Environment, Climate Change and Land Reform Committee. Scottish Crown Estate Bill. Written submission from Scottish and Southern Electricity Networks

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1 Environment, Climate Change and Land Reform Committee Scottish Crown Estate Bill Written submission from Scottish and Southern Electricity Networks Scottish and Southern Electricity Networks (SSEN) 1, is responsible for operating and maintaining the electricity transmission and distribution networks supplying over 3.7 million homes and businesses across the north of Scotland, the Scottish isles and central southern England. SSEN employs around 4,000 people in the UK and has invested over 3bn into national infrastructure over the last three years. SSEN also has a strong record of helping to facilitate low carbon technology and since 2010 we have connected over 5GW of wind and solar generation capacity to our networks. As a regulated business, we are an active and responsible participant within the Scottish marine development process; delivering much needed, in many cases nationally important, electrical infrastructure projects under the various obligations contained in our licences for the distribution and transmission of electricity supply. Our developments support investment in the low carbon economy and over the past six years our transmission business has invested over 1bn into infrastructure in the north of Scotland alone. Our first priority is to provide a safe, robust and reliable supply of electricity to the communities we serve. We manage, maintain and operate roughly 130,000km of overhead lines and underground cables across the UK, in addition to over 100 subsea cables which power our remote island communities. Executive Summary SSEN welcomes the opportunity to share our views on the principals of the Scottish Crown Estate Bill. As a transmission and distribution network operator in mainland Scotland and the islands SSEN will be significantly impacted by this new Bill. In broad terms, we recognise the need to maximise the benefits of the Crown Estate s assets for Scottish residents and communities. Acknowledging this, SSEN supports a balanced approach that creates opportunities for local engagement whilst ensuring that national interests remain represented. Our response below aims to reflect this and most importantly the interests of our customers. SSEN has concerns as to how the further devolution and delegation of assets will be managed at a local level and seeks clarity on the likely impact that any changes in management will have on our businesses marine cable development and operational plans. SSEN does not fundamentally disagree with the principals of the bill; and we recognise the ambitions of the Scottish Government to further devolve assets at a local level. However, we request that the wider impact of the Bill is fully considered as part of the scrutiny process, especially for regulated businesses such as SSEN, that have license obligations to meet for our regulator, customers and stakeholders. 1 operating in Scotland as Scottish Hydro Electric Power Distribution plc and Scottish Hydro Electric Transmission plc 1

2 SSEN undertakes regular engagement with the Crown Estate to agree leases and wayleaves for our required cable reinforcements to rural and island communities in the north of Scotland, and through our distribution business maintaining and replacing existing submarine electricity cables. While we are supportive of greater community ownership, we believe that greater strategic involvement will be required from Ministers to ensure a joined-up approach to Crown Estate asset management, especially for assets of national strategic importance. A high-level summary of our detailed response is provided below: We believe that the seabed and foreshore should remain under the management of Scottish Ministers to ensure there is a strategic overview and alignment of national interests with wider Scottish Government ambitions and policy for leases and any future leasing rounds. We strongly advocate that fees remain transparent and consistent amongst all assets. This is particularly important to limit increases to customers bills, which would be particularly felt by fuel poor customers. Wider strategic development and national policy needs should also be considered as a key factor during the lease agreement process in addition to local socio economic benefit. Should further devolution and delegation of assets take place, we seek assurances that asset managers will have the required skills and expertise to manage assets as per current practice, whilst also adhering to wider Scottish Government policy in relation to planning, fuel poverty, climate change and the wider energy strategy. We seek assurances that existing lease agreements will be grandfathered to limit the impact from the devolution process on the maintenance and operation of our existing distribution and transmission assets. We understand that the detail associated with the bill will be dealt with as part of the secondary legislation process, which will be subject to consultation with key stakeholders. We therefore request that SSEN is engaged as a consultee during this process. We hope that the Environment, Climate Change and Land Reform Committee will take our feedback into consideration as part of the stage one parliamentary scrutiny process, and SSEN would welcome the opportunity to provide oral evidence to the committee. Call for Views - Question Responses 2

3 Does the Bill allow Crown Estate Scotland, or a delegated manager, to appropriately manage the Scottish assets? As regulated businesses, SSEN s first priority is to provide a safe, efficient and reliable supply to our customers. Our network area covers the north of Scotland including Scotland s rural island communities, therefore we engage regularly with the Crown Estate on leases and wayleave agreements as part of the development and operational maintenance of our marine cables and electricity infrastructure. We believe that the current management procedures work well for regulated businesses like SSEN, which has an obligation to balance the delivery of a robust electricity supply to our customers, with ensuring that any required reinforcements are delivered cost efficiently for bill payers. We are concerned that the further delegation of Crown Estate assets will create a more bureaucratic and costly process for our businesses and could encourage delays or create barriers to required investment in our network. As highlighted in previous Crown Estate Scotland consultation responses, we believe a national approach should be the favoured option for lease agreements that are of national importance, for the following reasons: Increased costs for UK bill payers While it states in the Bill that the Scottish Government will continue to be responsible for setting leasing fees, it also states that Ministers will consider some variation of fees if requested by asset managers. We strongly advocate that fees remain transparent and consistent amongst all assets. This is particularly important to limit increases to customers bills, which would be particularly felt by fuel poor customers. There is also a risk that SSEN may need to negotiate multiple leases for a single network reinforcement, if it crosses more than one asset manager s boundary area. This is likely to increase costs (potentially doubling or tripling costs if separate agreements need to be reached for each), increase the likelihood of delays and uncertainty to project delivery and create an unnecessary bureaucratic process. Clarity would also be welcome on whether existing profitability targets for assets will continue under new management procedures. Socio economic benefit as a factor in managing assets As a regulated business, we are obligated to deliver reinforcements to our network to ensure security of supply and meet our license requirements at the fairest possible cost. These reinforcements deliver socio economic benefits on a local and national basis, some of which are directly quantifiable (use of local supply chain, local spend etc.) and others that are less easy to quantify (delivering a more secure supply to customers, reducing power cuts, connecting renewable energy projects etc.) However, these benefits may not be considered as lucrative to asset managers at a local level compared to other types of development that might deliver a higher monetary benefit. We are concerned that this will act as a barrier to realising future network reinforcements should lease agreements for cable infrastructure be deemed as a less attractive proposition. There is also a risk that the inclusion of socio 3

