Water is returning to public service delivery

Water privatisation is in retreat. Water and wastewater is returning to local authority ownership across the world.

The Public Services International Research Unit (PSIRU), Multinational Observatory, Municipal Services Project (MSP) and European Federation of Public Service Unions (EPSU) have released new research on the growing wave of cities worldwide that are taking previously privatised water supply and sanitation services back under public control, in a process called remunicipalisation.

Over the last 15 years, 235 cases of water remunicipalisation have been recorded in 37 countries, impacting on more than 100 million people. Moreover the pace of remunicipalisation is accelerating dramatically, doubling in the 2010-2015 period compared with 2000-2010.

After huge problems in the developing world, private companies have been shifting their efforts to the developed world. It is therefore interesting that recent remunicipalisation is concentrated in high-income countries, with 184 cases compared to 51 in low- and middle-income countries. The great majority have taken place in two countries: France (94), home of two of the world’s private water companies, Suez and Veolia, and the United States (58).

Transnational Institute water expert Satoko Kishimoto said: “This report shows that water privatisation, which has been promoted so heavily in recent years, is increasingly being rejected by cities worldwide after years of failed promises, poor services and high prices. The pendulum is swinging back in favour of public water, because of the strong evidence that remunicipalisation brings immediate cost savings, operational effectiveness, increased investment, higher levels of transparency and accountability.”

The former Deputy Mayor of Paris Anne Le Strat, who was behind the flagship 2010 remunicipalisation of water in the French capital added; “Moreover, public water operators are now joining forces within and across countries to support and learn from each other so we can achieve the human right to water for all.”

The book Our public water future: The global experience with remunicipalisation comes out as global leaders are gathering for the World Water Forum, which is dominated by private water operators and has been a key proponent of water privatisation in recent years.

The delivery of clean water and sanitation also has to be seen the context of a global water crisis with supplies running dry at an alarming rate. The world’s population continues to soar but that rise in numbers has not been matched by an accompanying increase in supplies of fresh water.

The consequences are proving to be profound. Across the globe, reports reveal huge areas in crisis today as reservoirs and aquifers dry up. More than a billion individuals, one in seven people on the planet, now lack access to safe drinking water.

We should therefore be doubly grateful that we live in a wet country with a public water service. And we want to keep it that way. Well, the public service bit at least!



Assurances given on fracking?

In a new twist on the fracking moratorium, the Scottish Government has admitted the First Minister held talks with Ineos on the same day, and even roughly the same time, energy minister Fergus Ewing announced a moratorium on granting planning permission for unconventional oil and gas developments.

In January, the firm argued fracking was safe and said delays risked the collapse of UK manufacturing, but following Mr Ewing’s announcement it appeared to welcome the move saying it “understood the importance of consultation… We welcome the Scottish Government’s decision to manage an evidence-based approach.”

The campaign group Frack Off has questioned if this u-turn was based on private assurances by Nicola Sturgeon that its interests were unlikely to be affected. It will be several years before Ineos will be ready to exploit the reserves they hold licences for, and as we recently reported, the consultation has been kicked into the post 2016 election long grass.

Ed Pybus, spokesman for Frack Off Scotland, said: “Why was the First Minister meeting with these people and not someone further down the tree? What promises were made in exchange for their public support for the moratorium? I fear that local communities are being stitched up by backroom deals.”

Meanwhile the independent health group Medact has examined the available scientific evidence on fracking health impacts and have identified:

•Potential health hazards associated with air pollution and water contamination: these include toxins that are linked to increased risks of cancer, birth defects and lung disease;
•Negative health impacts associated with noise, traffic, spoilage of the natural environment, and local social and economic disruption.
•The indirect effects of climate change produced by greenhouse gas emissions.

They conclude that the risks and serious nature of the hazards associated with fracking, coupled with the concerns and uncertainties about the regulatory system, indicate that shale gas development should be halted until a more detailed health and environmental impact assessment is undertaken.

More evidence that unconventional gas is the wrong energy approach for Scotland.

Fracking kicked into election long grass

Will the Scottish Government’s fracking moratorium and consultation be the end of fracking in Scotland, or just a temporary delay?

