QUALITY AND
17th December 2001
PART 1
PERFORMANCE
(OPEN TO THE PUBLIC)
SCRUTINY COMMITEE
SUBJECT:
ELECTRICITY CONTRACT SITES
SUPPLIED BY INDEPENDENT ENERGY
REPORT OF:
DIRECTOR OF CORPORATE SERVICES FOR INFORMATION
A. REPORT SUMMARY
1.
PURPOSE OF REPORT:
To update members on problems encountered with Npower and KPMG on the collapse
and calling in of receivers at Independent Energy.
2.
RECOMMENDATIONS
Members are asked to approve the involvement of the regulator to assist in resolving the
problems.
3.
ROUTING
Direct to council.
4.
IMPLICATIONS
4.1
Resources (Finance/Staffing):
The operation of an efficient Energy
Management Group contributes to
considerable cost savings to the City
Council.
4.2
Performance Review:
Not Applicable.
4.3
Environmental:
4.4
Equal Opportunities:
Not Applicable.
4.5
Community Strategy:
Not Applicable.
4.6
Anti-Poverty Strategy:
Not Applicable
IF YOU HAVE ANY QUERIES
PLEASE CONTACT
Jim Gosney
793 3472
QUALITY CONTROL
BACKGROUND DOCUMENTS
Report Prepared by Jim Gosney 793 3472
Checked by
Donald Simpson 793 3290
Corporate Services (Finance), Salford Civic Centre, Chorley Road, Swinton. M27 5AW
REPORT DETAILS
INDEPENDENT ENERGY / NPOWER
The City Council entered into a contract with Independent Energy in June 1998, for the supply of
electricity.
Unfortunately, Independent Energy had problems in registering all the sites. In July 2000, a
compensation claim of £105,000 was agreed with Independent Energy. Unfortunately, in
September 2000 they went into receivership without paying the compensation and KPMG were
appointed as the receivers. Npower bought all the business customers from the receivers, and
agreed to supply under the same contract terms.
On 31st March 2001 the Independent Energy Contract was completed and another supplier was
appointed (Scottish Power).
This encouraged Npower to commence invoicing for most of the sites, these invoices being
inaccurate and estimated and we were therefore, unable to authorise them for payment.
As a result of the lack of accuracy with the invoices, the Council could not agree to pay them.
Npower, subsequently, threatened to disconnect the supply at three of the sites they thought they
still supplied, but, Npower refused to inform the Council as to which sites they were referring to.
As a result of that, the City Council referred the matter to the regulator (Energywatch), who
investigated and prevented Npower from disconnecting the supplies.
On the 5th September 2001 a meeting took place between officers of the council, a Npower
representative and a representative from KPMG.
There were three main issues that the council expected to be addressed:The Integrity of the invoices
The legal relationship between Independent Energy, Npower and KPMG
The outstanding compensation issue
As regards to the legal position no information, i.e. documentary proof as to the relationship
between IE/KPMG/Npower has been received.
The Integrity of the invoices was questioned and Npower had used a “model” to calculate the
councils liability at a figure of £830,000.
It was agreed that we would take the model away and compare it with the actual; taking a sample
of ten sites.
The results showed that in each of the ten sites the actual calculation resulted in 25% of the
amount claimed by Npower. When applied across all the sites we would actually owe much less
than the figure of £830,000 quoted by Npower less the compensation of £105,000.
The outstanding compensation, Npower stated that everything would be taken into account, to
date no acknowledgement or payment has been received.
A further meeting on 25th September was attended by the same people but with an additional
representative from KPMG.
The results of the analysis of the ten sites were presented to them, they would not accept an error
in the “model” and insisted that it was a case of us choosing ten particular sites. We had
undertaken further investigation into a further fifteen sites which showed the same results.
Npower and KPMG would not accept a challenge to their “model” (which they claimed had been
used before) and nothing was resolved at this meeting.
It was suggested to Npower, that if the results of these investigations into a further ten sites
confirmed, that the amount should be 25% of that actually charged would they then accept the
position and the inaccuracy of their “model”. They stated that they would not accept it.
They then asked for a payment on account, which was refused.
Although actually stating that they wanted a negotiated settlement, they were clearly refusing to
negotiate at all, once it was becoming apparent they had claimed a sum in excess of what they
were entitled to.
Despite promises to the contrary no documentary evidence of the relationship between
Npower/KPMG /Independent Energy has been received.
On the 29th October the City Council wrote to Npower and KPMG formally requesting their
revised settlement figure and compensation claim acknowledgement, to date no response has
been received.
It is planned to meet with the regulator to discuss all the areas and to find a way forward and
seek an explanation as to why we are being treated in a very unprofessional manner by both
organisations.