Publication - Independent report
Public energy company: strategic outline case
Independent strategic outline case to consider how Scotland's public energy company could be developed suggests that a phased approach would work better.
Appendix F – Risk Register
| Risk ID | Class of Risk | Risk Description | Risk Owner | Likelihood 1- Low 5-High |
Impact 1-Low 5-High |
Exposure | Mitigation actions | Likelihood 1- Low 5-High |
Impact 1-Low 5-High |
Exposure |
|---|---|---|---|---|---|---|---|---|---|---|
| 1 | Commercial | SG selects a sub-optimal delivery vehicle and / or operating model, restricting the ability of the Energy Co to achieve its objectives. | SG | 3 | 5 | 15 | SG are working with both financial and legal advisors in the selection of the operating model/delivery vehicle for the Energy Co. Options will be further examined and critically evaluated in the OBC before a selection is made. | 2 | 4 | 8 |
| 2 | Commercial | The Energy Co is unable to acquire the necessary expertise to build and grow a future-proof and cost efficient organisation. | SG | 3 | 4 | 12 | The Strategic Case has considered the current market and also the future direction of the market. Short listed options for the operating model have taken findings into consideration. | 2 | 4 | 8 |
| 3 | Commercial/Financial | The Energy Co is unable to become cost efficient compared with existing energy supply companies. This can be due to a number of cost / efficiency considerations such as customer acquisition costs, operating overheads, energy purchase costs, green levies and the cost of smart meter roll-out. | SG | 3 | 5 | 15 | SG are obtaining specialist advice to understand and capture these costs. Costs will be further developed within the OBC and expected cash flows. | 2 | 4 | 8 |
| 4 | Commercial | The Energy Co does not successfully engage with the target audience, as a result fuel poverty remains an issue as customers have not switched from their original tariffs to a more suitable offering. | SG | 3 | 5 | 15 | Scottish Ministers have agreed that there will be consultation period towards the end of 2018. This will provide the opportunity for the management team of the Energy Co to engage with a range of stakeholders, including consumers. The programme will incorporate feedback from the consultation into future plans for the Energy Co to ensure it reflects the needs of stakeholders. | 2 | 3 | 6 |
| 5 | Financial | The scale of funding required for set-up and operating costs for the Energy Co is unknown. From a review of precedent companies it is evident that financial support from SG in the initial years will be significant. | SG | 5 | 5 | 25 | The OBC will develop the expected set up and operational costs for the Energy Co through extensive market testing. Following this the SG can review the level of funding required and consider how this will be provided for. | 3 | 3 | 9 |
| 6 | Financial | The Energy Co is not self-financing in the future and requires additional SG funds / financing, breaching State Aid regulations. | SG | 4 | 5 | 20 | The Financial Case has reviewed each of the short listed options and discussed a potential cost range for each. As the programme progresses the OBC will look to provide a financial base case and establish cash flows. Only options with positive NPV's will be taken forward. | 1 | 5 | 5 |
| 7 | Legal | State aid risk: SG is challenged by other suppliers on the basis that the Energy Co is seen to be subsidised and / or guaranteed by SG. | SG | 2 | 4 | 8 | SG are liaising with legal advisors throughout the development of the programme. Options taken forward will be both State Aid compliant and economically viable to ensure State Aid restrictions are not breached in the future. | 1 | 4 | 4 |
| 8 | Management | It takes longer to prepare and create the Energy Co. than originally envisioned, resulting in greater costs. | SG | 3 | 4 | 12 | A detailed implementation plan will be established, there will be a process to monitor the completion of tasks to ensure delivery of the Energy Co is as scheduled. | 2 | 4 | 8 |
| 9 | Management | Poor project management and project governance leads to implementation delays, budget overspend or potential reputational damage. | SG | 3 | 4 | 12 | SG have a strong track record of managing and implementing strategic projects. They have a well defined project management process and the ability to assemble teams with the correct mix of skills and experience. This will ensure appropriate decision making and clear lines of governance. | 1 | 4 | 4 |
| 10 | Strategic | Existing socially minded suppliers have only been recently established therefore their success and ability to provide energy at competitive prices whilst remaining self sufficient is not known. | SG | 5 | 5 | 25 | The OBC will review the likely operating costs based on the selected operating model. Analysis will consider the customer targets and revenues required for the Energy Co to be successful and if it can be self financing whilst maintaining competitive prices. | 2 | 4 | 8 |
Contact
Email: Alan.Clark@gov.scot
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