EurWORK European Observatory of Working Life

UK: EIRO CAR on the Changing Business Landscape in the Electricity sector and Industrial Relations in Europe

About

Country: 
United Kingdom
Author: 
Mark Carley
Institution: 
IRRU/Spire Associates

Disclaimer: This information is made available as a service to the public but has not been edited by the European Foundation for the Improvement of Living and Working Conditions. The content is the responsibility of the authors.

The UK electricity industry has undergone a major upheaval in structure and ownership since 1990, though most of the basic change occurred before 2000 and the main developments in the period since then have been mergers and acquisitions. Despite the restructuring, the sector has retained levels of union membership and bargaining coverage that, while declining, are high by UK standards. The next big challenge for the industry is decarbonising production. Key industrial relations issues in 2011 include the employment effects of recent restructuring, pensions, and health and safety.

1. General background information on the energy policy in your country and employment trends

1.1. Please explain briefly the main governmental strategies/action in relation to the electricity production and energy source mix. In your answer, please include information on the following aspects, where possible:

The main quantitative targets framing UK energy policy are:

  • a reduction in greenhouse gas emissions of at least 34% by 2020 and 80% by 2050, laid down in the Climate Change Act 2008 and further stipulated in a series of statutory five-year ‘carbon budgets’;
  • achieving 15% of energy consumption from renewable sources by 2020, as required by EU Directive 2009/28/EC.

A renewable energy strategy produced by the government in 2009 contained an indicative ‘lead scenario’ for meeting the overall 2020 renewables target of 15%, whereby at least 30% of electricity generation would come from renewable sources (including 2% from small-scale sources) by 2020 (compared with 6.7% in 2009), mainly from wind power, but also with an important role for biomass, hydro and wave/tidal (photovoltaic is not generally considered capable of making a significant contribution in the UK).

Since the Conservative/Liberal Democrat coalition government took office in 2010, energy strategy has been under review, though without challenging the overall targets. A July 2011 White Paper entitled ‘Planning our electric future: a White Paper for secure, affordable and low-carbon electricity’ sets out the government’s plans for the electricity sector. The Paper addresses the decarbonisation and renewables targets (for example, it states that power sector emissions must be ‘largely decarbonised’ by the 2030s), as well as the fact that over the next decade a quarter of existing generation capacity will be lost as old/heavily polluting plants close, while demand for electricity may double by 2050.

The electricity market reform set out in the White Paper aims to achieve by 2030: a ‘flexible, smart and responsive’ electricity system, powered by a diverse and secure range of low-carbon sources of electricity (without any specific, quantified mix of sources being stipulated), with a full part played by demand management, storage and interconnection; competition between low-carbon technologies that will help to keep costs down; and a network that can meet increasing demand.

Achieving the government’s aims is likely to require investment of £110 billion in generation and transmission by 2020, more than double the current rate of investment. With regard to generation, the government favours investment in renewables, a new generation of nuclear stations, and fossil-fuel plants with carbon capture and storage (CCS). To achieve the required (private sector) investment in these areas, the market reform’s main instrument is a new system of long-term contracts aimed at providing stable and predictable revenue streams for investors in low-carbon generation. The government has also announced the introduction of a ‘carbon price floor’ to provide a stronger incentive to invest in low-carbon generation. With regard to transmission, the government and Office of the Gas and Electricity Markets (Ofgem), the statutory energy market regulator, are seeking to facilitate investment in networks in a low-carbon context, and encourage a more strategic and longer-term approach to network investment. They have also launched a Smart Grids Forum to consider how future network challenges can be addressed.

According to the Office for National Statistics (ONS) Labour Force Survey (LFS), in the first quarter of 2011, there were 125,370 people employed in the electricity sector (79% men, 21% women). Of these, 63,436 were employed in production (84% men, 16% women), 4,363 in transmission (75% men, 25% women), 28,721 in distribution (79% men, 21% women) and 28,850 in trade (71% men, 29% women). The ONS changed the industry classifications used in the LFS in 2009, making direct comparison with 2005 figures difficult. Since 2009, according to the LFS, the overall trend has been upwards, especially in the distribution sector.

