 2020, Nottingham’s Robin Hood Energy, and Portsmouth’s Victory Energy Supply. This may not be surprising to anyone who has followed this issue; the writing has been on the wall for years now. But the huge sums of taxpayers’ money that have gone down the drain is astonishing.
Between 2016-17 and 2019-20, BE 2020 experienced the largest cumulative losses of any energy company at £46.5 million. Robin Hood Energy lost the most money in a single year at nearly £23.1 million in 2018-19, with total losses coming in at £31.6 million over a four year period. In those same four years, £132.3 million of public investment has been plunged into energy firms by local authorities.
Now at this point, we shouldn’t lose sight of the fact that the UK energy market is incredibly competitive and volatile, the latter being especially true at the moment. So there could be more bad news to come given recent news that a number of firms are on the brink of financial collapse. But – is there any good news? Have any council-owned or council-invested energy companies made a profit? The answer is yes but with some big caveats.
Five councils invested money in energy suppliers that were independently operated. Of these, four made a profit between 2016-17 and 2018-19. So it could be argued that if councils are desperate to get into the energy market then this is the better option based on the data available.
Of the eight council-owned companies, only one registered a profit – but dive a little deeper into the numbers and a fuller picture emerges. B&D Energy is owned by Barking and Dagenham council. Over the four year period (2016-17 to 2018-19) it posted profits of nearly £300,000. However, it received the largest amount of capital investment from taxpayers at £38.8 million. This consisted of £30.2 million in loans from the council with the rest coming in grant form thanks to the Department of Business, Energy and Industrial Strategy. Also interesting to note – that as of 2020-21, B&D Energy only has 477 customers so they shouldn’t count their chickens just yet.
But why do local authorities start or invest in energy companies in the first place? Many do it for the same reasons as Bristol Energy which said it would “provide ethically sourced, low-cost energy and with the aim of returning a profit for council tax payers.” This would have been wonderful had it paid off; perhaps council tax bills would have been lower as a result?
Sadly this hasn’t happened and Bristol now has the third-highest band D council tax bill in the South West. Nottingham has the highest bill in the entire country. Similarly, Gateshead council – which owns Gateshead Energy Company and made total losses of £1.9 million – has the highest rates in the North East and ninth-highest in England. I could go on but you get the picture.
There is a glimmer of hope in the fact that of the 391 local authorities that responded to our freedom of information requests, 94 per cent did not own an energy company. For those authorities thinking about risking public money in this market they should heed our warnings. Their grand visions for publicly-owned energy companies that will supply cheaper energy and plough profits back into frontline services rarely materialise. Instead, many taxpayers are being left in the dark with failed firms and a big bill to boot.