Robin Hood borrows £9.5m from Nottingham to pay green taxes
Robin Hood has once more narrowly escaped the clutches of death and will live to fight another day after the payment of a King’s ransom. However, this time Ofgem was the one shouting “your money or your life” and the hero was not the merry outlaw, but Nottingham, Nottingham City Council that is.
Robin Hood Energy and other not-so-merry-suppliers
Robin Hood Energy, a publicly-owned not-for-profit supplier, had been given until the end of October to pay a green tax bill of almost £9.5m or risk having its licence revoked by energy regulator Ofgem.
It was one of six suppliers Ofgem had ordered to submit sufficient evidence of green energy purchases in the form of Renewable Obligations Certificates (ROCs), or to pay into a renewables fund by 31st October.
The firms had already failed to meet two previous deadlines in August and September.
Robin Hood Energy was saved after securing a £9.5m loan from its only shareholder, Nottingham City Council.
The loan is to be repaid within six months with interest. Ofgem confirmed the payment meant it would not be issuing a final order and that Robin Hood could continue on its merry way.
Delta Gas and Power was also reported to have paid up by the deadline.
Meanwhile, Gurkha-run firm Gnergy was issued with a last-chance final notice to pay and Toto Energy, which owed over £4.5m, gave up the ghost completely and ceased trading on 23rd October.
This is what the situation looks like at the time of writing:
|Breeze Energy||£486,232.06||Provisional order|
|Nabuh Energy||£872,200.62||Provisional order|
|Delta Gas and Power||£91,937||Paid|
|Toto Energy||£4,555,880||Ceased trading|
|Robin Hood Energy||£9,435,925||Paid|
Four of the firms were initially named publicly by Ofgem in early October: Delta, Gnergy, Robin Hood Energy and Toto. Public warnings for Breeze and Nabuh followed later in the month when the regulator became concerned at their ability to meet the final payment deadline.
What are Renewable Obligations Certificates?
ROCs are given to accredited renewable energy producers to certify the amount of renewable power they have generated. Sometimes called a green tax, the scheme is intended to support the generation of renewable power in the UK.
Suppliers, such as Robin Hood or Delta Gas and Power, can buy energy from renewable producers and are then allocated an equivalent amount in ROCs.
Ofgem had given suppliers until 1st September to show they had made the required quota of renewable energy purchases by presenting their ROCs.
Firms that hadn’t collected the minimum amount of certificates were expected to pay into what is called a “buy-out fund” to make up the difference by 31st August.
Having missed these two deadlines, Robin Hood Energy and the other suppliers were warned to settle their bills by the end of October or face Ofgem’s wrath and the potential loss of their licenses to trade.
What went wrong for Robin Hood?
While Robin Hood purchases 100% of its supply from renewable sources, it did not have ROCs to submit and had planned to pay into the “buy-out fund”.
In a statement, Robin Hood CEO Gail Scholes said that the company had met Ofgem in September to discuss the payments.
According to Ms Scholes, with winter, a no-deal Brexit and a general election all looming, the firm had asked Ofgem to allow it to pay the bill in instalments to ensure it had cash reserves available for any surges in demand or wholesale prices.
This arrangement had previously been approved for other firms. She said the regulator had agreed to this suggestion, but for some reason changed its mind soon after.
“Despite welcoming our proactive approach and advising that as long as our ROCs payment was made by March 2020, which we had always planned to do, then this matter would be resolved,” she said.
“However, Ofgem has now written to us today (1st October 2019) demanding payment in full by 31st October.”
What is the outlook for the supplier?
Ms Scholes complained that the action by Ofgem was “frustrating” and had exposed the firm to media speculation about its viability. However, she stressed the company was in good shape.
“We operate in a tough market but we remain on track to report a surplus for this financial year and next,” she said.
“This means that as a business we are in a robust and stable position to continue to grow and challenge the big 6 energy providers in the UK.”
Robin Hood Energy has 130,000 customers and is a not-for-profit energy company, owned entirely by Nottingham City Council. It was set up to tackle fuel poverty and focuses on those customers with prepayment meters, a market which is often made up of vulnerable and low-income households.
The decision to grant the loan was made by the city council at a closed-door meeting on October 22. The council claimed “commercial sensitivity” required the public to be excluded from the proceedings.
A spokesperson for the council said the loan would allow Robin Hood Energy “to continue the successful work it has undertaken to date.”
Ofgem is certainly waving a big stick when it comes to ROCs. In a statement about the issuing of its provisional orders, it said: “Ofgem’s enforcement action sends a strong signal that all suppliers must meet their obligations or face the consequences.”
Those consequences must be giving some executives sleepless nights as the fates of Gnergy, Breeze Energy and Nabuh Energy still hang in the balance.