Tuesday, 11 August 2020

End-Game for Leftie Councils' Energy Adventures

Starting around 2015 or a little earlier, various local authorities started to get interested in becoming energy suppliers on a "social", Not-for-Profit basis: how hard could it be?  After all: cheap council capital; subsidised offices; no dividends to shell out; "no bonuses" to pay (well, no bonuses for the directors: you can't get experienced commercial energy staff without a bonus scheme) - we should be able to undercut the Wicked Big Six all the time!  Easy.

The bollocks it is.  And most of the local authorities that looked into it properly, and took proper advice, realised their error and quietly withdrew without spending too much to make it embarrassing.  These included Sadiq Khan's London, and Nicola Sturgeon's Scotland (amazingly enough).  Credit where credit's due.

But two councils wouldn't be stopped.  They were Nottingham, which set up Robin Hood Energy, and Bristol (the imaginatively named Bristol Energy).  Both were doomed from the start; though in zombie mode and each with access to council-taxpayers' money for a protracted series of bail-outs, they have both staved off the day of reckoning until now.  Yes, you can suspend the laws of gravity for just so long as you are willing to through cash at it.

Bristol at least tried to do it somewhat professionally and organically, with some basic financial disciplines in place, and a target of being profitable within 3 years.  The current mayor, an engaging moderate leftie (for whom I have some regard, actually) inherited it in 2016 and should have pulled the plug there & then.  But hubris plus taxpayers' money somehow carried it all through until the cash calls and the write-offs became just too big.  He called time a few weeks ago, and (as David Morris, one of our BTL regulars spotted) a buyer has just been found for the portfolio of business customers (for a pitifully small amount) - see comments under Monday's post.  Based on the ugly fate of Cooperative Energy last year, it's my guess Bristol will actually have to pay someone to take on the rest of the obligations and the residential portfolio.  Aside from the inevitable dissembling and secrecy from the mayor's office in the last few months of this doomed enterprise, Bristol wasn't conducted outrageously; just badly misconceived.  

By contrast, Robin Hood Energy is a shocker.  An outright leftie vanity project that boasted of having Corbyn as a customer, and of being the vanguard of a new wave of municipal socialism, Robin Hood was to be a NfP - a sure guarantor of being a stonking loss-maker, which it is.  The prime movers were doctrinaire Momentumites; and if I tell you the Chairman of the Board of Directors (a councillor) was also Chair of the Audit Committee charged with monitoring the company on behalf of the council, you won't be at all surprised.   Their USP was offering their services on a "white label" basis to a dozen other leftie councils (a ring of other pig-ignorant Momentumites - but at least with the nous to avoid becoming suppliers themselves, hahah!) the length and breadth of England.  With this rapidly expanding but massively loss-making buiness model, Robin Hood has been bleeding the council tax-payers of Nottingham white (robbing the, errrr, poor to pay the, errr...).  The statutory auditors have now called a halt, to much wailing and gnashing of teeth: it'll all get "sold off" quite soon (i.e., they'll pay someone to take it away).  It's pretty comical - if you don't live in Nottingham, that is.

In the meantime ... a truly bizarre thing happened late last year.  A very iffy, loss-making small Glaswegian supplier, Together Energy, somehow conned Warrington Council into paying the £18m for a half-stake in the company! (plus more millions in loans).  What they hoped to gain from this is anyone's guess: and their Due Diligence must have been utterly perfunctory and conducted by a rather dull form of invertebrate life.  It's so crazy, many would wonder if it was bent - except I think "crazy" is in fact the explanation.  Not only are the books very odd indeed; but by mid 2019 the writing was on the wall for Bristol and Nottingham in large bold characters and no uncertain terms.

