Regulator wants water charge cap

The regulator wants capped price rises for domestic and business water users

Household and business water charge increases should be kept below the rate of inflation over the next four years, according to the industry regulator.

Sir Ian Byatt, chairman of the Water Industry Commission for Scotland, wants annual price rises to be kept 1.5% below the rate of inflation.

The regulator said efficiencies would be required, but there should also be improved customer service.

But it should allow £500m annually to be spent upgrading pipes and sewerage.

The cap on price rises will apply to households, and should apply to most businesses, as well as the public sector and charities, though industrial effluent producers are to bear a larger share of the cost of handling their waste.

Priorities for Scottish Water include the tackling of problems with Glasgow's drainage, cuts in leakage, and reducing the risk of cryptosporidium infection through improved water treatment.

Household customers will benefit from prices that will increase at less than the rate of inflation and from better service Alan Sutherland Water Industry Commission for Scotland

But there was a warning from the regulator that tight public spending at Holyrood could choke off Scottish Water's capital spending allowance, and a call for the publicly-owned company to be given ways to access private funding.

Sir Ian Byatt suggested this could be through the Scottish Futures Trust, set up by the Scottish Government to find new ways of finding access to finance, or through giving Scottish Water the same funding regime as Network Rail.

If there is a lack of capital finance available, the warning goes on that customer bills would have to rise, or there would have to be a cut in the amount of capital investment.

With Scottish Water newly facing competition for its non-household customer base, but with little sign of competitors entering the market, the regulator's draft proposals are also aimed at boosting the opportunity for new retail suppliers to come forward.

'Good deal'

Alan Sutherland, chief executive of the Commission, said: "This Draft Determination represents a good deal for customers, our environment and our economy.

"Household customers will benefit from prices that will increase at less than the rate of inflation and from better service.

"Businesses and public sector organisations should expect more tailored and improved services from their chosen retailer and lower prices.

"Our environment should benefit from a substantial yet flexible capital expenditure programme which allows issues to be addressed in both a timely and effective way."

Scottish Water and others are able to respond to the draft proposals by 23 September, and then a final ruling on the charging regime will be announced on 26 November.