Are there more tough times ahead for Bristol City Council’s LOSS-MAKING electricity reselling business, BRISTOL ENERGY?
The private company, funded from our council tax, has already posted a £3M LOSS this year it doesn’t want you to know about. Meanwhile, total investment in the firm by Bristol City Council, although a closely guarded secret, is believed to top £9M. So will Bristol City Council ever see a return on this huge investment of our money?
Ovo is another local energy reseller that’s been running since 2009 and its business model is virtually identical to Bristol Energy’s. They both buy power wholesale off the ‘big six’ power companies who generate it and then try to sell it retail to customers for a profit. Ovo have just announced a £35M LOSS based on 400,000 CUSTOMERS. Bristol Energy has 80,000 CUSTOMERS.
Bristol Energy and Ovo both have the same problem: the cost of obtaining new customers. If you take apart the scant information available about Bristol Energy (their business plan is a closely guarded secret), it may well be COSTING THEM MORE to get customers than they will ever make in PROFIT from them in this low margin business.
Bristol Energy boss, Peter “HIGH PAY” Haigh pockets a six-figure salary for his troubles while claiming he will start making profits when Bristol Energy has “a large enough volume of customers”. However, Ovo with FIVE TIMES as many customers continues to run at a HUGE LOSS. What can Peter High Pay do that’s different?
But why should High Pay give a toss? He tops up his paltry six-figure salary from the council taxpayer with a LUCRATIVE DIRECTORSHIP at Energy Market Risk Ltd, consultants to the energy industry. Does Bristol Energy have a hope with High Pay at the helm? Does he even care while he’s spending other people’s money and significantly expanding his personal bank balance?
And why has Bristol City Council earmarked £7.5m of their capital funds to run this profitable ‘business’ over the next couple of years while they cut our public services?
The biggest problem for companies of this nature is not the cost of obtaining new customers, and anyway in Bristol Energy’s case our dear council has been doing the recruitment for them. Their business model is to take on long term price commitments to their customers while buying their electricity on the wholesale market on a short term basis. GB Energy, another small electricity retailer with 160,000 customers, has just folded because wholesale energy prices are rising steeply. GB Energy didn’t have a fairy godmother to bail it out, but no doubt we’ll all have to put our hands in our pockets for Bristol Energy.
It is the cost of obtaining new customers as the only way to obtain a new customer is to offer a better deal (customers don’t switch suppliers to pay more) than the competition. Thats the problem Bristol Energy are trying to sell for example electricity cheaper than the Company that are producing the electricity. As TM has mentioned GB went bust last week because they have been selling electricity cheaper than the generator in an attempt to ‘buy’ new customers and hoping volume will give them the edge in the wholesale market. The kicker with Bristol Energy is that there long term plan is based on volume but the reality is the more volume Bristol Energy buy the more money they lose, the maths is pretty simple if your losing 1p per unit the more units you sell the more 1p’s lose, however Bristol Energy or Bristol City Council have yet to make these simple calculations. I actually made a complaint to advertising standards about Bristol Energy adverts and they seem to have disappeared. The next set of Bristol Energy accounts is going to show an even bigger loss, wholesale prices are creeping up and Bristol Energy (like GB) are making a greater loss on all those fixed tariffs and again as TM says GB went bust because they don’t have a Council writing them blank cheques. The MD of Bristol energy earns around £140,000 per annum by the way.