Taking steps to ensure customer legitimacy - and so reduce regulatory and non-payment risk

As a regulator, it is vital that we focus on outcomes. Clearly we need to ensure that the cost of delivering the outcomes is reasonable, but if we allow ourselves to second-guess a company without reasonable cause, is there not a risk that it is the regulator who sets the strategy. Or the regulator who ought to be accountable?

Our aim is to agree some basic planning assumptions with Scottish Water before they begin to write their business plan (the high level objectives that underpin this business plan having already been set by Scottish Ministers).

We have yet finally to agree these parameters but our basic assumptions are likely to include: a range for a reasonable cash return for the wholesale business; a range for operating costs and capital maintenance and a range for growth in customer numbers. Scottish Water will be free to use whatever assumptions it chooses but we would expect any significant deviation from these ranges (or if the best value for Scottish Water is always used) would have been discussed with and justified to the Customer Forum. Agreement with the Customer Forum should be Scottish Water's ultimate aim.

This approach should ensure that there is no question that the business plan, written by Scottish Water, is owned by Scottish Water and will have been thoroughly discussed with customers. As such, the resulting charges should have much more legitimacy. Regulatory and non-payment risk should both be materially reduced.

About Alan

Alan Sutherland

I’ve been Chief Executive of the Water Industry Commission for Scotland since its establishment in July 2005. Prior to that I was the Water Industry Commissioner for Scotland having been appointed to that role by Scottish Ministers in November 1999. In 1998 and 1999 I was a managing director of Wolverine CIS Ltd, a division of Wolverine World Wide. Prior to that I worked in strategic consultancy with Bain and Company and in the investment banking industry with Robert Fleming and Company.