Regulator proposes 30% investment hike to "futureproof" Scottish Water services

Average household water bills in Scotland will rise by £9 a year (a maximum of 2% above inflation) in real terms under a draft determination for 2021-27 that the Water Industry Commission for Scotland (WICS) said would “futureproof” Scottish Water services for current and future generations.

Under proposals issued by WICS but developed collaboratively by stakeholders, total charges for the six years will be capped at £8,032m, to fund £4.5bn of investment, a 30% increase on spend in the 2015-21 period.

WICS said the decision represented the “lowest reasonable overall cost that Scottish Water will incur in meeting the Objectives that the Scottish Ministers set, including the target to achieve net zero emissions by 2040,” as well as replacing a backlog of worn out assets.

The charge cap included a 1% real efficiency challenge year on year in the allowed for ‘Tier 1’ expenditure (which covers PFI costs, interest, operating costs and reactive asset maintenance investment), and a £150m capital efficiency challenge on the long-term sustainable level of investment.

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… 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.”

The regulator is consulting on the draft determination until 19 November 2020 and anticipates the final determination will be published on 10 December 2020.