When the energy crisis hit last year, households up and down the country were met with exponential hikes to their bills.
At the same time, local authorities were forced to look at their own energy contracts – and figures shared exclusively with This is Money show some paid over the odds for power used in their offices and other public buildings such as schools and libraries.
Questions are now being raised as to how they hedged against rising prices, and how much value for money they are getting from taxpayer cash.
It comes as many taxpayers face higher council taxes as local authorities come under increasing financial pressure, with some fearing bankruptcy.
Over the odds? Box Power’s figures reveal some local authorities overpaid for their energy during the crisis and have since hiked council taxes
Now, This Is Money can reveal the full extent of the crisis that hit councils across the UK.
Box Power CIC, a not-for-profit energy consultancy, has compiled a performance table of how much councils paid for their energy at the peak of the crisis – and which vastly overpaid.
It marks the first time any table has been published, compiling all councils’ energy usage and spend and reveals the huge disparity between what local authorities paid.
Scroll down for the full rankings.
How do councils buy energy?
The way local authorities and public sector bodies buys energy differs from how households, and even businesses, buy energy.
Their process is more similar to domestic energy suppliers, whereby they bulk buy energy in advance and have hedging policies in place to ensure they get a good deal.
But public organisations have to either seek a full formal open tender process and buy independently, or they could join an existing framework agreement, according to Box Power.
These are mostly run by Public Buying Organisations, of which the largest is the Crown Commercial Service, while other councils form their own buying group – usually in regional clusters.
Unlike households, who were forced to pay the amount offered by their suppliers, local authorities have access to economies of scale and expert buyers.
Energy crisis: Like households, councils were forced to pay more for their power following Russia’s invasion of Ukraine in 2022 – but some claim they could have got cheaper deals
This is because they buy energy for their own offices, but also public places like schools, libraries and swimming pools. Council energy spend also includes street and traffic lights.
Councils tend to have a degree of flexibility on when they purchase energy, and can often leave this to nearer the date of supply so it is more cost effective, says Box Power.
These existing frameworks are supposed to help councils to navigate periods where prices rise quickly and they have risk triggers in place to protect the public purse.
However, the energy crisis that followed Russia’s invasion of Ukraine in February 2022 seems to have caught some councils by surprise, leading to much higher bills.
Box Power’s co-founder and CEO Corin Dalby says: ‘For the councils that had their energy contract renewed on 1 April of that year, then realistically they could or should have re-tendered up to 12 months earlier to enable them to forward-hedge their Winter 2022 energy before the prices spiked.’
Of course, councils couldn’t anticipate the spike in prices – but Dalby suggests that councils buying energy independently could have joined an existing framework to minimise risk.
Concerns: Corin Dalby is the founder and CEO of Box Power CIC
‘We understand one type only bought their winter energy in September 2022, but may not have had risk price triggers in place to protect the public purse.
‘A strategy is just that… but if world events like the invasion then warranted proactive action to issue a revised strategy that did include price cap triggers, this should have protected the exposure from further upward price shocks.’
The energy bill relief scheme which was introduced for non-domestic customers in September 2022 helped to alleviate some of the pressure, by capping prices at 21.1p/kWH for electricity and 7.5p/kWH for gas.
It means that while the councils might have paid a fraction of the predicted prices, they were protected by EBRS and money from the public purse.
How much have councils paid for energy?
With this in mind, Box Power CIC approached local authorities across the UK, asking them for their usage and cost figures for 2022/23.
The figures show that councils across the UK paid an estimated £1billion more for energy in 2022/23 than the previous year.
The figures show that the 272 councils that disclosed the previous year’s figures spent £1.114billion in 2021/22, and this rose by £835million to £1.939billion. It represents a 74 per cent increase over just one year.
These five councils were judged to have spent the most on energy, by Box Power. Its method combined the price per kWh and also the cost value, to come up with an overall ranking
This table shows the rest of the top 10 councils that spent the highest p/kWH on energy
Dalby said: ‘When you consider there are also 100 councils we didn’t receive information from, it’s reasonable to estimate that councils paid £1billion more than the previous year.’
