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Utilities News

Scotland's largest utility trade union

April 2003 Briefing



Utilities News

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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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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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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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