First minister Nicola Sturgeon last year said she wanted to set up the company on a publicly owned not-for-profit basis by the end of the current Scottish Parliament in 2021.
It would “sell energy, whether bought wholesale or generated in Scotland, to customers at as low a price as possible, and in so to offer people more choice, particularly those for whom fuel poverty is a key concern”.
Consultants EY were appointed to advise on the project but in a report this month it told Scottish ministers to be cautious about proceeding.
EY’s report said: “It is possible to establish an energy company to achieve the stated objective of delivering competitively priced energy to help alleviate fuel poverty in Scotland.
“We also, however, recognise the challenges of doing this in a highly innovative, competitive and evolving energy retail market. State aid restrictions prevent the energy company from operating on a subsidised basis, therefore a commercial model is required for this to be successful.”
This left an “overriding strategic question” for ministers of how the company could be competitive in a low margin market.
EY advised: “Further detailed scrutiny [is needed] of the available operating models, including the most cost effective way to utilise market leading technology and capability in a public sector context.”
