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Going with the market flow
Sunday, March 30, 2008
The state monopoly over water supply will at last be broken next week, as Scotland's business market is opened up to the UK's most radical private sector competition.
But as two rival companies prepare to take the plunge, with others likely to put a toe in the water before long, the chief executive of Scottish Water-owned Business Stream has other ideas.
Mark Powles insists: "I guarantee we will hurt every time we lose a customer - that is the culture we have created in here."
Already two companies, Satec and Aquavitae (both based in Berkshire), have been licensed by the Water Industry Commission for Scotland, and one (Satec) has so far signed a wholesale agreement with Scottish Water.
Whereas business competition in England and Wales is limited to just 2000 companies, the entrants in Scotland are angling for a bite of a complete market with 130,000 properties and 94,000 businesses. They are all customers of Business Stream, which has for 16 months been separated from its parent as an arms-length company with its own funding structure.
Powles says: "We had to satisfy a number of tests, to be independently-managed with our own board of directors, our own management team and staff, and in control of our own destiny."
He adds: "We consider Scottish Water as supplier, not parent. The subsidiary thing is not on our agenda."
Powles arrived last year to lead the change from public sector administration department to riproaring retailer. He commutes weekly from his home in Hertfordshire to Edinburgh, where a floor of Scottish Water's HQ at Fairmilehead has been given a culture change makeover.
The walls and pillars are adorned with mission statements, core values and KPIs (key performance indicators), and the windows sprout the organisation's coloured bubbles (purple for Scotland, green for the environment, blue for water).
"The bubbles are a key part of the personality of the business and everyone is bonused on delivery of certain KPIs," Powles explains as he walks the floor. "Nobody has an office here, we are all in the open-plan."
The 130 staff who transferred to the new company a year ago already have some 10% of pay linked to performance, with more to follow. "These are people who have worked in an inte-grated water industry, not a competitive market, and it is about getting them to think in a different way. There is a big difference between doing customer service because you are regulated to do it, and doing it because your future and your livelihood depends on it."
Powles admits Business Stream, now with 160 staff, is holding a lot of cards. "We know this market and are based in this market with local knowledge."
But when you have 100%, arguably the only way is down. "The regulator says there may be a mix of niche players, private companies who deal in one particular area, and some bigger companies who decide to come in as well in future.
"We don't have a God-given right now to keep the customer, and I am setting our stall out to ensure we have the product, service and service culture to be good at what we do - to do it on merit rather than because we are the only show in town."
Powles kicked off his career in retailing, but won his spurs in some of the big competitive battles in the UK's transport industry, working for Stenaline ferries as it fought Hoverspeed, then moving to National Express.
"Just after privatisation, it was about how you turn these institutions into customer-facing businesses, and bring commercial success into highly complex regulated companies."
He led the revamping of London's rail commuter "misery line", the launch of the Stansted Express, and a queue-jump project to drive efficient telesales and online rail ticketing.
On arrival in Edinburgh, he had to juggle the culture change with the need to keep the business running smoothly.
"A lot of staff have come over from Scottish Water, good young energetic people who just need direction and leadership. We have also brought in a range of skills you would not find in an integrated water business - marketing, relationship management, IT - from companies like Cap Gemini, Logica, British Energy and Standard Life."
Business Stream last month opened an office in Hillington, Glasgow, for up to 20 staff, giving the business a service base in the west of Scotland for the first time. It has also made an acquisition, a specialist water and waste consultant Business Solutions. This helps Powles to sell the new company as proactively helping its customers to cut their water bills, through advice on supply and conservation of water, waste reduction and treatment, and data management including real-time consumption.
"We have saved companies anything from £100,000 to £500,000," said Powles.
He is promising to roll out new services over the next 12 months, including direct debit discounts, electronic billing for multi-site customers, and online meter reading and bill management. There will also be "closer working with commercial property developers to ease the process of new water connections for business customers".
Powles says part of the new commercial focus is to get the basics right, such as accurate meter-reading, and much of it is about understanding a diverse market.
"I have broken our customer base down into 12 segments, from agricultural and manufacturing through to bed-and-breakfasts and newsagents, and we are looking to design a service offering around these different types of customer."
