Jon Rathjen

Scottish Government

Water Industry Team

Scotland The Hydro Nation

Scottish Water • 5.3m people - 2.4m

households

• 150 000 business customers

• 95% population connected to mains sewerage

• 98% to mains water

• 1.3 billion litres water

delivered per day

• Three regional water authorities

• Huge challenge to meet EU Directives

• Heavy reliance on PFI for wastewater investment

• English privatisation challenge

Scottish Water : History 1996-2002

Overall 2002-2010

• Service costs have been reduced by 40%

over last decade

• Savings around £2.5 billion

• Average annual household bills around

£105 lower than they would have been.

2015-2021

• Household charges set at CPI-1.8%

across the period.

• Average annual household bills over £100

lower than they would have been without

efficiencies made since SW created and

are £54 lower on average than those in

England and Wales.

What the charges pay for

• Scotland economy and communities –

Over £3bn capital investment over the 6

year period.

• Improved environmental performance,

reduced flooding and pollution.

• Drinking Water Quality – min standard

99.88% samples passed – public supply

Water Industry in Scotland

Delivery Organisation

Customer

Representation

Quality regulation

Economic regulation

Scottish Ministers must: ‘take such reasonable steps as they consider appropriate for the purpose of ensuring the development of the value of Scotland’s water resources’ Concept of Scotland the Hydro Nation

– ‘a nation which manages its water environment to the best advantage, employing its knowledge and expertise effectively at home and internationally.’

Scotland The Hydro Nation

Objectives, Principles and The Final Determination

• Ministers have set the key principles and objective for the industry through to 2021

• The economic regulator has responded

• The industry has accepted the framework and will deliver the outputs with predictable charging revenues and investment levels as the cornerstones of performance improvement.

Customers at the heart of decision making

• At the start of the 2015-2021 period customers played a key role in setting the price level and agreeing service improvement targets.

• Directive compliance and other essential works are of course not negotiable but customers now lead where we have choice.

What next?

• Next we are exploring the idea of using efficiency gains within the next operating period to fund new customer priorities in period.

• We are researching customer preferences for how they receive water and waste water services and do they want a role in their provision.

• Testing new technology to re-imagine rural provision to raise performance and reduce costs in a world of less certain weather and water availability.

Summary

• We have worked as a Government and an Industry to reduce cost burden on the customer through steadily reducing charge levels. [CPI-x previously RPI-x]

• Bringing the Customer directly into the price negotiation process has been beneficial.

• Stable investment and stable (falling) charges can still deliver performance improvement if the water company is incentivised and regulated to be more efficient.

Jon.Rathjen@Scotland.GSI.GOV.UK Team Leader

Water Industry Team Scottish Government