Hackney to tackle fuel poverty with clean energy company
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Hackney Council has earmarked £150,000 as start-up costs for a council-run energy company to tackle the fuel poverty of almost 10,000 households in the borough.
The council’s cabinet this week agreed to seek a “white label” deal with an existing energy provider. Hackney will offer sales and marketing while the provider will offer retail energy services under the borough’s brand.
A report to the council’s cabinet said the arrangement was straightforward and “has the potential to generate small but largely risk-free returns.”
In the long-term, Hackney also plans to use rooftop space on council-owned properties to generate clean solar energy for sale.
Ian Williams, Hackney’s group director of finance and resources, leads the project and told Room151: “At Hackney we believe that the energy company will, in the short term, allow us to offer customers better tariffs for renewable energy, secured through our white label partner, and in the longer term, through clean energy generated within the borough.”
Williams said Hackney would be joining a “movement” aimed at shifting energy provision from fossil fuels to “clean and extremely low carbon sources of energy”.
He added that Hackney believes the white label deal will place the council in a position to make better “strategic” energy decisions in the interests of vulnerable residents.
Hackney is not alone among local authorities in setting up an energy company. In January, Barking & Dagenham council launched its own energy company, Beam, supplying clean energy from wind and solar sources. In December, Norwich City Council approved plans to launch an energy company this Spring with Engie, the French energy company that has also agreed a white label deal with Cheshire West and Chester council.
Not all councils have a had happy time with energy. In August last year, Portsmouth scratched plans to set up a company, taking a loss of £2.5m. A report from PwC told the city’s councillors the company was using an “untried and untested” model and potentially required a £15.2m investment from the council instead of a projected £3.8m.
Williams said Hackney was managing the risks associated with its own “white label” model.
“We have reviewed existing energy companies set up by local authorities and we are ensuring that we develop ours using a risk-based management approach that ensures that the council maintains its strong reputation with the public, and that we are not financially worse off in undertaking this venture,” he said.
The review rejected the option of setting up a “full scope” energy company — such as Robin Hood, run by Nottinghamshire City Council, and Bristol Energy, run by Bristol City Council — because of the significant regulatory costs involved in obtaining a licence, and the potentially high investment levels required.
A “licence-lite” option was also discarded by Hackney due to high start-up costs and a lack of information in the market about its viability.
Risks associated with the Hackney energy project include energy price volatility and a failure to recruit enough customers. The cabinet report said these will be mitigated through choosing the right partner with the lowest prices, a rigorous governance structure, detailed business planning, and by sharing responsibility for performance with the partner provider. Customers will be protected by regulatory powers to place them with a suitable new energy provider should the venture fail.
