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Scotland's largest utility trade union
September 2002
(Note the first two headings were omitted when this was first published
on the site on 16 September. Rectified 17 September)
Energy Review
The Government has published the PIU UK Energy
Review and has completed a further consultation which will culminate
in a White Paper early in 2003. The context of the review is the
need to maintain security of supply whilst reducing greenhouse gas
emissions in accordance with our commitments under the Kyoto protocol.
The government remains obsessed with liberalised and competitive
markets that have contributed to the current crisis. The recent
problems facing British Energy are reflected across the industry
in Scotland.
UNISON Scotland supports the development of a Scottish
Energy Strategy within the context of the UK review. Scotland has
a distinct energy position within the UK because of its unique integrated
electricity industry, different generation structure and the opportunity
to develop extensive renewable energy resources. In addition there
is a split in responsibility for energy issues between the UK and
Scottish Parliament.
We believe 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.
UNISON Scotland's detailed contribution to the
Energy Review consultation, A Scottish Energy Strategy
can be viewed at our web site (www.unison-scotland.org.uk).
BETTA or Worse?
The UK energy minister has announced plans to take
Scotland into new UK electricity trading arrangements known as British
Electricity Trading and Transmission Arrangements (BETTA). This
is essentially the English system long favoured by the energy regulator
Ofgem with their well publicised hostility to the integrated Scottish
electricity system.
We already have a competitive market in Scotland
which 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 has no impact on these issues. In
fact the regional pricing mechanisms under BETTA could result in
higher prices for Scottish consumers.
Under the current system customers in Scotland
regularly switch suppliers although most customers wish they hadn't
bothered. 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. Others are the victim
of high pressure sales tactics and blatant mis-selling.
The endless regulatory initiatives from Ofgem have
been a costly failure. To cover up this failure they are promoting
yet another initiative, BETTA. The integrated Scottish electricity
system has nothing to do with most of the issues identified by ministers.
It is just the latest scapegoat for policy and regulatory failure.
For further details see our BETTA
briefing on the UNISON Scotland website.
Company News
British Energy
British Energy's financial problems, including
a £493m loss in the last financial year, has resulted in short term
support from the UK government. The company is in difficulty as
electricity prices are below the point at which nuclear plants can
operate economically. These problems have been made worse by plant
failures, particularly at Torness, which means the company is unlikely
to meet its output targets. In the medium term one option is for
the government to merge BE with state owned BNFL.
British Energy has entered the business retail
energy market. This follows the sale of Swalec to SSE ending their
short lived foray into the domestic supply market.
ScottishPower and British Energy have settled their
legal wrangle over the wholesale price paid for electricity generated
by Scottish nuclear stations under the NEA. This should result in
£40m of savings to ScottishPower.
ScottishPower
ScottishPower's first quarter results showed signs
of recovery. This follows better news from US subsidiary Pacificorp
which has recovered almost two-thirds of excess power costs from
state regulators and is now hopeful of recovering between 70% and
80%. However, the UK Division is still struggling with an £8m loss
largely due to falling electricity prices. UK customers remain flat
at 3.5m and the company has cut some 800 jobs in yet another round
of cost reductions.
Scottish & Southern Energy
Scottish & Southern Energy have reported a
7.4% increase in pre-tax profits. The wet summer is likely to result
in a revenue boost from hydro-electric stations. A silver lining
for some! Despite this city analysts are concerned that the company
has no growth strategy. This started a new round of merger speculation
with ScottishPower, a merger that would have significant regulatory
problems. The company subsequently pulled out of the bidding for
Seeboard when it became clear that EdF and Eon were prepared to
pay more than SSE thought the company was worth. Another example
of the deep subsidised European pockets taking over the UK energy
market.
SSE also has a new Chief Executive when Finance
Director Ian Marchant took over following the retirement of Jim
Forbes.
More good news on the Scottish energy export front
with SSE winning a £62m contract to supply green energy to an irish
electricity firm through the newly completed interconnector from
Ayrshire to Moyle.
Centrica
Centrica's (including Scottish Gas brand) pre-tax
profits for last year grew to £540m. Energy trading turned last
year's loss into a modest £16m profit with higher electricity sales
compensating for the loss of gas customers. The main source of profits
remains gas production up 79% and a strong performance from their
US businesses. Centrica has established a Scottish telecommunications
presence through the purchase of Iomart's internet business including
call centres in Stornoway and Glasgow. Like Scottish electricity
companies Centrica have increased their North American presence
with the £437m purchase of the home heating arm of Canada's Enbridge
and £87m for the New York supplier NewPower.
Lattice (Transco)
In February Transco announced 2,400 job losses
across the UK. The real figure (including agency staff) turned out
to be 3900. A merger with National Grid added further uncertainty
and reorganisation.
The introduction of individual price controls for
Transco's regional gas networks is likely to result in higher gas
charges in Scotland. This reflects the higher transportation costs
in parts of Scotland and moves away from the previous single pricing
arrangements. This is on top of substantial increases in wholesale
gas prices which has fed into the retail prices of the main Scottish
suppliers.
Renewable Energy
The commons environmental audit committee has reported
that the UK is likely to fall far short of international targets
for renewable energy. Britain still produces less than 3% of its
energy from renewable sources. They highlighted "the conflicting
priorities of market liberalisation and cheap electricity as against
our Kyoto obligations". Despite ever more optimistic predictions
by Scottish ministers even initial targets of 18% by 2010 are looking
optimistic. Let alone the new target of 40% by 2020. The introduction
of BETTA, a shortage of quality sites as well as growing opposition
from local NIMBY groups, means some realism needs to be inserted
into the debate over future generation.
