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Carbon pricing, flexibility and scaling-up hydrogen: UK energy sector unveils net-zero innovation plans

The body representing the UK’s electricity and gas transmission and distribution sector has set out its plans for reaching net-zero by 2050, concluding that this ambition will only be achieved if a “whole-systems” approach to transformation is adopted.

In its Energy Networks Innovation Strategy, the Energy Networks Association (ENA) lists the net-zero transition as a key theme around which current and future innovations must be centred.

The ENA praises policymakers and businesses across the utilities sector for investing in green innovation, noting that 1,100 grid innovation projects were underway as of the end of March. Among these projects are the UK’s first grid-injected hydrogen trials, currently underway at Keele University, virtual power plants in Yorkshire and West Sussex and the Social Constraint Managed Zone, whereby businesses have partnered with fuel poverty charity National Energy Action to provide low-income homes with the ability to sell flexibility services to the grid.

But the ENA ultimately concludes that broader, more rapid and more joined-up action is needed if Great Britain’s energy and gas networks are to align with the UK’s long-term climate targets while addressing consumer vulnerability and preserving energy security.

In the electricity sector, the Innovation Strategy states, priority in the coming years must be given to bringing more low and zero-carbon generation onto the grid – enough not just to meet current needs, but future demand, which will rise significantly as sectors such as heat and transport are electrified. This uptick in generation must be matched with investment in technologies which enable smart and flexible systems, such as large and small-scale energy storage and other demand-response methods, optimised by technologies such as artificial intelligence (AI).

Aside from these measures – which have all been repeatedly urged before by various corporates in the energy sector and by industry bodies and think-tanks – the ENA is calling on businesses to research the operational impact of long-duration reserve services, which would need to become more commonplace as the electricity mix shifts in favour of renewables.

Electricity firms should additionally collaborate with gas firms, policymakers, academics and other bodies to co-create a national methodology for calculating the cost of carbon, the ENA recommends.

Life’s a gas

In the gas sector specifically, the ENA is recommending that businesses begin “actively developing” networks and products which are both hydrogen-ready and capable of supporting a broader array of green gases.

The Committee on Climate Change (CCC) has repeatedly advised that hydrogen is a necessity, not an option, for decarbonising heat and transport in line with the UK’s net-zero target.

But the global and domestic clean hydrogen industries, a recent Bloomberg NEF analysis concluded, are “tiny”, and will need significant long-term support from business and policymakers. Moreover, the analysis found, such support must frame hydrogen as only one piece of a wider decarbonisation puzzle, rather than a “silver bullet” for all emissions.

To that end, the ENA is calling on businesses to develop not only the technologies but the market mechanisms needed to enable the clean energy transition in the gas sector. Policymakers will need to see evidence that the transition can ensure resilience and reliability, without dramatically increasing costs for consumers, the Strategy states. Moreover, sector coupling with industries such as the built environment and transport must be considered.

All of the ENA’s calls to action are ultimately underpinned by recommendations for implementing a whole-systems approach, in which ambition and action gaps are not allowed to widen. In order to shift to this approach, gas and electricity companies alike must collaborate on solution development and scaling; the creation of cost-benefit analyses; the development of regional plans and forecasts; and improving access to and visibility of data.

ENA chief executive David Smith said all recommendations have been drafted “following extensive consultation with a range of different groups across Britain’s energy sector”, making them ambitious yet achievable.

“From connecting ever greater levels of renewable energy to finding the new solutions we need for decarbonising heat and transport; our energy network infrastructure is already at the centre of delivering a world-leading net-zero economy,” Smith said.

“That role is set to grow, as that infrastructure takes on new responsibilities to deliver decarbonisation. We need to ensure our network infrastructure is future-ready, that our approach is transparent and accountable and that it is focussed as much on local needs as it is on national ones.”

