A Briefing from UNISON Scotland
Energy Service Group
Draft BETTA Bill
The UK government has published a draft bill setting
out their proposals for British Electricity Trading and Transmission
Arrangements (BETTA). This is essentially an extension of the
English system (NETA) to Scotland, which at present has a separate
wholesale market for electricity. This reflects the historically
integrated structure of the electricity industry in Scotland.
BETTA was originally to be introduced in April 2004 by the energy
regulator Ofgem through regulation. However, it was then recognised
that these changes require primary legislation. The Trade and
Industry Select Committee are currently considering the draft
bill. This briefing sets out UNISON Scotland's view of the draft
This legislation will create a single UK body to
operate the high-voltage electricity transmission system. In England
and Wales this currently run by National Grid Transco. In Scotland
ScottishPower and Scottish & Southern Energy run the transmission
system. An England/Scotland interconnector joins the two systems.
Ofgem claims that a UK system will enable more competitors
to enter Scottish wholesale and retail markets, allow Scottish
generators access to a wider British market and give renewable
generators greater choice of suppliers. They also claim that it
should mean a £20 per year fall in Scottish electricity
Any proposal to extend the English trading system
to Scotland has to be seen in the context of the current regulatory
system and its impact on suppliers and customers. There is little
if any evidence to support Ofgem's view that NETA has been a success.
Smaller producers, who again Ofgem claim will benefit in Scotland,
have been the main losers. As the Association of Electricity Producers
put it, "Giving them a bigger market is fine, but it would be
silly to inflict on them the problems that occurred with NETA
in England and Wales".
NETA hasn't been much fun for the larger producers
either. It has depressed the generating market to the extent that
no one is investing in new or upgraded plant. British Energy's
problems have been well publicised and other companies have been
selling off or mothballing capacity. New generating capacity cannot
simply be built overnight. If there is no incentive to invest,
a California style shut down becomes a real possibility.
For consumers the claimed savings are very modest
and in no way guaranteed. Consumers working their way through
the shambles of the current energy retail market are rightly sceptical.
We already have a competitive market in Scotland
closely linked to NETA. This means wholesale prices are essentially
the same both sides of the border. It is distribution, transmission
and metering costs that account for any difference in price and
that is due to geographic and demographic factors. BETTA will
have no real impact on these issues.
In the real world, customers in Scotland (as in
the rest of the UK) regularly switch suppliers. Despite this ‘competition'
most customers wish they hadn't bothered. Even a cursory glance
at the complaints received by Energywatch show that customers
are not impressed. UNISON members deal with thousands of calls
every day from confused customers. These customers are bombarded
with a bewildering array of marketing ploys and often end up unsure
who is providing their energy and without a bill for months. All
of these systems and the regulatory empire developed by Ofgem
is costing a fortune. Money that would be better spent on Scotland's
crumbling utility infrastructure.
And there are other losers. Disadvantaged customers
have been abandoned as all the companies seek to cherry pick the
affluent direct debit paying customer. Competitive markets do
little for fuel poverty. Thirteen years after privatisation fuel
poverty still affects one in three Scottish households.
The Scottish economy is also a loser. Three of Scotland's
top six companies are in the energy business. They have been forced
to incur huge costs separating their businesses into ever smaller
(and uneconomic) units, all the name of competition ideology.
Thousands of jobs have gone and Scottish companies are pouring
investment overseas. The only real gainers have been the logo
designers and the sign writers!
BETTA & Markets
Whilst Ofgem focuses on the allegedly dominant position
of Scottish electricity companies, in the real UK market there
is the inevitable consolidation into a smaller number of larger
suppliers. Everyone is forced to seek economies of scale to pay
for marketing initiatives and to cut the costs of generation,
and distribution. Scottish companies attempting to gain scale
are faced with unfair competition from European companies who
operate in protected home markets. These companies can afford
to pay high prices for customers and generating capacity when
it comes on the market. As a consequence the UK energy market
is rapidly being taken over by German, French and Italian companies.
BETTA & Renewable Transmission
A key element of government energy policy as set
out in the recent White Paper is the encouragement of generation
from renewable sources. Many of the best sites for renewable energy
are in Scotland and we already have a better record and more exacting
(although not very realistic) Scottish Executive targets on this
issue. One of the major difficulties with these targets is the
limited transmission capacity.
Probably the only strong argument in favour of BETTA
is that the cost of strengthening the transmission network would
be shared across the UK, thus encouraging the development of renewable
capacity. However, we question if this will be the case in the
long term. Ofgem is driven by an objective to constantly extend
competition. Therefore they will seek to introduce location pricing
which encourages the siting of generating capacity close to the
demand i.e. in English conurbations. This can already be seen
with their consultation over zonal transmission loss and their
similar proposals for gas distribution. The ‘postage stamp' approach
to electricity transmission, sensible though it may be, has no
place in the mantra of competition.
BETTA & Staff
The draft bill has extensive provisions relating
to property arrangements. However, the impact on staff is not
mentioned. There is a small number of staff involved in electricity
settlements in Scotland and those who administer the separate
transmission arrangements. As these functions are to be handed
over to English companies there should be statutory protection
arrangements for the staff concerned.
UNISON Scotland believes that there is no evidence
to suggest that the extension of NETA to Scotland will benefit
anyone. By constantly changing the system, the failure of the
current regulatory approach is being masked. BETTA is largely
an irrelevance in the context of the shambles that is the so-called
competitive energy market. That is the issue that urgently needs
to be addressed. We believe UNISON's policy A Scottish Energy
Strategy shows a truly ‘better' way ahead.
For further information contact:
Dave Watson, Scottish Organiser (Utilities), UNISON
House, 14 West Campbell Street, Glasgow G2 6RX
Tel. 0845 355 0845 email firstname.lastname@example.org
or visit the energy section of the UNISON Scotland website: www.unison-scotland.org.uk.