Consultation Document on Future Electricity Wholesale Trading
Arrangments in Scotland
Response from UNISON Scotland
This paper sets out UNISON Scotland's response to the consultation
document issued by the Office of Gas and Electricity Markets (Ofgem)
on future electricity wholesale trading arrangements in Scotland.
The Ofgem proposals include
- Separation of supply and generation from distribution and
- Creating a single system operator for Scotland.
- Cuts in the price for transporting electricity
- Wider access to the interconnector between Scotland and England.
- Cuts in the regulated Scottish price for wholesale electricity
The key element of these proposals impose the English model,
splitting up Scotland's integrated electricity industry.
UNISON Scotland is opposed to general thrust of the Ofgem proposals.
We believe that the Regulator's proposals are short sighted and
will cause long term damage to the electricity industry in Scotland.
Power generation is a highly competitive business and an important
strategic industry for Scotland. The development of the interconnector
was a strategic investment by a Scottish company to allow the
cost effective export of Scottish electricity. If other companies
in England wish to develop similar facilities then they have the
option of making the business case for that investment. If the
Regulator continually intervenes in this way it will inevitably
weaken the case for similar strategic investment in the future.
UNISON Scotland can see no merit in an artificial separation of
the businesses as proposed by Ofgem. The Scottish model of an
integrated system has served Scotland well over many years and
the Ofgem proposal fails to make a convincing case for destroying
this system. Ofgem appears to have simply bowed to commercial
pressure from England to have a standard UK system. We believe
this response strengthens the case for statutory responsibility
for electricity regulation to be transferred from Westminster
to the Scottish Parliament.
Splitting the businesses will result in an inevitable increase
in costs with no improvement in service to the customer. Essential
economies of scale will be lost. The management expertise gained
in operating as an integrated business has been a factor, particularly
in Scottish Power's world wide growth. A further example of how
the Regulator's proposals are damaging the Scottish economy.
The continued pressure on prices is forcing all the Scottish power
companies to take short term cost cutting measures at the expense
of long term investment. This approach adds to the short term
thinking which is endemic in the City's approach to British industry.
Companies will be forced to abandon large sections of their investment
programme and reduce services to customers. Services at the margins
of the business which are important to the community will be at
UNISON accepts that the power companies emphasis on shareholder
return does not assist the case against price cuts. However, it
is a business reality that companies cannot afford to ignore shareholder
return if they are to attract the necessary investment to grow
the business. Again the actions of the Regulator has an indirect
effect on the growth of the businesses and therefore the Scottish
economy. We are concerned that companies will increasingly be
forced to look overseas to achieve shareholder return. In the
long term this will result in a lack of focus on the Scottish
end of the business.
The drive for price cuts also impacts on jobs within the industry.
Power companies generally have a good reputation in areas such
as training and development which are essential to the future
of the Scottish economy. There is very clear evidence that price
pressure has forced power companies in Scotland to reduce their
investment in these areas.
In conclusion UNISON believes these proposals are short sighted
and not in the best interests of customers, staff or the long
term progress of the Scottish economy. We would urge a serious
rethinking of the proposals and urge Ofgem to take a wider view
of the impact of their plans.
Senior Regional Officer
Ofgem Consultation Document
Review of Scottish Trading Arrangements
Home Utilities News Index
index | Home