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Euston Energy Ltd, trading as Northumbria Energy: Final Order

On 10 January 2020 the Authority published a notice of proposal to issue a final order on Euston Energy Ltd (“Euston”) in accordance with section 26 (1) and (2) of the Electricity Act 1989 and section 29 (1) and (2) of the Gas Act 1986.

The Authority had been in discussions with Euston regarding the requirement to become a DCC User (as defined in standard licence conditions 42.11 and 48.11 of the gas and electricity supply licences respectively).

Standard licence conditions 42.8 of the gas supply licence and 48.8 of the electricity supply licence require licensees to become DCC Users by 25 November 2017. As highlighted in the Authority’s open letter from December 2017, those suppliers who entered the market following the 25 November 2017, should not exit Controlled Market Entry (CME) without being a DCC user.

The particular behaviour of concern giving rise to the proposal to make a Final Order was that Euston failed to become a DCC User by the deadline and remains non-compliant. By failing to be a DCC User in accordance with the licence condition, its existing customers with smart meters are suffering harm because they do not have smart meter functionality. There will also be harm to customers who will lose their smart functionality on switching to Euston.

Representations or objections with respect to the proposed final order were invited to be made to the Authority by 10am 3 February 2020.

Euston made written representations on 3 February 2020. The Authority has noted the representations received from Euston in the context of the consultation undertaken pursuant to section 26(1) of the EA89 and section 29(1) of the GA86. The Authority notes the progress Euston has made to becoming a DCC User since leaving CME and that Euston anticipates becoming a DCC User before the end of March 2020. However, the fact remains that Euston is not compliant with the Relevant Condition despite the fact that Euston should have been compliant before exiting CME.

Therefore, on 6 March 2020, the Authority made the final order, pursuant to section 25 (1) of the Electricity Act 1989 and section 28 (1) of the Gas Act 1986, requiring Euston:

• to become a DCC User by no later than 31 March 2020;

• not to acquire any new customers or add any customer accounts by upgrading to dual fuel from the date that the Final Order is made until Euston can demonstrate that it is a DCC User.

As soon as Euston becomes a DCC User, the sales ban will be lifted and the Authority will begin the process of revoking the final order.

On 1 April 2020, the Authority received satisfactory evidence from The Smart Energy Code Administrator and Secretariat (SECAS) that Euston had completed all the required steps to become a DCC user and had therefore met the requirements set out in the Final Order for it to be able to acquire new customers and add new customer accounts by upgrading to dual fuel.

On 9 April 2020, the Authority published its notice of proposal to revoke the Final Order imposed on Euston on 6 March 2020. The Authority was satisfied that the Final Order should be revoked because Euston became a DCC User on 1 April 2020 and is therefore compliant with standard licence conditions 42.8 of the gas supply licence and 48.8 of the electricity supply licence.

The Authority gave this notice in accordance with section 26(6) of the Electricity Act 1989 and section 29(5) of the Gas Act 1986. Any representations or objections with respect to the proposed revocation are to be made to the Authority by 5pm on 8 May 2020.

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Energy UK asks government to enable payment holiday scheme

UK energy companies are asking the government to support a £100m loan scheme that will enable businesses and households affected by the Covid-19 coronavirus pandemic to take a payment holiday.

As reported by the Financial Times, energy industry trade body Energy UK has allegedly consulted with the UK Government to set up the programme, as the number of people cancelling their direct debit plans increases.

An Energy UK spokesperson said: “We have been in contact with the Government, Ofgem and Citizens Advice on what actions, protections and practical steps suppliers can take to support customers during these challenging times. Suppliers will be doing all they can to identify customers in vulnerable circumstances and provide support where possible on a case-by-case basis.

“On behalf of the industry, we have been also having discussions with the Government to explore if any additional financial support could be required to help these customers over the coming months.”

The plan would be for the government to lend money to energy suppliers that will repay once customers resume their payment plans.

The UK Government had already put in place a set of financial measures to help the economy during the pandemic, unveiling on 17 March its plan to give out £330bn in loans to businesses.