Rob Edwards in the Sunday Herald, reports that the Energy Minister, Fergus Ewing, is planning to announce that the Scottish Government’s consultation will begin in November and run until January. When he announced a temporary moratorium on fracking and coalbed methane developments on January 28, he promised a health investigation and a public consultation. He said he would announce the consultation “in around two months” and it would last for 12 weeks. This means that any decision to maintain or end the moratorium is unlikely to be made before the Scottish Parliament election in May 2016.

Green MSP, Alison Johnstone said:

“Given the huge level of public concern, it is simply unacceptable that Scottish ministers have failed to bring forward their promised consultation by now. Many people will be wondering if the SNP is trying to delay making a decision on fracking until after the next Holyrood election. We need to see the current moratorium become a permanent ban.”

Even supporters of fracking have attacked the delay. Scottish Conservative energy spokesman, Murdo Fraser MSP, described the moratorium as a “political fix to kick this important issue into the long grass”.

The fracking industry has been notably silent on the issue. While they will find the delay irritating, they know that Ewing is supporter of fracking and will want to give him some political headroom. He was outmanoeuvred by Labour on the left into agreeing the moratorium and many of the local anti-fracking groups are full of SNP activists.

In addition, Fergus Ewing has received a letter signed by organisations including Friends of the Earth, UNISON and the Women’s Environmental Network, as well as a number of community anti-fracking groups and academics, expressing their “grave concern” that UCG is not currently covered by the scope of the Scottish government’s moratorium.

The letter said: “While we are disappointed that Coal Authority licensing is not proposed to be devolved to Holyrood under the Smith Commission, we note that the means of imposing a moratorium on unconventional oil and gas developments – ensuring that no planning permissions or environmental permits are granted for these developments – could equally be applied to underground coal gasification.”

Kicking a decision into the election long grass is probably the best solution the industry could hope for and it certainly works for Fergus Ewing.


Longannet – three reasons why it’s closing early

The early closure of Longannet power station in Fife is a shocking blow to the workforce and the Fife economy. The causes are a toxic cocktail of company indifference, absurd regulations and an energy policy that’s not fit for purpose.

Scottish Power has announced that it is to to close its coal-fired power station at Longannet early next year, rather than the original 2020 date. This comes after they failed to win a contract from National Grid to help maintain voltage capacity on the grid. The company didn’t even bid for the earlier capacity auction from 2018. 270 jobs will go, plus those in the supply chain, including freight train operations and Scotland’s struggling coal industry will suffer even more.

So why is it closing early?

Firstly, because of discriminatory transmission charges. The cost of sending electricity down the long distance transmission wires is heavily biased towards encouraging electricity generation near where it’s consumed – mainly in the big English cities and London in particular. This is important because Scotland has always been an exporter of electricity, providing quality jobs and contributing revenues to the Scottish economy. This means that if you generate power near London you get a subsidy from the grid. If you generate it in Scotland or the North of England, you pay an additional charge. Ofgem’s Project TransmiT has been reviewing those charges for years, but the changes will be too small and too late for Longannet. At best, its transmission costs next year will fall from £40m to £34m.

Secondly, we have company indifference. ScottishPower is owned by the Spanish energy giant Iberdrola, who have significant pressures on their limited investment funding. They have failed to invest in Longannet, either to make it IED compliant (reducing emissions) or put in a serious bid for Carbon Capture and Storage (CCS). It suits Iberdrola’s purpose to highlight transmission charges because it diverts attention from their own failures. Former energy minister Brian Wilson described the relationship between the company and the Scottish Government in a recent column in the Scotsman. Lots of grand announcements, but precious little delivery.

Thirdly, we have UK and Scottish Government energy policy. A UK government implementing its hugely complex energy market reform that attempts to patch up market failure, badly. As for the Scottish Government’s hopelessly unbalanced energy policy? Brian Wilson sums it up well:

Now reality is closing in. The Scottish Government’s policy is based on crossing its fingers and hoping that hated nuclear power stations keep going till 2030. Cockenzie is closed. Longannet is on the way out. “Renewables” has turned out to be synonymous with onshore wind – with virtually none of the hardware which adorns our hillsides manufactured in Scotland.”