He says the challenge is in some ways unusual. "We are a start-up, but we start with 100% of the market, which I have never had before. You have got to give your staff something to believe in but a lot of companies make a big mistake, they bring in all the consultants and specialists and change goes down to the staff. I decided early on that it needed to be owned and driven by the business with specialists in support, rather than the other way round."
He will not be drawn into how much of the customer base he expects to retain once the switching starts, but says: "We will work very hard to understand why they have switched, and we will work hard to win them back."
This news story featured on "The Herald"
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Holiday call charges – why we still get done roaming?
Sunday, March 30, 2008
The new capped tariffs don't apply everywhere, finds Sue Hayward, but costs can be cut amid the confusion
The post-holiday blues often kick in the moment you land on home soil, but the financial pain might come a little later – when your mobile phone bill hits the doormat.
Taking a mobile on holiday is essential for many of us – whether to call home to let family know we've arrived safely or to make the occasional work call. But even if you check the call charges before heading off, you could still be in for a nasty shock.
"Around 80 per cent of us don't think twice about the cost of calls that we make abroad," says Rob Barnes, head of mobiles at the price-comparison site moneysupermarket.com. But with some "roaming" charges costing as much as £2 per minute, those holiday calls can bring bumper profits for the network.
Under European Union regulations that came into force last September, roaming costs across the EU are now capped at a maximum of 38p per minute (including VAT) to make calls and 19p per minute (inclusive) to receive calls. According to the UK telecoms regulator Ofcom, these charges are set to fall each year until 2010 – when, it says, "the current roaming regulation is due to end".
Ofcom adds that operators are now also obliged to send customers a free text when they arrive in another member state with information on the cost of making and receiving calls.
But even under this new regime, "there's still a very healthy profit margin for network providers", says Eddie Murphy, a telecoms expert from Priory Consulting Services.
While the new "Eurotariff" has cut call costs by around 50 per cent, the problem is that "it's only EU-wide and not across the whole of Europe, which in itself creates confusion for consumers," Mr Barnes points out.
"If you're going on holiday to Turkey," he adds, "you could make the mistake of thinking you're covered. But Turkey's not a member of the EU so you'd be charged between 70p and £1.50 a minute depending on your provider."
Ofcom is also concerned that, despite the EU charge capping, hidden fees remain. "It's common practice to charge for the first full minute, so a 20- or 30-second call can be charged as if it takes one minute," says Ed Richards, chief executive of the regulator.
If this is confusing, adds Mr Barnes, it's even worse once you're outside the EU. "There are so many different, convoluted tariffs. O2, for example, has several separate overseas call options." Add to this the problem that some call-centre staff aren't clued up when it comes to giving accurate pricing information before you travel, and you can easily face an inflated bill for a quick call.
And once you've made the call, "you often don't have a leg to stand on," says Mr Barnes, "as proving you were given bad advice is difficult."
Rather than imposing standard roaming charges to call home, many mobile firms do offer packages aimed at reducing the cost. But once again it's not straightforward: some of these cost nothing and some you pay for. Vodafone's Passport is free but you'll need to ask for it to be included on your account by contacting customer services. You'll then be charged a 75p connection fee plus your standard call rate when ringing home from abroad, so if you've got inclusive "free" minutes within your existing package, this can reduce the expense still further. But the service isn't available in North America.
Orange's Frequent Traveller costs £2 a month and claims to save customers up to 50 per cent on call rates worldwide. But in some cases the saving can be as low as just 8 per cent – when calling Ireland, say. And it can be hard to work out which deal is best.
Other ways to cut your call costs include actively choosing which network to switch to abroad, as most phones automatically lock on to the strongest signal at the time. "Before you go, identify which network will be cheapest," says Mr Murphy at Priory Consulting, and this can be done by calling your existing provider. "Most are partnered with foreign networks and it's relatively easy to change networks on your phone."
Switching off your voicemail can save pounds too. Even if your phone is turned off, calls to your voicemail will still cost you money. So ask your network provider to remove the facility temporarily.