As reported by the Financial Times, the Department for Business, Energy and Industrial Strategy said: “We have been clear we will do whatever it takes to get us through this pandemic and have put in place an unprecedented package of support for businesses, including £330bn of loans and guarantees and paying 80 per cent of the wages of furloughed workers.

“We continue to engage with the energy sector to understand how suppliers and their customers could be further supported.”

The energy sector has already set up contingency plans to help customers during the pandemic.

Energy UK chief executive Audrey Gallagher said: “The sector is very conscious of the potential consequences for customers confined to their homes for prolonged periods.

“In particular, customers in vulnerable circumstances and those on prepayment meters may need additional help and support with repayments or keeping meters topped up.”

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Energy firms’ request for a bailout is rebuffed by ministers

Cash-strapped energy firms have been denied a state bailout amid concerns they could go bust if thousands of customers are unable to pay their bills.

Suppliers had sought a special taxpayer-backed rescue fund as British workers brace for economic hardship and businesses shut their doors – but the Government has refused to provide one and is instead directing them to a rescue loan scheme already on offer to other companies, emails show.

Last week, trade organisation Energy UK approached the Government to request its own loan scheme worth £100m a month which could be used to offer repayment holidays for struggling customers.

But energy suppliers have instead been told to rely on support already being made available more widely.

In an email to the energy suppliers, Dan Monzani, director of energy security at the Department for Business, Energy and Industrial Strategy (BEIS), said: “I would like to draw your attention to the business support measures announced by HM Treasury on March 17.

“We are aware that energy companies do not always think they are eligible when in fact you may be.”

The email then goes on to describe the range of support measures available to companies in the UK, including the Covid Corporate Finance Facility for the biggest firms and the Coronavirus Business Interruption Loan Scheme for smaller players.Small companies and the self-employed | Numbers to call

The Government has so far been reluctant to offer special assistance to individual industries, instead pointing to these £330bn lifelines.

But there is some concern among energy suppliers that vulnerable customers will not be able to pay for their gas and electricity in coming months if they are unable to return to work. The small business loan scheme has also faced criticism for being slow to deliver cash.

A number of suppliers have already seen some customers cancel direct debits, an early indication they are struggling to make payments.

A string of energy companies have large debts and virtually no safety net after several years of aggressively chasing new customers and charging ultra-low prices. 

Industry sources have said that some smaller, profitable energy suppliers are frustrated that large loss-making firms appear to be seeking ways to get a bailout without having to get their bank to approve a business plan. 

Doug Stewart, chief executive of provider Green Energy, said: “There should be no need for further intervention at present.

“The Covid-19 measures are not about supporting companies with poor business models.”Business Briefing Newsletter REFERRAL (Article)

Last week Energy UK requested that firms provide detailed information to support their claims that customers are falling behind. 

In a letter to the firms, BEIS thanked suppliers for providing evidence on potential risks. It appeared to leave open the possibility of further support by saying that the Government is still considering these cases.

One of the companies that originally approached Energy UK to discuss the bailout was Centrica, the owner of British Gas.

In a statement, the company said: “This is about supporting customers and our immediate focus is on supplying the country with the energy that will help it get through the coming months.

“This is not about propping up financially weak and unsustainable energy supply companies.”

A spokesperson for BEIS said that Government had put in place an “exceptional package of economic support for businesses, including extending the eligibility criteria for the Covid Business Interruption Loan Scheme which will allow more smaller energy businesses to qualify.”

“We continue to engage with the energy sector to understand how suppliers and their customers could be further supported,” they added.

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Centrica replaces chairman and ousts outgoing CEO

The owner of British Gas has replaced its chairman and ousted its outgoing chief executive with immediate effect amid deepening financial woes.

Centrica has appointed its chief financial officer, Chris O’Shea, as the interim chief executive while its new chairman, Scott Wheway, hunts for a permanent replacement.

Wheway replaces Charles Berry, who is stepping down from the board after taking medical leave last month.

