Foreword by the Chief Executive

The Covid-19 pandemic has continued to dominate all of our lives since we published our draft determination in October, and we have seen a return to tighter restrictions. Fortunately, there is now much greater optimism on both the efficacy and the availability of a vaccine, and government scientists appear to have more confidence that we will see life returning to something approaching normal in the not too distant future.

However, this pandemic has served to highlight the fundamental importance of a reliable and high-quality water and wastewater service. At its most basic level, you can’t wash your hands without water, a point well illustrated by the fact that during lockdown in the late spring of 2020, we each used around 30 litres more water in our homes every day. Recent tragic events have also highlighted the risks and complexity of the wastewater assets which we all rely on Scottish Water to manage.

Recent events have therefore brought home quite starkly the fact that we must not take the improvements we have seen in service, in drinking water quality and in the industry’s environmental impacts for granted. Climate change is making it harder to deliver services, affecting raw water quality and increasing sewer flooding, and Scottish Water’s infrastructure is ageing. At the same time Scottish Water now faces a challenging 2040 net zero emissions target.

The sector therefore stands at something of a crossroads, but decisions about the future direction must draw on the evidence available on customers’ priorities. Extensive research confirms that customers cherish their water, and want high-quality, value for money services. They also want Scottish Water to provide broader public benefits and to help tackle climate change. I very much welcome Scottish Water’s commitment that it will, at all times, act as though there is a customer in the room. It is also encouraging that Scottish Water will engage in a national conversation to build and to maintain as good an understanding of the views and priorities of its customers as is possible. This will require a strong focus and a commitment of resources by Scottish Water.

Our statutory role is to promote customers’ interests. As such, we must allow Scottish Water the funding it requires to address the challenges it faces and to ensure that both current and future customers enjoy the same high-quality and reliable services as we do today.

Without sufficient investment, there would inevitably be a gradual deterioration of standards that would become harder to reverse, and substantially more costly, if it were allowed to gather pace.

We recognise that the decisions we are making today are against a backdrop of unprecedented challenges for customers and businesses in Scotland. Our approach therefore allows Scottish Water maximum flexibility to consider the phasing of charge increases over the regulatory control period to reflect, through its national conversation, the preferences of the customers and communities it serves. We are also pleased that the Scottish Government is providing greater protection to those least able to afford water charges through the changes announced to the water charges reduction scheme. This will mean that bills for those who are least able to pay will go up by less than the rate of inflation over the next regulatory control period.

We are playing our part in ensuring that bills are no higher than necessary by setting stretching, but achievable, efficiency targets for Scottish Water.

Meeting these targets will require Scottish Water to transform its business, ensuring it delivers best value in all that it does. In tandem, we are transforming how we regulate – to a model based on ‘Ethical Business Regulation’ (EBR) – while keeping the overall cost to customers of our office below the rate of inflation during the next regulatory control period through income earned from working on international projects. This income from our international work to date will allow us to return over £1.5m to Scottish Water and retailers.

The final determination is an important milestone in building on progress since Scottish Water’s creation in 2002, by doing the right thing for Scotland, for future generations and for the environment. We look forward to continuing to work closely with our stakeholders as we continue on the journey.

Alan D A Sutherland

Chief Executive

10 December 2020