Here's the thing.  Rebecca Long-Bailey, queen of the left, published a strategy still greatly lauded on the left, for nationalising all of energy and putting it into the hands of local authorities and indeed parish councils and 'local communities of at least 100 homes', all to be heavily unionised etc (we've written about this before).  With these stonking examples of municipal idiocy, secrecy, incompetence and gross failure in even the simpler side of energy (being a supplier is a lot easier than running a distribution network, with a lot less at stake), WTF is she thinking?  That's a serious question.  

It ought to be a sober lesson for all: but we know it won't be.

ND  

19 comments:

Michael said...

Nick, did I send you this link earlier this year?

https://www.ft.com/content/7a01b39d-a5df-4e3f-b9a6-dfcf9339368f

Robin Hood Energy looks like a real 'Friar Tuck up'...

Nick Drew said...

Indeed!

(I didn't mention Thurrock here because it's a bit different - though worthy of a story in itself. Thurrock isn't the only one, even if with the others it's mainly commercial property rather than solar. As I mused a couple of weeks ago, solar could turn out to be a better bet!
http://www.cityunslicker.co.uk/2020/07/property-oh-yes-recession-is-coming.html )

Anonymous said...

Indeed local authorities' commercial property investments look a lot more risky now, though the shoe may take longer to drop.

Spelthorne Borough Council must be concerned now that BP are considering a "radical reduction" of office space (https://www.theguardian.com/business/2020/aug/12/bp-mulls-radical-reduction-of-office-space-in-move-to-flexible-working). BP is Spelthorne's most significant tenant, accounting for 40% of their commercial property income (https://www.spelthorne.gov.uk/article/18023/Property-investment-FAQs). Spelthorne has around £1bn of debt from which it expects to receive £10m in net income.

Nick Drew said...

That's a neat illustration, Anon - thanks.

I had solicited examples like this earlier, but yours is the first

Matt said...

Who needs to learn the lessons? The morons in the council who like to think they are the equal of the private sector when pissing away taxpayers money? Or perhaps the idiot electorate who voted them in?

Anonymous said...

"The morons in the council who like to think they are the equal of the private sector when pissing away taxpayers money? Or perhaps the idiot electorate who voted them in?"

I seem to remember they did the same thing with high-interest Icelandic accounts. What are the electorate to do? All the parties promise to be good with money.

(And for any last few people who think the BBC/Guardian have no agenda, try and find "Cannon Hinnant" on there, or Paul and Lidia Marino, or going back Christopher Newsom and Channon Christian.)

Anonymous said...

With commercial property, central government is patently terrified about working from home becoming the norm, perhaps not 100% of the time, but 25% or more of the time.

That's a lot of sandwich shops, boozers, coffee shops, small shops and supermarket "local" shops suddenly moving into being unviable as office traffic gets reduced, and there being a lot less commuters in train/bus station catchments, and as the rate of WFH increases, so does the number of businesses entering unviability.

That's also a lot less tax heading towards HMRCs coffers, as most of those aren't multinational businesses architected purely to minimise tax rather than actual business units.

Expect some form of intervention to try and get people back into offices, as to whether it'll work or not... The lockdown has ended up being a massive experiment in working from home, and people like the flexibility - they generally don't want to be in either all the time.

An awful lot of people(voters) have found Monday's don't have to be *that* shit, that they can switch on at 8 with a coffee, go through stuff without having to wait for the next train, and still get up close and personal with someone else's armpit, wait for a bus in the rain running half an hour late or being sat in a traffic jam.

Equally, they also want to have a bit of a social after hump day, so going in the office Wed/Thurs followed by a hump day/almost-weekend pint is less onerous.

And many of those who must go into their place of work have discovered they can actually get a seat for their princely-summed monthly pass.

So I'll be intrigued as to what the intervention will be, and how big a gift it'll be to Starmer.

Jan said...

Anon@12.17pm
Not only coffee shops etc but all those sparkling office blocks in Canary Wharf etc. No wonder Boris was urging a back to the office asap policy. There are going to be a few bankrupt commercial propery landlords in the not too distant future I should imagine.

