Bristol City Council has taken away a contract to supply itself with energy from its own company and granted it to British Gas instead.

The council founded Bristol Energy in 2016 and has invested more than £15m in the business.

But last year Bristol Energy revised its original business plan in response to a slower than anticipated customer take-up. It then said it would become profitable in 2021 – two years later than was initially forecast.

A council spokesman told Utility Week it had no choice but to follow strict procurement rules, and when questioned, Bristol Energy managing director Peter Haigh said the company had been “marginally undercut on the council contract” by British Gas.

He added: “It’s important that the council goes through a process when choosing suppliers, including where its energy comes from.”

The decision follows a call from smaller energy supplier Bulb to local councils across the country to commit to switching to a renewable energy provider. In a report published last week it said Bristol City Council was a community that was “leading the way in the renewable revolution”.

Bristol City Council said it could not give special treatment to Bristol Energy, despite the fact the authority owns the company. Craig Cheney, cabinet member for finance, said: “We are fully behind Bristol Energy, but we must follow the procurement rules when awarding public contracts using public money.”

Haigh told Utility Week last year that as a council-owned energy company, Bristol Energy would always come under more scrutiny, but that this was only right.

When it was formed in 2016, Bristol Energy was the second fully-licensed municipal energy supplier behind Robin Hood. Since that time a host of other councils have gone on to set up their own energy companies after entering into white label arrangements with Robin Hood. These range from Liverpool’s Leccy to Angelic Energy in the London borough of Islington. In addition, the Scottish government, the Greater London Authority and both Birmingham and Portsmouth councils are in the process of trying to secure a full electricity supply licence.

Besides cutting local customers’ bills, the municipal companies aim to generate a return that will help to compensate councils for dwindling government grants, but so far many are not measuring up.

Robin Hood recently revealed that it made a £7.6 million loss in the year ending March 2017. Together with the previous year’s losses, the council- owned company is now £10.8 million out of pocket since its inception.

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