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The Water Services (Scotland) Act 2005 requires
that the retail function of Scottish Water be separated from
the rest of the corporation and licensed. The Water Industry
Commissioner for Scotland is consulting on the principles
that should underpin the retail licence for the separate retail
business established by Scottish Water.
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This paper constitutes UNISON Scotland’s response
to that consultation. UNISON is the largest trade union in
the Scottish water industry.
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As the largest trade union in the utility
industry UNISON has considerable experience of the impact
of the introduction of competition and the role of regulation.
That experience makes us highly sceptical of the alleged benefits
of competition and the damage inappropriate regulation can
do to the industry. This is reflected in our evidence to Parliament
during the passage of the Water Services (Scotland) Act and
in our industry briefings that can be viewed on our website.
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We agree that there will be a continuing need
for price and customer service regulation under the new arrangements.
This will be essential during the period up to 2008 when Scottish
Water Retail will be the monopoly supplier. When competition
is introduced that regulation should change to a ‘light touch’
approach to ensure that basic standards are maintained. The
requirements on Scottish Water Retail should be no more onerous
than that applying to new entrants.
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The licensing objectives in Chapter 3 reflect
the range of utility licences in the UK. This license consultation
covers retail provision that is now lightly regulated in other
utilities because of the introduction of competition. It would
be inappropriate to include licensing objectives used in monopoly
situations (e.g. infrastructure) to a retail environment.
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Regulators have a tendency to require organisations
to provide ever greater amounts of information for them to
analyse and expand their own functions. This can be a major
burden on utilities and should be unnecessary in a retail
environment. The information requirements should therefore
be kept to the minimum necessary.
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We agree that the proposed timetable is reasonable.
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We agree that an interim license is probably
unavoidable given the two stage process envisaged in the Act.
We do not agree that the incumbent ‘may be subject to additional
license conditions’. There should be a level playing field
from 2008 with all suppliers facing the same conditions including
a universal obligation to supply across Scotland.
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One of the most expensive and unnecessary
provisions of previous utility business separations has been
demands from regulators that businesses are entirely separate.
Business separation entails considerable expense that in our
view would be better spent on investment in the infrastructure.
Therefore this should be kept to a minimum and Scottish Water
should be able to operate as many common services between
its wholesale and retail arm as possible. Other utilities
began with extensive splitting of services but more recently
have brought common services back together to realise economies
of scale. New entrants will be able to maintain common services
across their different operations and therefore excessive
separation conditions on Scottish Water would be discriminatory.
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After 2008 the charge cap and customer service
requirements on Scottish Water retail should be those required
to meet the provisions of the Act and no more onerous than
those applying to new entrants.
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It has been the practice in other utilities
that meter provision has been the responsibility of the supplier.
There is a growing view that it would be more efficient if
the network operator undertook this responsibility. UNISON
has no final position on this but we believe it is worthy
of further consideration.
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A fast track approach to the interim license
would appear to be a practical approach. The regulatory approach
should recognise the significant (and in our view unnecessary)
disruption this process will create for Scottish Water. Regulatory
requirements should recognise this.
Scotland's
public service union
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