4 economic benefit as a factor creates a cherry picking approach towards use of the assets. Wider strategic development and national policy needs should also be considered as a key factor during the lease agreement process in addition to local socio economic benefit. SSEN feel that these decisions, and the expertise involved, naturally fall within a national overarching framework at Ministerial level, rather than at a local level. Skills and expertise of asset managers Should further devolution and delegation of assets take place, we seek assurances that asset managers will have the required skills and expertise to manage assets as per current practice, whilst also adhering to wider Scottish Government policy in relation to planning, fuel poverty, climate change and the wider energy strategy. It is not clear from the bill document what resources or training will be put in place to support and develop asset managers, and how this will be funded. We have concerns that delays for lease agreements could increase, as a result of asset managers lacking experience, and that lease costs could also increase to cover the requirement of skills development and training. We feel that the above concerns could be easily addressed by ensuring that decision making and management of the seabed and foreshore for nationally strategic developments remain at the national level, sitting under the responsibility of Scottish Ministers. We also seek assurances that existing lease agreements will be grandfathered to limit the impact from the devolution process on the maintenance and operation of our existing distribution and transmission assets. There is currently no reference of this within the Bill therefore SSEN seeks clarification on this to ensure we can continue to deliver a secure supply of electricity to the rural communities that we serve, without the risks and costs associated with renegotiation of existing leases. 1) Are the powers to allow the transfer of the management function appropriate? We feel that there is currently not enough detail contained within the Bill to allow SSEN to fully answer this question. At present, there is a great deal of uncertainty as to how the management functions will work in practice following further devolution and delegation. We are not comfortable with further third party delegation of assets and the process for how this would happen and how it would work in practice is unclear. We understand that the detail associated with the Bill will be dealt with as part of the secondary legislation process, which will be subject to consultation with key stakeholders. We therefore request that SSEN is engaged as a consultee during this process. 2) Are the managers powers and duties as listed in the Bill appropriate? Currently there is not enough detail in the Bill to understand if the powers and duties are appropriate. In particular, SSEN would welcome further detail on where accountability lies. Asset managers should be responsible for the liabilities associated with their assets, not just the benefits, and at the moment it is not clear where responsibility lies. If there is an issue, dispute or disagreement in relation to a 4

5 lease agreement, it is not clear what processes will be put in place or who will be responsible for resolving them. This needs to be fully explored to avoid any unintended consequences. As above, SSEN requests that this is consulted on as part of the secondary legislation process so that the impact of the Bill on regulated businesses can be fully accounted for. 3) Should any additional power or function of the Scottish Crown Estate not currently provided for in the Bill be included? SSEN suggests that the following functions and/or powers also be included within the Bill: Ownership of the seabed and the foreshore should remain at the national level Overall, we believe that the seabed and foreshore should remain under the management of Scottish Ministers to ensure there is a strategic overview and alignment of national interests with wider Scottish Government ambitions and policy for leases and any future leasing rounds. Set targets for timescales and costs To avoid delays to required reinforcements, we request that set timescales and costs are implemented by Scottish Ministers for the delivery of lease agreements. We believe the current process for this works well, and a similar implementation plan for the long-term management of the Crown Estate Scotland s assets should be followed to avoid unnecessary delays or setbacks. Independent ombudsman process Should further devolution or delegation take place, we believe it would be useful to introduce an ombudsman process to allow concerned parties to raise any issues regarding lease agreements independently of the asset managers, and resolve disputes fairly. Grandfathering of existing lease agreements We request that the Bill provides clarity on how the management of existing leases will be dealt with under the new system. Specifically, we call on the Scottish Government to ensure that agreements for existing leases and wayleaves are grandfathered to limit operational impact to our infrastructure and avoid companies like SSEN, which has a regulatory duty to deliver electricity supplies, being held to ransom during negotiations. Promotion of activities We also believe that asset managers should continue to contribute to the promotion of activities and research that the Crown Estate currently undertakes, as per current practice, to ensure there is a continuation of the positive impacts. 4) Any additional information 5

6 In summary, SSEN welcomes clarity on many aspects of the Bill as outlined in our response above. We believe that the Bill would benefit from including provisions for greater strategic involvement. This would enable Ministers to ensure a joined-up approach to asset management and provide greater certainty in helping to achieve wider Scottish Government policy ambitions. In particular, the Crown Estate Bill appears misaligned with the Planning (Scotland) Bill that is also progressing through parliament, in that the latter focuses on greater collaboration between communities, local authorities and national level priorities whereas the former risks communities focusing on their own needs rather than having a wider more strategic outlook. Marine spatial plans for nationally important marine infrastructure are currently managed at a national level through the National Marine Plan, which places even greater importance on the Scottish Ministers having a strategic overview in managing Crown Estate assets should they be further devolved locally. Under SSEN s license obligations set by our energy regulator Ofgem, we have a duty to challenge proposals that could potentially increase costs for our customers. Therefore, SSEN would welcome the opportunity to provide oral evidence at a committee meeting so we can further discuss our concerns. 6