Our Power Energy is the first in the UK operating on a non-profit distributing basis, which plans to be selling heat and power to tenants in 200,000 homes across Scotland by 2020.
Our Power is backed by a £2.5 million loan from the Scottish Government and another £1 million from Social Investment Scotland (SIS).
Over the next five years, SIS states the initiative could create up to £11 million of savings for households in disadvantaged communities across Scotland.
The organisation was founded by 35 member organisation's including some of Scotland's largest housing associations (HA).
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It expects to save its members up to 10% on their household utility bills and develop renewable energy projects for local communities.
Social Justice Secretary Alex Neil said: "Fuel poverty is at its highest level in a decade with fuel prices having risen by an inflation-busting seven per cent between 2012 and 2013.
"A recent investigation by the Competition and Markets Authority (CMA) found that millions of energy customers are paying too much for their energy bills.
"That is why the Scottish Government has invested £2.5 million in Our Power. It will be the first independent and fully licensed energy supply company registered as a non-profit distributing organisation owned by its members."
Alister Steele, Chairman of Our Power and Managing Director of Castle Rock Edinvar, said: "This is a monumental day for Our Power.
"We are absolutely delighted to have agreed a funding package with Scottish Government and SIS’s Social Growth Fund.
"Our Power can now fully focus on market entry and delivering a utility offer to households disadvantaged most in the energy market."
(LM)
