Rising energy bills threaten city with £10m black hole

COUNCILLORS have been warned to budget for a massive £10 million rise in energy bills as they start planning next year's spending priorities.

The stark announcement from finance chiefs has raised fears about the impact on essential services, such as care for the elderly, which are already stretched.

The news is known to have taken senior politicians by surprise, and they are now preparing to order officials to find ways to reduce the council's carbon footprint.

A report will be produced outlining the local authority's fuel consumption over the past two years, as well as identifying what has already been done to conserve energy.

Also included will be the scope for both short and long-term measures to combat rising costs – which could include measures such as the insulation of buildings.

The council's current gas and electricity bill for all its buildings – including schools – is thought to be around £12m.

Director of finance, Donald McGougan, said: "There are growing inflationary pressures on fuel and fuel-related costs.

"Current estimates show that electricity costs are likely to increase by 94 per cent in 2009/10 and gas by 70 per cent.

"Together with fuel increases, this could add in the region of £10m to the budget.

"Clearly there will have to be a rigorous approach to energy efficiency in order to offset some of these costs, and this will be an area of focus during the budget process."

City finance leader, Councillor Gordon Mackenzie, added: "Clearly this is something we're going to have to take even more seriously, and that's why I'll be looking for further information by the time of the next committee meeting."

The council runs competitions for its electricity and gas contracts, with the electricity deal also covering properties owned by Lothian and Borders Police and the fire brigade.

The Scottish Government recently announced plans to bulk-buy electricity for the whole public sector with a view to saving taxpayers' money in a climate of soaring energy bills.

This would replace hundreds of separate contracts throughout the country, and the local council is thought to be keen to join this set-up.

Labour group finance spokesman Ian Murray said councils should be able to take advantage of long-term fixed-rate contracts.

"I don't know if this is possible or not, but I would have thought an organisation the size of the council would be able to negotiate a good deal," he said.

He added: "I'm disgusted that giant energy firms are making hundreds of millions of pounds profit while everyone else has to struggle along."

Graham Kerr, spokesman for the consumer group energywatch, warned about the impact of rising costs on local services.

"In many ways, for consumers the secondary effects (of fuel price rises] can be just as devastating," he said.

"Not only are the costs of their goods going up, but essential service providers like local authorities are going to have to make some really tough decisions about the provision of their services, because of the enormous rise they are going to see in their energy bills."