Portsmouth stands by abandoning its own energy company
0Portsmouth City Council has voted to stick by its decision to scrap plans to create its own energy company, despite improved financial projections.
A special cabinet meeting this week reconfirmed a decision taken in August to cease investment in Victory Energy Supply Limited (VESL) and to sell the company.
That decision had been reopened following new information submitted by accountancy firm PwC raising the estimate of returns the company would make over its first five years.
However, speaking during the meeting, Liberal Democrat council leader Gerald Vernon Jackson said: “Having looked at all of this and the information provided, I think we should keep with option two which is that we shouldn’t proceed with this, just because the level of risk is something we feel is too high for the city council to take at this time.
“We have a duty to protect taxpayers’ money by trying to do things that are of a risk appetite we are prepared to take.”
The council report showed that PwC’s updated business case said that the council would be required to provide a £9.5m loan to VESL for it to be set up and for the first two years of trading.
The five-year investment return was revised up from £2.5m to £22m, and up from £50m to £63m by year ten.
However, speaking during the meeting, Liberal Democrat councillor Hugh Mason questioned some of the assumptions in the analysis.
He said: “The number or successes per person per day has been reduced in this new iteration of the business case from the earlier business case from six to three.
“Taken with the changed number of customers in the new projection, this means that the sales envisaged for year two will require 66 sales people to be employed compared to 29 under the former business case.
“This will certainly exert a downward pressure on margins and impose a greater risk on the operation.”
However, members of the Conservative group, which initiated the proposals before they lost power in the May elections, argued that scrapping the company would hit services.
Former council leader Tory councillor Donna Jones, said: “The ‘why’ is to protect public services. The ‘why’ is to generate much needed income because we are carrying children and adult social care overspends that are almost at £9m now.
“For me the risk of not proceeding is a significant risk to people in the city that really need social care”.
But Vernon Jackson pointed to the mixed record of other councils’ energy companies to conclude that the risk of proceeding was too great.
He said: “The two big examples are Robin Hood in Nottingham and Bristol Energy.
“Robin Hood, because they have been able to do lots of deals with other councils like Islington, Southampton and Liverpool, and have acquired a reasonable number of customers and look like they are going into the black.
“But Bristol Energy is looking at substantial losses.
“I am also conscious MMD, one of the other companies the city owns, is having financially quite a difficult time and the council has had to subsidise that.”
It is estimated the decision will cost the council between £1.7m and £4m in sunk costs.