Centrica’s outgoing chief, Iain Conn, had expected to remain in his role until a permanent replacement was found. He agreed to leave the company last summer as it swung to a loss for the first half of 2019 and slashed shareholder payouts.

The decision to hasten his exit comes weeks after Conn revealed a £1bn loss for the full financial year, and the lowest ever revenues from the British Gas business.

It marks the end of a difficult five-year tenure for Conn in which the supplier struggled against rising competition in the energy market and a government cap on prices.

The new leadership team is expected to face a difficult financial situation after the collapse of global oil prices and ongoing market gloom caused by the coronavirus pandemic. Those challenges have already pushed the market value of the biggest UK energy supplier to its lowest levels since Centrica was formed in 1997.

Wheway said: “I’m acutely aware that I’m taking this role at a time when we need to navigate our way through the current volatility caused by the impact of coronavirus. Protecting our employees and customers is a priority for us, particularly those who are vulnerable.”

He said Centrica would remain focused on “structural simplification”, improving its efficiency and growing its customer-facing businesses. “I will immediately be concentrating on completing the search for a CEO for Centrica, which includes both internal and external candidates,” he said.

Centrica was forced to write off £476m against its North Sea oil and gas business, Spirit Energy, last year after oil prices fell to an average of $64.36 (£53.17) a barrel from an average of $71.34 a barrel in 2018.

In recent weeks oil prices have plunged, and remained at a four-year low of just below $30 a barrel on Tuesday. The drop threatens to derail Centrica’s plans to sell the North Sea business as part of its financial turnaround plan.

The company had expected to receive bids for its 69% stake in Spirit Energy by the end of this month, but an industry source said it would not be possible to determine its value during the current market volatility and the bidding “would most likely be delayed”.

Centrica is also in talks with a consortium of investors to sell its stake in the UK’s nuclear power reactors, a process which could also be delayed by the macroeconomic impact of Covid-19 and ongoing technical trouble at two of the reactors.

The share price of the FTSE 100 energy firm – which is supported by an army of small shareholders – has tumbled to below 40p, the lowest price in more than 20 years and around one tenth of its value in 2013.

Around 1.5 million individuals bought shares in British Gas for 135p when it was first privatised in the late 1980s after the “Tell Sid” campaign. About 600,000 individuals continue to hold shares in Centrica, which became the supplier’s parent company a decade later.

The company has been considered a takeover target by industry analysts for years because of the steady decline of its share price, and its latest financial woes have reignited concerns over its long-term future.

Wheway also thanked Conn for his “continued commitment and resilience in the face of unprecedented challenges during his tenure as CEO … The board wishes Iain well and thanks him for his contribution.”

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Arbnco Partners with Centrica to Improve SME Energy Efficiency

The company is set to deploy a prototype of its SME energy efficiency digital platform in three locations across the UK.

Scottish building optimisation company, arbnco, has won a £641,000 contract for phase two of ‘Boosting Access for SMEs to Energy Efficiency’ (BASEE), the Government innovation competition.

The contract with the Department of Business, Energy and Industrial Strategy (BEIS), through its Energy Innovation Programme, will allow arbnco to develop a prototype of its Digital Energy Efficiency Platform (DEEP) to improve energy efficiency across the UK’s 5.9 million SMEs. Phase two of the project will involve arbnco deploying the prototype for pilots in the central belt of Scotland, the West Midlands and Bridgend, Wales.

Led by arbnco, the project brings together energy and services company Centrica, Energy Systems Catapult, Aston Business School, Durham County Council and sustainable finance company, Cyan Finance.

DEEP will simplify the process of engaging with energy efficiency by automatically optimising a business’ total energy consumption and the energy performance of its premises specifically.

The platform will use a range of data sources such as energy consumption and building energy performance, retrieved automatically or supplied by the SME, to generate a unique list of physical and behavioural energy efficiency recommendations together with costs, trusted suppliers and finance options.

