A bold plan for public sector bodies such as councils, hospitals and emergency services to cut their soaring energy bills by clubbing together to buy fuel in the futures market is being aggressively championed by one the UK’s largest local authorities.

Local authorities spend more than £2bn a year on fuel – much of it oil for heating schools – but this does not include large quantities of petrol and diesel bought by private contractors, such as refuse collectors and highway maintenance companies.

Because individual amounts spent by councils are too small to interest futures traders, Kent County Council has taken the lead in writing to public sector bodies asking them if they would be willing to co-ordinate fuel purchase with other public bodies. A meeting of local authorities is being planned for next month to discuss the idea.

Local authorities would have reduced their fuel bills by a third if they had bought on the futures market a year ago, for delivery this month. The futures price for Brent crude, the benchmark used for European oil purchases, was quoted at just over $71 a barrel a year ago compared with Thursday’s spot price of more than $108 a barrel.

But traders warned that public sector bodies, funded by taxpayers’ money, could be embarrassed if prices subsequently fell after deals had been agreed.

Dozens of councils, led by Hammersmith & Fulham, lost large amounts of money on interest rate swaps sold to them by banks in the 1980s. The affair ended up in the courts, with the House of Lords ruling that councils had had no powers to enter swap agreements in the first place, leaving banks bearing losses of £500m to £600m.

The Office of Government Commerce, an independent body established by the Treasury to achieve better value from public spending, has been informed of the Kent proposals, according to an article in Friday’s Municipal Journal. “Town halls are desperate to limit the impact of rising fuel costs on vehicle fleets and want to reduce exorbitant heating bills for public buildings,” it says.

Improvement & Efficiency South East, one of a series of regional bodies established by government to help councils improve their efficiency, which is helping Kent develop the proposals, told the Financial Times that local authorities had been asked to provide details of individual purchases and fuel storage capacities.

Councils would be asked to a meeting next month to flesh out the proposals, said Andrew Larner IESE director. Storage facilities were essential, he said, if councils and other public sector bodies were to make bulk purchases of fuel in the wholesale market.

Kevin Harlock, director of commercial services at Kent County Council, said: “We need to create critical mass. A link-up between council and NHS trust could be just the start. Police and fire services could also benefit by co-ordinating purchases.”

The county council already co-ordinated its electricity and gas purchases with about 80 local authorities, including on the futures markets, said Mr Harlock. Distributors bidding to supply fuel to local authorities currently competed on distribution costs but the price of oil itself was fixed according to the spot market price five days before delivery, he said. The county council’s fuel bill had risen by 23 per cent at its worst point this year, said Mr Harlock.

The Local Government Association said: “Councils deliver more than 800 different services to people and the savings which could be achieved are likely to be substantial.”