A council-backed energy services firm has reported an increase in profits for the past financial year despite a “volatile” period in global energy markets.

West Mercia Energy, a purchasing consortium backed by four local authorities including Shropshire and Telford & Wrekin councils, was created in 1989 and manages energy contracts for around 2,250 public sector organisations.

A report on the business’ annual accounts delivered to the joint committee of member authorities showed the firm recorded a net profit of £2.5 million with annual turnover increasing by around 38% to just over £186m.

A surplus of just over £2.4m will be distributed to member authorities in October, with Shropshire and Telford & Wrekin Council set to earn just over £600,000 each. The other members of the scheme, Herefordshire and Worcestershire councils are set to benefit from dividends of £551,000 and £603,000 respectively.

Treasurer James Walton told the meeting the firm was in good shape after recording improved results over the past two years.

“Overall we’ve seen a good position over the year and a return to significant profitability for the organisation,” he said.

“We’re seeing a healthy accounts position, a strong balance sheet and as has been reported throught the year to members we’re seeing the organisation working to a high standard.”

The annual report to the joint committee said that despite price rises for customers in 2023/24, customer retention had been “excellent” and said the volatility of the energy market had led to contracts being signed with two new local authorities and a number of education academy trusts in an effort to reduce their energy costs.

“The net profit of £2.5m compares favourably against the budgeted level for the year and is above the prior year result of £2.4m. This is an excellent result for the business whilst at the same time providing competitive rates to our customers through the year,” the report said.

“As a result of this [difficult] market landscape, price rises seen for 23/24 were at  a level much greater than previous years. This was exacerbated by the fact that our prices for the 22/23 financial year were, compared to the general market rates, extremely low.

“Whilst the price rises were much greater than our norm, pleasingly our commodity rates were 29% below the average market rates and 54% lower than the government support scheme for 23/24.”