‘Significant failings’ led to £16m power bill disaster

Independent report into Liverpool City Council’s £16m energy bill debacle identifies ‘clear and significant failings’ within the authority. Tony McDonough reports

Liverpool Town Hall
Liverpool City Council’s energy bill debacle could cost the authority £16m

 

A Liverpool City Council cock-up that could add a reported £16m to the authority’s electricity bill was a result of “clear and significant failings”.

That is the conclusion of an independent report into the debacle carried out by accountancy firm Mazars. However the report did not find any evidence of malpractice, cover-up, or ‘playing the market’ by any council employee.

Published on Thursday morning, the report outlines how in March Scottish Power, which then supplied the council with power, abruptly withdrew from the commercial market in the wake of the Russian invasion of Ukraine.

This left the city council without a fixed-rate tariff on its electricity supply. The report found that Lee Kinder, the council’s asset management director, failed to inform the cabinet on March 4 of Scottish Power’s decision.

It said: “He openly admitted that this is something he should have done. We have seen no evidence that this was a deliberate act of concealment.”

The report identified issues with the council’s risk management process and lines of reporting. It added the then chief executive Tony Reeves  “did not have controls in place to flag major risks ahead of time”.

When the situation came to light in May it was reported that it would see an estimated £16m added to the authority’s power bill. Maintained schools across the city, as well as Merseyside Fire and Rescue Service were on the same deal. The council was without a fixed-rate deal between April 1 and June 30.

Click here to read the full Mazars report

According to the report, there was no evidence that Mayor Joanne Anderson, or Deputy Mayor Jane Corbett, had any prior knowledge of the situation that Scottish Power had withdrawn from the commercial market.

Earlier this week it was reported in the Liverpool Echo that school governing bodies across Liverpool “utterly terrified” of the potential financial implications.

In the weeks following the revelations, finance director Mel Creighton stepped down from her role. The report says she had a “lack of input” into the contract dealings. However it was suggested she was “overloaded” with work. Earlier this month Tony Reeves also resigned with immediate effect.

In the last few weeks the city council has approved a new energy contract with Crown Commercial Services, which will run until March 2025. This final cost is expected to be reported to the council in August.

 

Tony Reeves
Tony Reeves, former chief executive of Liverpool City Council

 

Mayor Anderson said: “Scottish Power’s last-minute decision to withdraw from the energy market clearly left the council in a very difficult position. The timing of this decision – and how it was communicated to myself and the Cabinet – was very disappointing.

“When I campaigned to be the Mayor, I promised honesty and openness. It is important to me to be open with the residents of our city. To that end, I widened the scope of the Mazars report to ensure that it included accountabilities and responsibilities and that these were fully transparent.

“Lessons have been learnt and the necessary improvements are being made to ensure this council delivers best value for the services it provides to residents. The council’s energy contract is now on a surer footing and a root and branch review in the city’s contract management system is already under way.”

Mike Cunningham, chief commissioner to Liverpool City Council, added: “This report reaches conclusions about the council that align with our own judgements after a year into the intervention, set out in our second report to the Secretary of State for Levelling up, Housing, and Communities, to be published soon.

“It is essential that the Mazars report is carefully considered, lessons learned and the recommendations implemented.”

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