Andrew Stewart, research and development manager at arbnco, said: “The first phase of the project focussed on the technical feasibility of the platform as well as, understanding of the obstacles that SMEs face when it comes to energy efficiency.

“A review of potential business models was conducted by Energy Systems Catapult during the first phase. Bringing Centrica on board for phase two will provide greater insight and access to SMEs as we look to roll the platform out nationwide.

“By providing SMEs with critical insight into their energy use and tailored retrofit recommendations, based on an assessment of the energy performance of their building and patterns in their energy consumption, we can help thousands of businesses become more energy efficient.”

Liam Burlinson, head of business energy efficiency at British Gas Business, said: “SMEs have a critical role to play as the UK strives to meet its net-zero targets, but they often don’t know where to start when it comes to improving energy efficiency.

“Centrica is committed to helping customers become more sustainable and we think arbnco’s platform can help tackle some of the fundamental barriers that exist for SMEs today – such as lack of time, money or internal expertise to make targeted, cost-effective changes.”

Phase two of the project began in February 2020 and will run for 14 months. Following completion in April 2021, the platform will be rolled out nationally.

arbnco has partnered with Energy Systems Catapult on the project, which is providing Business Model Innovation support to improve the functionality and usability of the DEEP prototype.

Rebecca Lane, business modelling analyst at Energy Systems Catapult, said: “Having worked with arbnco on phase one of the project, we are confident we have now identified a strong value proposition from both ends of the value chain.

“As the project moves into phase two, we will be working with arbnco and Centrica to pilot the prototype in three locations across the UK and develop the product ready for its national rollout in 2021.”

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Council-backed energy firm working with outsourced telesales centres in South Africa

A COUNCIL-BACKED energy company has confirmed it works with six outsourced telesales contact centres in South Africa that have 90 staff allocated to its campaigns.

But Scottish firm Together Energy says it only has one of its own members of staff based in South Africa, with the other 129 located in Clydebank.

Warrington Borough Council is putting £18 million into the company, as well as providing a £4 million loan to it.

Together Energy finished bottom of the Which? energy provider table and has received many complaints from users.

It said it is looking to recruit around 25 members of staff in Warrington and that it recently attended a careers fair in the town to help achieve this aim.

But concerns have been raised from customers following adverts online for vacancies in a South Africa call centre for work on a Together Energy campaign.

However, the issue has sparked a response from the company.

A spokesman said: “We do not have any sites in South Africa.

“We had a customer service function in South Africa to help us with the Supplier of Last Resort volumes which has now been closed and the function moved back to Clydebank.

“We work with six outsourced telesales contact centres in South Africa who have around 90 staff allocated to campaigns for Together Energy including a small sales verification team.

“These companies also sell for many other UK energy suppliers including most of the ‘big six’ energy companies.

“The adverts are for these companies trying to recruit people to work on our campaign.

“They are not our adverts or our employees.

“Our one full-time employee in South Africa manages these relationships and the necessary compliance for these centres.”

The firm says it is not directly recruiting for any field sales agents in Clydebank or any telesales agents in South Africa.

There was also an advertisement online for a national fields associate role in Clydebank to sell Together Energy products.

The spokesman added: “We also work in the UK with two outsourced field sales companies, who sell our tariffs and again recruit for people to sell Together Energy products.

“They are not employed by us and the job referred to is for one of these companies not us.”

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SSE intends to pay dividend despite COVID-19 disruption

Energy giant SSE has confirmed it remains “confident” about its long-term performance in spite of the disruption caused by the COVID-19 outbreak.

Ahead of the publication of its full year results, the firm stated that its board intends to recommend a full-year dividend of 80 pence per share for 2019/20, as the pandemic has not yet had a “material impact” on the group’s results.

However, SSE has stressed that the board may reconsider the timing of the dividend payment as the effects of the coronavirus become more apparent.

Gregor Alexander, finance director at SSE, commented: “In common with everyone else, our overriding priority is supporting efforts to contain and delay the spread of Covid-19 – helping communities, customers and colleagues through this exceptionally difficult time.

