Revenues increased during 2010, mainly due to an increase in energy balancing activity within the wholesale market, although this was partially offset by lower retail tariffs, as lower average wholesale costs were passed back to customers via price reductions early in the year.

Staff costs reduced in 2010 in line with a reduction in employee numbers, as a result of business reorganisations and efficiencies.

Contribution to Regional and UK Economies

We continued to make a significant contribution to the regional economies where we operate in Scotland, England and Wales through our payroll and to the UK national economy via tax paid to HM Revenue & Customs.

At 31st December 2010, we employed 8,039 people. Our total payroll for 2010 was £276 million and our pension funds paid out a total of £114 million to retired employees.

We collected £273 million in VAT and paid £280 million in corporation tax – up 27% on last year. This was because tax in 2009 was reduced through the tax treatment of certain items by agreement with the tax authority in that year.

Procurement Spend

The total value of our procurement spend for 2010 was £5,511 million, including fuel and energy purchases. The total value of our non-fuel purchases for the year was £671.95 million, of which the majority were contracts made with UK suppliers in pounds sterling. At the year-end we had placed orders with 3,655 suppliers during the year.

One of our largest, on-going non-fuel contracts, worth in excess of £200 million, was with Eaga (now Carrillion Energy Services) for the delivery of our Carbon Emissions Reduction Target (CERT) obligations.

New contracts were negotiated during 2010 and let in February 2011 for the delivery of the final phase of the Carbon Emission Reduction Target (CERT) and Community Energy Saving Partnership (CESP) programmes, with a combined value of £169m.

The contracts, for the installation of energy saving measures in customers’ homes will create and maintain jobs in this sector.

Carrillion Energy Services (formerly Eaga) is the lead partner on both contracts and will work in association with six contractors for CERT and with Direct Local Authority Housing Association/Funding Agreements for CESP.

We also continued significant coal contracts with ATH Resources and Scottish Coal.

Most of the coal supplied by Scottish Coal comes from Scottish surface mines, while ATH supplies come from Muir Dean in Fife, which employs a workforce of 100. Both contracts will help to support the Scottish and regional economies.

The contract with Scottish Coal, for up to 10 million tonnes of coal over five years, was the largest ever coal contract to be placed by a UK generator.

During 2010 we continued to use Scottish-sourced wood pellets supplied by a company in Perth.

Investment

During the recession and early stages of the recovery, we have continued to invest in everything that is critical to the safe and effective operation of our power stations and electricity networks, and to ensure that we continue to meet all regulatory and legal obligations.

Other investments have been prioritised and we have favoured those that provide the best rates of return, while maintaining tight control of budgets and cash flow. Our capital spend for the year was £585 million during 2010, compared with £539 million in 2009, with £395 million invested in strengthening our networks and providing grid connections for renewable energy projects.

During 2010 we also progressed investment in the early development of several new, efficient Combined Cycle Gas Turbine (CCGT) power stations.

Community Investment

We continued to support a host of programmes in the communities we serve during 2010, ranging from employability training for young people, to arts and culture, environmental and public safety projects, energy efficiency and charitable giving.

Our total community investment for 2010 was £3.4 million. Examples of the projects we supported during 2010 appear in the Communities section of this review.