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Utilities News

Scotland's largest utility trade union

November 2003

News Index

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.


News Index

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.


News Index

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.

News Index

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.

News Index

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.

News Index

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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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