Portsmouth’s council-owned energy company, Victory Energy, will be shuttered before it served a single customer.
Victory Energy was set up by the then Conservative-led council in 2017, with the intention of providing residents with low-cost renewable electricity and generating revenue for the council.
Conservative group leader Donna Jones had insisted the supplier could bring £50 million to the council within five years.
However, the Victory Energy never got off the ground. The Liberal Democrats regained control of the council in the May 2018 elections and mothballed plans for the energy firm that August, deeming it too risky in a challenging energy market.
The Liberal Democrats referred to an audit by PwC, which cautioned that the government’s energy cap would “materially affect financial performance and peak funding requirements” of Victory Energy. The audit also found that the supplier’s goal of signing up 50,000 customers would be challenging and warned that upfront costs faced by new market entrants are substantial.
At the time, the council estimated it had lost £2.5 million in the venture.
The council made efforts to find a buyer for the supplier over the next year, but two deals fell through. Reportedly, the project was continuing to cost Portsmouth £18,000 a week.
Victory Energy will now be shuttered, and its nine employees made redundant.
In setting up Victory Energy, Portsmouth was following the lead of Nottingham City Council, which launched Robin Hood Energy in 2015 and Bristol, which followed with Bristol Energy the next year. The creation of publicly-owned energy suppliers is a favoured policy of both Labour and the Scottish National Party.
Labour’s energy policy envisions a public supplier for every region, while the SNP have pledged to create a state-owned energy company for Scotland by 2021.
However, the fortunes of council-owned suppliers has been mixed. Together Robin Hood Energy and Bristol Energy serve just around 200,000 customers, far behind even medium-sized challenger energy companies like Ovo and Bulb.
Small suppliers across the market battled against rising wholesale energy prices across 2018. Smaller firms are unable to use the hedging strategies which insulate the Big Six suppliers from these price rises. Increased wholesale prices have been cited as a factor in the collapse of more than a dozen small energy firms since the beginning of that year.
Steve Battlemuch, chair of Robin Hood Energy’s board, acknowledged the difficulties: “Undoubtedly, it’s not an easy time to be in the energy market for smaller providers, who don’t have the financial clout that the big six have. It’s a difficult market because energy prices are going up.”
Labour insisted that small suppliers, including publicly-owned small suppliers, could thrive if the market was reformed.
“The case for market reform as well as revolutionising energy generation and transmission as Labour has pledged is stronger than ever,” shadow business secretary Rebecca Long Bailey said last summer.