ENERGY giant SSE is in talks with Edinburgh City Council over the renewal of a lucrative “preferred supplier agreement” to thousands of local authority tenants – just weeks after it appointed council chief executive Sue Bruce to its board.
Ms Bruce announced on July 17 that she would be taking on a £50,000-a-year non-executive director role with the energy company. The announcement was criticised in several quarters over a potential future conflict of interest between the city council and her private sector role.
Now the Evening News can reveal that talks are to begin between the council and SSE on a continuation of a deal which sees it listed as the local authority’s preferred supplier of gas and electricity for council flats.
The deal is estimated to be worth at least £11 million in revenue for SSE.
Today, questions were once again raised about the wisdom of a local authority chief executive assuming a role in a major private sector company. One critic described Ms Bruce’s role with the energy firm as “untenable” given the imminent contract review, calling for her to declare an “unhealthy” conflict of interest.
The News was alerted to the upcoming review by a whistleblower within the city council who believes Ms Bruce’s dual role makes it difficult for a fair decision.
Ms Bruce, who is paid £158,000-a-year by the local authority, today strongly refuted any suggestion of a conflict of interest and said that she would take no part whatsoever in the decision over the preferred supplier status. But the council employee said: “It should be a massive red flag for councillors and senior officers. It certainly seems like a conflict of interest.
“No matter what decision is made, this will not look right to the public.”
As a non-executive director of SSE, Ms Bruce must hold shares totalling £32,000, the value of which could rise if the contract is renewed.
SSE has 200 preferred supplier agreements with council and housing associations across the UK. Dundee City Council also uses SSE as its preferred supplier.
However, its spokesman conceded none of those organisations and authorities had an SSE board member – apart from Edinburgh.
When she announced her new role last month, Ms Bruce made it clear she would be giving part of her SSE salary to charities which benefit the city and would be carrying out her new duties - which amount to 12 days a year - in her own time.
She also received the support of council leader Andrew Burns who publicly backed the new role and described it as positive for the Capital.
The controversy centres on new council tenants who are automatically signed up to a power account with SSE under existing arrangements that date back to 2001.
Tenants are only allowed to switch suppliers after first waiting a mandatory 28 days. SSE has previously been awarded contracts lasting as long as five years.
More than 22,000 council lets agreed over a ten-year period between 2002-12 would have involved the creation of accounts for the power giant.
The company was put on a month-by-month rolling contract as preferred supplier last October. However the firm was told in May – a month after it was fined a record £10.5m by regulator Ofgem for mis-selling gas and electricity – that the arrangement would be reviewed later this year.
The review will take place within weeks of Ms Bruce officially beginning her second job – with SSE.
Green Party convener Councillor Steve Burgess said: “If the council chief executive was to be part of any future decision over a preferred electricity supplier then this could be seen as a conflict of interest. As with any other staff member or councillor who has a personal interest in a council matter there’s a need to remove oneself from any decision making.”
Eben Wilson, director of campaign group TaxpayerScotland, said the opportunity for Ms Bruce to get into trouble over a conflict of interest appeared “high”.
He said: “If she’s saying ‘I’m trying to help SSE make good profits out of their customers’ and some of those customers are people she represents, she has a problem on her hands. She’s got a mixed allegiance almost by definition. A director, even a non-executive director, has a duty to the shareholders of SSE. Now she’s got a duty to the shareholders of SSE and a duty to the ‘shareholders’ – that is the taxpayers – of Edinburgh, she’s in trouble. It’s very unhealthy that she gets put in this position. It seems to me that she’s in an untenable situation.”
It’s a “situation” that will see Ms Bruce hold £32,000 worth of shares in her non-executive role. Despite pledging a chunk of her salary to charitable causes, she has still come under fire from union chiefs who want her to concentrate on her six-figure salary job leading the city – and its 20,000 strong workforce.
