Scotland's largest utility trade union
April 2003 Briefing
Energy White Paper
The UK government has published their long awaited
white paper on energy policy Our Energy Future - creating a low
carbon economy.
The government claims to be putting climate change
at the heart of its energy strategy by reducing carbon emissions
by 60% by 2050. This will be achieved by strengthening the contribution
of energy efficiency and renewable energy sources.
The white paper leaves the door open for new nuclear
power stations recognising that these challenging targets may not
be capable of being met without nuclear. The future for coal electricity
generation lies with clean coal technologies.
Most of the goals set out in the white paper will
be supported by UNISON. Cutting greenhouse gas emissions, securing
reliable energy supplies and ensuring that every home is adequately
heated are all worthwhile objectives. The emphasis on maintaining
competitive energy markets in the UK and beyond, ignores the accumulating
experience that competition is failing to deliver most of the white
paper goals.
UNISON Scotland believes that a Scottish energy
strategy should be based on a planned market for energy combined
with security of supply as well as social, employment and environmental
objectives. Our contribution to the Energy Review consultation,
A Scottish
Energy Strategy can be viewed at our web site.
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BETTA
The UK government has published a draft bill to
introduce new UK electricity trading arrangements known as British
Electricity Trading and Transmission Arrangements (BETTA). This
extends the English system known as NETA to Scotland.
UNISON Scotland has produced a new briefing on
the draft bill (see website). In that briefing we express considerable
scepticism over the claims made for BETTA. We already have a competitive
market in Scotland linked to NETA that means wholesale prices are
essentially the same both sides of the border. The only attraction
of BETTA is the prospect of encouraging renewable generation in
Scotland by sharing the transmission costs across the UK. However,
Ofgem following their competition objectives are already proposing
location pricing that will undermine this potential advantage.
Smaller generators have suffered under NETA and
larger generators are mothballing capacity or collapsing as in the
case of British Energy. The very modest savings claimed for customers
have to be weighed against the chaos caused by the current regulatory
arrangements. UNISON members deal with thousands of calls every
day from confused customers who 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. Others are the victim
of high pressure sales tactics and blatant mis-selling.
BETTA is largely irrelevant to the real problems
facing the electricity generation industry in Scotland. The recent
Commons Trade & Industry Committee report on the draft bill
also questioned the value of BETTA.
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Renewable Energy
The Energy White Paper's support for renewable
energy, is good news for ScottishPower and Scottish & Southern
who are well placed to exploit this growth. S&S already produces
more than 9% from its hydro-electric works and ScottishPower investing
£500m on wind farms aiming to have 20% of its generation from renewables
by 2010. SSE have also formed a joint venture company with the Wier
Group to boost technology for wave and tidal energy schemes.
Ofgem have announced that work will begin on planning
how Scotland's electricity networks are expanded to support the
increase in renewable generation outlined in the Energy White Paper
ahead of the 2005 price review.
Scottish Executive ministers have adopted a 40%
target for Scottish energy requirements to be generated from a mix
of renewable sources by 2020. Cynics have pointed out that a political
target for 2020 is less than credible and few people in the industry
believe it is achievable. UNISON Scotland believes the target could
result in Scotland failing to support the necessary baseload generation.
In particular, the need for government support for clean coal technologies
to maintain Longannet and Cockenzie power stations. The
UNISON Scotland consultation response can be viewed on our
website.
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Energy News
ScottishPower produced good third quarter
results. Earnings per share up 8% based on decent customer retention
in the UK, £20m of cost savings and continuing solid performance
in the US.
ScottishPower's Cockenzie power station removed
a staggering 650 tons of mussels from culverts at the station in
a recent clear out.
Speculation continues that Scottish & Southern
are the front runners to acquire Midlands Electricity. This would
add 2.3m customers and bring critical mass in a rapidly consolidating
UK power market.
Storm damage to electricity distribution in England
has brought about a much needed rethink over the alleged efficiency
of some companies trumpeted by Ofgem as benchmarks for the industry.
Energy minister Brian Wilson has called on Ofgem to treat Scottish
& Southern as a benchmark in future. It remains to be seen if
this is reflected in the next round of distribution price controls.
British Energy has secured a deal with certain
of its creditors to keep the company out of administration. Fuel
cost savings and the sale of its Canadian subsidiary has helped
the company's financial position. The government has taken legislative
powers to effectively renationalise the company if required, although
other power producers are still threatening action in the European
courts.
British Energy's Hunterston plant hit the news
in January when a report on an emergency exercise highlighted a
catalogue of problems. Proposals have been drawn up to power Torness
with plutonium from Sellafield as an alternative to storage. This
has sparked fears that terrorists could extract the plutonium to
make a primitive nuclear explosive. BNFL & BE have emphasised
that this type of fuel is only an option at this stage.
