Overview
Local authorities’ budgets have changed substantially over the last ten years. Central government funding reductions have coincided with councils, since April 2013, retaining 50 per cent of business rates generated locally.[1][2] Councils have also sought other sources of income, such as investments in commercial property and energy companies.
At the time of publication, high wholesale energy prices due to increased global demand for gas have had an impact on the highly competitive UK energy market.[3] This may seriously undermine the financial prospects for energy companies.
Local authorities in the UK have financial interests in energy companies in two ways. The first is to purchase shares in an independent energy company. The second is for a council to set up – or become the whole owner of – an energy company. Between 2016-17 and 2019-20, UK councils lost £74,106,589 on energy companies which they either owned or invested in.
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Key findings
- 13 energy companies invested in by local authorities lost a total of £74,106,589 over four years from 2016-17 to 2019-20. These companies were either fully or partially owned by a local authority. The biggest loss in a single year was 2018-19, when councils lost a combined total of £39,585,046.
- The eight council-owned energy companies lost a combined £114,022,019 over the same period.
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Three council-owned energy companies are now in either administration or liquidation. These are BE 2020 Limited, Robin Hood Energy, and Victory Energy Supply Ltd.
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BE 2020 Limited – owned by Bristol city council – experienced the largest cumulative losses of any energy company, losing £46,516,619 between 2016-17 and 2019-20.
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Robin Hood Energy – owned by Nottingham city council – experienced the largest loss in a single year of any energy company, losing £23,075,000 in 2018-19. This company also saw total losses of £31,618,000 between 2016-17 and 2019-20. This was the second highest of any energy company.
- The total amount of public capital investment committed to energy companies in which local authorities had a financial interest between 2016-17 and 2020-21 was £132,310,960.
- B&D Energy – owned by the London borough of Barking and Dagenham – received the largest amount of capital investment from taxpayers at £38,770,000 between 2016-17 and 2020-21. This includes £30,200,000 in loans from the council and a further £8,570,000 in grants from the Department for Business, Energy & Industrial Strategy.[4]
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[1] Local Government Association, Don’t be left in the dark: What localised business rates mean for your council, www.local.gov.uk/sites/default/files/documents/dont-be-left-dark-what-lo-48e.pdf, (accessed 27 September 2021).
[2] House of Commons, Local authority financial sustainability and the section 114 regime, 19 July 2021, p. 10.
[3] BBC, Can the energy market survive this crisis?, 22 September 2021, www.bbc.co.uk/news/business-58633336, (accessed 28 September 2021).
[4] Three grants were awarded to Barking and Dagenham by the Department for Business, Energy and Industrial Strategy via the Heat Networks Investment Project (HNIP). This included £1,070,000 in 2017, £5,000,000 in 2020, and £2,500,000 in 2021.