Public energy company: outline business case

10 Appendix C – Soft market testing memorandum

Below is the memo sent to market, as outlined in the Commercial Case section 5.16.

Confidential

Scottish Government is in the process of developing an Outline Business Case supporting the development of a Public Energy Company.

Project overview

The First Minister announced the intention to establish a publicly owned energy company (Public Energy Company) on 10 October 2017. The aim of the Public Energy Company is to provide competitively priced energy to help alleviate fuel poverty in the Scottish market.

Opportunity

The Public Energy Company will be looking to procure a white label agreement with an existing energy supplier to provide energy (gas and electricity) and service functions to its customers. Scottish Government is committed to have a Public Energy Company offering by the end of the current parliament (March 2021). The initial objective is to help reduce fuel poverty by offering competitively priced energy and encouraging disengaged customers to switch suppliers in order to secure a better deal for their energy supply. The customer base focus will be on domestic customers in Scotland, although it is recognised that customers from further afield will be permitted to switch to the Public Energy Company.

In 2018, a Strategic Outline Case for the Project was published and Scottish Government are currently in the process of developing and publishing an Outline Business Case. They are therefore looking to discuss this opportunity with the market to assess the desire to be involved in the Project.

Key benefits of the opportunity

• Opportunity to work with Scottish Government
• Potential to increase brand awareness through the partnership
• Additional revenue stream
• Income without the need for provision of marketing
• Ability to negotiate the terms of the white label agreement including pricing structure

Key risks and issues

1. Insufficient take up of offering – there is a risk that there is not sufficient uptake by customers. Scottish Government will need to ensure the offering is attractive to customers and the marketing strategy is well tailored and appropriate to encourage customers to switch from their current provider.

2. Reputational risk– there is a risk of adverse publicity or association resulting from poor offering or service provided by the Public Energy Company. Due to the relationship with Scottish Government this Project involves there is an increase in the level of public scrutiny it is likely to receive.

White Label Arrangement

Scottish Government is looking for a potential partner to enter into a white label agreement with.

Scottish Government foresee that the chosen third-party supplier would provide energy and customer services to the Public Energy Company's customers, with Scottish Government (and potentially Local Authorities) being responsible for marketing to attract customers. Scottish Government would anticipate receive income from the energy supplier in the form of either sign-up fees and/or on-going annual customer retention fees.

Key questions

Scottish Government would like to discuss the appetite of the market for taking a role in this Project. Key questions they would like to answer include:

• Would you consider being involved in the Project?
• Who are your target market in terms of customer focus?
• How would you describe your interest and focus on helping to alleviate fuel poverty?
• What is your strategic agenda in relation to renewables and innovative energy solutions?
• What are your core values as a company?