The move is also a potentially lucrative one for SSE. It could reap as much as £11m if a new five-year contract is agreed – according to estimations backed by figures from the Department of Energy and Climate Change.
Colinton/Fairmilehead Ward councillor Jason Rust has demanded answers over the content of any talks that took place before Ms Bruce accepted the job.
He said: “It is a personal judgement call for the chief executive to make as to the existence or not of any potential conflicts of interest in assuming any further role.
“My questions are not to call into question that judgement in the circumstances, but as it is new ground for a council chief executive it is important to be open about those processes.”
John Stevenson, branch president for Edinburgh’s largest union, Unison, said all council workers have to declare conflicts of interest.
He said: “The new council code of conduct defines a conflict of interest as something that has the potential to interfere with decisions in the course of work for the council, or appear to or could be perceived to influence or interfere with the decisions made in the course of work for the council.
“This is especially important in financial issues. Unison would expect all staff to be treated equally under this code whether they be a cleaner or a chief executive.”
Edinburgh West MSP Colin Keir said Ms Bruce would need legal advice. He said: “Like anything else in the public sector, whether you’re an MP, MSP, councillor or senior officer, there are standards which have to be upheld.”
However, former city council leader Donald Anderson said the critical point was that Ms Bruce was accepting a “non-executive” position.
He said: “She’s not going to be involved in any of the operational matters there. I have to say it’s very, very unusual for any major private company, let alone one of Scotland’s greatest companies, to invite a council chief executive to join their board. It is quite an accolade I think for Sue and the city.
“All she needs to do to make sure that there aren’t any difficulties is just be open about any issues that are there.”
SSE originally paid £30 for each property signed up under the scheme into an energy advice fund run by the council, but that deal no longer exists.
Tenants signed up by SSE under the preferred supplier contract do not receive any discounts, with the council saying they were put on the company’s standard rate.
The power firm refused to confirm what tariffs council tenants were paying under the arrangement.
The company said: “It is SSE policy that we don’t provide specific details relating to contracts with customers, including business customers such as councils, as the information is confidential.”
The contract is under review at a time when power bills are soaring. The average household bill has climbed to a record high of £1353 a year, according to price comparison service uSwitch.com.
SSE warned customers faced higher bills in May, despite posting a 27.5 per cent rise in profits to £410m.
Ann Robinson, director of consumer policy at uSwitch.com, urged customers to shop around as soon as they could. She said: “Consumers could be sitting on savings of up to £294 by staying loyal to their energy supplier.”
How SSE could benefit
ESTIMATES energy supplier SSE could reap as much as £11 million from a new five-year deal are based on the latest figures for average power bills and council tenancies.
A total of 1854 new council lets were approved by the city council in 2011-12. That figure multiplied by the average household energy bill of £1353 a year represents a potential revenue of £2.5m for the power firm, or £12.5m over five years. That is reduced slightly when the three per cent of households switching electricity suppliers every quarter is taken into account – thus potential revenue would be about £11m.
• The interests of power customers are protected by Ofgem. For more information go to www.ofgem.gov.uk.
The council’s explanation of the situation
EDINBURGH City Council issued the following statement in response to questions put to them by the Evening News about the preferred supplier contract that exists with energy generation and supply giant SSE.
The statement read: “To make it easier for council tenants when they first move into a new property, the gas and electricity supply is already set up.
“SSE is the council’s supplier for this service and tenants can then change to another energy provider if they choose to do so.”
Extra information supplied by the council explained:
• The arrangements were put in place in 2001, long before Sue Bruce became chief executive of the council in 2011.
• The agreement does not cost the council anything. The relationship is between the tenant and the energy supplier. The council makes no payments to the energy supplier.
• Any future procurement of a preferred supplier agreement for the provision of energy to empty council homes would be approved by committee.
• Sue Bruce will not be involved in this process.
n SSE was the council’s energy suppliers for services and building until March 2013, at which point the council replaced it with EDF.