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Review of the Rural Petrol Stations Grant Scheme Final Report

9 OPTIONS AND INITIAL SIFTING

Introduction

In this chapter we outline what we consider to be the predominant theoretical options for the future of the RPSGS. These have been developed from our own experience and from discussions with the Scottish Executive, present scheme administrators and staff of rural petrol stations and accords with guidance as set out in STAG. Appraisal of each of the options has also been undertaken. Those options that have been ruled out immediately are indicated in this chapter, with reasons given. Other more worthy options are taken forward for more detailed consideration in section 10.

The options broadly fall into five categories:

• withdrawal of the scheme;
• maintain scheme in current form;
• amendment to eligibility criteria;
• amendment to administration/application process;
• other associated changes.

We give further consideration to each of these categories below.

Withdrawal or maintenance of current scheme

Withdrawal of the present RPSGS scheme is a potential option. Although appraisal of options is outlined below, this is not an option that has been the subject of rigorous analysis as it is clear that the scheme provides a contribution to Scottish Executive objectives and that additional benefits can arise from the continuation of the scheme in some form.

A further option is to retain the scheme in exactly its current form. This option is the most straightforward for administrators and will be used as a 'do-minimum' comparator for other options.

Amend eligibility criteria

Each of the three predominant eligibility criteria could, in theory, be made more or less stringent.

It is apparent that the present 8-mile minimum distance to the nearest petrol station criterion has caused some inconsistencies and, in some cases, controversy on the part of applicants. Changing to another arbitrary distance limit would enhance or reduce the total number of eligible sites, although the removal of any distance criteria may lead to the public subsidy of a greater number of petrol stations than is strictly required to maintain an acceptable level of service.

Similar issues arise with the current limit of one million litres maximum fuel sales for eligibility. Given the very low profit margins reported by almost all stations on fuel sales, it is possible that investment in new infrastructure represents a significant burden to some businesses selling more fuel than this. Potential changes are to change the maximum sales limit or to remove it altogether.

A set minimum drive distance to urban centres is a further criterion that some LECs have had difficulty in application, given that it can be open to subjective assessment by applicant and administrator. Relaxation of drive distance to urban centres would also generate more applicants, although reduce the rural focus of grant expenditure.

A further option is to remove some or all specific eligibility criteria and to replace them with a more general requirement that successful applicants must form part of a 'strategic network' of fuel sites across Scotland. Although open to interpretation both by administrators and by applicants, such an approach could lead to a better long-term supply network.

Similarly, there is a case for consideration of criteria that allow a more flexible approach to be taken to funding for those highly isolated sites - including those that are the only one on a particular island - where the community benefits from petrol station maintenance. This could be undertaken in conjunction with the definition of a strategic network. Note that this option is intended for that part of RPSGS related to maintenance of existing provision only, and not for the expansion of service to include LPG (see below).

Many petrol stations reported that their main concerns were not related to infrastructure elements eligible for RPSGS. The grant could, in theory, be widened to cover a broader range of infrastructure items. Some petrol stations mentioned the desire to provide forecourt canopies or pumps available for self-service customers in order to attract more sales or that the cost of new communications equipment to cater for new-type credit cards is prohibitive.

We have shown (see section 5) that a significant proportion of the benefit arising from the retention of many rural petrol station arises not from the availability of fuel but from the dependence of other services offered on fuel customers - and that these services bring community benefits. An option is, therefore, to provide grant funding for petrol stations to improve, or develop new, other services. Of particular relevance here is shop and Post Office facilities.

A further option would be to address the biggest single concern mentioned by petrol stations, which is the low profit on fuel, through the revenue support of fuel sales. All sites questioned on this issue reported high levels of price elasticity of demand and some mentioned specifically that it is revenue, rather than capital, investment that would guarantee their long-term sustainability.

Changes could be envisaged to the usage of RPSGS for LPG availability enhancement. Potential changes are to amend the eligibility criteria so that they are exactly as those for other fuel types, to undertake a nationwide review of a strategic network of LPG supply and to support those stations that meet these requirements or to undertake a more rigorous assessment of estimated demand for LPG ³³.

Application process

If changes were to be made to the application process, we feel that the following options could be available:

• changes to the administrators of the scheme: a model where applications for RPSGS are handled centrally, or by a small number of specialist advisers would bring greater consistency to applications, albeit at the expense of the local knowledge that LECs can provide;
• to tighten the checks on the availability of funds from other sources. This is obviously not being rigorously checked in all applications at present, but this also has a resource implication for administrators;
• to amend the maximum of 50% grant payment. A reduction in this limit would cause a greater proportion of businesses to lever in more funds from elsewhere, although would, if administered rigorously, lead to the closure of some businesses if they are unable to find the funds from elsewhere; and
• to undertake a separate cost/benefit assessment for LPG provision. Especially for island sites where the (financial and environmental) costs of separate delivery of LPG are high and long-term demand levels constrained, a more rigorous estimation of costs and benefits of LPG provision could be worthwhile.

Related measures

There are a number of related measures, beyond those currently assisted by RPSGS that could assist the long-term viability of rural petrol stations. If potential customers have uncertainty about the availability of fuel in rural areas, it is likely that demand will be displaced to urban fuel stations (this has not been tested during the survey work for this study as surveys were undertaken only at rural petrol station sites). Anecdotal evidence from a small number of visitors to rural areas suggests that this effect may detract from total demand from rural petrol stations.

It is expected, therefore, that information on the availability of fuel in rural Scotland may help to improve demand at rural petrol stations. Although some information is available on the internet, we are not aware of any information that is targeted at visitors to rural areas. The main options to be considered are the provision of information through tourist information channels and/or improved local signing to petrol stations in rural areas to advertise their presence to motorists unfamiliar with the area.

A final related option is that the RPSGS could proactively encourage the dispensing of fuel from non-conventional (specifically unstaffed) sites.

Summary of options

Table 33 outlines a summary of the options for consideration for the future of the RPSGS.

TABLE 33 SUMMARY OF OPTIONS

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