Water bills soar to pay for systems improvement
SCOTS are set to see water bills soar above inflation for the next six years to pay for £1 billion of extra improvements to ailing Victorian infrastructure.
The Water Industry Commission for Scotland (WICS) has admitted that “bills have to go up” by two per cent above inflation each year up to 2027 in order to improve water systems across Scotland and meet climate-change targets.
The news will come as another blow to cash-strapped Scots – with unemployment levels rising and 474,000 people in Scotland currently claiming Universal
Credit amid the coronavirus crisis.
Scottish Labour has called for water bills to be frozen until at least 2023 as the public grapples with the financial crisis brought on by the pandemic and has labelled the plans by the regulator a “cash grab”.
WICS has recommended that Scottish Water “should seek to utilise its full cap” that will be made available.
The regulator will publish its final recommendations in December but has warned that “if we do not invest sufficiently today there is a risk that we slide backwards” and has stressed that delaying the investment “would risk even higher bills, reduce service reliability and water
quality” and prevent carbon neutral targets being achieved.
Scottish Water’s charges in the 2020/21 year, including supply and waste water collection services was limited to a 0.9 per cent increase from 2019/20 – an average annual charge of £372.
WICS has claimed the price hike will keep bills “broadly the same in real terms as they were in 2002”.
The proposed increase set out in WICS’S draft determination will let Scottish Water invest at extra £1 billion to improve infrastructure – taking the total to £4.5 billion.
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. This also reflects the priorities of customers that were identified through wide-ranging research.”
He added: “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.
“WICS expects that Scottish Water will engage with and listen to its customers as it develops its proposals for charges each year.”
In its draft determination, WICS has warned that Scottish Water “will have to transform its business in a radical way if it is to meet the long-term challenges it faces”.
Scottish Water chief executive Douglas Millican said: “We’ve worked closely with the WICS over the last few years on the future of our sector and the essential services we provide our customers and communities and so we welcome the publication of the draft determination.
“We face significant challenges in the future, not least as a result of climate change and our ageing infrastructure, to maintain the level of service we provide to customers and communities.”
He added: “Further investment over the long-term will be needed to secure the service we currently provide and to allow us to transform into an organization that achieves net zero emissions. This is a very important milestone in our regulatory process and so we will study it carefully before responding fully.
“I encourage other stakeholders and interested parties to take this opportunity to respond to the consultation on the draft determination. Scotland’s water and waste water services belong to all of us and it is vital everyone gets the opportunity to input to our future.”
Labour has called for a rethink with thousands of Scots facing hardship due to the pandemic and council tax rising from a three per cent cap to almost five per cent by the Scottish Government.
The party’s deputy leader and finance spokesperson, Jackie Baillie, said: “The fact that the water industry commissioner found it acceptable to consider increasing water charges to significantly higher levels than inflation fails to reflect our current circumstances and the struggle that individuals and businesses will face.
“What we currently know about the economic effects of Covid-19 is only the very tip of the iceberg.
“It is vital that the Scottish Government commits to a complete freeze of water charges for at least the next two to three years until people and businesses across Scotland manage to get back on their feet.
“The Scottish Government should commit to a freeze for water charges as this would go a long way in relieving the public and businesses of any increased burden for their water at a time of great financial difficulty.”
WHAT price a resilient water service? Regular handwashing and working from home have become the new normal for many. This means ever greater reliance on our water service – during lockdown each of us was using around 30 litres more water in our homes every day.
Clean drinking water, and properly treated wastewater, is essential to our health and environment.
In Scotland, its importance is reflected in the public ownership of Scottish Water.
Scottish Water does not pay shareholder dividends so every single pound from customers’ bills is invested in our water environment and services.
There is a lot to invest in. Scottish Water has over 100,000km of pipes, over 1,800 wastewater treatment works and nearly 240 water treatment works.
It is Scotland’s biggest energy user, owns and hosts renewable energy schemes and cares for our natural environment.
Scottish Water is a success story. Customer service levels are as high as those of any water company in the UK, but bills are around 10 per cent lower (after inflation) than in 2002 when Scottish Water was formed.
Drinking water quality is high and environmental pollution much reduced.
But our water services are at risk. They are not in immediate danger, but there are real threats to the progress that has been made.
Climate change is making it harder to deliver the services we rely on.
More intense rainfall can overload sewers, causing flooding. Scottish Water must deliver the challenging target set for it by the Scottish Government to achieve net zero emissions by 2040.
To do so, it will have to transform the way it works, pioneering innovation and investing in smarter and greener ways.
Scottish Water’s infrastructure is also ageing.
Queen Victoria opened its Invercannie treatment works 154 years ago. Last week its refurbishment was announced.
We face the prospect of a gradual deterioration of standards.
If we allow that to gather pace, it will become harder and harder to reverse – not to mention more expensive.
We have had the benefit of a bountiful inheritance, but to address the challenges ahead, and leave any sort of legacy to those who follow us, we now need to invest more.
The Water Industry Commission for Scotland’s (WICS) Strategic Review of Scottish Water has put customers’ needs and aspirations at its heart: establishing a Customer Forum and participating in undertaking a thorough research programme, asking customers what they want of their water company.
We learned that customers cherish Scotland’s water and want its high quality maintained in the face of climate change and ageing assets.
We learned that customers want Scottish Water to do its bit to help tackle climate change.
And we heard clearly that customers want value for their money and for Scottish Water to deliver broader public benefit, thinking about people and communities in all that they do.
The more we heard from customers, the clearer it became that thinking beyond short six-year regulatory periods, instead focusing on futureproofing services, should be the priority.
We are acutely aware that the Covid-19 pandemic is causing many customers and businesses to face financial challenges. Scottish Water’s commitment to work with customers to identify the levels of service and price profile during the period that they consider reasonable is something the Commission particularly welcomes.
WICS’S Draft Determination of Charges, published yesterday, therefore proposes increasing investment by more than £1 billion between 2021 and 2027.
It recognises that further increases in investment will be necessary in future if Scottish Water is to meet its net zero targets and provide resilient services to the customers and communities it serves.
But we can take the essential first steps by increasing charges by a maximum of two per cent per year above inflation on average for the next six years. This means the average household bill will rise by a maximum of £9 above inflation each year.
To put that in perspective, people would still be paying broadly the same (after inflation) in 2027 as they were in 2002, even if bills were to go up by the maximum allowed, given the reductions over the last 18 years.
At WICS we have always sought to play our part in making sure people pay no more than is necessary, requiring Scottish Water to achieve the objectives set for it by the Scottish Government as efficiently as possible.
Our draft determination challenges Scottish Water to improve its efficiency year on year until 2040 at a rate that is equal to or better than the UK industry has, on average, achieved previously.
We also now expect investment decisions to take account of carbon, natural and social capital and of the principles of circular economy, providing the best all-round value.
Planning and the appraising of projects is key: we need to start building the infrastructure requirements of the future right now.
Our aim is that the decisions Scottish Water makes now will still be viewed as the right ones in 2040 and beyond.
Our proposals are therefore about building on what has been achieved to date, doing the right thing for Scotland and for future generations.
Where would we be right now without our resilient water service?
Climate change is making it harder to deliver the services we rely on