A Briefing from UNISON Scotland Energy Service Group
March 2003
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 legislation.
BETTA
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 bills.
Regulatory Context
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.
Conclusion
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 d.watson@unison.co.uk
or visit the energy section of the UNISON Scotland website: www.unison-scotland.org.uk.
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