Portsmouth council paid Â£750,000 to six staff atÂ taxpayer-owned Victory Energy '“Â including Â£270,000 to chief executive
THE chief executive of a council-owned energy company shelved before it sold a single kilowatt of electricity has been paid Â£270,000, The News can reveal.
Contractors and consultants at Victory Energy Supply Limited have cashed in with lucrative public payouts during the set-up and operation since May last year.
Worked up as a joint venture with Portsmouth City Council, former SSE senior executive Daniel O'Hara led the way on trying to establish Victory Energy as a major player in the industry, earning money for public services.
Mr O'Hara was paid Â£270,050 as a contractor for 17 months via his own limited company, meaning his Â£750 day rate, which could equate to Â£180,000-a-year, was not reported publicly. Other high salaries are reported online.
Independent councillor Claire Udy said: '˜It's shocking that no-one else really knew about the ins and outs of Victory Energy until the Liberal Democrats took over the council.'
She added: '˜That money has come out and the council will have to carry on paying that money if it decides to carry on with this. That money will be pouring out while services are going without.'
Conservatives have defended Mr O'Hara's pay packet, saying they were following the '˜rules of the game' in a commercial environment.
Despite councillors voting to axe the firm, with Â£1.5m invested by August this year, it remains running with contractors and employees still being paid.
Axing the firm would see the council lose between Â£2.5m and Â£3.5m, it was warned in August. It had been ready to enter the market in July.
Among the costs of setting up the firm, The News found:
n Mr O'Hara was paid Â£270,050 through a limited company between May 2017 and September thisÂ year.
n His Â£500 day rate soared to Â£750 when the business case was approved.
n Five contractors earned Â£474,190.44 between them in the same period.
n A salary bill for 14 employees was Â£285,850.82 including national insurance and tax between November 2017 and September this year.
n Lawyers CMS were paid Â£203,804 for legal advice.
n Industry experts Baringa reviewed the business case for Â£24,150.
n A Lib Dem-ordered review by PriceWaterhouseCoopers cost Â£92,915.
James Price, campaign manager at the TaxPayers' Alliance, said: '˜It's completely baffling why a local authority thought it in any way appropriate to start an energy company.
'˜It will come as no surprise to taxpayers, then, that this venture is already suffering losses of millions of pounds, all of which will have to be borne by those taxpayers.'
He said the council should unwind itself from the project.
A report said Mr O'Hara '˜brings the industry knowledge, regulatory background, expertise, skilled resources and industry contacts'.
In a statement, Southsea-based Mr O'Hara said: '˜I'm an experienced industry professional and keen to make a success of this business.
'˜I'm also a local resident, and I remain keen to work in partnership with the council to give Portsmouth people a choice of green, lower-priced energy, as well as services to improve energy efficiency in their homes and reduce bills.
'˜This is why our plans include a team of energy advisors, an energy efficiency service and a Â£1m-per-year community fund to help people who can't afford to heat their homes.'
Council leader at the time, Donna Jones, had dreams of rivalling Nottingham City Council's publicly-owned energy firm Robin Hood, valued at Â£30m.
But those were dashed when power changed hands to Gerald Vernon-Jackson's Liberal Democrats and the company was halted. Its future is in limbo as that decision is being reviewed.
'˜One of the big concerns that was raised was how much money is being spent on very high salaries,' Cllr Vernon-Jackson said.
'˜The issue as far as I can see is that in the year between the company being established and change of political control (at the council) there were no public reports to anybody about what was going on and how much money was being spent.
'˜Things have been done in secret and that's not the way that should be done if you're spending public money.'
Cllr Vernon-Jackson's cabinet stopped the firm in its tracks in August following the commission of a Â£92,915 review from PriceWaterhouseCoopers.
That has left members of former Conservative leader Cllr Jones's cabinet blaming the Lib Dems for cutting down the business too early.
Cllr Jones said: '˜If I were still leader of the city council this company would be into its third month of trading and providing 100 per cent renewable energy to the people of Portsmouth and the surrounding area.'
Inner workings of Victory Energy's infancy uncovered by The News reveal Mr O'Hara approached Cllr Jones over a coffee about working with the council to cut its energy bills.
By chance Cllr Jones had recently had a meeting with energy secretary Greg Clark when the prospect of publicly-owned firms was discussed.
Cllr Jones and Mr O'Hara discussed this and instead of taking Mr O'Hara up on the bill-saving pitch, they met again weeks later. At the second meeting, Mr O'Hara pitched a business case for an energy company to Cllr Jones' cabinet, together with the council chief executive David Williams, finance officer Chris Ward and city solicitor Michael Lawther.
All four are named as directors of the company.
The council defended the amount spent on Mr O'Hara and said he should not have been paid as an employee as the project was a joint venture at that stage.
A spokesman said: '˜The council negotiated a discounted daily consultancy rate given that the proposition was at an early stage of development and that, if successful, this would be an enduring partnership arrangement.'
A similar industry consultant would have cost Â£1,000 a day, the council added.
It said there was no tender process so as to protect the '˜unique features in his proposal'.
The decision to axe the firm has been called in by Labour and Conservative groups, meaning it may yet be resurrected.
A cabinet meeting is expected to reconsider the decision, with a possible meeting in December.
In a statement, Cllr Jones said: '˜Chief executive officers, senior staff, and directors in the energy industry in the UK earn salaries larger than the equivalent level post in local government. In fact the council were paying heavily discounted rates for the calibre and experience of professionals in this market place.
'˜Setting up a fully-licensed energy company is a highly specialised activity and heavily regulated, therefore if the council wanted to operate in a commercial market such as energy, it's key that we had the right people.
'˜Ultimately, the joint venture arrangement would see the council as the owner of a very profitable business with those profits making around Â£5m per year by year five and those profits being ploughed back into council services.'
Former deputy leader Luke Stubbs added: '˜If you're going to operate in the commercial environment you have to follow the rules of the game '“ that means some people will be highly paid.'
He said the Lib Dem move was '˜extraordinary'.