We now have the previously unthinkable situation where Scotland relies on England to keep the lights on when the wind isn’t blowing. As Tom Greatrex MP highlighted recently, in the three years from 2012 to 2015, Scotland relied on English power for part of 231 out of 1036 days, or one in five. For seven days in each year, Scotland imported electricity from England for a full 24 hour period.

Even with English electricity there will be a concern that we have enough generation capacity in Scotland. On Boxing Day, when wind generated less than 1% of the power from Scotland going into the grid, Longannet met 40% of our electricity demand through coal. When our two nuclear stations go as well, the position will be even worse.

The early closure of Longannet is the result of an energy market that isn’t working for Scotland. Multi-national companies don’t care where the power is generated, but we should because of the impact on jobs and the economy. Equally, governments need to recognise the value of a balanced energy policy that ensures a mix of generation capacity. That is the best guarantee that the industry in Scotland has of a long term future and importantly, our lights remain on.

World Water Day

Today is UN World Water Day. It’s a day to celebrate water. It’s a day to make a difference for people across the world who suffer from water related issues. It’s a day to prepare for how we manage water in the future.

In a developed country like Scotland we take water from the tap and the disposal of wastewater for granted. In developing nations the responsibility for collecting water every day falls disproportionately on women and girls. On average women in these regions spend 25% of their day collecting water for their families. This is time not spent earning an income, caring for family or attending school.

This year, World Water Day is focusing on sustainable development. Climate change negatively impacts fresh water sources. Current projections show that freshwater-related risks rise significantly with increasing greenhouse gas emissions, exacerbating competition for water among all uses and users and the potential for conflict. Combined with increased demands for water, this will create huge challenges for water resources management.

Here is just one of many scary statistics about water. To produce two steaks you nee 15,000 litres of water. By 2050, agriculture will need to produce 60% more food globally, and 100% more in developing countries.

In Europe a year has passed since the so-called 'positive' response from the European Commission to the first successful European Citizens' Initiative (ECI), but there has been little action. Nearly two million citizens who supported the Initiative are waiting for the European Commission to implement the Human Right to Water in the EU, and to stop its water commodification and privatisation agenda. The European Parliament is debating its opinion about the Initiative and the human right to water, which will be voted in the Plenary in July this year. European trade unions and others will be demonstrating in Brussels on Monday to call upon the EU to take action.

In Scotland, we are very fortunate to have a public water service. Scottish Water has around 5 million customers in 2.45 million households. 1.3 billion litres of water is provided every day and 842 million litres of waste water is taken away and treated before being returned to the rivers and seas. It has to cover an area of over 30,000 square miles, a third of the area of Britain. And Scotland has a longer coastline – over 6,800 miles – with a small and relatively dispersed population which requires a large number of small water and waste water treatment works. Despite these unique challenges, we pay lower charges than the average for the privatised industry in England. That's what public service can achieve through lower borrowing costs, vital to a capital intensive industry, and of course no profits filtered off to shareholders.

Across Europe, towns and cities are taking back their water services from the big corporations, recognising as we do the benefits of public ownership. However, we can't afford any complacency. The sharks would love to get their hands on Scottish Water. There remains an active lobby to privatise Scottish Water, even if they try and hide behind Trojan horses like Public Interest Companies or cooperatives.

Scottish Water has already privatised almost all of its capital programme and the Scottish Government is considering handing over the contract for public sector water to an English private water company. The direct consequence of the absurd introduction of competition for non-domestic services.

The regulatory system in Scotland seeks to mirror the English system, designed for a privatised system not a public service. Scarce resources are wasted maintaining these arrangements that do nothing for service delivery and encourage short term cost cutting that could put safety at risk.

In 2012 the Scottish Government launched a positive initiative – Hydro Nation. It set out a vision for Scotland's water that recognised a wet country has amazing potential in a world where water will increasingly be a scare resource. Sadly, the initiative was watered down (intentional pun!) and the grand vision has not been realised. The idea was right, even if the delivery has been poor.

Scotland needs a more democratically accountable water structure. One that builds on the public service ethos and takes full advantage of one of Scotland's greatest assets. On World Water Day let's be thankful we have a high quality public water service, but also recognise that we can do better.