“Covid-19 is having an exceptional human, social and economic impact and dealing with that must be our overriding priority.

“Nevertheless, as a clean infrastructure company with first class assets and practical solutions to the critical problem of climate change and achievement of net zero emissions, we remain confident about the long-term opportunities for SSE.”

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Supporting retail market innovation for net zero

Ofgem recently published its Decarbonisation Action Plan. This set out our priorities and the steps we will take as a regulator to help achieve ‘net zero’ at lowest cost. One of those priorities is to accelerate innovation to create products and services that help consumers use energy in ways that supports decarbonisation.

Empowered consumers will be central to fair and effective decarbonisation. Ultimately, a diverse range of products and services need to be made available to consumers, empowering them to change the way they use energy in order to meet and benefit from the net zero challenge.

We’ve been speaking to innovators and investors to understand their experiences and realise we need to continue to adapt our approach to regulation to better enable innovative consumer offerings. This means Ofgem being more proactive and using our existing powers to provide the flexibility innovators need to bring new products and services to market. 

So, what can you expect over the coming months? Our plans centre around: 

  1. the launch of an expanded Innovation Sandbox Service 
  2. extending our ability to provide relief from certain supplier obligations
  3. a more permissive approach to granting supply licences restricted by geography or premises type.

Enabling innovators to test and trial

Testing new ideas allows us and businesses to understand how consumers actually react and respond to new products and services. Yet there are times when it is not always clear whether an idea is possible or not under existing rules and regulations. 

Our Sandbox service was launched in 2017 to experiment with ways of mitigating barriers when innovative plans didn’t readily fit with the rulebook. This includes the BP and Tonik trial of a new platform for trading customers’ small scale exports with other consumers. We now have a much better handle on what kinds of support innovators are looking for, and are expanding our Innovation Sandbox Service

As part of this, we are widening the scope of rules that can be relaxed for innovative trials beyond the Ofgem rulebook to cover some of the main industry codes. This includes the rules for electricity balancing and settlement (BSC), rules around the connection to, and use of, the electricity distribution networks (DCUSA), and code requirements relating to retail energy activities (REC).

We also want to better use derogations from the rulebook so that experimentation, trialling and testing can flourish. This means taking a more permissive approach and we will consult shortly on expanding the number of rules that we can provide relief from. 

Bringing innovative ideas to market

Many innovators have told us that they want to specialise in the products and services they bring to market, focusing on offerings within their expertise. This could include local or regional suppliers, social enterprises focused on vulnerable customers, or those delivering flexibility solutions. To help with this, we’ll be providing greater clarity on when we might grant restricted supply licences – that enable a business to focus on particular geographies or types of premises. We’ll say more on restricted licences and the potential for greater use of derogations to deliver innovative ideas shortly.

Innovators often approach us with ideas that blur the boundaries of the traditional definitions of generation, distribution and supply. These activities typically aren’t prescribed for in law which can undermine the confidence of innovators, investors, and consumers. Many of you think that we should be able to confirm whether a type of activity is permissible (as well as what isn’t), and we agree. This means we’ll confirm to innovators that what they’re trying to do is allowable within today’s regulatory framework, without going as far as endorsing particular business models.

Helping navigate complexity

We’re regularly reminded of just how complex the energy sector can be and we want to help the industry and new entrants navigate this complexity effectively.

Today, we’re outlining our view of how Ofgem and government reforms will help improve the environment for innovation and competition in the retail energy market by 2024. This is accompanied by refreshed guidance on what you need to know, and what you need to do, if you want to sell electricity to consumers

We’ll provide more guidance in other areas as we go forward – including on how longer-term contracts fit with the current rules. And we stand ready to amend or remove rules where these are getting in the way of good outcomes for consumers. We want to work with innovators and industry to help drive innovation so welcome your views and input

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Fears raised over Bristol Energy after suggestions it could need more public money

Speculation is mounting about the future of Bristol Energy after city council leaders hinted they might have to throw even more money at the loss-making company.

