Ofwat consults on Scilly transfer to South West Water

Ofwat is consulting until 9 April on varying the licence of South West Water so it becomes the appointed water and wastewater company for the Isles of Scilly. The regulator said it and the water company, together with the government, the Council of the Isles of Scilly and other stakeholders, “consider this to be a necessary measure to meet the challenges of protecting public health and safeguarding the environment on the IoS, now and in the future”.

The consultation states substantial investment is required to bring water and wastewater infrastructure on the islands up to the standards of mainland England. South West Water was the only firm to respond to a 2016 DEFRA invitation to express interest in operating the networks there, and has since conducted due diligence and prepared a plan.

This proposes South West Water would take on responsibility for the relevant infrastructure of the Council of the Isles of Scilly, the Duchy of Cornwall and the Tresco Estate and be under equivalent mainland regulations at the commencement of operations, with agreed work being carried out to achieve full water quality and environmental protection from April 2025 onwards for four of the five inhabited islands. For the fifth, Tresco, the equivalent date is April 2030 onwards because the infrastructure there is already relatively well maintained and managed.

The water company has proposed spreading the high cost per head of investment over all its customers, so the island customers pay equivalent charges to those on the mainland. There will also be an initial significant contribution from the Duchy of Cornwall on the transfer of its assets.

Ofwat said: “We estimate that the impact on SWW customers’ bills due to the inclusion of the IoS within SWW’s area to be on average £2.10 a year for 2020 to 2025 and £4.20 a year for 2025 to 2030. This would be more than offset by expected bill reductions due to increased efficiency, also secured through PR19.” In its PR19 customer engagement, South West found 82% of its customers supported extending the SWW area to include the IoS.

For those on the islands, Ofwat said most customers’ metered bills would be broadly stable in real terms or would decrease at the point of switching to SWW, though larger households currently on the Council’s water and wastewater tariffs are likely to experience bill increases. Business customers will be served on an equivalent basis to those in the rest of England via the retail market.

Ofwat proposed accepting SWW’s application to vary its licence, subject to the relevant legislative framework being put in place (is subject to the UK government extending the relevant legislation so that it applies to the IoS) and the responses it receives to this consultation.