Longannet and a balanced energy policy

The threat to Longannet power station has brought the absence of a balanced energy policy in Scotland sharply into focus. Longannet plays an important role in baseload generation and balancing the system, particularly as Scotland becomes increasingly dependent on intermittent wind energy. Longannet is one of the biggest coal-fired power stations in Europe, and generates enough electricity each year to meet the needs of more than two million homes.

Scottish Power has previously said that given the “particularly disproportionate transmission charging penalties applicable to the station” it could not justify entering the plant into the auction for delivering electricity generating capacity for the winter of 2018/19. It costs about £40m a year to keep Longannet connected to the grid, while a similar power station in the south of England would receive a payment of £4m.

The failure to secure CCS at Longannet has meant the plant has no long term future, but it was planned to operate until the end of the decade. If negotiations with National Grid over transmissions costs fail, the plant could close much sooner.

Professor Colin McInnes, from Glasgow University is critical of the way that the energy debate has been led by the Scottish Government, and sees the growing uncertainty about how to provide baseload and “dispatchable” (emergency top-up) power as a case of “chickens coming home to roost.” He says the Scottish Government’s emphasis on renewables targets has distracted attention from baseline needs and realities, and allowed “barking” ideas about a potentially renewables-only Scotland to gain mainstream currency.

“We need to have an energy policy that is technically well-founded, we need a balanced energy mix. Instead of what should have been a simple matter of energy economics, we have seen the debate politicised by a 2020 target to achieve the “equivalent” of all of Scotland’s energy needs by renewable energy. Why would you want such a target? It’s an arbitrary number thought up by spin doctors for a purely political purpose. It’s more fitting for the 1950s Soviet Union than for a dynamic modern economy.”

Nicola Sturgeon’s call for the PM to take action over Longannet was given ‘The brass neck award’ by former energy minister Brian Wilson in his Scotsman column. In a detailed analysis and history of the Scottish Government’s cosy relationship with ScottishPower and SSE he said:

“Now reality is closing in. The Scottish Government’s policy is based on crossing its fingers and hoping that hated nuclear power stations keep going till 2030. Cockenzie is closed. Longannet is on the way out. “Renewables” has turned out to be synonymous with onshore wind – with virtually none of the hardware which adorns our hillsides manufactured in Scotland. In security of supply terms, it may no longer matter that Scotland is an importer of electricity rather than an exporter. But hundreds of jobs are being shed while the manufacturing boom promised from renewables has not happened. Scottish Power and SSE should have been the catalysts for that new industry but have been allowed to get away with importing virtually everything.”

Utilities Scotland has consistently argued that the discriminatory transmission charges are wrong and not just for Scotland. However, the lack of a balanced energy policy means that Scottish lights are increasingly being kept on by English power stations. That would have previously been unthinkable and has serious consequences for jobs and the industry in Scotland.


Public water contract – ultimate in market madness

Paying a privatised English water company to provide Scottish public water to Scotland’s public services has to be the ultimate in market madness.

An article in yesterday’s SundayTimes reports that the Scottish Government is about to award a massive contract to provide water and waste water services for most of Scotland’s public bodies to Anglian Water, which is based in Huntingdon.

If you thought we had a public water service in Scotland, you might be a bit confused at this stage. Well we do, but it’s looking a bit frayed at the edges.

Scottish Water is a public corporation (even if it often wrongly calls itself a ‘company’) accountable to Scottish Ministers and the Scottish Parliament. Scottish Water is responsible for the provision of water and waste water services to almost all domestic and non-domestic properties and for maintaining the public system. There are some small scale privatewater supplies, largely in rural areas.

However, there is competition in the provision of customer-facing activities such as billing, charge collection, meter-readingand complaints handling for non-domestic customers in Scotland. This means that Scottish Water levies a wholesale charge on licensed retailers for non-domestic customers. Licensed retailers can agree their own charges with customers, subject to them being no higher than a default tariff set by the Water Industry Commission Scotland(WICS). Scottish Water is also a retailer, through its own retail arm BusinessStream, which provides a service to the vast majority of non-domestic customers in Scotland.

As the public bodies are non-domestic customers they come under this system of retail competition and the Scottish Government, actually the then Infrastructure Secretary Nicola Sturgeon, put one big contract for public bodies out to tender last August.

