How 'doomed to fail' energy firm cost taxpayers £40m

A council-owned company was set up to help people receive ethically sourced and low cost energy - yet ended up costing city taxpayers £40m.

It has come to light the final cost to council taxpayers of the collapse of Bristol Energy is £39.3m, following five years of liquidators winding up the company by collecting the money it was owed and paying off debts.

In 2021, council auditors Grant Thornton criticised the decision making which saw large sums of public money being lost, and questioned why the council kept propping it up.

The Bristol Energy chapter spanned two Mayors and the current administration - but how did the city end up in this situation?

Bristol Energy was set up under former mayor George Ferguson in 2016 to help people save money on energy bills, and ultimately return a profit for the city's taxpayers.

Any profits or savings were intended to fund council services and local communities, rather than private shareholders, however Grant Thornton said in 2021 an "overly unrealistic" business plan led to millions of pounds being lost.

It came at a time when councils across the country were setting up energy companies as commodity trading businesses, such as Nottingham City Council which similarly also failed.

Bristol Energy posted financial losses totalling £19.6m in its first two years of trading, and in its last financial year before it was put up for sale in 2020 it totalled £14.8m in losses.

The alarm was raised in June 2020 when the council decided to sell the business's commercial and residential customer books.

In 2021 the Local Democracy Reporting Service (LDRS) reported the total cost of the business for the council would end up being as much as £43.8m.

However the final figure is £39.3m because half of the £7.3m to wind-up was needed, and liquidators managed to get £900,000 back, the LDRS said, adding the liquidators were then charged about £300,000 for their services.

Peter Atherton, an independent energy analyst, told the BBC Bristol Energy was "doomed to fail".

It was "at its heart a commodity trading business", he said.

"They are very, very risky businesses and are typically carried out with great sophistication and very big balance sheets.

"Bristol Energy had neither. Because of that, they were doomed to fail from the moment it was set up."

Atherton added: "The people who work in these businesses are not stupid, they thought they could deal with the risks.

"The mitigations they were putting in place were not sufficient, and the risk ultimately overwhelmed the business model."

According to a council report presented to councillors on Tuesday, Bristol Energy traded during a period "characterised by strong market competition and price competition from the big six energy suppliers, which resulted in a number of smaller suppliers" going out of business.

The report said: "Wholesale commodity markets were also very volatile, making trading and pricing extremely challenging, and putting pressure on margins."

Craig Cheney, then cabinet member for finance and deputy mayor, said in 2021: "At no point did we sign off on taxpayers' money knowing that it would never be returned; there was always a view that we would make money back."

Speaking to the committee, Bristol Holding director Chris Smith said: "The lessons learned from Bristol Energy are important in shaping the council's approach to company governance.

"The focus now is on ensuring improvements are embedded in a way that council companies are managed and monitored appropriately."

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