PA Consulting's Ted Hopcroft, an energy expert, discusses the questions raised by the news that Bristol Energy, one of the country's largest council-owned energy companies, is up for sale, and asks what kind of role local authorities should play in the energy market.
The article notes that were we to step back in time five years, the chatter in local government circles was all about energy, or rather the idea of going into business and supplying their residents with electricity.
At the time, council-owned energy companies were seen as a game-changer, which would help usher in a new era of renewable energy, tackle fuel poverty and, whisper it quietly, raise a bit of money for cash-strapped local authorities in the process.
The omens were certainly good. Two local authorities – Bristol City Council and Nottingham City Council – went all in and formed fully-fledged energy service companies, and other councils used existing energy companies to provide the back office for their own 'white label' businesses.
However, the article goes on to explain that neither Robin Hood Energy (Nottingham City Council) or Bristol Energy have turned a profit since they started operating, and local government's love affair with energy appears to have cooled in the last 12 months.
With local government finances under increasing strain from the cost of dealing with the COVID-19 pandemic and the increasingly competitive nature of the energy supply market, there has been mounting speculation that the days of the council energy company are at an end.
Speaking to Air Quality News, Ted said there has been a big shift in the energy supply market from the 'Big Six' to a more crowded marketplace, with more smaller and medium-sized suppliers.
"The sheer number of smaller suppliers makes it hard to establish a brand and hence critical mass,"
Ted continues: "Council-owned companies may be limited by their brand – e.g. "Bristol Energy" implies a certain geographic focus, although some white-label their services. It may also be hard for a smaller supplier to obtain and retain the skills in trading and hedging to ensure a stable, profitable energy supply; newer smaller companies tend to have fewer sticky customers, which make energy purchasing more challenging,"
"Local authorities do some excellent work with vulnerable customers, for example, Bristol Energy's support for the Warmer Homes and Money (WHAM) project, but they may tend to attract less profitable customers. Bad debt arising from COVID could be an additional challenge for council-owned customers," says Ted.