'It's a battle to prove you were given bad advice'
Barry Compton, 41, a jeweller from London, has found himself out of pocket several times after using his mobile abroad.
"Whenever I go on holiday, I contact Vodafone to ask for the cost of calls home," he says. "Invariably, the call- centre staff don't seem to know, and when they come up with a price, I usually seem to get charged more as they've got it wrong."
Barry has also had problems trying to avoid roaming charges. Before going to the US, he contacted Vodafone's customer services department, as the company had advised. "I was charged for the calls, yet they assured me it would be free."
On a recent trip to Dubai, he was billed over four times the price he'd been quoted. "The reason I check before I go is so I can decide the cheapest way to make calls. In Dubai I was staying with a friend who has an internet phone; if I'd known I'd be charged £1.60 a minute by Vodafone instead of the 38p quoted, I'd have asked to use her internet package, which would have cost a few pence a minute."
Barry got in touch with Vodafone and has been promised a refund. "But once you've made the calls, it's always a battle to prove you were given bad advice."
This article was featured on The Independent website
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Pulling plug on water monopoly
Tuesday, March 04, 2008
Scots businesses will be first in the world to have choice of suppliers, writes MARTYN McLAUGHLIN of The Scotsman
It is considered the most wide-reaching development ever in the Scottish water industry, and the most significant in the UK for a generation.
Whether it is a newsagents in the Shetland Islands, or a major housebuilding concern in Edinburgh, tens of thousands of Scottish businesses will have the right to choose their water and sewerage suppliers from the beginning of next month.
Some 94,000 commercial customers across 130,000 properties will have the option to abandon Scottish Water for one of a growing number of firms from England tapping into a market worth £330 million.
Competition, many believe, is long overdue in the water industry. Only last month, a government report ruled that businesses are being overcharged by almost £70 million a year by Scottish Water to subsidise household bills. MSPs have also condemned the organisation for its waste of treated water, estimated at one billion litres a day.
No-one can accuse the state-owned organisation of complacency, having spent more than £2 billion repairing its network, but the shake-up is being welcomed.
Addressing a conference entitled The Future of Scotland's Water, the man at the helm of the nation's water watchdog yesterday spoke enthusiastically of the transition ahead.
Alan Sutherland, the chief executive of the Water Industry Commission for Scotland (WICS), said: "It is probably the most significant change in the water industry in Great Britain for some 20 years. Perhaps it is the most significant change ever to affect the industry in Scotland.
"Real choice… competition… is coming to the water and sewerage industry in Scotland. Competition in the Scottish water industry will help ensure that customers see further significant improvements in value for money."
The changes, the WICS insists, will not mean business customers face extortionate bills, as is the case with electricity and gas. Significantly, the wholesale charges imposed by Scottish Water on licensed suppliers will be regulated, so as to rule out the volatility in retail prices in the energy markets.
That means providers will be required to offer a standard level of service for a standard tariff – a default tariff. With limits set on any increases in the tariff until 2010 – which are on average less than the rate of retail price inflation – businesses will not face exorbitant costs.
Iain McMillan, the director of CBI Scotland, which represents about 26,000 Scottish firms, said: "It is comforting for business that the default tariff is no more than the maximum charge customers would have paid to Scottish Water if competition had not been introduced."
However, as is to be expected with a scheme of such seismic change, difficulties are feared. Given the volume of non-household customers that will have the option to switch supplier, there are concerns of a backlog in the first months.
The Central Market Agency, a company owned by Scottish Water and all the other licensed providers, believes it will take six days to process a customer's switchover. Multiply the number of interested parties by a figure reaching into the thousands, however, and the CMA may have to revise its timescales.
The part-deregulation of the quango is one which Mr McMillan believes should pave the way for its full privatisation, a step he believes could free £180 million of public money a year. "The current nationalised business model of Scottish Water belongs in a bygone era – the era of the 1960s and 1970s when high and unnecessary public expenditure and taxes were needed to fund a whole raft of publicly owned utilities and other businesses – all with their inefficiencies, defects and high prices to the consumer," he said.
"The Scottish Government needs to throw off one of the last remnants of its 'public good – private bad' mentality and come into the 21st century."
