New energy firm must tap into '˜tartan trust' effect

A new Scottish publicly '¨owned energy firm could use the 'greater trust' it would enjoy as the country's national supplier to sway Scots to switch and ensure its success, MSPs have been told.

A publicly owned energy firm could see prices in Scotland lowered. Picture: John Devlin

It could be critical to the core aim of the proposed new national power company to lower energy prices north of the Border, a report by Strathclyde University’s International Public Policy Institute indicates.

Nicola Sturgeon has pledged to establish a new public owned energy company (POEC) by 2021 and a report for Holyrood’s economy committee indicates that persuading enough Scots to switch to the new supplier will determine its ability to lower prices.

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“Customer switching to the POEC is likely to make as large a difference to consumers’ bills as the fact that POEC may be able to offer new competitive tariffs,” states author Ragne Low.

“This puts emphasis on the POEC’s potential for customer acquisition, and for driving up switching rates. The existing not-for-profit supply companies reviewed here exhibit a range of rates of success in the market, although they do demonstrate that a socially-minded supply company can make a difference to fuel poor and vulnerable consumers.”

An outline case for the new nationalised energy firm was published by ministers in March this year with a “core objective” of reducing bills for customers and alleviating fuel poverty in Scotland.

An impartial switching service – which ministers have already part-funded Citrus Energy to provide – could be “developed and expanded” according to today’s report.

“A new public entity could take a stronger position in promoting and supporting customers to switch supplier,” the report adds.

Rates of fuel poverty remain high in Scotland with 26.5 per cent of households being fuel poor in 2016.

Citizens Advice Scotland also warns MSPs that the one of the key challenges facing the new energy company will be persuading poorer Scots – most likely to need its service – to switch.

“The POEC will need to consider innovative ways of attracting typically disengaged, fuel poor customers to ensure that they can benefit from lower-cost tariffs and thus fulfil its aim,” CAS states in a submission.

“Consumer trust in energy suppliers is still low and while some consumers may feel greater trust in a POEC which is not operating for profit, a POEC would arguably be more vulnerable to a loss of trust if it faces difficulties (e.g. inability to maintain competitive tariffs, poor customer service) than other energy companies given its high profile and the likelihood of greater scrutiny,” it adds.