A council-owned energy company may be scrapped with a loss of £1 million before it begins operating after concerns were raised by the current leadership.
Last year Portsmouth City Council approved the establishment of Victory Energy with a view to the company generating £2 million a year for the council.
But following a change in the “regulatory environment” and a change in administration, the plans for Victory are now in doubt.
A review into the profitability into the fledgling firm has been commissioned by current Liberal Democrat leader of the council, councillor Gerald Vernon-Jackson.
Vernon-Jackson told Utility Week he had concerns about how the company was set up, as well as its profitability.
He said: “My concern with this one is that it was set up by one party without getting support from all the other councillors. I think that is a worry and if we are going to continue with this we need cross party support.
“My questions around the business plan have been around the number of new customers the business plan says need to be acquired each year to break even. I am concerned about whether it is realistic to have a number of sales per agent that the business envisaged.”
It has been reported that the scheme will have to sign up 44,000 new households each year to break even.
Several council-owned energy companies currently operate in the UK, with many partnering with the not-for-profit Robin Hood Energy, owned by Nottingham City Council.
Former leader of Portsmouth council, Cllr Donna Jones, said Victory was developed to disrupt the big six and increasing energy prices.
She said: “Victory Energy Services Limited is delivering exactly what the government has asked for.
“A municipal owned energy company that has been built and developed in 18 months to disrupt the big six and the increasing energy prices.
“The government want to disrupt the big six energy suppliers and locally owned energy supply companies are the solution.
“The unique feature of Victory Energy is the profits which will be put back into the communities they serve. Local parks, swimming pools, mountain biking tracks are the sort of projects Victory will fund whilst giving a low cost, trusted service to its loyal customers.”
Chris Ward, director of finance and information services at Portsmouth City Council, said: “We’re carrying out further due diligence and have engaged PwC to review the highest risk areas of the business case to ensure that this remains a solid investment for the council.
“They are due to report back at the end of this month.”
Once PwC announces its findings, they will be presented to a full council meeting.