The driving enthusiasm for non-domestic competition was the WICS CEO – a well known supporter of privatisation. So keen that he promoted the scheme’s extension to England and Wales. UNISON has always argued that this arrangement is an expensive waste of effort. The WICS claims it has resulted in savings, but in practice these savings are all about water efficiency, not marginal differences in billing systems.

Non-domestic competition is not the only area of privatisation. Last year the insider web site ‘Utilities Scotland’ submitted FoI requests to ascertain the extent of privatisation in the delivery of the water and wastewater capital programme. In the last four years, 92.5% of Scottish Water’s capital programme has been delivered by private contractors, 7.5% by ScottishWater staff. By any standard that is substantial privatisation. This is on top of PFI schemes run by a variety of privatised water companies.

Weare also concerned about the impact the Transatlantic Trade and Investment Partnership (TTIP) could have for Scotland’s public service model. The greater the privatisation, the easier it will be for overseas corporate interests to challenge our public water system.

There is a certain historical irony in the Scottish Government exporting Scottish jobs to Huntingdon. The Earldom of Huntingdon was held by Scottish kings, most famously by David 1 in the 12th century. He used the revenues to build several abbeys in Scotland and generally spruce up public buildings. On the other hand, Oliver Cromwell came from Huntingdon and he knocked down quite a few public buildings in Scotland. Also, a later Lord Huntingdon was a custodian of Mary, Queen of Scots – that didn’t end well either!

ScottishWater is a public sector success story, but we are only too aware that there is a powerful lobby for privatisation. As I said in yesterday’s Sunday Times, the gradual drip of privatisation will have reached a new high if this contract is awarded to Anglian Water. The privatisation sharks are still circling ScottishWater and we need to remain vigilant.


Energy profits and the failed market

Scottish Power profits have increased by 41% year-on-year in its generation and supply business for 2014. This comes after the Competitions Authority said the Big Six providers, including Scottish Power, were overcharging loyal customers by £234.

Scottish Power's parent group Iberdrola reported an increase in profits to €139.1 million, from €81.2 million in 2013. They also gained 10,000 new customers. However, profits were down 17% at the company’s SP Energy Networks business from €578.6 million to €479.7 million. Profits were also down in UK renewables with net profit €55.9 million in 2014 compared to €130.6 million in 2013.

Iberdrola chairman Ignacio Galán had some interesting comments on offshore wind, he said: “One of our key priorities is to play a leading part in reducing costs for offshore wind and we believe that our large scale future projects in the UK will be able to deliver power at a significantly lower price than many people expect. We are looking to a future when offshore wind will be competitive with fossil generation, contrary to some expectations.”

In contrast Centrica, which trades as Scottish Gas, announced a 35% cut in profits. The retail business had a 20% cut in profits, attributed to lower retail consumption due to 2014’s historically mild temperatures. However, losing customers has also played a part in the weaker results.

The report by the Competition and Markets Authority (CMA) shows that the Big Six energy companies are charging their most loyal customers up to £234 extra a year.

Labour's Shadow Energy Secretary, Caroline Flint said: “Energy bills are £300 a year higher under the Tories. The number of families with children who cannot afford their energy bills is at a record high. Time after time, David Cameron has ignored warnings about rip-off energy bills, opposed Labour's plans to reform the energy market and create a tough new regulator, and let the energy companies get away with overcharging millions of consumers. Households and businesses cannot afford another five years of this.”

While true, Flint is not proposing to take radical action to break up the failed energy market. A market that has failed the most for the people who have the greatest energy need. Ofgem, the government regulator of the energy utilities is simply myopic and sees no other solution to the problem than providing even more market.

The Morning Star leader was typically direct, they said: “Ofgem's primary concern is not to advise Britain’s gas and electricity customers on how to obtain a better deal from their energy suppliers, but to maintain private ownership when even the dogs in the street know that the industry is one big racket.”

Philip Pearson at the TUC is more measured, but also points to the long term trends in his analysis. He says that customers who did not switch were more likely to be on low incomes, over 65, living in social housing and without qualifications. Customers on Standard tariffs were also more likely to be disabled, a single parent and struggling financially.

The CMA report has made it abundantly clear that the corporate-controlled energy system isn't working and we need a radical new approach.