Figures disclosed by Government agencies show this rose just 34 per cent last year.
To adjust for any differences in sizes between councils, Box Power translated usage and spend to the price per kWh to give a fairer assessment.
Its performance table ranks the top councils and combines the price per kWh for both and also the cost value of each, looking at their overall spend on energy.
Which councils paid more for energy?
Manchester takes the top spot, having paid 62.1p/kWH for electricity according to Box Power’s figures.
By comparison, the average for the councils in the top half of the table was 40.3p/kWh and 23.9p/kWH for the average council who paid less.
A spokesperson for the council said: ‘We do not believe that taking our pence per unit figure for this specific period provides a fair or realistic comparison.
‘It was a period of high turbulence in the energy market due to global factors, such as the war in Ukraine, and inevitably some councils – such as those who happened to have contracted earlier – will have been impacted less than others but they are likely to have paid a higher premium in the period before.
‘It is also unclear whether the figures quoted are a like-for-like comparison. The total we quoted was inclusive of 20 per cent VAT (which the Council subsequently recovers) and various Government levies such as the Climate Change Levy which will inflate the total. It is not clear whether the figures for other local authorities include these or not.’
Until this point, there has been no benchmark for councils to see how they have performed, meaning many will be unaware of whether they have paid over the odds.
Dalby says: ‘We think more transparency and scrutiny is essential, as without it the public cannot hold these public bodies that are spending their money to account.
‘The impact that the cost of living crisis is having on ordinary people is being exacerbated by council tax increases and cuts to local services. It’s vital that ordinary people can see that their local council is delivering best value for money and protecting the public purse with the buying decisions made on their behalf.’
Box Power has estimated that local authorities who overpaid for energy could have saved £676million by buying in line with the bottom half of its table.
Worst perfomer: Manchester City Council was judged by Box Power to have overspent the most on energy – but claimed it was not a ‘fair or realistic comparison’
> Energy firms accused of hiking small business bills to pay ‘secret commission’
The City of London takes the second spot, with an average 56p spent per kWH, some 16p higher than the average for the highest paying councils. The price paid for gas was 6.4p/kWH, meaning it fell below the average.
A spokesperson said: ‘These figures are misleading. The City Corporation has a much wider remit than that of a local authority.
‘The reality is that we have cut our annual net carbon emissions by 66 per cent and our energy consumption by 21 per cent since 2018/19, and we use 100 per cent renewable electricity.’
Islington also paid more per kWH at 55.9p/kWH for electricity and 15.3p/kWH for gas.
Cllr Diarmaid Ward, Islington Council’s Deputy leader and executive member for finance said: ‘As part of our efforts to create a more equal borough, we work hard to ensure we’re securing good prices for electricity and gas, to help reduce residents’ bills and to save money that can be spent on vital public services.
‘However, the unprecedented rise in prices during the energy crisis meant that, like councils up and down the country, we had to spend more on energy and electricity between April 2022 and April 2023.
‘While our previous approach to buying had worked successfully for many years, this unprecedented rise has led to us adopting a new strategy from 2023 onwards, in order to secure better prices in the long-term.’
Coming in second: The City of London took the second spot, paying an average 56p spent per kWH – some 16p higher than the average for the highest paying councils
Call for more scrutiny
The figures reveal significant disparity between councils on the price paid for electricity and gas, leading for calls for more scrutiny.
Dalby said: ‘Each council’s energy costs have been undisclosed until we released the Box Power CIC Performance Table.
If they have so far been oblivious to each other’s performance, then no council, in our view, could honestly demonstrate that they are achieving value for money
‘That means if they have so far been oblivious to each other’s performance, then no council, in our view, could honestly demonstrate that they are achieving value for money if they have nothing to compare to.
‘Our report shows it’s simply not the case that factors such as the war in Ukraine made it inevitable that some authorities would have purchased energy at a much higher rate – as the £500 million in cost differences within our Box Power CIC Performance Table lays bare.
‘We will continue to call for greater transparency and for a similar national report to be published by the councils themselves so the public can scrutinise spend more easily. But if they don’t do it then we will. Transparency should be an obligation not an option.’
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