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Scotland's largest utility trade union
November 2003
Water Charges
More excitable headlines on water charges have
contributed little to the need for a sensible debate on the future
financing of the water industry in Scotland. Claims that non-domestic
customers are paying an ‘inefficiency premium' of 50% are clearly
absurd. The Water Industry Commissioners (WIC) figures are based
on misleading comparisons with England. Scotland's water and sewage
system as well as our coastline and environment are significantly
different from England. Scottish water charges also reflect where
we are in the investment cycle, which again is different to England.
It is not surprising that wider enthusiasm for these comparisons
have dimmed since the English water companies are now demanding
a one-third increase in charges to cover their second wave
of maintenance and infrastructure improvements since privatisation.
That is not to say that water charges should
not be investigated. UNISON welcomes the inquiry launched by the
Scottish Parliament Finance Committee and the paper Principles
of Charging for Water and Wastewater published by the Water
Customer Consultation Panels. UNISON's responses to those inquiries
can be viewed on our website. Particular elements of the WIC's
charging structure need to be investigated including the pace
of harmonisation, standing charges and the treatment of debt.
The challenges facing the industry are considerable
but not impossible to resolve given time. The key requirement
is a more realistic financial framework rooted in the realities
of Scotland's water and sewage infrastructure. Not dubious economic
models or false comparisons with England.
Wake Up Call for Energy Policy
Power failures in London, North America, Italy
and elsewhere should act as a wake up call to government energy
policy. In the short term spare power capacity in the UK this
winter will be at its lowest for some 13 years. National Grid
has confirmed that the power margin will fall from 20.7% last
year to 15.1% this winter. In Scotland we are fortunate in being
an exporter of electricity. But for how long?
Hard long term decisions need to be taken on
future energy supply. In the present market framework no one is
going to replace our aging power plants. Whilst renewables will
play an important role they cannot provide all our needs. This
means an increasing reliance on imported gas. Most of it from
countries in central Asia, whose security of supply is at best
tenuous.
Attacks by environmental groups on Scotland's
coal fired stations are misplaced. Coal will remain an essential
part of our energy mix. Of course carbon emissions will have to
be reduced, but their campaigning efforts would be better directed
at encouraging the DTI to support clean coal technologies and
change the off/on market mechanisms which increase pollution from
Longannet and Cockenzie.
Optimistic assessments of the capacity of renewable
energy sources are looking unrealistic. Environmental and planning
objections are already slowing development. Even Sir Sean Connery
has joined conservationists in opposing wind farms - albeit from
the Bahamas! Demands for five fold increases in contributions
from wind farm developers by the Highland Council are unlikely
to encourage further growth. Similar problems exist with off shore
wind farms and other technologies are far from proven. The overall
message is that whilst theoretical capacity exists, the practical
realisation of that capacity is more difficult to achieve.
More welcome news has been the announcement by
Trade & Industry Secretary, Patricia Hewitt, rejecting Ofgem's
plans to extend charges for zonal transmission loss to Scotland.
This follows criticism of the plans by MPs on the Trade &
Industry Select Committee who recognised the damage these charging
arrangements would do to the development of renewables in Scotland.
The Energy Bill is anticipated in the next UK
parliamentary session. This will be an opportunity for the government
to promote the balanced energy policy we urgently need.
Company News
The collapse of TXU Europe cost Scottish &
Southern Energy £32m in lost revenue. This was a major
contributor to flat first half profits which rose just 1%. Customer
growth in the supply business remains strong, growing to 5.05m.
The company is still on the look out for further acquisitions
despite withdrawing from a £1bn deal to takeover Midland's
Electricity. The company also announced a review of boardroom
pay after shareholder criticism of the massive payout to retiring
Chief Executive, Jim Forbes.
ScottishPower continues its recovery with
a 17% rise in first-half profits to £393m. Some excitable
comments from Energywatch Scotland, accusing the company of exploiting
Scottish customers, failed to recognise that most of the profit
growth came from the USA. The highly competitive UK market meant
that division contributed a very modest £7m to the bottom
line. Even dafter comments came from city analysts calling for
the break up of the group to enhance shareholder value. Such calls
ignore the fact that it was the silo mentality which contributed
to the company's previous problems. Integrated operations have
been key to the company's revitalisation.
The threat of insolvency has been staved off
at British Energy although it may be a short term joy if
the EU Commission investigation finds against government support
for the company. In those circumstances DTI renationalisation
plans may have to kick in. Not that new Chief Executive Mike Alexander
needs worry too much. His contract entitles him to a £800,000
pay off if the firm goes bust before next March. His claimed cost
saving plans includes largely abandoning the company's Scottish
base. Unions argue that the company should focus on operating
safe and reliable power stations. Two more stations have suffered
shutdowns forcing the company to buy energy on the market to meet
supply contracts.
Centrica (Scottish Gas) reported an 11%
increase in operating profits. The continuing loss of gas customers
is balanced by gains in the electricity field. The company will
continue investment in gas-fired generation plus significant involvement
in renewables. Less welcome was a £200,000 fine for stopping
direct debit customers from switching to new suppliers. At the
opening of their new Edinburgh HQ the company confirmed its plans
to sell other services on the back of fuel products.
Merger cost savings is driving increased profits
(up 23%) at National Grid Transco. As UNISON warned, the
company confirmed it is planning to sell off one or more of its
local gas distribution networks. There are still significant safety
and regulatory issues and a number of electricity companies including
ScottishPower and SSE have expressed an interest in the sale.
The court of appeal's decision to reject the culpable homicide
prosecution of Transco for the Larkhall gas explosion was criticised
in the Scottish Parliament. Karen Gillon MSP is seeking to plug
this legal loophole with a private members bill.
Electricity Distribution
The next electricity distribution price control
is due to take effect from April 2005. Interim work shows a threefold
increase in distributed generation by 2010, increasing expenditure
from around £30m to between £200-350m. This price
control review is particularly important for Scotland to enable
distribution networks to respond to additional generating capacity
from renewables. If real costs are not recoverable then development
will be held back. Recovering pension costs is a particularly
difficult issue.
Fuel Poverty
In the first six months of this year ten times
as many Scottish gas and electricity customers were disconnected
than in the whole of 2001. Whilst the numbers of disconnections
are still low (458) this more aggressive approach to debt recovery
reflects the pressure on costs in a highly competitive supply
industry. Good news from the Scottish House Condition Survey figures
which shows that the numbers of households in fuel poverty has
halved in the past six years.
UNISON Scotland has published a guide to energy
efficiency aimed mainly at union welfare officers and members
who give benefit advice. In addition a pilot training programme
for community nurses has been completed in Glasgow.
Call Centres
The Commons Trade & Industry Select Committee
has launched an inquiry into the overseas outsourcing of call
centres. Predictions of 600,000 UK jobs disappearing by 2008 are
a wake up call for the need to act now before call centres go
the same way as much of Scotland's manufacturing industry. UNISON
and other call centre unions are pressing the Scottish Executive
to urgently adopt a credible strategy.
Click
here for a UNISON guide to pay and staff turnover trends.
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