Using somewhat different definitions and data sources, Energy & Utility Skills (EU Skills), the government-licensed Sector Skills Council (SSC) for gas, power, waste management and water, puts total employment in ‘power’ at 93,900 in 2010, with 18,000 in generation, 44,900 in transmission and distribution, 21,500 in supply and 6,500 in corporate functions. In 2003 |(the nearest year to 2005 for which information is available), EU Skills put the total workforce at 68,600, with 18,000 in generation, 22,400 in transmission and distribution, 21,800 in supply and 6,300 in corporate functions. Employment growth has therefore come almost entirely from transmission and distribution.

The LFS and EU Skills data do not allow employment levels to be broken down by energy sources. Some information is available from other sources for employment in renewables and nuclear generation. In 2010, according to research commissioned into employment in wind and marine energy by EU Skills and RenewableUK , the sector was estimated to employ directly 10,800 workers (full-time equivalents), with 56% in large-scale onshore wind, 29% in offshore wind, 7% of in small-scale wind and 8% in wave and tidal energy. Since 2007, employment in large-scale onshore and offshore wind had nearly doubled, with employment in large-scale onshore wind increasing by 48% and employment in offshore wind increasing more than fourfold (Working for a Green Britain Vol 1, EU Skills and RenewableUK, February 2011). Cogent, the SSC that covers nuclear industries, found that 7,400 people worked in nuclear electricity generation in 2009.

1.2. Government policy for increase of the share of renewable resources according to the RES directive

The main current mechanism for increasing the share of renewable energy sources and meeting the RES Directive’s targets is the Renewables Obligation (RO), introduced in 2002, which provides financial incentives for renewable generation as part of the wider electricity market. The scheme obliges electricity suppliers to source a specified and annually increasing proportion of their annual sales to customers from renewable sources, or pay a penalty. Suppliers demonstrate their compliance by obtaining Renewables Obligation Certificates (ROCs) from the generators of the electricity they supply. Generators are issued with ROCs in line with the amount of renewable electricity they produce. Penalties paid by non-compliant suppliers are redistributed to generators, in line with the number of ROCs they have been awarded, thereby encouraging further investment in renewable generation.

A Feed-in Tariff (FiT) scheme was introduced in 2010 and will close to new entrants in 2021. It provides financial incentives for small-scale generation of low-carbon electricity from renewable technologies. Other schemes provide incentives for renewable heat and biomass fuel production.

As part of overall public spending cuts, in 2010 the government abolished or reduced a number of subsidies or grants for development of bio-energy, geothermal energy, offshore wind and other low-carbon technologies. In October 2011, the government also announced plans to cut the FiT for small-scale solar photovoltaic production, on the grounds that the costs of photovoltaic have fallen.

In its July 2011 White Paper (see 1.1), the government outlined plans for a Feed-in Tariff with Contract for Difference (FiT CfD) scheme, which will provide larger-scale low-carbon electricity generators with a guaranteed price throughout the period of a long-term contract. The FiT CfD will initially run alongside the RO and then replace it from 2017, though existing generation capacity based on RO will continue to be supported by this scheme.

The government is in the process of creating a Green Investment Bank, with initial funding of £3 billion, which will provide finance to accelerate private sector investment aimed at helping the UK’s transition to a ‘green economy’. Areas targeted will include renewable energy sources.

1.3. Are there any studies and documents assessing the employment impact of energy policies and of prospective changes in the energy mix within the electricity sector? This could include, for instance,

Future employment prospects in the electricity sector are heavily dependent on government energy policy. With the current government having only recently announced a readjustment in policy (see 1.1), detailed statistical forecasting has yet to catch up. However, the broad lines of earlier predictions (see, for example, ‘Meeting the low carbon skills challenge’, consultation document, Department for Business, Innovation and Skills and Department of Energy and Climate Change, March 2010) remain relevant. These indicate that employment will grow in renewable (notably wind and tidal) and nuclear generation, and fall in traditional fossil-fuel generation. Further, on a shorter-term basis, there will be increased employment in building new generation capacity, modernising networks and introducing CCS.

