Nottingham City Council has agreed to lend its energy company further £9.5 million more to help pay its upcoming bill to energy regulator Ofgem.
Robin Hood Energy (RHE) was due to pay £9,435,925.38 in ROCs on 31 October and was at risk of losing their license.
The loan decision was made by the Labour-run council in a meeting held behind closed doors on 22 October, on the grounds of commercial sensitivity.
“Nottingham City Council has agreed to continue its support of Robin Hood Energy to enable it to continue the successful work it has undertaken to date”, a Council spokesperson said.
“Our Executive Board has [on October 22] agreed to provide assistance to RHE to enable it to make its renewable obligations in line with the Ofgem requirements. This will be repaid by the end of this financial year at a state aid compliant rate of interest.”
RHE does not create its own electricity, meaning it has to pay a subsidy to Ofgem to fund green initiatives.
“We have agreed an arrangement with Nottingham City Council which will see us paying our Renewable Obligations Certificate (ROCs) payment in full by the October deadline. The arrangement will see us paying our shareholder back over the next 6 months with interest”, Gail Scholes, CEO at Robin Hood Energy, said.
RHE, whose customers include Jeremy Corbyn, had hoped to set up a payment plan with Ofgem.
The company explained their reasoning in the following statement:
“This was a prudent business decision to help us effectively manage the business better in light of the uncertainty in the UK today.
“There are many factors that contributed to our decision to request to make these payments in instalments rather than in one lump sum.
“We have no idea what a No-Deal Brexit will bring, so we want to have a cash reserve to manage that impact. The Yellowhammer report indicates that prices will rocket.
“The Capacity Market scheme, introduced by Ofgem, had been suspended by the European Court of Justice (due to state aid reasons) but is expected to be re-approved in October.
“So, in addition to our £9.5m ROCs bill, we are also expected to make another multi-million pound payment to Ofgem at the same time.
“When an energy company goes to SoLR each energy company has to pick up the cost to balance the system.
“As the failed company will not be able to pay for the energy required to fulfil its needs, these costs under Ofgem’s rules are passed onto all other suppliers. This means we have had to navigate a further 14 unscheduled payments in the last 18 months alone.”
Robin Hood made an annual loss of £713,000 in 2015, followed by losses of £2.5m in 2016 and £7.2m in 2017.
It reported a profit of £202,000 last year after Nottingham council offered it a £5.5m loan.
Ofgem has not yet issued a statement on the matter.