Vestas are planning to build a new wind turbine
factory in the next four years to complement its Campbelltown plant.
The Ayrshire coast is the likely location.
Energy Mis-selling
Ofgem have announced a tougher approach to energy
marketing in its latest decision document. The regulator has been
criticised by Energywatch and the CAB amongst others for their failure
to adopt a comprehensive strategy on this issue. Energywatch has
launched a major campaign "Stop Now!" against mis-selling.
The latest example of energy mis-selling comes from Virgin Home
Energy. A Glasgow family was shocked to receive a contract after
their 15 year old daughter signed what she thought was a survey
about music outside the city's Virgin Megastore. Much of the problem
has been caused by energy companies outsourcing their sales operations
to commission led agents.
Fuel Poverty
The Scottish Executive has published their Fuel
Poverty Statement. This highlights significant measures aimed at
eliminating fuel poverty. UNISON broadly welcomed the statement
although we have concerns over the definition of fuel poverty. Our
full submission can be viewed at the UNISON Scotland website.
ScottishPower came bottom in an Ofgem survey of
energy advice given by the major energy suppliers. The survey concluded
that the helplines (which are a licence requirement) were not staffed
by adequately trained advisors.
Ofgem's own modest measures to address fuel poverty
have been widely criticised. They continue to place too much faith
in competition. Consumer representatives Energywatch also fiercely
criticised Ofgem's proposals to lift price controls for pre-payment
customers.
Call Centres
Call centres are one of Scotland's biggest industries
with utilities forming a significant proportion of the 40000 workforce.
UNISON Scotland recently published its call centre charter Raising
the Standard together with a survey of working conditions. The
charter aims to promote best practice and address many of the poor
standards which give the industry a such a poor public image.
Indian software group Tata Consultancy Services
has won a three year deal to supply IT services to United Utilities
(the Vertex call centre company is part of this group) worth £30m.
Indian IT firms grabbed £20m of the Scottish market. This is expected
to rise to £50m this year.
Management consultants Accenture (at the time part
of the discredited Arthur Anderson group) have been promoting India
as an alternative location for Scotland's substantial call centre
industry. They apparently believe that some training on accents,
football teams and soap operas are a substitute for the obvious
customer service implications. Not to mention its telecoms infrastructure
and security situation.
Nuclear Waste
Two government committees have produced damming
reports on the storage of nuclear waste, some of which is leaking
into the environment. Whilst most waste is stored at Sellafield
large stockpiles exist in Dounreay, Hunterston and Chaplecross.
Water Round Up
Water Environment Bill
The Scottish Parliament is considering the Water
Environment and Water Services (Scotland) Bill. The Bill sets out
new arrangements for the protection of the water environment and
changes how new connections to the public water and sewerage infrastructure
are to be funded.
Most of the detailed environmental provisions will
be included in secondary legislation. Even so there has been some
criticism of the potential impact on hydro-electric schemes and
the role of SEPA. Water services provisions do not include the planned
extension of competition. However, powers to allow third parties
to lay water mains are a further step towards the privatisation
of Scotland's water.
A detailed briefing is available on the UNISON
Scotland website.
Scottish Water
The public water corporation which consumed the
three water authorities came into existence in April 2002. As UNISON
predicted during the passage of the Water (S) Act it is already
looking at privatising its operations.
Scottish Water has also announced a shortlist of
ten private sector groups to undertake the £1.8bn investment programme.
This comes after the dismal record of water PFI schemes is becoming
obvious to all. As UNISON warned this is another step towards the
privatisation of Scotland's water.
Water Quality
The quality of Scotland's water supplies has come
under the microscope following the precautionary boiling of water
supplies in Glasgow due to traces of cryptosporidium. Claims and
counter claims over responsibility for notifying the public has
led to public meetings organised by the Water Industry Commissioner
(WIC) which will be followed by a report to the environment minister.
An analysis of Scotland's water shows that the most serious failures
are over levels of trihalomethanes. Some 40 plants water plants
have been described as ‘high risk' including the controversial Milgavie
plant whose private sector rebuild has been refused planning permission
by East Dumbarton Council. UNISON previously highlighted the safety
risk to the public when large numbers of experienced staff are leaving
the industry. This experience is particularly important when maintaining
older plant.
The new Drinking Water Regulator, Tim Hooton has
warned that the risk from lead water pipes remains the most serious
long term threat to health from Scotland's drinking water. One in
five Scottish homes are affected but grant support is still being
means tested. The one in five public buildings affected will be
addressed in new regulations (after 2003) which will require the
elimination of lead pipes.
Water Supplies in Public Buildings
UNISON's submission on this and other water issues
can be viewed on the water section of the UNISON Scotland website.
Other News …..
Pensions
Most utilities companies in Scotland capped their
final salary schemes before the introduction of FRS17, which has
been used by many companies as a pretext to ditch these pension
schemes. They took the savings in the good years and ditched them
when the going got rough.
CEO Pay
Chief Executive's pay in Scotland's top 20 companies
soared by an average of 18% last year. Profits are down by half,
staff pay increased by 1%. That's the sort of performance related
pay all staff would like a share of! Perhaps the best utilities
example is Bill Allen at Thus whose company has never made a profit
and during a year when losses grew by a half he was awarded a 67%
pay rise.
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