CHANGE MAKER: GAIL SCHOLES

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CHANGE MAKER: GAIL SCHOLES

Gail Scholes - CEO, Robin Hood Energy

In the run up to Utility Week Live, we will be talking to six industry leaders driving change across energy, water and utilities. Denise Chevin begins our series of 'change makers' with Gail Scholes, who started up the first local authority energy company in England and whose actions have brought down bills for the poorest customers.

The name Robin Hood Energy does not just reflect its Nottingham location, it also has an ethos and purpose that echo those of the city's famous son - redistributing wealth from the rich (energy companies) to the poorest consumers. And not surprisingly, Gail Scholes, who created this first local authority-owned energy operator, has an air of crusading zeal about her.

The actions of Robin Hood Energy were subsequently referenced in the Competition and Market Authority's (CMA's) investigation into the energy markets, resulting in the prepayment price cap in April 2017. Scholes says "it was a real feather in our cap, to think that we set up with a social value purpose and we've absolutely delivered on that".

The idea to reduce energy bills was set in motion by the Labour controlled authority a few years earlier. At the time, Scholes was director of energy at the council and was charged with coming up with a solution for a cheap energy tariff. Her response was the idea of a licensed supply company.

“From September to May, we’d found premises, we’d done a full procurement, we’d got systems on board, we’d gone out and recruited talent and we had our first customer. So when most people say that local authorities are very slow and they’re not very commercial or driven in that way, this proves that’s not the case.”

Nottingham City Council provided a £20 million loan to set up Robin Hood Energy and it is still 100 per cent owned by the local authority, but staff were transferred under the TUPE regulations into a separate company about a year ago. That came about to provide more flexibility on recruitment in what is a specialist sector. “We got to a certain point where suddenly the job description for head trader didn’t fit any of the council’s job descriptions and it became a very natural parting of ways. But we do have councillors who sit on the board.”

The staff of 12 has now grown to 250, and customers from zero to 220, 000-meter supply points, and it has garnered interest from Labour politicians more widely who want to see not-for-profit publicly owned energy companies set up in every region. It’s also brought benefits to councils around the country by offering its services in white label arrangements.

Spreading the benefits through partnerships

Robin Hood Energy has nine white label partners – most of them council-owned – whereby Robin Hood is the licensed supply partner and its tariffs are sold by its partners under their own branding.

They include White Rose Energy in Leeds, Ram Energy in Derby, Angelic Energy in London, Great North Energy in Doncaster, Citizen Energy in Southampton and Leccy in Liverpool. Around half of its customers come from these partnering arrangements.

“This was always part of our growth strategy to expand the ethos of Robin Hood Energy by tackling fuel poverty and helping vulnerable customers on a national scale. We partner with other local authorities who have this shared and common goal," says Scholes.

 She says it allows local authorities to create a local brand to tackle fuel poverty and help vulnerable customers while minimising the risk to them. “It also means bespoke local tariffs can be set to attract local customers. Local authorities are paid a commission for each customer who signs up, so this commission can be ploughed back into the region for good causes.”

Certainly, the results of rapid growth are apparent when visiting Robin Hood Energy’s offices in the city centre, where it occupies three floors of what might be a 1970s-type block, well past its best. Desks are packed in tightly and Scholes herself occupies a no-frills office squeezed in the corner.

“You know I’m not sat here as a very wealthy chief executive, getting a very nice bonus. It’s completely different,” she says. Indeed, the down to earth Scholes gets the bus to work from a village a few miles away. Originally from Northumberland, the family moved down with the mines in 1970s, “My dad was a miner, so we’ve always been in energy,” she quips.

Despite keeping overheads down, Scholes is the first to admit that Robin Hood Energy is not the cheapest. “We’re not at the top, we’re not the cheapest. We’ve always been in around about the top 10-15 per cent price-wise for a 12-month fixed credit tariff. Our sell is very much on trust and social values.”

Scholes says that as part of these social values it has a strong focus on vulnerable customers, linking with charities and other organisations to reach out to them. Introducing payment programmes to suit different needs and helping those who might be in difficulty are key strands.

“It can be hard to reach vulnerable customers, but I’ve always strongly believed that if anybody can get through to that market, other than the big six, it is probably going to be a local authority, where you’ve still got that trust, and you’ve still got that relationship with somebody who lives in that community.”

Scholes says her team actively encourages customers off higher prices and only 20 per cent of its customer base is on standard variable tariffs. In another move to lend a helping hand, it has launched more affordable boiler cover.

Some might say that without profit as an incentive, inefficiencies creep in and costs aren’t kept as tight as they might be. Scholes is having none of it. “Not at all. It’s almost like having your own personal purse. You are constantly keeping an eye on money, because actually at the end of the day you know that’s affecting the customer’s price and what they can afford to pay for energy. So every single thing that we do to save money means the customer ultimately is getting a better deal, and that’s what drives us every single day. If there’s a cheaper way of doing something, we will absolutely do it.