According to EU Skills, the electricity industry currently faces problems of skill shortage and unfilled vacancies, especially with regard to engineers, project managers and other skilled technical staff (see Sector Skills Assessment 2010, EU Skills). This is linked to the industry’s ageing workforce: around 80% of the current electricity workforce will retire over the next 15 years. Filling vacancies is made more difficult by increasing demand for technical skills from across the UK economy. Over the next decade, the increasing role of renewables in the energy mix will be an additional draw on an already stretched labour market across the electricity industry.

Meeting government renewable generation targets will require a sevenfold increase in the number of workers with skills in this field, EU Skills reports. With other countries facing similar issues, the UK industry will face rising global competition for skilled workers. Skills gaps are likely to be increased by the introduction of new technologies. Further, the introduction of ‘smart metering’, and a ‘smart grid’ will require significantly higher volumes of skilled labour, with potentially new combinations of skills. The upgrades required to the grid in order to handle the greater volume, and intermittent nature of renewable energy, will add to labour demand. Employers face a need to increase recruitment, training and underlying training capacity.

A 2011 report on wind and marine energy employment commissioned (see 1.1) estimated future employment on the basis of three varying scenarios of development of the sector. These indicated direct employment levels in the industry in 2021 of either 29,000, 56,000 or 73,000, depending on the sector’s growth (‘Working for a green Britain’, Vol 2, EU Skills and RenewableUK, July 2011).

1.4 To what extent are the social partners involved or consulted concerning the governmental energy policy, notably in relation to employment impacts? Has this happened on an ad-hoc basis or on a structural, permanent basis? Is there a special tripartite social dialogue body for such consultations? Did consultation take place at national level, at sector level, or at the initiative of individual companies? Please briefly provide details.

The social partners are involved in government energy policy in a variety of ways, specifically or as part of a broader green, low-carbon or sustainable development agenda.

At national level, the current government abolished a tripartite Forum for a Just Transition set up by its Labour predecessor to help ensure that the transition of the industrial base to low carbon creates benefits and opportunities for workers, businesses and consumers. The Conservative-Liberal Democrat government has replaced the Forum with a Green Economy Council, which includes employer and trade union representatives and advises government on aspects of ‘green and green growth policies’, including employment. A tripartite Business Energy Forum, re-established by the government in June 2011, advises on the business aspects of energy policy.

Trade unions are consulted bilaterally by the government on sustainable development and environmental issues, including energy, through the Trade Union Sustainable Development Advisory Committee (TUSDAC), which was set up in 1998. It agenda currently includes skills for a low-carbon, resource-efficient economy, and climate change adaptation.

In the electricity industry, there are no standing or ad hoc tripartite social dialogue bodies. There are a number of government-appointed advisory and consultative structures on particular issues, though not specifically relating to employment. Examples include the Offshore Transmission Coordination Group, the Smart Grid Forum and the Carbon Capture and Storage Development Forum. Companies are represented on these bodies, but not trade unions.

The main forum for social partner involvement in addressing issues relating to employment and skills in the electricity industry is the SSC, EU Skills (pus Cogent, for the nuclear part of the industry). SSCs are government-licensed but independent, bodies bringing together relevant parties to discuss, plan and implement skills improvement initiatives. They are employer-led but also involve trade unions, alongside public authorities, training providers and funders. There is also trade union involvement in the government-approved National Skills Academy for Power, an employer-led organisation launched in 2010 to develop and govern the provision of industry-approved training and skills standards.

Social partners also contribute through responses to government consultation exercises. For example, respondents to the 2010 consultation that led to the 2011 electricity market reform White Paper (see 1.1) included most of the sector’s trade unions and employer/trade associations, along with many individual electricity companies, the Trades Union Congress (TUC) and the CBI.

2. Composition, structure and employment trends for the different resources used for electricity production

2.1 Please give an overview of the current sectoral composition of electricity production in your country, by giving for each of these seven groups of energy sources, the NAME of the three largest producing, the NUMBER OF EMPLOYEES of these companies, and the public or private STATUS of the EMPLOYMENT RELATIONSHIP with their employees.

In terms of overall market share, the UK’s largest electricity generating companies are EDF Energy, Centrica, E.On UK, RWE npower, Scottish Power and SSE. No data are available on generation companies’ market share by fuel source used. The ‘top three’ rankings for companies per fuel listed in the table below are based on installed capacity rather than market share, based on the Department of Energy and Climate Change’s 2010 Digest of UK Energy Statistics (DUKES).

