Public energy company: strategic outline case

1. Introduction

1.1 EY scope of work

This Strategic Outline Case (SOC) presents the case for change for the Scottish Government (SG) to establish a publicly owned energy company (Energy Co.). Its primary aim will be to provide competitively priced energy and help alleviate fuel poverty.

The intention to set up an Energy Co. by the end of this Parliament (March, 2021) was announced by the First Minister Nicola Sturgeon on 10 October 2017.

EY were engaged to prepare the SOC in line with the HM Treasury Green Book guidance. Our scope of works does not include a review of the regulatory or legal matters in respect of establishing Energy Co.

1.2 Approach to applying the five case model

HM Treasury Green Book guidance requires business cases to be developed in three stages:

• Strategic Outline Case (SOC) – explore initial options
• Outline Business Case (OBC) – evaluate list of options
• Full Business Case (FBC) – develop the preferred option.

The key focus of this document is to evidence the case for change and to provide an analysis of the options through which the Energy Co. can be established, subject to further development at the OBC.

1.3 Structure of this Strategic Outline Case

The SOC is structured as follows:

• Strategic Case – identifies the case for change. The Strategic Case highlights the need for additional intervention based on the high level of fuel poverty in Scotland, and the limited success of initiatives thus far to alleviate this
• Socio-economic Case – identifies a long list of delivery vehicles and qualitatively identifies a short list of suitable options for establishing the Energy Co. Short listed options can then be taken forward to the OBC for further analysis and evaluation
• Commercial Case – examines the potential operating models that would allow the Energy Co. to achieve its objectives and operate in the highly commercial and competitive energy retail market. Options have been appraised and supported by recommendations to take forward to the OBC for further analysis
• Financial Case – The Financial Case looks at the likely funding requirements for the Energy Co. with respect to the operating models being considered. These have not been quantified for the SOC; instead existing benchmarks have been evaluated, subject to further development at the OBC stage
• Management Case – The Management Case examines whether the project is capable of being delivered and summarises the likely implementation plans, governance structure and provides a review of risks associated with the project.