There are still very few cars (20-30) in my local station car-park on weekdays cf 200-300 before the pandemic. No-one is rushing back to the office any time soon.

Sorry to go off topic but the commercial property sector looks a bit iffy as well as the "commercial" energy projects which local councils have toyed with.

Anonymous said...

'Sorry to go off topic but the commercial property sector looks a bit iffy as well as the "commercial" energy projects which local councils have toyed with.'

South Somerset District Council - are you listening?

rwendland said...

Worth noting Bristol Energy was essentially a LibDem creation during the coalition years. The LibDem run council made the decision-in-principle to create such a company as long ago as 2010. I wonder if Ed Davey supported it, but a quick google doesn't show up anything obvious.

The by-then Mayor run council took to 2015 to produce the business plan, agreed a few months later, and customers by Feb 2016. This was done at the tail-end of mayor George Ferguson's reign, who was elected as an "independent" but had been a Lib & LibDem in the 70s and 80s before becoming a developer/architect. The new Labour mayor inherited it just 3 months later, but with £3.86 million of Bristol Energy shares bought by the council 9 days before his election, probably on top of loans already made. Pretty much a fait-accompli by the previous administration!

Panjandrum said...

Guido has this story now.

Matt said...

@ Anonymous

"All the parties promise to be good with money."

Shit as they are, how many of these councils are Tory run?

Nick Drew said...

@ Sorry to go off topic but the commercial property sector looks a bit iffy as well ...

no need for apols, Jan, it's absolutely on point. As noted above, actually Thurrock's move into solar, although pretty speculative and risky by some measures, might turn out better than either energy supply or commercial property

Always nice to be ahead of Guido, Panjanrum

david morris said...

But........but.......but

Bristol Energy Bad

Ovo Energy (just over the road from Bristol Energy) good

??

Nick Drew said...

I have a fair regard for Ovo: and they will demand a decent dowry before they take on B.E. - they are pretty over-stretched already

no Bristolian charity there

Anonymous said...

I see they're starting up Barrow on Soar, as most of the windmills have stopped and gas doesn't work as efficiently in a heatwave (won't that apply to coal too, or is it dependent on how it's burned?).

https://www.theguardian.com/business/2020/aug/12/national-grid-fires-up-coal-power-station-for-first-time-in-55-days

Now all our coal stations are due to shut by 2025. What will we fire up when there's a big freeze and no wind available? And even in a heatwave, I see solar is only 5-6%, it'll be much less in winter.

56% from gas? I can see that low-carbon future from here!

Meanwhile

"China accounts for nearly half of global coal use in power and saw the growth of coal-fired output slow to 1.6% in 2019 from 5.3% in 2018."

"China's coal powered generating capacity is expected to increase to 1300 GW by 2020, from 960 GW in 2016"

The UKs total installed electricity generation capacity is about 90GW, so China will have increased coal use in the last 4 years by the equivalent of 3.5 Great Britains, IF GB was 100% coal fired. Just something to think about as you put on your Chinese mask to shop for Chinese electronics while saying how hot it is.



(Don't be like the BBC and ignore Cannon Hinnant)

E-K said...

Anon - China's coal powered generating capacity increases...

Doubtless to produce the stuff that so called clean countries have stopped making but still need.

Madness.

Anonymous said...

E-K and because what the UK has done will have zero effect, we'll be told we need to do more! That Swansea tidal lagoon may rise from the grave yet.

YDG said...

RE: Anonymous @ 12:09 and 10:08

I tried a few experiments using the search box at the top of the BBC news page.

"Cannon Hinnant" returns no matches at all.

"Christopher Newsom" returns one hit. He is mentioned in passing as part of an article about the death penalty.

"Channon Christian" no matches at all.

"Lidia Marino" no matches at all.

"Paul Marino" returns ten or so matches, all sports related

For comparison, "Ched Evans", wrongly convicted of rape, returns just under 300 hits.

It must be the unique way they are funded.