Ofgem called in to rule over SDEN’s unfair heating prices

Sutton’s deputy leader has much to account for over the ‘too complicated’ business model for the misfiring power network. CARL SHILTON reports

Jayne McCoy: did she mislead over SDEN’s business model?

Just days after appointing independent accountants to conduct a review into the business of Sutton’s controversial heating network, SDEN, and the council’s own finance director has given the clearest indication yet of his own lack of confidence in the work of his predecessors to prove that the local power business could ever be viable.

The comments, made by senior council official Richard Simpson to the chair of a local residents’ association, could prove to be very bad news indeed for the deputy leader of Sutton’s Liberal Democrat-controlled council, Jayne McCoy, who has been an enthusiastic supporter of SDEN over many years.

SDEN, the Sutton Decentralised Energy Network, was last week described by a local MP as a “catastrophic failure”, as it continues to stumble from crisis to crisis, with just one corporate customer for its over-priced heating and hot water, and with households in the blighted New Mill Quarter in Hackbridge still suffering power outages.

Inside Sutton has discovered that in addition to the council-commissioned review to be conducted by CIPFA (the Chartered Institute of Public Finance and Accountancy), SDEN is now subject to a formal and lengthy complaint from a resident of New Mill Quarter to Ofgem, the heating regulator.

The complaint to Ofgem is bad news for Sutton Council, and very bad news for SDEN’s sole customers, Barratts, who built the NewMill Quarter and agreed to make the energy network its monopoly heating and hot water supplier.

The complaint to Ofgem states, “False assertions were made concerning pricing, reliability, green energy and service standards to both customers and developers…

“SDEN is under investigation following allegations of fraud, false accounting and price inflation. Its managing director stepped down shortly after this revelation.

“Had SDEN been transparent and honest with its claims and business model, I would not have purchased here.

“Accordingly, I make the following evidenced complaint to request disconnection from the SDEN system, to receive compensation for distress and misrepresentation, to receive a refund for overcharges and to have a suitable alternative heat source provided by SDEN such as an air source heat pump.”

SDEN was used by the LibDems on Sutton Council to provide “green” planning credentials to justify building the £210million polluting waste incinerator at Beddington. But to this day, nearly three years since the Viridor-operated furnaces were switched on at Beddington Lane, the incinerator has never provided any power to SDEN or its customers.

Overheated? The claims made about the SDEN heating network to prospective buyers of houses in New Mill Quarter quickly unravelled

Key to all this was the original business model provided to the council, which claimed SDEN could provide “green” energy and make a profit without having to charge exorbitant prices to the end-users.

Thanks to dogged persistence from independent councillor Nick Mattey, last year Sutton Council was forced to abandon its efforts to keep that SDEN business model top secret.

Two adverse rulings from the Information Commissioner saw the council, after spending £30,000 on legal costs, forced to drop the case just as a judge was about to order them to release all the information.

With the business model in the public domain, the flaws in the SDEN case quickly became obvious.

Frank: Sutton finance director Richard Simpson

So obvious, in fact, that now even Richard Simpson, the council’s finance director, appears to be trying to distance himself from the dodgy dossier as quickly as possible.

In a late-night exchange of emails with the chair of the NMQ Residents’ Association on Monday, Simpson wrote,  “The model that went to HEB…”, that’s the housing, economy and business committee, which is chaired by council deputy leader Councillor Jayne McCoy, “…was updated at financial close on the project with a series of updated assumptions and still had to achieve a minimum of the equivalent IRR [internal rate of return] to progress.

“This is the subject of the CIPFA review as you are aware.

“I didn’t work for the council in 2015 or 2017, so I am unsure about your question about whether I misled members.” Translation: “Nuffink to do wiv me, guv.”

Simpson also quoted from council reports from 2017, which delegated authority to McCoy and senior council officials to allow SDEN to move forward and “to agree amendments to the business case that may be required, insofar as the overall parameters of the business case can still be achieved and to award and sign contracts with preferred bidders”. Those are out italics, for emphasis.

What critics of SDEN’s over-priced and unreliable heating system have long maintained is that the business never was and never could have been viable, as Councillor McCoy and her LibDem colleagues always maintained it would be.

In his email, council official Simpson wrote, “My reading of the recommendation from four years before I joined the council…” (or “Definitely nuffink to do with me, guv”), “… is that if the overall parameters had changed in the final model any decision would have had to be referred back to HEB.”

In other words: it’s all McCoy’s fault.

Sheldon Vestey, the chair of the New Mill Quarter RA who has pursued this case relentlessly, today described Simpson’s comments as “an interesting turn”.

Vestey told Inside Sutton, “I was once told by McCoy that this was very complicated and I wouldn’t understand it. I do, however, now think that I do understand it. Perhaps to her detriment.

“The finance director of Sutton Council has confirmed that there was an IRR, an internal rate of return, required for the project to proceed.

Sheldon Vestey: relentless

“This is something that Councillor Jayne McCoy denied for over a year.

“What makes this really bad is not just that Jayne McCoy lied about it, but that if she, as HEB chair, or colleagues, fixed pricing to this level, they artificially inflated it to hit this level to permit millions in funding from the GLA, the Department of Business, Energy and Industry and so on.

“They then went on to deliberately, and I would say fraudulently, make claims about the network they knew to be false to sell almost a quarter of a billion of property and sign up developers. At the same time, this also secured approval for the incinerator contract.

“Now, if McCoy can’t substantiate her pricing, as the ultimately responsible party (something the finance director has been keen to say), it would not be unreasonable to say  McCoy may be guilty of large-scale fraud and attempts to hide it.

Read more: Sutton heat network director quits as fraud inquiry begins
Read more: SDEN’s business plan ‘dishonest at best, fraudulent at worst’
Read more: SDEN: A timeline of council bungling and sky-high fuel prices

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2 Responses to Ofgem called in to rule over SDEN’s unfair heating prices

  1. Jim Duffy says:

    If fraudulent claims secured the approval for the incinerator, that would seem to undermine its moral and, perhaps more importantly, its legal standing.

  2. Hans Mien says:

    So you have Two Councils getting into industries they know nothing about and cocking it right up. Hotels & Energy. Bunch of muppets. Not only that freely spending other other people’s money is easy when it’s not yours isn’t it. Lastly getting there hands burnt and ripped off. Amateurs!

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