The West Mercia Energy Joint Committee met to discuss the company's financial performance, risk management, and future business plans. The committee approved the distribution of a £2.182 million surplus to its member authorities¹ and endorsed the annual governance statement, external audit findings, and internal audit report. Members also reviewed and endorsed the company's risk management update, focusing on medium-level risks related to trading and potential loss of business due to central government initiatives.

Distribution of Surplus

The committee approved the distribution of £2.182 million to the member authorities, retaining £1.703 million as an accumulated surplus. The distribution formula allocates profits based on the business each authority brings to West Mercia Energy (WME), with the remaining profits split equally among the four authorities. James Walton, Executive Director and Section 151 Officer at Trobshire Council and the Treasurer for West Mercer Energy, explained that the total general fund balance was £3.885 million, with a recommended surplus of £2.182 million for distribution, leaving a general fund balance of £1.703 million. The surplus retention includes £1.603 million for capital at risk for gas and electricity and £100,000 as a general reserve. The distribution amounts are:

• Herefordshire Council: £501,733
• Shropshire Council: £571,548
• Telford & Wrekin Council: £560,618
• Worcestershire County Council: £548,609

Councillor Pete Starter, Cabinet Member for Finance and Corporate Services for Hereford and the Chair of the Committee, noted the benefit to Herefordshire, and other finance members echoed their appreciation.

Statement of Accounts and Annual Governance Statement

The committee approved the Statement of Accounts 2024/25 and noted the Annual Governance Statement 2024/25, following a report from James Walton. The statement of accounts includes a narrative report, movement in reserves, an income and expenditure account, a balance sheet, and a cash flow statement. Key points from the accounts:

• Prices increased over the year, despite being lower at the start.
• Managed volumes increased, particularly gas volumes in winter.
• Customer retention was strong, with new clients acquired.
• The social value strategy was launched.
• Overall profitability and cash position were strong.

The Annual Governance Statement demonstrated no significant control weaknesses and strong governance across the organisation.

External Audit Findings Report

The committee endorsed the audit findings report presented by Alex Reilly, External Audit at WR Partners, following the completion of the external audit for the year ended 31 March 2025. The audit opinion was unmodified, indicating a clean audit report. Key points from the report:

• The audit was completed efficiently and on time.
• Materiality was set at £1.1 million.
• No issues were reported regarding fraud, income recognition, or going concern.
• The pension scheme valuation showed a surplus position, with a decreased asset recognition of £98,000.
• No corrected or uncorrected misstatements were identified.
• No deficiencies or significant deficiencies in controls were identified.

Councillor Zona Hannington, Cabinet Member for Finance, Governance, Customer Services for Telford and Reakin, and others congratulated the team for the positive audit report.

Internal Audit Annual Report

The committee endorsed the Internal Audit Annual Report 2024/25, presented remotely by Adam Williams, Principal Auditor at Shropshire Council. The report provided a good opinion on WME's control environment, with substantial assurance that governance, risk management, and internal control processes were sound and effective. Key points from the report:

• Five audits were undertaken, covering debtors, finance, corporate governance and risk management, procurement, and IT utility system administration.
• All audits received a Good assurance opinion.
• Four recommendations requiring attention were raised to address minor weaknesses or housekeeping issues.
• Positive feedback was received from feedback surveys.

Councillor Paul Davis, Cabinet Member for Communities and Civic Pride, inquired about action plans for the recommendations, and Adam Williams confirmed that action plans were in place and would be followed up in the current year's audit work.

Risk Management Update

The committee considered and endorsed the risk management update presented by Nigel Evans, Managing Director of West Mercer Energy, which highlighted two medium risks:

1. Breach of Capital at Risk Levels: The likelihood of exceeding capital risk levels was deemed rare, but the potential impact was significant, resulting in a medium risk.
2. Loss of Business Due to Central Government Initiatives: The likelihood of losing business due to central government initiatives was increased, but the overall risk remained medium. This risk was attributed to central government areas looking to mandate how departments procure their energy, such as in the NHS, blue light services, and the Department for Education (DfE).

Nigel Evans noted that the risk register is formally reviewed twice a year, with 71 highlighted risks, most of which have mitigation measures in place. He also stated that WME addresses customer inquiries about alternative offerings on a one-on-one basis, encouraging them to remain with WME.