Summary information for the eight companies listed in the table is as follows (2010 data from DUKES for capacity, distribution across fuel sources and main plants):

  • EDF Energy. Installed capacity – approx. 13,800 MW, of which around 63% nuclear, 36% fossil fuels and 1% wind. Largest plants – West Burton (coal), Cottam (coal) and Heysham 2 (nuclear). Total employment 2010 (company data) – 15,441. No data available on number of employees in electricity generation or distribution across fuel sources.
  • RWE npower. Installed capacity – approx. 12,000 MW, of which around 98% fossil fuels, 1.5% wind and 0.5% hydro. Largest plants – Didcot (coal/gas), Aberthaw (coal) and Tilbury (coal). Total employment end 2010 (company data) – 12,333. No data available on number of employees in electricity generation or distribution across fuel sources.
  • E.On UK. Installed capacity – approx. 11,400 MW, of which around 96% fossil fuels, 3.5% wind and 0.5% biomass. Largest plants – Ratcliffe (coal), Kingsnorth (coal/oil) and Connahs Quay (combined cycle gas turbine, CCGT). Total employment end 2010 (company data) – 15,823, of whom 1,140 worked in electricity generation or distribution across fuel sources.
  • SSE. Installed capacity – approx. 9,400 MW, of which around 79% fossil fuels (including some combined coal/biomass), 15.5% hydro and 5.5% wind. Largest plants – Fiddler’s Ferry (coal/biomass), Ferrybridge C (coal/biomass) and Peterhead (gas/oil). Total employment 2011 (company data) – 20,249, of whom 9,334 worked in generation and supply. No data available on number of employees in electricity generation or distribution across fuel sources.
  • Scottish Power. Installed capacity – approx. 6,900 MW, of which around 78% fossil fuels, 14% wind and 8% hydro. Largest plants – Longannet (coal), Cockenzie (coal) and Damhead Creek (CCGT). Total employment 2010 (company data) – 8,039. No data available on number of employees in electricity generation or distribution across fuel sources.
  • Magnox. Installed capacity – approx. 1,400 MW, of which around 98% nuclear and 2% hydro. Largest plants – Wylfa (nuclear) and Oldbury (nuclear). Total employment 2010 (company data) – approx.3,000. No data available on number of employees in electricity generation or distribution across fuel sources.
  • Dong Energy. Installed capacity – approx. 540 MW, of which 100% wind. Largest plants – Walney (wind) and Gunfleet Sands 1 (wind). Total employment 2011 (company data) – 80. No data available on number of employees in electricity generation or distribution across fuel sources.
  • Sembcorp Utilities. Installed capacity – approx. 360 MW, of which 89.5% fossil fuels and 10.5% biomass. Largest plants – Wilton (gas/coal/oil), Wilton GT2 (gas) and Wilton 10 (biomass). Total employment 2010 (company data, based on 8% of 9,100 worldwide) – approx. 700. No data available on number of employees in electricity generation or distribution across fuel sources.
Electricity production

Electricity production with

TOP 3

PRODUCING COMPANIES

(the largest 3 in market share)

NUMBER OF EMPLOYEES

Reference year for the number of employees

Private/Public STATUS of WORKERS

FOSSIL FUELS

RWE npower

12,333 (total employment)

2010

Private

E.On UK

1,140 (in electricity generation and distribution)

2010

Private

Scottish Power

8,039 (total employment)

2010

Private

NUCLEAR

EDF Energy

15,441 (total employment)

2010

Private

Magnox

3,000 (total employment)

2010

Private

-

     
HYDRO

SSE

9,334 (in energy generation and supply)

2011

Private

Scottish Power

8,039 (total employment)

2010

Private

-

     
WIND

Scottish Power

8,039 (total employment)

2010

Private

SSE

9,334 (in energy generation and supply)

2011

Private

Dong Energy

80 (total employment)

2011

Private

BIOMASS

SSE

9,334 (in energy generation and supply)

2011

Private

E.On UK

1,140 (in electricity generation and distribution)

2010

Private

Sembcorp Utilities

700 (total employment)

2010

Private

PHOTO-VOLTAIC

No data available (photovoltaic accounts for a very small proportion of electricity production and is included under ‘wind’ in the DUKES data)

     
       
       

2.2 Please provide an overview of the current organisation of electricity distribution in your country. Is there a single distributing company/body? Are there multiple companies? At national or territorial level?

