Scottish Gas Board

Scottish state owned gas provider (1949–1973)

The Scottish Gas Board was a state owned utility providing gas for light and heat to industries and homes in Scotland. The Board was established on 1 May 1949, and dissolved in 1973 when it became a region of the British Gas Corporation.

The first chairman of the board was Sir Andrew Clow who established the headquarters at 25 Drumsheugh Gardens and 12 Rothesay Terrace Edinburgh. He served until 30 April 1956. In the last of his quarterly letters to his senior management, he reflected on the experience of centralising the control of over two hundred independent undertakings. The remainder of the article is abstracted from that letter and includes explanatory remarks.

Each undertaking performed the functions of coal gas production and distribution through underground pipes to domestic, commercial and industrial customers, sales promotion, finance, etc. Some works were too small to remain viable and one at Wigton was closed. Studies were conducted to establish whether previously rival works could be integrated, both managerially and physically by linking their distribution systems.

Most of the larger gas undertakings had been owned by local authorities and employed many expert and talented engineers. However the same authorities were also owners of electricity generating and supply companies (the main rivals of the gas industry); the local authorities had felt no need to promote competition.

Immediately after World War II there was a chronic shortage of pipes (for mains replacement and extension to new customers), and other materials. Most gas pipes were made of cast iron and often leaked at the joints. Actual 'unaccounted for gas' (loss through leakage and other losses) was estimated as being as much as 25%. Refurbishment and replacement of pipes was a priority, for safety reasons. Little preventive work was carried out; distribution engineering was usually initiated by the detection of a leak. Many gas works had not been adequately maintained, the price of coal and of coke oven gas was rising, contractors were in short supply and the Scottish rating system at that time was such that 'profits might prove as damaging as losses'.

Regarding gas tariffs, the chairman wrote "we must keep the allocation of charges between customers fairly close to our estimate of their individual costs and we do not have the freedom of private companies to discriminate between customers whose conditions are similar." This was a reference to the notion that pricing of state owned produce should reflect cost as accurately as possible (a cost plus pricing model). This was in very sharp contrast to the free market concept of charging 'what the market will bear' i. e. the highest price that still enables sufficient competitive advantage to retain that customer, thus capturing all the consumer surplus.

Gas was losing share of the industrial market in Scotland because of falling oil prices. One of the largest refinery sites in the country was located almost at the centre of the industrial belt. Domestic customers were becoming ever more sensitive to the price of gas as electric heating, in various forms, became relatively cheaper. New house building after the war was on an unprecedented scale on mainly green field sites beyond the reach of gas mains. Government rules about return on investment often made mains extension impossible, again to the detriment of suppliers of gas versus electricity.

While the chairman was confident about the technical expertise of the staff he had inherited, he recognised that, unlike the previous owners, it was necessary to promote gas sales by 'educational advertisement and display, canvassing and salesmanship' and by making 'more contact with domestic customers, local authorities and various personalities'. The industry had, hitherto, been managed mainly by professional engineers, whose aim was to produce and distribute gas as cheaply as possible, bearing in mind that, in the interest of safety, demand had to be met at all times.

A failure to supply for any reason had dire consequences. Not only might it entail prosecution for breach of statutory responsibilities, but restoration of supply required, and still requires, every home to be visited to ensure that all gas taps are turned off (including the main supply to the premises). The procedure then requires pipes to be purged to ensure that any explosive mixture of gas and air is removed before the main is pressurised again. Finally, every household had to be visited again to ensure safe restoration of supply. Consequently, the engineer manager was more concerned about ensuring continuity of supply and with balancing supply with demand on an hourly basis. The notion that in addition to performing his delicate task, he would have to 'sell' gas by making personal contact with potential customers was unusual. The chairman admitted that "the great amount of work that re organisation has involved has also had some effect, especially in the bigger places, in leaving Managers too little time to move around and to have frequent and close contact with others at work, whether they are stokers or typists, or mainlayers or meter readers in whatever capacity they serve". Customer contact not mentioned.

The chairman remarked on the good relations the Board had with the trade unions and, although he welcomed increasing wages, he deplored the fact that wage negotiations were conducted at national level (by the Gas Council) and that wage awards were "above what the cost of living and our (Scottish) position justified." He regretted that he had to mark his departure with a concomitant rise in gas prices.

The chairman concluded his account by remarking that " a first class plant, first class gas and coke, a first class office and showroom, a first class financial system are all admirable. But these and many more gadgets in the machine will be of little value unless those using them add to their professional competence a sense of vocation and an anxiety to brighten up what Wordsworth calls 'the still, sad music of humanity.'"