My Photo

Blog powered by Typepad

Statcounter


« So You Want To Be Minister for Finance, Mr. Bruton? | Main | How Middle is the Middle Class? »

November 20, 2006

Comments

Niall

Michael,

You don't have too far to travel to find a very similar electricity operation to the ESB, which shows how poorly managed and wasteful a company the ESB is.

Scottish Power is similar in size to the ESB is an integrated operator, e.g. runs the network and generates power. It also has small foreign operations. However an examination of its financial results show what is possible with the proper structures, controls etc. All of this in a market of a similar size to that of the ESB. (I have used a conversion rate of €1.45 to get these figures.)

It paid dividends of €620M to shareholders, generated profits in excess of €1,000M profits. It has a pension deficit of just €225M, compared to the ESB's €1,800M plus. Average employee costs are €46,100 per employee, including pension costs.

It also has a much better investment record than the ESB, in particular in relation to renewable energy.

Any comments?

Michael

Thanks Niall for bringing up this example. Will get back to you with a fuller reply.

Lorenzo

Interesting stuff but I don't think the ESB is the best case to use in defending the cause of the public sector against the onslaught of competition.

The average payroll costs in power generation were over €94k in 2005 and in some plants were much higher. Transmission salaries averaged over €108k. Overall in the ESB average salaries (not costs) were over €60K. Looking at the 2005 income deciles from the ESRI, these are phenominal amounts.

Most people looking at these figures would think that Deloittes would be right to 'believe' staff costs are very high. Niall's statistic of €46k average payroll cost in Scotish Energy would seem to bear this out.

The people who end up paying for this largesse are the consumers. When 17% of the population are 'fuel poor' (spending more than 10% of their income on energy) it is very difficult to justify keeping the circumstances and practices that reduce efficiency and increase costs.

You rightly point out that staff costs are only a small proportion of overall costs but they are a very significant proportion of the costs that are under the control of ESB - it is a price taker for fuels. Furthermore I would suspect (without any proof!) that at least some of the inefficiencies in the plants are due to restrictive work practices. Again these are unjustifiable.

Michael

Thanks Lorenzo for your comments. I have promised to return to this issue, in light of Niall's comments (and now yours) and I fully intend to. My initial reading is that the comparative figures are not that far apart, despite the headlines. However, there are some things that are clear. One, the massive jump in electricity prices cannot be put down to payroll costs. Two, that as both consumers and, through the Minister, shareholders of ESB, people have the right to know how their company is being operated and be assured that only the best practice will be acceptable. Third, that Deloitte didn't get anywhere near explaining the first or assuring people of the second.

Lorenzo

I look forward to reading it when you do.

One thing, could you post up the address of the Eurostat figures on the utilities sector? I tried having a look for them, but their site is an absolute mess to use. Thanks.

Michael

Lorenzo, been battling with the EUROSTAT website to transfer the information (it's not the most user-friendly). Can't get the particular address to transfer. If you go to the EUROSTAT home page and type in 'labour costs' in the quick search, it will be item 103 (top of the third page) - Labour costs, wages, salaries and direct renumeration. I've also found that some of the variables in the dataset for Irish utilities labour costs are listed as 'confidential'. Have no idea how that could possibly be.

Otherwise, just e-mail me directly and I will send the actual table. I will be away from Thursday until the New Year.

vme

Wonderful and informative web site.I used information from that site its great.

The comments to this entry are closed.