Shetland Islands Council is talking to NorthLink about buying its ferry fuel through the shipping company to save money as prices soar way beyond expectations.
The approach comes as the rising cost of marine gas oil for the inter-island ferries looks set to cost the council £540,000 more than it budgeted for this year.
To make matters worse an expected saving of £90,000 from joining a nationwide fuel purchase scheme is not going to materialise because the project has been delayed.
There are further headaches for the local authority from its bill for heating oil which looks likely to be overspent by £160,000 this year. The electricity bill is shooting up too.
In total the local authority’s energy use is likely to cost over £1 million more than it budgeted for in 2011/12, rising to £7.1 million.
The council was only expecting a rise from £5.97 million last year to £6.37 million. The unexpected extra comes at a time when the council is trying to slash its spending and reduce its energy use.
The ferry fuel problems are to be reported to councillors on the new-look environment and transport committee tomorrow when it meets for the first time.
Today the council’s head of transport Michael Craigie said the talks with NorthLink were to see if the council could “piggyback” its existing fuel contract and bring savings for both outfits. However he conceded there may be competition regulations which get in the council’s way and the type of fuel the ferries need is a lighter form of oil than NorthLink is supplied with.
Officials are also to investigate whether it might be cheaper for the council to source fuel itself rather than through the current set-up which is under a contract that the Office of Government Commerce has with GB Oils, the main fuel supplier to Shetland.
Mr Craigie said: “We don’t have any answers today but hopefully in a few weeks we will have something more certain.”
It is the third year running that the fuel price rollercoaster has upset council budgeting. For the past two years various maintenance and refurbishment jobs had to be postponed or rescheduled to find the extra cash.
This year the council is considering whether to pursue a series of so-called spend-to-save schemes to make energy economies in future years, including switching buildings to the Lerwick district heating system, using micro-wind turbines and fitting new storage heating systems which operate on a lower tariff.
Building bigger bitumen storage tanks at the Scord Quarry fitted with new electric heating could also save money and energy, partly by reducing the number of ships carrying tar which have to come to Shetland.
Next year the council faces another unwanted bill when the UK’s carbon reduction commitment (CRC) energy efficiency scheme kicks in. It requires the council to buy carbon allowances to match its use of carbon-based energies other than for transport or domestic purposes. It is expected to add around £150,000 a year to the council’s energy bill.