Bristol Energy to be sold by Bristol City Council following accountancy firm recommendation

Why sale?

On Tuesday, Bristol City councillors held a cabinet meeting to decide the future of the energy supplier.

Following the meeting held behind closed doors, councillors agreed to sell the company after reviewing recommendations made by consultants Ernst & Young who were hired earlier in the year to assess Bristol Energy’s viability and structure.

Opposition councillors have railed against the Labour run councils running of the company, claiming that it has been nothing but a ‘dead weight’ on taxpayers and council finances.

Bristol Energy has 100,000 customers, but in its third year of trading, it posted an adjusted operating loss of £10.1 million roughly the same loss as the previous year, despite increasing turnover to £76.2 million.

Bristol Energy was initially set up by former Bristol City mayor George Ferguson in 2015. The mayor built something of a reputation in launching new and often costly schemes. Since the company’s launch, it has cost the taxpayer £36.5 million and has posted total losses of £32.5 million.

Read more: Bristol city council calls time on Bristol Energy

Coronavirus and market conditions

The current state of the market as a result of the Coronavirus pandemic has also weighed heavily on the energy supplier.

A sharp drop in demand for electricity due to the lockdown many companies have struggled, so much so that Ofgem announced a £350 million support scheme.

Read more: Ofgem announces £350 million support scheme to help struggling energy suppliers

The number of domestic and non-domestic customers defaulting on their energy bills has risen over the past month and the number of consumers cancelling direct debits has increased as both households and businesses struggle to pay their bills.

The council’s latest set of accounts also revealed that the changing market conditions and the impacts of the coronavirus pandemic are expected to wipe up to £7 million off the value of the council’s investment int the company.

Blocked inquiry

Anger has grown in recent months as more and more money was put into the company and as opposition calls for an independent inquiry were blocked last week after Labour councillors used their majority.

“Establishing an energy company, was always a high risk for the council, and one which has brought continued challenges. The energy market is dominated by well-established far larger energy providers. I inherited a failing company from the previous administration and that trying to turn it around has proven impossible in such a volatile marketplace,” said Bristol mayor Martin Rees.

Some could argue against Mr Rees comments as there are now a number of challenger energy suppliers utilising well managed business plans, new innovations and delivering excellent customer service that has allowed them to survive and thrive in the energy sector.

Mr Rees said the authority had three choices for the company: to collapse it, try and make it work or try and get into a position where the risks were reduced.

“To collapse it wouldn’t have been an acceptable decision. Hindsight is fantastic but we’ve got a lot of people now criticising an energy company when at its launch they were its biggest champions. I’m disappointed it didn’t work, of course, I am.”

Further Reading

The importance of being a DCC user for Energy Suppliers

Energy Suppliers urge the UK Government to deliver a green Covid-19 recovery

The Post Covid-19 Energy Forecast: What Comes Next?

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For more information on how to start and manage an energy company, get in touch with Dyball Associates today.

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