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Consultation on the Principles of Licensing

UNISON Scotland Response

22 July 2005

  1. 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.
  2. This paper constitutes UNISON Scotland's response to that consultation. UNISON is the largest trade union in the Scottish water industry.
  3. 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.
  4. 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.
  5. 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.
  6. 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.
  7. We agree that the proposed timetable is reasonable.
  8. 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.
  9. 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.
  10. 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.
  11. 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.
  12. 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.


Dave Watson

Scottish Organiser (Utilities)

22 July 2005


For further details contact:

Dave Watson, Scottish Organiser (Utilities)

UNISON House, 14 West Campbell Street Glasgow G2 6RX. Tel: 0845 355 0845

E.mail d.watson@UNISON.co.uk web: www.unison-scotland.org.uk/


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