Centrica's (Scottish Gas) multi-utility
strategy has come under fire from city analysts who have urged the
company to "refocus on the core fundamentals". A recent survey confirmed
that 75% of consumers would be prepared to buy multiple household
services from one company - but not an energy company. This says
much about the damage energy competition has caused to customer
confidence.
Ofgem are consulting on changes to the regulation
of gas distribution. This would see the introduction of separate
price controls, which could lead to variations in price between
different regions. This is widely seen as the first stage in the
sell off of regional gas distribution and could have price consequences
for customers in rural areas.
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Customer Focus
Energywatch are to focus on unreliable billing,
dishonest sales tactics and erroneous transfers over the next twelve
months. 50% of complaints relate to billing problems. The consumer
watchdog has also produced new guidelines of good practice to help
customers running up debts. The energy companies have been asked
to implement debt prevention programmes that will be monitored and
formally evaluated in September 2004. UNISON Scotland's response
to the Energywatch 2003-04 work programme can be viewed on our website.
The Scottish Parliament have recently debated utilities
mis-selling. A range of MSPs lined up to support a motion from Duncan
McNeil MSP calling for stronger protection for customers.
The DTI have announced a series of safeguards,
which they hope will strengthen corporate governance and
avoid an Enron-type corporate scandal in the UK. The role of non-executives
are to be strengthened and new accountancy rules including independent
monitoring. Whilst these changes have been broadly welcomed by the
utility industry, many commentators feel that the proposals are
too cosy, particularly when compared with the measures adopted in
the USA.
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People
British Energy has a new Chief Executive. He is
Mike Alexander, currently Chief Operating Officer with Centrica.
Norman Askew the Chief Executive of BNFL is to
leave this summer. BNFL runs the Chapelcross nuclear power station
and he is reported to be frustrated over the lack of government
commitment to a new-build nuclear programme.
Retirement should not be too much of a struggle
for Scottish & Southern's former CEO Jim Forbes. He is to receive
an expected pension of £398,934 per annum.
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Water Round Up
Water charges in the west and east of Scotland
will rise by 9.9% in 2003-4. Prices in the north of Scotland will
be frozen as a move towards harmonisation of charges. For a Band
D house this means an increase of 56p per week. The increase is
part of the strategic review of charges approved last year to finance
a massive investment programme to modernise Scotland's water and
sewage systems. Scottish Executive spending plans for water show
a major cut from £285m in 2002-3 to £207m by 2005-6.
Customer water debt in Scotland has grown to £284m
an increase of 9% in the last six months. This has resulted in a
call for water charges to be collected separately from the Council
tax.
The Water Industry Commissioner for Scotland
has appointed a panel of seven expert advisers to assist in regulating
the industry in Scotland. With the odd exception they are the usual
business led appointments and others imbued with the regulator's
competition ideology.
The WIC recently produced a highly critical report
claiming that £750m had been wasted since 1996 by the former water
authorities in the management of assets. This includes £296m of
PFI schemes hit by delays and poor management which had brought
about higher operating costs.
The overall figure (based on north/south comparisons)
has been greeted with considerable scepticism by industry sources.
The PFI losses are well known and this method of procurement has
effectively been abandoned. The report also gives insufficient recognition
to the fact that investment in England and Wales has totalled some
£50bn over the last 13 years. Scotland has only spent around £1bn
since 1986.
Scottish Water has appointed Stirling Water and
United Utilities as preferred bidders to split £1.8bn worth of water
and sewage treatment upgrades over the next four years. Whilst this
form of broader PPP appears to be an improvement on the failed PFI
schemes, the workforce reaction has been sceptical until further
details of the arrangement are properly consulted over.
The WIC produced another highly critical report
of Scottish Water's handling of last summer's cryptosporidium scare
in Glasgow. Poor advice, a lack of detailed records and insufficient
capacity to notify customers were the main failings. As the WIC
has constantly proposed massive cuts in staff, his criticism on
these points is somewhat less than credible.
The NIMBY objections to a new treatment plant at
Mugdock have now been overcome and the new plant will make a significant
contribution to water safety in Glasgow.
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Fuel Poverty Advice
UNISON Scotland supported by UNISON Energy and
UNISON Welfare has published a welfare workers energy advice booklet.
Energy bills are often the last straw for members in financial difficulties
and UNISON hopes this booklet will help our Branch Welfare Officers
and others in assisting members.
The booklet is also part of UNISON's contribution
towards the Keeping Scotland Warm campaign that seeks the
permanent eradication of fuel poverty. Recent activities have included
fringe meetings at the SNP, Liberal and Scottish Labour Party conferences.
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