A spokesman for the Scottish Government last night refused to rule out such a move, explaining: "This is the first time anywhere in the world, that non-domestic users will be able to choose their own water suppliers. We will monitor how the introduction of competition for non-domestic users develops over the coming months."
There are rumblings that the Scottish Government is intent on keeping a closer eye on Scottish Water's performance. Also present at yesterday's Holyrood conference was Stewart Stevenson, the infrastructure minister, who said household customers should get rebates if Scottish Water lets them down.
He said: "While the industry may be in good shape today, we must ensure it is in even better shape in the future. We must maintain the best aspects we have and improve on all the others."
He said Scottish Water deserved congratulation for its "great strides" on improving customer service, but warned it must offer value for money.
"When customers pay for a service, they rightly expect to receive good quality service. In most commercial areas this is a given, but it is not so in the water industry," he said.
"We should therefore also consider setting a guaranteed minimum service. Considering customer rebates when service fails is an example of how the industry could innovate."
The minister added: "Public bodies are often criticised for being unimaginative and innovation averse. We cannot let that happen with Scottish Water."
Unison's Dave Watson told the conference that Scottish Water needed "greater accountability" rather than privatisation.
"Unison, along with the STUC and the other unions involved in the water industry, have been engaged in the debate about the future of Scottish Water, and we all believe that there should be greater democratisation of the service, so we want any review to clearly address proposals to deliver that accountability," he said.
BATTLE FOR COMMERCIAL CUSTOMERS
UNDER the changes, Scottish Water will be split into two companies. The first will retain the Scottish Water name, and continue to provide services to over two million household customers and control the nation's pipes, sewers, and treatment works.
From next month, though, it will provide water at wholesale prices to commercial customers, among them its own newly-established arms-length retail offshoot, Scottish Water Business Stream (SWBS).
It will compete with two Berkshire-based firms. The first, Satec, is understood to be in negotiations with the likes of food producers and distilleries.
The second, Aquavitae, can count over 100 contracts for private concerns in England and Wales, among them the likes of Heinz and East Sussex NHS Trust. Owned by a ring of wealthy i
ndividuals, it is a subsidiary of Vitae, a private equity group based in Jersey.
Already, it has signed up Four Seasons Health Care, which operates 58 Scottish care homes.
"Scotland is a place where we can do business," said Michael Samorzewski, Aquavitae's managing director. "The regulatory system devised by the Water Industry Commission for Scotland encourages competition, and will enable us to offer choice and lower prices to Scottish business users."
Significantly, such English firms are limited in their home country to supplying water for customers using less than 50,000 litres a year. In Scotland, they can tender for a full range of services.
Others firms, both "big and small", will follow, according to Alan Sutherland, chief executive of the Water Industry Commission for Scotland (WICS).
The likeliest candidates are thought to be firms such as Thames Water.
Click here for the story on The Scotsman Website
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UK energy firms told to surrender profits
Sunday, March 02, 2008
LONDON, March 2 (Reuters) - British gas and electricity companies are being ordered by the government to hand over part of their bumper profits or face a new windfall tax, according to a newspaper report on Sunday.
Chief executives of utility firms have been told that, unless they agree to subsidise a new nationwide "fuel poverty" scheme aimed at the 4.5 million poorest households, a levy will be put on their profits, the Sunday Telegraph said.
Finance minister Alistair Darling plans to unveil the fuel poverty programme in his budget on March 12, it added.
The move follows widespread protests at ballooning gas and electricity bills. Five of the six big suppliers to British homes and small businesses have announced big price increases this year, blaming soaring wholesale energy costs.
The Britain's energy watchdog Ofgem launched an investigation into power and gas supply markets because of growing public concern on Feb. 21.
Centrica, owner of leading supplier British Gas, has received much of the criticism. The company argues the market is competitive and is working as it should.
Last week, the chief executives of Scottish & Southern Energy, the second-largest provider, and Npower, the fourth-biggest, owned by RWE, were ordered to meet ministers in Downing Street, the Sunday Telegraph said.
Over the next few days, they will be followed by top executives from Centrica, Scottish Power, E.ON and EDF Energy which owns the former London Electricity business.
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