The electricity market is regulated by the statutory Office of the Gas and Electricity Markets (Ofgem).

The high-voltage transmission system in Great Britain is operated by National Grid (a private company), which also owns the transmission grid in England and Wales, while the grid in Scotland is owned by SSE and Scottish Power. From the transmission grid, electricity is distributed to consumers by 14 regional distribution networks. For each of these networks, a single licence is granted by Ofgem to a Distribution Network Operator (DNO), which has a distribution monopoly in a particular geographical area. The 14 DNO licences are currently ultimately owned by six companies –Electricity North West, Northern Powergrid, Scottish and Southern Energy Power Distribution, Scottish Power Energy Networks, UK Power Networks and Western Power Distribution. There are also four independent DNOs that own and run smaller networks embedded in the DNO networks.

In Northern Ireland, the grid is operated by SONI, while Northern Ireland Electricity (NIE) owns the grid and is also the DNO.

Consumers buy their electricity from suppliers, which buy electricity on the wholesale market and pay the owners/operators of transmission grids and distribution networks to transport it to consumers. There are six main supply companies (all of which supply gas as well as electricity) - British Gas (Centrica), EDF Energy, RWE npower, E.On UK, Scottish Power, and SSE. These are also the main generation companies.

Distribution companies
 

TOP 3

DISTRIBUTING COMPANIES

(the largest 3 in market share)

NUMBER OF EMPLOYEES

Reference year for the number of employees

Private/Public STATUS of WORKERS

Distribution GRID

Western Power Distribution

6,000

2011

Private

UK Power Networks

4,212

2010

Private

Northern Powergrid

2,200

2010

Private

2.4. Where there any significant developments/changes since 2008 for a specific company or source of electricity production in numbers of employees or in their public/private status? Was this due to the current economic crisis? Were there any instances of unbundling or mergers? With what consequences in terms of employment and industrial relations?

Since 1990, the UK electricity industry has been privatised, while generation, transmission and distribution have been unbundled and wholesale and retail markets have been liberalised. This process was largely completed by the early 2000s. It led to the creation of new private companies, followed by a wave of mergers and acquisitions, and a process of concentration, with foreign-based multinationals now owning much of the industry. Most change since 2008 has involved divestments and acquisitions among DNOs, with the main developments including the following:

  • In 2009, EDF Energy purchased British Energy, a partly state-owned electricity generation company, operating most of the UK’s nuclear power stations.
  • In 2010, EDF sold EDF Energy Networks, which consisted of three UK DNOs, to the Hong Kong-based Cheung Kong Group. The business was renamed as UK Power Networks.
  • In 2010, Electricity North West, a DNO, acquired from United Utilities its subsidiary United Utilities Electricity Services Limited, which previous operated and maintained the north-western network on Electricity North West’s behalf.
  • In 2010, the Ireland-based ESB purchased NIE, the DNO for Northern Ireland, from Viridian.
  • In 2011, E.On sold Central Networks, a UK DNO, to PPL, based in the USA. Central Networks was added to the two DNOs that PPL already owned, under the Western Power Distribution brand.

While the takeover of NIE was accompanied by assurances on job security from the new owners, several of the other changes have been followed by substantial workforce reductions. For example, in September 2011, E.On announced 500 job losses, attributed mainly to the sale of its distribution network. In the same month, Western Power Distribution launched consultations on up to 830 job losses, largely to eliminate duplicated functions after the acquisition of Central Networks, while UK Power Networks started consultations on 600 job losses following its takeover by Cheung Kong Group.

3. Industrial relations in the electricity sector: Actors

1.1 Please provide details on the membership in the electricity sector and membership of the top 3 producing and distributing companies in employer’s organisation (see questions 2.1-2.3 above). Please provide information on the name of the trade unions organising in this subsector and the level of their membership, or otherwise provide overall data but please include indications on differences in membership densities across subsectors.

