‘U-turn’ on ditching of energy supplier

PORTSMOUTH City Council is set to U-turn on plans to end a £5.5m gas supply contract with Gazprom after the subsidiary responsible for its UK operations was taken over by the German energy regulator.

Inresponsetotheinvasion of Ukraine, the council confirmed it would use a break clause to terminate the contract with Gazprom Marketing and Trading Ltd which, until April 4, was whollyowned by the Russian government.

NextTuesdaythecouncil's cabinet will be asked to abandon this decision, which was expected to cost millions of pounds.

'The imperative that existed to end the contract in March no longer exists as, in so far as can be reasonably ascertained,nomoneyfromthe contractisflowingbacktothe Russian state,' a report by the council's head of energy services, Andrew Waggott, says. 'The change of shareholder of Gazprom M&T and the control of Gazprom Germania by the German Federal Network Agency breaks the link between the contract and Russia.

'Terminating the contract with Gazprom M&T will have an inevitable cost increase to the council which cannot be quantified, but it will result in a negative effect.'

It add that Gazprom M&T neither has contracts to buy RussiangasandthatGazprom Germania, its parent group, is unable to buy Russian gas due to sanctions. Under German law, the company can only be seized for a six-month period althoughthiscanbeextended indefinitely. Mr Waggott's report says it is ‘extremely unlikely’ it would cede control back to the Russian government.

And it adds that the decision of the US government to remove sanctions on It can be reasonably inferred from the US removal of sanctions on Gazprom Germania implied 'theyaresatisfiedthatthelink with the Russian state has been severed'.

Several councils have said in recent weeks that they will no longer be able to end similar contracts, including Eden District Council which said German control over the company was the reason for doing so.

The city council is able to use a break clause this month toendthethree-yearcontract, whichwasonlysignedinOctober, at a cost of £57,000.

However, its leader, councillor Gerald Vernon-Jackson said a replacement contract would have cost about £1m a year more due to the rising cost of gas.

'It was absolutely right that we sent the really clear message to the Russian government that we would not send them any money as a result of their invasion of Ukraine,' he said. 'But with the German government stepping in and that is no longer an issue and we are also able to save a substantial sum of money.’

Before the war, the London-based arm of Gazprom, the world's largest natural gas company, provided more than a fifth of commercial gas in the UK.