Opposition councillors expressed “very grave doubt” that the budget passed by full council on Tuesday (February 25) is legal amid fears it could mess up the balance sheet, and by law, local authorities must set balanced budgets.

The concerns stem from an “urgent” confidential report to next week’s cabinet which overview & scrutiny management board (OSMB) chairman and Tory Cllr Geoff Gollop said was “of such significance” that the budget meeting should have been postponed to allow all 70 councillors to read it.

Labour deputy mayor Craig Cheney insisted the mystery papers, whose details were not revealed, “did not materially affect the budget”.

He told the full council meeting: “We have adequate risk reserves should we need to draw down on them should we need to deal with any issues arising from that paper.”

It comes just a month after cabinet members approved the energy firm’s five-year business plan amid assurances that it did not need any further public cash.

Bristol City Council has already pumped £37million into the company.

However, the business has posted total losses so far of £29.7million, including £10.1million in 2018/19, its third year of trading.

It was initially expected to be in profit by 2019/20. But in December, Peter Beange, executive chairman of Bristol Holding, which oversees Bristol Energy, told OSMB councillors that the firm’s break-even point remained 2023/24 .

He told members: “Bristol Energy is not seeking any investments nor increased collateral within this business plan. However, its risks remain significant.

“The key risks to Bristol Energy are not dissimilar from a lot of energy companies in that it needs to secure its customer base, there is tremendous volatility of the energy sector and that might lead to a credit gap and dependency on the council for collateral coverage.”

Whether the situation has changed within a matter of weeks is now open to speculation with an exempt report, thought to contain commercially sensitive information, going to cabinet on March 3, that has alarmed Cllr Gollop.

He told full council: “The implications of the item on the cabinet agenda are of such significance that all members of this council should access it before full council considers this budget, not just members of cabinet.

“To have not had access could risk the setting of an ultra vires budget [without legal authority].

“I understand the sudden urgency of this cabinet item but to not refer to it in the (full council) papers is appalling, and for the mayor and deputy mayor to have not alluded to it in their presentations is unacceptable.”

He said he had only received access to the report minutes before full council began.

“It is inappropriate that the only time members can read something of such significance is actually during the debate when they are setting the budget,” Cllr Gollop said.

“I am not allowed in public session to explain my concerns further, so I apologise to members of the public that I’m talking in riddles but I cannot breach confidentiality.”

Cllr Cheney said: “I have been assured that that paper does not materially affect the budget.

“We have adequate risk reserves should we need to draw down on them should we need to deal with any issues arising from that paper.”

Cllr Gollop replied: “I understand why Cllr Cheney is saying that but if we could have a debate about it, I could explain why I believe it is significant and why members need at least to be aware of the potential significance when deciding whether to approve the budget today or not.

“If that budget is potentially illegal then I think that will be very dangerous.”

City council finance director Denise Murray said: “I have reviewed the details and been party to the drafting of the report.

“There is sufficient contingency risk reserves to deal with any risk to which the council is exposed.

“The budget itself is robust and the paper does not impact on the budget.”

Legal and democratic services director Tim O’Gara said: “I have also been privy to the drafting of the report and I’m satisfied that the council can proceed to set a lawful budget this afternoon without further consideration of a report which will be duly considered by cabinet next week.”

Cllr Gollop said: “Professionally I have a different interpretation of the financial position and I believe there is a potential impact fundamentally on the council’s budget and balance sheet.

“I find it very frustrating that we can’t have a debate about it because I cannot explain why I have those concerns.

“But I cannot let a budget go through without registering my very grave doubt.”

Cllr Cheney said: “The paper will go to OSMB next week so there is the opportunity for councillors to scrutinise and review that paperwork.”

Tory group leader Cllr Mark Weston said: “I don’t know what is in that report but the fact we’re having to get assurance that even if the worst happened it wouldn’t affect the budget makes me wonder what the hell is in there.