Scottish government releases public energy company brief

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A CONSULTATION on the creation of a Scottish public energy company was published, more than two years later.

The Scottish government scrapped plans for a national energy company earlier this year, with a watchdog agency to be set up instead.

Meanwhile, SNP members called for the establishment of the state-owned energy company at their party’s conference in September.

The energy company was first hired by Prime Minister Nicola Sturgeon in 2017, saying it would deliver cheaper and greener energy to people in fuel poverty.

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However, in the government program 2021-2022, the plans were replaced with a public energy agency, which would lead the charge of decarbonising heat across Scotland.

A consultation on the powers and role of the agency was launched on Tuesday, November 30.

At the same time, a 200-page overview of the business case for a public energy company was published on the Scottish Government website.

What can we learn from the long report on the feasibility of a national energy company?

When was the report prepared and by whom?

The report was first sent by the consultancy firm Grant Thornton UK LLP to the Scottish Government on September 25, 2019 and posted online on November 30, 2021. In the introduction, the document states that it has been ‘prepared from good faith ”, but is not exhaustive or independent. checked.

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Why does Scotland need a public energy company?

Reducing fuel poverty is the key objective of creating a national energy company. It is believed that a national company would keep tariffs low for customers.

The report says the Scottish government could ‘influence and control unit and permanent prices for consumers’, but added that this would depend on the delivery model chosen.

A whopping 24.9% of households in Scotland are classified as being fuel poor.

What are the delivery model options?

The report presented three options; fully licensed sourcing, white label sourcing and doing nothing. The first option would create “a licensed gas and electricity supplier with full responsibility for complying with all regulatory requirements”.

A white label supply would require the establishment of a contract with an existing supplier to provide services under the public company brand, with the chosen company paying a fee to the public company for each customer that changes.

The third option would exclude the creation of an energy company and maintain the status quo.

What delivery model does the report support?

The consulting firm rated all three options based on several criteria, with the white label sourcing option coming first. However, the report notes that the full licensed procurement option would have been competitively evaluated, but was “evaluated as not being deliverable on time.”

The Scottish government had given a fixed date of March 2021 for the creation of any business.

Why was the white label sourcing model chosen?

The report notes that it would be much cheaper to establish a public energy company under this model, compared to the fully licensed supply option, which would have up-front set-up costs of between 2.5 and £ 4million, and a working capital requirement of approximately £ 3.5million. He would also need a significant amount of credit, especially for the winter months, estimated at around £ 7million.

The report states: “One of the main advantages of white label being the preferred option is that the level of funding required is significantly less than that which would be required under other options.

“There is no capital requirement under this option and the third party vendor will bear a large portion of the costs of the support function. ”

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How much money would this save the average Scottish consumer?

The report claims that customers of a public energy company would benefit from annual savings of £ 58.97 for a dual customer and £ 26.21 for a single fuel customer.

He adds: “It is not possible at this time to calculate exactly how many people this could help lift themselves out of fuel poverty.”

However, the report suggests elsewhere that those most at risk of fuel poverty should be offered the lowest rates, through coordination with local councils.

The National:

What could be the benefits of a public energy company for the Scots?

In addition to the financial benefits, the report touts marketing campaigns on energy consumption and the benefits of switching suppliers to increase public awareness.

The report notes that Scottish customers are less likely to switch providers than those in the rest of the UK.

He also notes that a public energy company could allow the Scottish government to have “more influence and control over the reliability of supply”. However, this could be limited by pursuing a white label option over the full offering.

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What concerns are noted in the report?

Although the consultation was released ahead of the energy crisis in October this year, it notes that there is a high risk of energy companies collapsing and a trend towards closing small businesses.

He suggests that the reasons for this should be “fully considered” before starting a business. Concerns have also been expressed that new energy companies typically need high levels of investment and experience losses in the first few years of operation.

The report cites Robin Hood Energy, which had initial seed money of a £ 11million loan and subsequent funding of £ 25.5million from Nottingham City Council to make up for the losses.

What is the current position of the Scottish government?

Michael Matheson, Net Zero and Energy Secretary, said: ‘As work on a public energy company has been halted during the pandemic, the Scottish government is supporting the future potential of local energy companies, and the consultation is seeking to seek advice on the role of the Agency in supporting this model.

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