A council-owned energy firm has been scrapped before becoming operational at a cost of at least £2.5 million.
At a cabinet meeting on Friday (10 August) Portsmouth City Council decided to scrap the Victory Energy scheme.
The council, headed by Liberal Democrat councillor Gerald Vernon-Jackson, says the company would have needed “many millions of pounds of taxpayers’ money” to get it up and running and was not predicted to pay it back for up to eight years.
The scheme, which was approved by the previous Conservative administration, has already received significant investment to set up the company, the council said.
It confirmed the administration may lose at least £2.5 million already committed to the project, but the current cabinet felt it “more responsible to cut the council’s losses” rather than risk spending further money with no guarantee of it being returned.
Councillor Vernon-Jackson said: “As an administration we are responsible for spending money belonging to every resident in the city and we are not willing to take such a great risk with taxpayers’ money.
“The money the council will lose from this will not put extra pressure on future council budgets. The previous administration spent money setting the company up, that money has been spent and is gone, we have taken this decision to limit the council’s losses and make sure no further money goes the same way.
“The plans for Victory Energy would see it operating in a different way to any other energy company ever, and target people who have never changed their supplier. The independent expert advice we have received said it is an untried and untested business model trying to attract a very inaccessible audience.”
PwC, which was asked to compile a report into the profitability of the company, has reportedly said the scheme can be profitable.
In another report to the cabinet written in July last year it was suggested the company would require a total of £3.8 million investment from the council, but PwC’s current estimate is more likely to be £15.2 million with no guarantee changes in the market would not increase this amount further.
The same paper also included figures forecasting 25,000 customers per year would be needed to make the company viable, a figure that has now risen to 50,000 according to the company’s business case.
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.