State energy venture would cost ‘millions’
SNP plan faces price and EU hurdles, warn experts
A State-owned energy firm will cost millions to set up and struggle to offer cheaper deals than the private sector, say experts.
nicola sturgeon announced this week that she will form a publicly owned firm to sell gas and electricity by 2021.
It would offer lower prices than the Big six providers, made up of firms such as Scottishpower.
But experts yesterday said setup costs could be huge, while the firm might be unable to compete with private sector cheap deals and could run into difficulties with eU ‘state aid’ rules. Concerns were also raised about Miss sturgeon’s commitment that the firm would largely use green energy, since renewables are so variable in output.
opponents warned that it could become a venture which burns through taxpayers’ cash.
david Hunter, of energy firm schneider electric, said most people who have switched tariffs using price comparison websites have already made the ‘vast majority’ of the savings they could make.
He added: ‘the retail supplier profit on competitive energy deals is relatively low.’
Mr Hunter pointed out that nottingham City Council’s Robin Hood energy lost £3.6million in its first year and had to impose higher price rises than Big six suppliers.
He highlighted eU state aid rules as another possible obstacle, saying: ‘You do have state-owned firms operating these markets but they do have to stay within competition rules.’
He said potential questions would be: ‘does the Government use its scale, borrowing power and financial power – and does that represent a distortion of competition?’
Addressing the snP conference on tuesday, Miss sturgeon said a publicly-owned firm would provide gas and electricity bought wholesale or generated in scotland – ‘renewable of course’ and sold to customers ‘as close to cost price as possible’.
Companies which offer gas and electricity entirely from renewables already exist, including Good energy, which last night raised concerns about the snP’s plans.
Juliet davenport, chief executive of Good energy, said: ‘the scottish Government… needs to steer clear of subsidising an energy business with taxpayers’ money to provide cheap energy to customers.
‘they need to promote a renewable energy market through a green product rather than a greenwash many suppliers are selling today.’
scottish Conservative energy spokesman Alexander Burnett said: ‘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.’
dermot nolan, chief executive of industry regulator ofgem, said it would ‘welcome any potential new entry’ into the energy market.
while he stressed any new power firm would ‘need to satisfy its customers and provide a high quality level of service’, he told BBC Radio scotland’s Good Morning scotland show: ‘In future the energy sector will change a lot. we will have more community energy groups, more local production of energy, so it seems any company with strong roots locally, with a strong reputation is likely to do well.’
A scottish Government spokesman said: ‘the fact that 31 per cent of scottish households were in fuel poverty in 2015, largely due to rising fuel prices, shows the energy market is failing many households.
‘our focus is to provide consumers with low-cost energy and we are committed to doing so via a publicly-owned energy company.’
AT first blush, the SNP’s big idea of a not-for-profit, state-run energy company is eye-catching.
As ever, the devil is in the detail – and there is a lot of detail missing.
Experts say those of us who have switched suppliers are likely to already be on the best possible tariff.
True, there are precedents. Nottingham City Council introduced non-profit Robin Hood Energy, but it is not the cheapest and hit a problem that bedevils all but the very largest energy suppliers. When wholesale prices jumped, it could not use other areas to cover the increase and customers faced 17 per cent higher bills.
Then there is the question of start-up costs. Will customers take the hit – or will taxpayers be asked to dig deep?
Will civil servants run the firm? Will the Government outsource?
If taxpayers’ cash is involved, the party’s plans could yet be thwarted by its beloved EU’s rigid rules on state subsidies. Only the lawyers will benefit then.
With an additional showboating flourish, Nicola Sturgeon hinted the company would supply energy bought on the wholesale market or generated in Scotland and declared: ‘Renewable, of course.’ Really? Renewables are notoriously fickle. Of course the SNP could deliver cheaper energy bills for domestic and commercial users if it allowed fracking. Fracked gas has given America a plentiful, clean source of fuel for power stations. Bills for families and businesses alike have tumbled.
SNP dogma means Scotland’s riches must be left untapped underground while it plunges into uncharted waters with a complex and high-risk venture.
SNP energy policy – wedded solely to unreliable and expensive renewables – has always been short-sighted.
Now it risks adding an expensive layer of bureaucracy that may burden taxpayers while doing little for customers.