Caithness Heat and Power 'an expensive lesson'
A project launched to meet a council's commitments to renewable energy and tackling fuel poverty resulted in a £11.5m loss, according to a watchdog.
Caithness Heat and Power (Chap) was launched in 2004 to provide a wood-fuelled heating system to up to 500 houses in Wick.
But it experienced problems in 2009 and was later scrapped.
The report by Audit Scotland for the Accounts Commission criticised Highland Council's handling of the project.
Chap, which was run by a community-run enterprise before being taken over by the local authority, was described in the report as an "innovative heating system".
It was also consistent with Highland Council's commitment to renewable energy and tackling fuel poverty.
However, a "lack of good governance" when Chap was affected by technological and financial problems led to an "expensive lesson" for the local authority, according to the Accounts Commission.
It said: "We accept the Controller of Audit's conclusion that the final cost to the council is £11.5m.
"This is a substantial and serious loss of public money caused by significant deficiencies in the governance of the project and, patently, it does not represent value for money for the council's taxpayers."
The report acknowledged efforts by the local authority to resolve the problems with Chap.
Highland Council had expected the final cost to run to more than £13m.
Following the collapse of Chap, the households it had supplied switched to an oil-fired heating system.
A private company has since taken over the scheme with the aim of providing low-cost heat to about 200 homes.
Highland Council said it recognised and regretted the failings of Chap during the early years of its operation.
A spokesman said: "Since taking control of the enterprise in 2008, the council has worked tirelessly to minimise the losses and to learn lessons to ensure that the failings are not repeated in any future venture of this nature.
"Through these efforts the council has been able to protect the interests of local residents and see carbon emissions reduce."