Portsmouth City Council has stopped its fledgling energy company Victory Energy.

 

The decision was taken by the council's Cabinet following a briefing session for all councillors that included analysis of the company's business plan by finance experts PwC.

 

The company would have needed many millions of pounds of taxpayers' money from the council to get it up and running and was not predicted to pay it back for up to eight years.

 

The council has already invested a significant sum in setting up the company and may lose at least £2.5m of money already committed to the project by the previous administration, 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.

 

In July 2017 a report to Cabinet said the company would require a total of £3.8m investment from the council however PwC's current estimate is that this is more likely to be £15.2m, with no guarantee market changes wouldn't increase the amount further.

 

The same Cabinet paper also included figures forecasting 25,000 customers per year yet this has now risen to 50,000 according to the company's business case.

 

Cllr Gerald Vernon-Jackson, Leader of the council, 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 strength of the business model is the council's backing of the company, however that assumes the council backing equates to an open chequebook where we would bankroll whatever the company needs and that is not a position we are willing to take. It is not the role of a council to be effectively acting as a hedge fund and playing roulette with public money.

 

"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.

 

"The energy market is in a state of change with lots of new companies and government plans for a price cap to come in at the end of this year, which independent advice says will expose the proposed business model to significant additional risks. I just cannot understand why the independent review the Lib Dem administration has instigated was not commissioned by the previous administration given the government price cap policy was announced on 26 February. It is just too big a risk for us to take with the city's money with no guarantee of it ever being fully repaid. It is one thing to be entrepreneurial but another to be cavalier with public money."