There are no employer organisations in the electricity sector, in the ‘continental European’ sense of organisations that conduct sectoral collective bargaining or deal principally with employment matters, or in the sense of the statutory definition used by the official Certification Officer for Trade Unions and Employers’ Associations (which defines an ‘employers’ association’ as an organisation that consists ‘wholly or mainly of employers or individual owners of undertakings’ and whose principal purposes include ‘the regulation of relations between employers of that description or those descriptions and workers or trade unions’). There are, however, two major trade/business associations that play a role in the limited sector-level social dialogue in the electricity industry (see 1.4 and 4.2) and deal to some extent with employment matters. The Association of Electricity Producers (AEP) represents generation companies and the Energy Networks Association (ENA) represents electricity (and gas) transmission and distribution companies. AEP and ENA are affiliated at EU level to Eurelectric, along with the Energy Retail Association (ERA), which is outside the central scope of this study and represents the main electricity (and gas) suppliers, many of which are also the main generation companies. The Nuclear Industry Association (NIA) represents operators of nuclear power stations, among other parts of the nuclear industry.

On the trade union side, four unions have members across the whole sector. These include the UK’s main general unions – GMB, Unison and Unite the Union. While GMB and Unite organise across much of the private sector and in parts of the public sector, Unison predominantly represents public service workers. Its presence in electricity reflects the industry’s public sector roots. The fourth union is Prospect, which organises professional staff in a range of industries.

Analysis of data on union membership from the ONS Labour Force Survey for the last quarter of 2010 indicates that in the electricity sector as a whole, union density stood at around 46%. The rates were 45% in production, 45% in transmission, 54% in distribution and 42% in trade. These levels are high by UK standards - Department for Business, Innovation and Skills statistics on trade union membership put overall union density in the UK at 26.6% in 2010, with a rate of 14.2% in the private sector.

There are no official data available on union membership/presence in electricity generation, broken down by fuel source. However, it is likely that in the areas of generation dominated by the large generation companies (especially fossil fuels and nuclear), membership is relatively high. However, in areas such as wind where generation is spread over a relatively large number of smaller companies (in addition to the operations of the large ‘traditional’ companies), union membership is likely to be lower.

Trade union representation and Membership to employers’ organisation
FOSSIL FUELS

RWE npower

AEP (ERA)

GMB, Prospect, Unison Unite. Combined membership stands at around 45% of the workforce, and is likely to be higher in subsectors dominated by a few large companies (fossil fuels, nuclear) than in those (wind) where a large number of smaller companies operate.

E.On UK

AEP (ERA)

Scottish Power

AEP (ERA)

NUCLEAR

EDF Energy

AEP, NIA (ERA)

Magnox

AEP, NIA

-

 
HYDRO

SSE

AEP (ERA)

Scottish Power

AEP (ERA)

-

 
WIND

Scottish Power

AEP (ERA)

SSE

AEP (ERA)

Dong Energy

AEP

BIOMASS

SSE

AEP (ERA)

E.On Uk

AEP (ERA)

Sembcorp Utilities

-

PHOTO-VOLTAIC

No data

 
   
   
And in the distributing companies

Distribution GRID

companies

Western Power Distribution

ENA

GMB, Prospect, Unison, Unite. Combined membership stands at around 54% of the workforce.

UK Power Networks

ENA

Northern Powergrid

ENA

1.2 To what extent are employees in the different subsectors (fossil/nuclear/RES) covered by trade union representation? Has there been any impact of the crisis on trade union representation?

Trade union presence – measured as the proportion of workers reporting a union in their workplace – is high across the electricity sector. Analysis of ONS LFS data indicates a presence of 76% in the industry as a whole in the last quarter of 2010. The rates were 63% in production, 70% in transmission, 91% in distribution and 76% in trade. The UK average in 2010 was 46.1% and 29.6% in the private sector. There are no official data available on union representation/presence in electricity generation, broken down by fuel source – similar considerations apply as for union membership (see 3.1). There is no evidence of any effects of the crisis on union representation.

1.3 Have there been major reorganisations/splits/mergers of trade unions or employers organisations in the sector during the last five years?

The only relevant development is that Unite was formed in 2007 by a merger of Amicus and TGWU (UK0706039I), both of which had members in electricity, as well as in numerous other areas of the economy. Electricity workers are organised within Unite in the energy and utilities section.

