Martin Wheatly

Financial Conduct Authority

25 The North Colonnade
Canary Wharf
London
E14 5HS

Dear Mr Wheatly,

We are writing with regard to the concerning and rapidly developing situation for energy co-
operatives and their relationship with the Financial Conduct Authority. We have recently
heard from a number of parties who are concerned that the FCA’s recent actions may serve
as an effective block on the future development of energy cooperative projects, a model
which has proved hugely productive and has much to contribute to both the UK’s
decarbonisation process and involving communities in energy production, efficiency and
conservation.

We understand that on Friday 11th July 2014 a meeting was held between members of the
FCA’s mutuals team and Energy4all, among others. At that meeting, the FCA representative
stated that the most common model for an energy cooperative was no longer deemed to be
compliant with the FCA’s codes. This would prevent the FCA from registering any further
mutuals of this kind, but would also eventually impede upon existing projects.

It is clear that the FCA has a duty to uphold the principles of fair financial conduct and to
prevent any abuse of the mutuals system. However, we are deeply concerned that the manner
in which the FCA has intervened in this instance puts at risk the future of cooperative energy
in the UK.

There has been no major change to the framework governing mutuals since the (Mutual
Societies) Order 2013. So it is difficult to understand the timing of this action from the FCA
and the apparently sudden change of stance.

We understand that there has been some ambiguity about the meaning of the word
“participation” in ascertaining whether a project is a bona fide cooperative. Participation is
clearly more than just a narrow question about whether the product of the cooperative is
traded solely with members. They may be other forms of participation that the FCA has not
considered. So long as this question remains open, we do not believe that the FCA can
reasonably move to block future cooperative energy projects.

There has also been some suggestion that the recent actions of the FCA reflect a desire to
clamp down on potentially misleading share offer and investor prospectus documents. If this
is the case, we would strongly suggest that other, more proportionate measures should be
considered rather than moving to prohibit a whole model of cooperative investment.

The transition to a decarbonised economy is also an opportunity to devolve aspects of our

power supply, empowering communities who want to generate their own clean energy. We
ask that you urgently review the recent change of stance of the FCA, and reconsider ways to
ensure financial probity whilst retaining the very positive contribution energy co-operatives
are making across the UK where they are already established.
We look forward to receiving a prompt response.

Yours sincerely

Tom Greatrex Mark Lazarowicz Claudia Beamish

Labour Shadow Energy MP for Edinburgh North MSP for South of Scotland
Minister and Leith

MP for Rutherglen and

Hamilton West