Warnings of big risks for state-run energy firm

Academic says volatile prices could make taxpayers’ cash vulnerable

A leading economist has warned taxpayers could be “exceptionally badly harmed” under Nicola Sturgeon’s proposals to introduce a state-run energy company.

Under plans announced by the First Minister on Tuesday, renewably-sourced power from the privatelyowned enterprise would be sold on to customers as cheaply as possible.

However, Dr Ariel Bergmann, an energy economist at Dundee University, warned the scheme meant taxpayers could be at risk from volatile market prices.

He said: “The big challenge is the financial risk. Both electricity and natural gas can be quite volatile in daily prices, even within the day prices.

“If you try and take out longer term contracts to minimise that volatility, you could end up being either very lucky if it’s locked in at a low price or you could be exceptionally badly financially harmed if you lock it in at a high price.”

Dr Bergmann said the company could be successful if it secures talent to strike the best deals.

However David Pike, who set up consumer-run People’s Energy in East Lothian earlier this year, said similar companies already exist in the private sector “without the need for government intervention”.

He said: “I’m confused about why it’s needed when we’re already doing it and going further.”

Scottish Conservative energy spokesman Alexander Burnett said: “As nice as it all sounds, ministers cannot ignore the fact so much of Scotland’s energy is provided by coal and nuclear, yet this organisation won’t touch either.

“If this turns into an arm’s length body which just swallows taxpayers’ cash, the only ones suffering will be the consumers.”

A spokesman for the Scottish Government said: “The fact that 31% of Scottish households were in fuel poverty in 2015, largely due to rising fuel prices, shows that the energy market is failing many households.

“We are developing plans for an energy company that will support our efforts to tackle fuel poverty.

“We are aware of several social enterprises operating in this market. Our focus is to provide consumers with low cost energy and we are committed to doing so via a publicly-owned energy company.”

Picture: Getty. Wind power could be one of the main suppliers of energy for the new state-run firm announced by Nicola Sturgeon. However, one leading economist says the idea has big risks attached.