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The Water Services (Scotland) Act 2005 requires
that the retail function of Scottish Water be separated
from the rest of the corporation and licensed. The Water
Industry Commissioner for Scotland is consulting on the
principles that should underpin the retail licence for the
separate retail business established by Scottish Water.
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This paper constitutes UNISON Scotland's
response to that consultation. UNISON is the largest trade
union in the Scottish water industry.
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As the largest trade union in the utility
industry UNISON has considerable experience of the impact
of the introduction of competition and the role of regulation.
That experience makes us highly sceptical of the alleged
benefits of competition and the damage inappropriate regulation
can do to the industry. This is reflected in our evidence
to Parliament during the passage of the Water Services (Scotland)
Act and in our industry briefings that can be viewed on
our website.
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We agree that there will be a continuing
need for price and customer service regulation under the
new arrangements. This will be essential during the period
up to 2008 when Scottish Water Retail will be the monopoly
supplier. When competition is introduced that regulation
should change to a ‘light touch' approach to ensure that
basic standards are maintained. The requirements on Scottish
Water Retail should be no more onerous than that applying
to new entrants.
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The licensing objectives in Chapter 3 reflect
the range of utility licences in the UK. This license consultation
covers retail provision that is now lightly regulated in
other utilities because of the introduction of competition.
It would be inappropriate to include licensing objectives
used in monopoly situations (e.g. infrastructure) to a retail
environment.
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Regulators have a tendency to require organisations
to provide ever greater amounts of information for them
to analyse and expand their own functions. This can be a
major burden on utilities and should be unnecessary in a
retail environment. The information requirements should
therefore be kept to the minimum necessary.
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We agree that the proposed timetable is
reasonable.
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We agree that an interim license is probably
unavoidable given the two stage process envisaged in the
Act. We do not agree that the incumbent ‘may be subject
to additional license conditions'. There should be a level
playing field from 2008 with all suppliers facing the same
conditions including a universal obligation to supply across
Scotland.
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One of the most expensive and unnecessary
provisions of previous utility business separations has
been demands from regulators that businesses are entirely
separate. Business separation entails considerable expense
that in our view would be better spent on investment in
the infrastructure. Therefore this should be kept to a minimum
and Scottish Water should be able to operate as many common
services between its wholesale and retail arm as possible.
Other utilities began with extensive splitting of services
but more recently have brought common services back together
to realise economies of scale. New entrants will be able
to maintain common services across their different operations
and therefore excessive separation conditions on Scottish
Water would be discriminatory.
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After 2008 the charge cap and customer service
requirements on Scottish Water retail should be those required
to meet the provisions of the Act and no more onerous than
those applying to new entrants.
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It has been the practice in other utilities
that meter provision has been the responsibility of the
supplier. There is a growing view that it would be more
efficient if the network operator undertook this responsibility.
UNISON has no final position on this but we believe it is
worthy of further consideration.
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A fast track approach to the interim license
would appear to be a practical approach. The regulatory
approach should recognise the significant (and in our view
unnecessary) disruption this process will create for Scottish
Water. Regulatory requirements should recognise this.