“Everything is stripped down to the bare minimum in terms of cost. We’ve not ploughed money into masses of technology. If you go onto our website it’s still fairly basic.” But in an acknowledgment that it needs to move with the times, the company is soon to launch a smart phone app to allow customers to pay their bills on the phone.

Warm and friendly, Scholes makes light of the challenges of the past three years. “I’ve certainly got a lot greyer, but I think it helps having both levels of experience,” she says, referring to the decade she spent from 1987 to 1997 at East Midlands Electricity where her roles spanned the highly technical to more customer facing as the electricity and gas markets became deregulated. Prior to that she worked both in the private and public sectors in energy management and strategy posts, after graduating with a masters in renewable energy and sustainable development from Leicester’s De Montfort University.

THE PROSPECTS FOR LOCAL AUTHORITY-OWNED ENERGY FIRMS

Like everyone else in the sector, Scholes points to the tough operating landscape. “The market is very different to when we set up; we’ve had two price caps and so business cases that are being written now are predicated against all those challenges. And so the risk has increased somewhat from when we started. But saying that, our councillors were fully aware there would be risk entering into such a highly regulated market. I think what we’re going to see as an industry is that the number of switches will slow down considerably over the next 12 months.”

As well as being one of two local authority-owned energy companies (Bristol Energy is the other) Robin Hood Energy has the accolade of having turned in a £202,000 trading surplus for the year ending March 2018, on a turnover of £70 million (now almost £100 million). Surpluses are put back into the businesses or used to benefit customers. In 2018 it voluntarily offered its customers the Warm Home Discount despite falling below the mandatory threshold for offering the discount at the time.

But in the highly competitive market retail has become, not every local authority has the appetite to take on the risk. Last November, Portsmouth City Council confirmed that it was closing down Victory Energy, writing off the £8 million start-up cost without ever having signed a customer. The council decided it simply could not justify the risk.

“If I was a local authority now, I probably wouldn’t set up a fully licensed supply business, knowing all of the changes that have happened in the industry over the past two years. Now, they could still do white labels, could still offer a fair and cheap tariff to the region, but without having the risk, the industry risk, the government and the policy risks, that are likely to head their way.”

We talk about how that might play out for a Labour vision of wanting to see more public ownership. The model for this has not been made clear, though the party would appear to favour an integrated model with a breed of council-owned energy company with a remit beyond energy supply towards more vertically integrated arrangements, embracing distribution, transmission and potentially even generation.

Scholes thinks there could be merit in what’s being mooted. Historically it was the municipal authorities that used to provide gas, electricity and water services, so the idea of local energy firms isn’t new, she points out.

“If you’re investing in cities and you’re putting in local renewable infrastructure and battery storage and you’re doing really smart street lighting and you’re linking all of those strategies up, including transport, and electric vehicle charging points, and everything that’s accelerating renewable energy growth, you can see there’s a lot of good stuff  that can be thrown into the mix of a publicly owned model. It’s not about building another nuclear power station, or buying EDF or buying Scottish hydro.”

 

WHAT'S THE FUTURE FOR ROBIN HOOD?

Scholes is not pointing Robin Hood Energy in the direction of vertical integration – not yet, at least. “I think where we are going is looking at local solar and wind projects, and renewable energy that we can take a PPA [power purchase agreement] from, so we would invest through that route,” she says.

It has just switched to a green energy supplier and is looking at regional energy schemes, both in Nottingham and in the regions where its white label partners operate. “As a customer it’s quite a nice feeling thinking that you’ve got your energy from some solar panels that are on social housing just down the road.”

In terms of the retail side, she’d like to concentrate on brushing up on the internals – including bringing the technology up to date and improving customer service. “For this next 12 months, I would like to have a period of stability and investment in terms of making sure that we are future proofed because we’re here for the long-haul. We’re not here to pile up the customers ready to exit the market with a few million. We’re trying to create a model that is very different, but hopefully one that can really change the market going forward.”

So, does she think she’s got a tough time ahead making the numbers stack up? “I feel this has been the toughest of the three years, though to be honest they’ve all been tough years. It’s not an easy industry to be in. But I’ve got more hope for next year.I think the market will settle somewhat next year, so my view is that there will be fewer switches and there will be some consolidation, which we’re already seeing. I think you’re still going to get some rogues, unfortunately, until Ofgem can get the proper financial due diligence that’s required put in place.”

Given all that she’s achieved at Robin Hood, does she see herself as a pioneer? “It has been so incredibly busy that you kind of forget that it is ground-breaking, a real change for the good. Sometimes we just all need time to reflect on the journey and what that’s meant for people, and in particular what it’s meant for customers.”

 

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