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Utilities News

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)

News Index

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).

News Index

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.

News Index

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.

News Index

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.

News Index

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.

News Index

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.

News Index

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.

News Index

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.

News Index

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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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