Scottish Water is delivering and recovering capital spending slippage, says regulator

Scottish Water maintained its past levels of performance in 2022-23 and managed to catch up with some capex slippage, according to the Water Industry Commission for Scotland’s (WICSs) annual assessment. 

The regulator said it welcomed that Scottish Water has:

• recovered some of the slippage in capital investment expenditure by around £35m. This related to a concern flagged up in last year’s report, that Scottish Water’s capital delivery had fallen behind – in particular, that the company had not met its target dates for delivering the investment projects that were carried forward from the 2015-21 period;

• spent less than the allowed for operating expenditure and expenditure related to legacy Private Finance Initiative contracts; and

• maintained performance on key levels of service measures.

That said, WICS noted there remained signs that Scottish Water is experiencing delays completing projects that were meant to be delivered in 2015-21.

In 2022-23, due to cost of living concerns, Scottish Water raised charges in line with CPI but below the annual average cap of CPI inflation + 2% allowed at the 2021-27 Final Determination. This has resulted in the company having lower funding available for investment than was assumed.

WICS has requested information on Scottish Water’s ability to meet the objectives of the Scottish ministers and will use this information to form an investment ‘baseline’, to forecast capital investment expenditure, tangible deliverables (such as kilometres of mains replaced) and benefits delivered from that investment over the 2021-27 regulatory control period.

WICS plans to set out its draft methodology for the Strategic Review of Charges 2027 later this year.