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Southend Council has said it intends to continue plans to enter into a partnership with an energy firm that has been warned it is at risk of breaching regulations over a £9million tax bill.
The council-operated Southend Energy is poised to enter into a five-year partnership with Robin Hood Energy, a firm owned and managed by Nottingham Council.
But that company’s financial stability has been called into question after coming under pressure from energy regulator Ofgem to pay a tax bill of £9.4million by the end of the month.
Ofgem has said Robin Hood Energy owes the money to make up for a shortfall in their use of electricity from renewable sources. The company had been expected to pay the bill by September 1 but after failing that, the regulator has given them until October 31.
It comes just one day after the Local Democracy Reporting Service in Nottingham reported that a financial expert had raised concerns about the company’s future to Nottingham City Council, telling councillors that they were not in a “great situation”.
Southend Council said it has not finalised the deal with Robin Hood Energy but does intend to continue negotiations.
Councillor Carole Mulroney, who oversees environment and planning, said: “We understand that Robin Hood Energy have met with Ofgem to discuss resolution of the issue and we will be closely monitoring the situation.”
Richard Johnson, marketing and acquisitions director for Robin Hood Energy, said they have an agreement with Ofgem that “as long as our Renewable Obligation Certificate (ROCs) payment is made by March 2020, which we have always planned to do, then this matter will be resolved”.
But Ofgem denied such an arrangement is in place and stressed that any delay to the payment means a breach of the company’s obligations and could lead to the energy supply licence being revoked.
A spokesperson warned that of the four companies Ofgem took action against last year “only one is still in the market”.
The regulator went on to reassure that no matter what the outcome is for the council’s partnership with Robin Hood Energy, energy supplies will be protected and will not be cut off. Instead the regulator will hold a bidding process and transfer customers to the most appropriate alternative.
Southend Energy was formed in 2015, with OVO Energy agreeing to manage the operation of the company for five years. Since then, the council has encouraged more than 6,000 households to switch supplier, with the majority being over the age of 65.
Negotiations to renew the contract between OVO and the council broke down in 2018 and the company asked the council to end the contract. This prompted negotiations to begin with Robin Hood Energy.
Conservative councillor Mark Flewitt, who had initially worked with officers on the deal, said that “all due diligence” was done when the deal was being negotiated at the beginning of the year but added he would be willing to abandon the partnership with Robin Hood Energy following the concerns raised by Ofgem.