Getting wind farm subsidy and planning right

The role of onshore wind in meeting renewable targets and Britain’s future energy needs has always been contentious. The IPPR has thrown something of a grenade into the debate with a paper that claims there is a loophole in the subsidy scheme that is costing the taxpayer dear.

Given the scale of customer financial support for wind generation it is important that subsidy schemes are cost-effective. However, a loophole in the feed-in tariff (or FiT) for onshore wind energy threatens to cost the taxpayer more than £400 million over the scheme’s lifetime, and to erode both public confidence in onshore wind.

The loophole identified by IPPR sees developers installing ‘derated’ turbines – turbines which are ‘capped’ so that they generate less energy. Turbines are derated in this way so that developers and investors are able to qualify for the more generous subsidy offered to lower-capacity turbines, generating 100–500kW. By installing derated turbines, developers are making larger profits off a feature of the scheme that was designed to support small-scale projects. Derated turbines are also physically larger than correctly rated turbines of the same capacity, and therefore threaten to exacerbate public concerns about the visual impact of onshore wind without providing any pay-off in terms of increased electricity generation.

IPPR believe that, at September 2014, almost half of installed turbines qualifying in the higher-subsidy 100–500kW band were derated. Even allowing for future reductions in the amount of this subsidy, they have calculated that each derated turbine will earn £100,000 in ‘excess subsidy’ each year, or £2 million over its 20-year lifespan. This means that, by September 2014, the British energy billpayer was already committed to £175 million in excess subsidy payments on derated turbines. Assuming the number of onshore wind turbines continues to grow at its historical rate, this total liability will swell to more than £400 million by the end of 2015, if this loophole is not closed.

IPPR makes three suggestions for change. Subsidy based on rotor size rather than capacity; a subsidy cap; and a new subsidy band to take away the incentive to exploit the loophole.

These revelations will strengthen the anti-wind farm lobby. An open letter, which calls into question the government’s judgement on large windfarm projects, has been signed by a group of rural protection groups including the National Trust for Scotland. It says the government, in backing large windfarm developments, has ignored its own advisors and failed to ensure windfarm plans have been laid open to “proper and democratic scrutiny”.

It also says: “It is vital that any decisions on the location of these developments rely on the fair and impartial assessment of all pertinent information and points of view. Unfortunately, we do not believe that the Scottish Government is doing this in a consistent manner with windfarm developments.”

As wind farms play such a major role in meeting our renewable targets, it is important that we get the subsidy and planning regimes right.


Ineos threats over fracking

Perhaps the least surprising energy story of recent weeks has been INEOS threatening the future of their Grangemouth plant if unconventional gas extraction (fracking) is not allowed in Scotland.

We were told at the time of the last crisis by INEOS that their business plan was based on importing gas from the USA. Many of us were sceptical, given the likely availability of shale gas so close to Grangemouth.

In fact in 2013 we warned, “The link with fracking is that his Grangemouth plant sits right in the middle of the central belt shale gas area. Using this gas would obviate the need to ship in shale gas from the states. We are bound to speculate that his next line will be to threaten (again) that without local gas the plant is no longer ‘viable’. Central belt residents – you have been warned.

Now, surprise, surprise, we are told by Ineos Upstream chairman Gary Haywood that buying in the gas from abroad was not a long-term solution. Speaking at a conference in Edinburgh, he said it would be feasible to get a shale industry up and running in the UK “within three to five years…… Can we do that efficiently enough to make Grangemouth make sense in the future? That is a real challenge.”

Ineos has bought licences for shale gas exploration across 700 square miles (1,126 sq km) of land in central Scotland, but the government moratorium has left a question mark over the future of the industry locally. When asked if the plant would have a future without an indigenous supply of gas, Mr Haywood said it would be “very difficult”. He said: “When you are shipping in material of that nature you are always at a disadvantage.”

Amazing that this wasn’t pointed out when Ineos was ‘selling’ us the 2013 plan and taking substantial amounts of taxpayers money. And let’s not forget that Ineos’s owner is another corporate who relocated profits to Switzerland to avoid tax.

MSP’s should not be swayed on fracking by the shifting sands that is the latest Ineos threat. There is a strong safety, environmental and economic case against fracking and that is the correct focus for legislators.



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