By Suzanne Evans, Director, Political Insight
News of the imminent collapse of Together Energy comes as no great surprise. Sky News claims the energy supplier is likely to run out of money later this month and that a last-ditch search for new funding is unlikely to come to fruition. Certainly, any rescue deal would be at odds with the industry trend.
Nearly half of all energy firms have done bust of late and, if Together does go under, it will become the 26th energy supplier to cease trading since August. The reason? Huge spikes in the price of wholesale gas caused by several factors have bumped up against an immoveable energy price cap introduced by Ofgem to protect consumers from precisely these kind of sudden increases in costs. Energy companies simply haven’t been able to afford to keep supplies going.
Together Energy, however, is no ordinary energy supplier. It is 50% owned by Warrington Borough Council, and therefore funded through the public purse. It has 170,000 mostly local customers and although this is not a great number in the scheme of things – Bulb, for instance, the largest failure to date, collapsed with 1.7 million customers – I’d say each one of them has every right to be angry as well as worried. If I were one of them, I would be asking: why on earth is my council spending my money running an energy company, given this activity is not even remotely within their remit?
The argument for such a move is that councils must invest to provide best value for money for taxpayers. That might make sense. The problem is, councils don’t appear to be much good at investing.
Recent research by the TaxPayers’ Alliance (TPA) revealed that shocking amounts of taxpayers’ cash has quite literally gone up in smoke due to underperforming investments in energy companies by local authorities. The TPA found that 13 energy companies in receipt of council investment had a net loss of over £74 million between 2016-17 and 2019-20. Of these, eight were council-owned and their losses totalled £114 million in the same period.
Out of the eight, only one, B&D Energy, registered a profit. Dive a little deeper into the numbers however, and a less bright picture emerges. Owned by Barking and Dagenham council, B&D might well have posted recent profits of nearly £300,000, but it received the largest amount of capital investment from taxpayers – £38.8 million – and only has 477 customers at last count. Hardly a glowing example of successful return on investment, nor good local service provision.
The TPA’s findings confirm that councils are in no position to blame the current crisis for their losses. Their record was woeful even before it. Ironically, of course, their failures will fuel even greater pressure on those same households who will no doubt soon be receiving news of council tax hikes alongside their higher energy bills.
I agree with the TPA’s conclusion: local authorities should stop experimenting in the energy market and focus on keeping council tax down.
Some final thoughts: Warrington Borough Council (alongside neighbours Lancashire and Cheshire) refused to entertain the idea of investing in fracking in the area. Councillors buckled under pressure from the green lobby, despite the possibility that low-cost fracked gas would have given a huge boost to the area’s considerable energy intensive chemicals, pharmaceuticals, engineering, and motor manufacturing sectors, providing energy security and therefore local job security. Arguably, neither Warrington Council nor the country would be in this mess if a different line of approach had been taken to the development of our own, home grown, natural gas resources.
Our message to business: Post COP26 the government is unable to return to the fracking debate. Energy will continue to have to be imported from overseas at inflated prices. Meanwhile, both local and national government energy policies will continue to directly influence the prosperity and sustainability of businesses, whatever their size or reach. Effective influence being brought to bear on policymakers – especially in the wake of the covid crisis and the huge spending decisions that are going to have to be made to mitigate the many billions spent on it – are going to be as important as ever in 2022.
Read the full TPA research paper here: https://www.taxpayersalliance.com/council_energy_companies