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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)
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).
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.
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.
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.
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.
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.
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.
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.
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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