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Matthew Vickers: Trust is key to successful council energy schemes

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The demise of Portsmouth City Council’s Victory Energy in August has led some sceptics to conclude that the public energy movement is living on borrowed time.

Victory’s defeat is certainly a cautionary tale, but it doesn’t mean it’s the end for local authority involvement in the energy market. In fact, there are several examples of council-run energy companies showing signs of progress.

Robin Hood Energy, launched by Nottingham City Council in 2015, announced in June that it had made a surplus for the first time. This was thanks in part to white-labelling agreements with several other council-owned, not-for-profit suppliers.

The public-to-public model pioneered by Robin Hood isn’t the only white-labelling game in town either. Mid-tier supplier Ovo Energy has arrangements in place with various local authorities, including Southend and Peterborough.

French energy giant Engie likewise entered the fray in September, becoming the first new private-sector entrant to the local authority white-label market in four years. The firm partnered with Cheshire West and Chester Council to create Qwest Energy which, according to the PR blurb, will have a “specific focus on reaching out to disengaged and vulnerable customers”.

Engie says it has provided “all investment required” for the setup and ongoing operation of the new energy brand, ensuring the venture is “financially risk-free” for both Cheshire West and Chester Council and local people.

Apart from Robin Hood Energy, the only fully-licensed, council-run supplier in the market is Bristol Energy. Launched in 2016 and describing itself as a “force for social good”, Bristol City Council’s venture isn’t expected to move into the black until 2021. But it did come ninth out of 33 companies in the most recent Citizens Advice customer service star-rating league table.

This shows the potential of public suppliers to punch above their weight when providing excellent customer service – a key battleground in a sector where consumers are realising that a cheap deal isn’t everything.

Still, energy is a risky business for local authorities. The gas and electricity retail market is already crowded and going through unprecedented upheaval. Even some of the most established suppliers are struggling to keep pace with technological, operational and regulatory change.

But there are reasons to believe that public energy is more than just a passing trend.

Scotland’s first minister Nicola Sturgeon has promised to create a Scottish public energy company by 2021, while London’s mayor Sadiq Khan wants to set up a white-label energy supplier for the city. Labour would like to see a public supplier in every region.

Hackney LBC became the latest authority to get in on the act last month, announcing plans to create its own energy company in 2019 whilst ensuring that “financial risk is limited.”

There is clearly demand amongst ethically-minded consumers for non-profit, locally-run public suppliers that provide cheaper energy and reinvest money in their community. The only question is whether there is enough demand to allow the public energy movement to survive and thrive long-term.

I think there is room for public energy suppliers. But before taking the plunge I would urge any local authority to consider the reputational as well as the commercial risks.

Their social purpose means that public suppliers are held to higher standards by consumers than the likes of the Big Six. Questions of trust, governance, legitimacy and transparency are key.

When people choose a council-run energy company, they expect to be charged fairly and treated well. That includes getting any complaints resolved quickly.

Failure to treat customers properly could damage trust and perceptions of the council – not to mention the energy company. In the consumer’s mind, there will often be little or no distinction between the energy supplier and the council itself.

At the Energy Ombudsman, we know from our work with existing players in this space that customer service issues crop up. If you’re already active or thinking of becoming active in the local authority energy movement, we’re keen to help you get your complaints-handling process right.

More importantly, we want to help protect, nurture and grow the consumer trust that this innovative approach to energy supply depend on. That way, we can ensure the movement truly becomes a lasting force for good.

Matthew Vickers, chief executive and chief ombudsman, Ombudsman Services

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