Council taxpayers face more than £20 million loss after sale of Bristol Energy

September 09 2020
Council taxpayers face more than £20 million loss after sale of Bristol Energy

BRISTOL taxpayers are facing a loss of more than £20 million after the city council sold its troubled energy company.

Fifty jobs are at risk following the sale of Bristol Energy’s domestic customers for £14million to Scotland-based Together Energy, which is 50 per cent owned by Warrington Borough Council.

While 110 frontline workers will transfer over to the new company, a further 50 Bristol Energy staff face a consultation on their future employment as soon as the consumer deal is complete.

Service for customers will continue as before, after Together also bought the Bristol Energy brand and systems, along with 155,000 residential meter points.

Last month, Bristol Energy's business accounts were sold for £1.34m to specialist firm Yü Energy.

It means that the local authority, which has invested £36.5m into Bristol Energy since its formation in 2015, has now recouped only £15.3m – a loss of £21.2m for a business that had already posted total official losses of £32.5million in the last five years.

The final amount of exactly how much City Hall cash will never be recovered is not yet clear.

The council announced earlier this year that it was selling its wholly-owned company and appointed a new managing director in March to oversee the sale, handing the previous incumbent Marek Majewicz an £86,000 pay out for leaving the company.

Deputy mayor and cabinet member for finance Craig Cheney has apologised to council taxpayers.

In an interview on BBC Radio Bristol, he said: “I think the council would apologise.

It didn’t achieve the ambitions those who set it up had envisaged it making. So yes, I am apologising.”

Mr Cheney defended the series of decisions by the Labour administration over the last four years to sink more and more money into the company, despite Bristol Energy posting total losses of £32.5million.

The alternative was to let the company wind into administration and make all the staff redundant,” he said.

We still received advice that said if we continued to invest, we would have an energy company that was profitable.

We made that decision based on that advice we received.

Bristol Energy’s plan included a number of years of losses until it got to the point of achieving enough customers to become a profitable organisation.

That date moved back a few times but it was still felt that the organisation would become profitable.

However, there is a limit to the amount of money we can continue to put in.

When you’re receiving advice that says this company will become profitable, do you want to write off all the money you’ve invested so far or do you continue to try to trade and get yourself into a position of profitability?

It is actually a very difficult decision to have advice in front of you that says actually this company will become profitable and for us to decide to sell it and make staff redundant and all the other problems that would come off the back of it.”

He denied accusations that Bristol Energy had been an “abject failure”, saying: “We have delivered a lot of things we intended to do – local jobs, social value – however, it didn’t make the profits that were originally envisaged.

Had we had the option, we wouldn’t have set up an energy company in the first place.

The energy market is very challenging. The council has very little experience of being involved in it.

The ambition was laudable to set up an energy company that would undercut the Big Six and ultimately break that stranglehold.

It was always a very volatile market. It has got increasingly volatile rather than those small energy companies breaking into it.

A lot of them were going bust while the Big Six continue to consolidate further and further, in fact they’re probably the Big Five now.”

He said the exact amount the council had lost was not yet certain, adding: “There are lots of moving parts, there are lots of things that will continue to trickle on for quite a long time as liabilities are met and advances are paid back."

Mr Cheney (abovesaid the authority’s other two wholly-owned companies, Goram Homes and Bristol Waste, were highly successful and operated in very different markets to the energy sector.

Conservative group leader Mark Weston said: “Local taxpayers will be glad to see the curtain finally fall on this misadventure.

It is just a pity this action was not done much sooner, as we had advised the mayor (Marvin Rees), before Bristol Energy was allowed to rack up such huge losses.

However, I urge people not to be taken in or fooled by these sale figures.

No amount of inevitable political spin around this deal can hide the true scale of this financial failure.”

A council press release on the sale described Together Energy, whose headquarters are in Clydebank, as “one of the UK’s most ethically aware energy firms”.

It says: “Together Energy prides itself on its social impact employing more than 90 per cent of its staff from Scotland’s most deprived areas.

During negotiations, Together Energy committed to guaranteeing the jobs of 110 frontline workers who will now TUPE into the company and remain in Bristol.

The companies also both strive to provide renewable and sustainable energy to customers with Together Energy supplying 100 per cent  renewable electricity to all its customers.”

Together Energy CEO Paul Richards said: “There are great synergies between both companies and the acquisition is a natural fit to our growth strategy.

We are an employer with strong social ethics and in the current climate are delighted to have secured so many jobs.

We are delighted to welcome Bristol Energy’s customers into the Together family and want to assure them that nothing is changing – tariffs, terms and conditions and how you contact Bristol Energy will all remain consistent.

We also recognise the value of the brand and plan to retain it.”

However, energy switching specialist Flipper claimed the sale was "bad news" for Bristol Energy customers, saying it had refused to switch anyone to Together Energy since early last year because of the supplier’s "poor customer service record".

Flipper chief executive Mark Gutteridge said: “More than half of the customer reviews for Together Energy on Trustpilot rate them as ‘bad’, the lowest score possible.

"So it is incredible that the city council says they are pleased with the deal and that the new supplier 'shares similar values' with them.

While the deal will save 110 jobs and put some money into the coffers of Bristol City Council, customers should expect a big drop in the quality of service.

As well as the poor rating on Trust Pilot, Together Energy are ranked last out of the 35 energy companies reviewed by Which? and 35thout of 41 energy companies looked at by the Citizen’s Advice Bureau.

Flipper stopped switching customers to Together Energy in early 2019 after experiencing major issues when customers of One Select Energy, who were transferred to them under Ofgem’s Supplier of Last Resort (SoLR) process.

"The problems were so bad and took so long to resolve we have never recommended them to any of our members since.”

By Adam Postans, Local Democracy Reporting Service