DD2077 Energy for Londoners Not for Profit Energy Supply Company

1.1 The Mayor in his election manifesto committed to ‘Establish Energy for Londoners, a not-for-profit company providing a comprehensive range of energy services to help Londoners generate more low-carbon energy and increase their energy efficiency, support local and community energy enterprises, and buy clean energy generated across the city, using it to power GLA and TfL facilities.

1.2 The Energy for Londoners programme will be an umbrella programme for all of the Mayor’s activities on energy efficiency, fuel poverty, low carbon energy generation and climate change mitigation. The proposed not-for-profit energy company (EfLCo) is an integral component of the delivery of the Mayor’s vision for a zero carbon London by 2050, and a fairer and more affordable energy system in London.

1.3 The objectives of an EfLCo are to:
o Reduce and alleviate fuel poverty and energy bill debt amongst Londoners, through the provision of fairer and more affordable tariffs
o Reduce carbon dioxide emissions through the promotion and improvement of buildings energy efficiency
o Encourage the generation of low carbon energy through provision of a market for surplus generation
o Minimise the need for investment in additional infrastructure by managing energy demand more effectively and efficiently.

1.4 The primary objective is to reduce and alleviate fuel poverty and therefore initial focus should be on provision of gas and electricity to the residential market However, consideration should be given to provision to the commercial market, particularly public sector which would open up a sizeable market in London as existing contracts expire.

1.5 Approval is sought to procure specialist consultants to undertake the options appraisal for the three options set out above in line with the GLA’s Contracts Code.

2.1 There are a range of options between a White Label and a GLA-owned fully licensed supply company.

White label scheme
a. standard white label scheme whereby the GLA would procure a licensed energy supply company to provide energy, which would be branded as Energy for Londoners.
b. white label plus – GLA would seek to establish more of a partnership arrangement with a licensed energy supply company in order to have greater control over factors such as tariffs and sources of energy.
Full supply licence
c. a company fully owned by the GLA, would be a fully licensed supply company.
d. consortium – a separate company or SPV is established, and owned by GLA and others, such as the Boroughs.
e. mutual – a community benefit society (CBS) would be established with GLA, Boroughs, housing associations and community energy groups as members, and the fully licensed supply company would be owned by the CBS.
f. equity – GLA (or subsidiary company) could take an equity stake in an existing fully licensed supply company.
g. purchase – GLA (or subsidiary company) could purchase an existing operational fully licensed supply company (not ‘supplier in a box’ but an operational company that has already achieved full market entry).

2.2 Objectives
The primary objectives for the successful bidder will be to:
• provide a detailed assessment of the three options set out below
• evaluate the three options based on the essential criteria set out below
• develop an outline business case for the option that delivers against each of the essential criteria

2.3 The three options to be assessed are:
• White Label Plus
• Full Supply Licence – Mutual
• Full Supply Licence – Consortium company

2.4 Outcome

We expect the consultants to produce a written review of the three options against a range of evaluation criteria, and produce an outline business case for the preferred option. The written review should include all data and assumptions used to conclude a preferred option to take to OBC phase.

3.1 The proposal is in accordance with the Greater London Authority’s Equalities Framework in relation to this procurement. Consultants will be asked to demonstrate how they comply with the Mayor’s Equality and Diversity Policy Statement and related documents.

3.2 The Energy for Londoners programme has equality at its core and the successful bidder will be required to assess each of the options against a number of equality indicators.

a) Key risks
4.1 None of the options to be assessed perform well against all or the majority of the criteria. This has been mitigated through the selection of a range of options, each of which have been proven to deliver against the relevant criteria.

b) Links to Mayoral strategies and priorities
4.2 The Mayor, in his manifesto, committed to the establishment of a not-for-profit company, Energy for Londoners, to offer fairer and more affordable energy bills for Londoners and to increase the generation of low carbon energy.

4.3 The developing Mayor’s Environment Strategy will reflect the manifesto pledge and the outcome of the options appraisal for a not for profit energy supply company.

c) Impact assessments and consultations

4.4 The preferred option for a not for profit energy supply company will be consulted on as part of the Mayor’s Environment Strategy consultation in spring 2017

5.1 MD1640 previously approved expenditure for the consultancy to the Business Energy Challenge. Approval is now being sought for expenditure of up to £60,000 to procure a consultant to undertake appraisals on three energy supply companies. The cost will be funded from the Environment team’s London Energy Plan 2016-17 Budget.

5.2 As this work relates to consultancy contract, officers have to ensure that the requirements of the Authority’s Contract & Funding Code are adhered to and that the requirements relating to consultancy services within the Authority’s Financial Regulations and Expenses & Benefits Framework are adhered.

5.3 Any changes to this proposal, including budgetary implications, will be subject to further approval via the Authority’s decision-making process.

6.1 The GLA’s principal purposes, under section 30 of the Greater London Authority Act 1999, are promoting economic development and wealth creation, promoting social development, and promoting the improvement of the environment, all in Greater London. At this stage various options as to the structure of the scheme are to be considered. The GLA has power under section 30 of the Greater London Authority Act 1999 to operate in the area of energy supply and related matters, on the basis that such operation is calculated to produce social and environmental benefits. Under section 95 of the Local Government Act 2003 the GLA can, through a company, do for a commercial purpose anything it is authorised to do for the purposes of its ordinary functions.
6.2 Further, the Authority also has a subsidiary power pursuant to Section 34 of the Act. This gives the Mayor the authority to do anything which is calculated to facilitate or, is conducive or incidental to the exercise of any of the statutory functions of the Authority. In this case, the procurement of a consultant to provide advice in relation to the options set out above, may be viewed as being calculated to facilitate and conducive and incidental to all of GLA’s various functions
6.3 Sections 1 to 4 of this report indicate:

• that the decision requested falls within the GLA’s statutory powers to do things considered to further, or which are facilitative of, conducive or incidental to the discharge of, its general functions; and
• that due regard has been had to the principle that there should be equality of opportunity for all people further details on equalities are set out in section 3 above.

6.4 Under Section 4.1 of the GLA's Contracts and Funding Code (the "Code")) this requires the GLA to undertake a formal tender process or make a call off from an accessible framework for procurements with a value between £10,000 and £150,000. As noted in paragraph 1.6, Officers will follow the Code. Officers must ensure that an appropriate contractual document is put in place.
6.5 Further legal consideration should be given to any recommended option, if and when the GLA wishes to pursue it.