3.4. Have new actors (trade unions or employers organisations) been founded in recent years, especially in the newly evolving RES industries? Or is the industry covered by established actors?

On the trade union side, the electricity industry is covered by established actors. On the employer side, several organisations specifically represent companies involved in renewables, for example the Renewable Energy Association (REA), which was established in 2001. Its members include a number of companies that also belong to AEP. RenewableUK, representing wind and marine renewables industries, is a longer-standing association, and is a member of AEP. However, these bodies are trade or professional associations and not employer organisations proper (see 3.1).

3.5. Have the established sectoral actors (both trade unions and employer organisations) started any initiative to extend their representation to the new emerging parts of the sector? Please describe such initiatives and their results so far.

The sectoral actors all appear to recruit members in emerging parts of the electricity. For example, on the employer side, AEP has numerous members among producers of renewable energy. On the trade union side, all unions appear to seek to recruit in emerging areas. For instance, Unite states: ‘Whether it be wind, wave hydro or photovoltaic, our aim is to ensure that the “new wave” generators are as organised as the existing and achieve terms and conditions that are at the cutting edge of our negotiations.’ However, there are no reports on either side of specific campaigns to recruit in these areas.

4. Role of collective bargaining and social dialogue

4.1 Please provide information on the structure of collective bargaining in the electricity sector. Please, briefly mention the main characteristics of collective bargaining:

There is no multi-employer collective bargaining in the electricity industry (as with most parts of the UK private sector). In both production and transmission/distribution, all bargaining occurs at the level of individual companies or, more commonly, at sub-company level – ie, for specific business units or sites, employee groups and/or geographical areas.

Analysis of data on bargaining coverage from the ONS labour force survey for the last quarter of 2010 indicates that coverage in the electricity sector as a whole stood at around 58%. The rates were 55% in production, 44% in transmission, 64% in distribution and 62% in trade. The UK average in 2010 was 30.8%, and 16.8% in the private sector.

Collective bargaining occurs for at least some employee groups at all the main production and distribution companies, but there are no reports of bargaining at the small companies that operate in new areas such as wind and marine generation (it should be noted that there is no official collection or recording of collective agreements in the UK and the main sources of information are a number of private subscription-based services and reports from the social partners).

4.2 Please comment on the most recent collective agreements reached at sector level and at company level. Please address the following topics:

There are no official data on collectively agreed pay settlements, and the main sources of statistical information are private subscription-based services, such as Incomes Data Services (IDS), Labour Research Department (LRD) and XpertHR. None of these sources provide specific average figures for pay settlements in the electricity sector, instead including it in a wider group of utilities. For example, according to LRD (‘The LRD pay survey’, LRD, October 2011), in the 2010-2011 pay round (between August 2010 and July 2011), the median collectively agreed increase in the lowest basic pay rate, weighted for the number of workers covered by each agreement, was 3% in energy/mining/water/nuclear, compared with an economy-wide figure of 1.83%. Figures from the other sources also indicate that median utilities pay increases have been considerably higher than the national average in 2010-2011.

Data available from IDS, LRD and XpertHR on pay settlements in individual electricity companies during 2011 indicate a mixed picture, but generally suggest somewhat higher increases in transmission/distribution than in generation. 2011 pay settlements in generation varied from 4.9% at Drax Power and RWE npower to 1% at EDF Energy. In transmission/distribution, they were as high as 5.3% at NIE and 5.2% at Western Power Distribution and the lowest reported increases were 3% at National Grid and Scottish Power Networks.

According to a database of information from organisations and industry agreements maintained by IDS, collectively agreed basic working time averaged 37 hours a week in energy and water in 2010, compared with an average across the UK economy of 37.5 hours (‘Hours and holidays 2010’, IDS HR Study 926, September 2010) and 37 hours. Working time does not appear to have been a significant issue in recent bargaining in the electricity industry. Most companies for which information is available, in both generation and transmission, have a 37-hour week.

4.3. Cooperation between the social partners and government

See 1.4 above for details of government consultations and institutional tripartite and bipartite social dialogue arrangements relevant to the electricity sector.

The UK’s National Renewable Energy Action Plan was based on the government’s UK Renewable Energy Strategy, which was developed following a consultation exercise, to which the social partners responded.

