This item was published during the term of a previous administration that ended in April 2007
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Good news on water bills
30/11/2005
Limits on water charges for 2006 to 2010 have been published by the Water Industry Commission.
The Commission announced that it expects Scottish Water to achieve all of the objectives set for it without real term increases in average water charges.
The limits take account of a new charging regime for businesses, which will benefit firms to the tune of £44 million next year, and of a new reduction scheme for up to 120,000 low income households, which will cut bills by up to 25 per cent.
Environment Minister Rhona Brankin said:
"Today's announcement is an important milestone in the Executive's drive to create a modern and efficient public water service in Scotland. It presents the prospect of one of the largest ever programmes of investment in UK water services being delivered without the need for real term increases in water charges.
"The creation of an independent Commission was agreed by Parliament as the best way of delivering improvements in standards and capacity at lowest cost to customers.
"I welcome the Commission's assessment that Scottish Water should be able to achieve our objectives of delivering cleaner rivers and beaches, better quality drinking water, higher customer standards and support for new housing and economic development without charges rising above inflation.
"This is particularly good news for those low income households that will, for the first time, be eligible for a reduction in charges of up to 25 per cent.
"There is good news too for business customers who will benefit by £44 million next year when a new charging regime is introduced."
Scottish Water has two months to consider the contents of the Commission's determination of charges. If it concludes that the determination does not provide it with enough income to allow it to meet its statutory obligations it will be able to make a case for higher charges to the Competition Commission.
The Water Industry Commission for Scotland was established on July 1, 2005 to replace the Water Industry Commissioner as the independent economic regulator of Scottish Water. Under the Water Industry (Scotland) Act 2002, as amended by the Water Services etc. (Scotland) Act 2005, it has a statutory duty to ensure that Scottish Water has sufficient financial resources to enable it to achieve, at lowest reasonable overall cost, whatever objectives the Executive sets for Scottish Water in any given period.
The Commission is chaired by Sir Ian Byatt, the former Director General of Water Services for England and Wales. Its members have extensive senior level experience of the water industry, economics and utility regulation.
The Executive announced in February 2005 the objectives that it requires Scottish Water to achieve in the period 2006 - 2014, and its policy on charging for water services in the period. The objectives relating to the first four years of the period were given statutory effect in the Scottish Water (Objectives for April 1, 2006, to March 10, 2010) Directions. The Commission's determination of charges is required to fund the objectives specified in the Directions at lowest reasonable overall cost.
Key features of the Executive's charging policy include its charges reduction scheme for low-income households and fairer charging for businesses. The reduction scheme will reduce charges by up to 25 per cent per year for households where there are two or more adults and which receive Council Tax Benefit. It is estimated that this will helps some 120,000 households, which to date have received little or no help with their water charges. Under the new scheme for businesses, firms are expected to save £44 million a year on their water bills as a result of charges being rebalanced to reflect more closely the cost of the services that they receive.
To ensure that the Commission's decisions are subject to rigorous expert scrutiny, Scottish Water has the right, under the Water Services etc. (Scotland) Act 2005 (Consequential Provisions and Modifications) Order 2005, to have the Commission's determination of charges referred to the Competition Commission, the body that is charged with considering all appeals against decision by utility regulators in the UK, such as the Office of Water Services, which regulates the water companies in England and Wales.
Scottish Water has until January 30 to decide whether to accept the Water Industry Commission's determination or to refer it to the Competition Commission. If it decides against referral the Water Industry Commission's determination will set the financial limits within which Scottish Water must achieve the Executive's objectives for 2006 - 10.
If Scottish Water decides to refer the determination to the Competition Commission, that Commission can confirm the determination or replace it with a determination of its own. The Commission's decision will be final and will bind Scottish Water to deliver the Executive's objectives within whatever limits it sets.
A reference would take between six months and a year to complete. During that time, the Water Industry Commission's determination would remain in force.