Scottish water regulator says bills must go up to futureproof systems

Scottish Water has been granted £4.5 billion to invest in futureproofing services and tackling climate change in the Scottish regulatory body’s draft determination for 2021-27.

Mitigating the impacts of climate change and reaching net zero were central to the draft determination, which is based on Scottish Water’s Strategic Plan published in January. It focuses on three overarching goals: service excellence, going beyond net-zero emissions, and providing value for customers while maintaining financial sustainability.

The Water Industry Commission for Scotland (WICS) said billpayers will see an increase of around £9 a year above inflation to cover the additional investment, which is £1.2 billion more than was invested in the current regulatory period.

WICS said the amount represented the lowest reasonable overall cost that the water company would incur to meet its objectives, including net zero emissions by 2040.

The regulator said Scottish Water will need to invest more than twice as much (in real terms) by 2040 than when it was established in 2002 and said failure to invest would mean a deterioration of service levels. Furthermore, not investing could undermine the achievements made in the past 20 years to water quality and environmental improvements.

WICS’ chief executive, Alan Sutherland said: “We understand that many customers are facing financial difficulties and that the economy is under pressure, particularly in light of the covid-19 pandemic. But this pandemic has underlined just how important a reliable and high-quality water system is. Our draft determination will futureproof these services for current and future generations. This also reflects the priorities of customers that were identified through wide-ranging research.

“To delay increased investment would put water quality, reliability and the 2040 net zero target at significant risk, with the likelihood of even higher bills to fix those problems in future. That would be poor value for both current and future customers. WICS expects that Scottish Water will engage with and listen to its customers as it develops its proposals for charges each year.”

Douglas Millican, chief executive, Scottish Water said: “We face significant challenges in the future, not least as a result of climate change and our ageing infrastructure, to maintain the level of service we provide to customers and communities.

“Further investment over the long-term will be needed to secure the service we currently provide and to allow us to transform into an organisation that achieves net zero emissions.”

WICS will publish its final determination, following a consultation period, in December and Scottish Water then has 60 days to accept the determination or request a referral to the Competition and Markets Authority.

Scotland’s regulatory cycle is a six-year period, unlike England and Wales’ five-year asset management period (AMP).