The main development in sectoral dialogue since 2008 was the launch in 2010 of Powering Improvement, a joint strategy aimed at making the UK electricity industry a world leader in health and safety by 2015. The initiative involves AEP, ENA, their member companies, the sector’s four trade unions and the Health and Safety Executive (HSE). It is managed and directed by the long-standing tripartite National Health and Safety Advisory Committee (HESAC), involving the electricity sector social partners and the HSE.

There have been no joint social partner initiatives to influence government energy policy since 2008. A large part of the work of the employer/trade associations, AEP and ENA, involves seeking to influence policy to the benefit of their members through lobbying, campaigning, engagement in policy debate, consultation responses and so on. The sector’s unions also all engage in such work. For example, the GMB reported in 2011 that in the previous year it had expressed its energy policy (which is that the UK needs a balanced energy policy utilising renewables, nuclear, clean coal and gas) in correspondence, submissions on consultation documents and face-to-face meetings with government ministers and Ofgem.

4.4. Please provide information about the views of the trade unions and employer organisations on the main changes regarding employment and working conditions affecting the sector since 2008 and especially on the impact of the current crisis (for instance on employment trends, quality of jobs, working hours, wages, fixed-term employment, part-time, temporary agency work, participation in training, outsourcing, subcontracting etc.).

The restructuring of the electricity sector through privatisation and unbundling was mainly completed by the early 2000s. Despite a fall in demand for electricity during the recession of 2008-2009, the economic and financial crisis does not seem to have a major effect on the industry in terms of overall employment levels or company profitability. In this context, no major changes in employment and working conditions can be said to have occurred since 2008, rather the continuation of longer-term trends. These appear to have been accelerated somewhat by increased company efforts to reduce costs. Unions report that the increasing foreign ownership of many UK electricity companies may have implications in this area. Multinationals facing financial problems elsewhere may respond by cutting costs or divesting businesses in the UK, even though their UK operations are not the source of their problems.

Key issues for trade unions have included maintaining employment levels, pay and conditions in the ongoing process of mergers, acquisitions and divestments, mainly involving DNOs (see 2.4). Where companies have reduced their workforces, sometimes linked to such restructuring, unions have sought to reduce the planned job losses or avoid compulsory redundancies as far as possible.

Occupational pensions have been a particularly contentious issue in the electricity sector. As across much of the UK private sector, many companies have – despite trade union opposition - reformed and/or closed defined-benefit schemes, because of concern about the mounting costs, and switched to cheaper defined-contribution schemes. In the electricity industry, the matter has been complicated by the complexity of pension arrangements, given the constantly changing pattern of company ownership and the fact that many staff are still covered by a pre-privatisation scheme or is successors. Further, Ofgem has a role in this area, as it regulates the extent to which company’s pension costs are reflected in electricity prices.

Other themes of concern for unions include: the widespread and increasing use of outsourcing, for example of IT activities; and the use of individual contracts rather than collective bargaining, especially for senior employees.

In pay bargaining, unions have been relatively successful at most companies since 2008 in securing wage rises that, while generally lower than before the recession, are above the average for the whole economy.

5. Commentary

The UK electricity industry is unusual in the UK context, in terms of its high levels of union membership and collective bargaining coverage. Though these characteristics have their origins in the sector’s pre-1990 public ownership, they have survived – if somewhat eroded - through the process of privatisation, unbundling and multiple changes of ownership. Their next challenge will be decarbonisation of the industry, with the main new structural threat to union membership and bargaining probably coming if generation switches on a large scale from the small number of ‘traditional’ producers to a large number of small new producers. Another threat to unionisation levels is the industry’s ageing workforce, many of whom are soon to retire, given that union membership in the UK is much lower among younger workers than among older ones (for example, the rate is more than three times higher among those aged 50-54 than among those aged 20-24).

Employers and unions in electricity frequently express their views to the public authorities on the move to renewable energy sources. However, given the lack of sectoral bargaining and limited sectoral dialogue, there seems to be little sector-level interaction on the subject. At company level, the industrial relations agenda appears to be largely dominated by issues such as pay, pensions and the employment effects of restructuring.

Mark Carley, IRRU/SPIRE Associates