I am encouraged by the reactions of Scottish Water, the Scottish Government and other stakeholders in Scotland to our I3 (or ‘I cubed’) initiative.
This seeks to involve customers more extensively in the entire price setting process but most particularly in developing the priorities for improvements in broadly defined customer service issues – everything from security of supply to resolving water pressure or malodour problems.
The initiative also seeks to correct some of the perverse features of the current regulatory framework that can limit the opportunity for a regulated company to pursue NPV positive initiatives whose payback is greater than five years, or to favour capital expenditure solutions when other approaches may be economically more efficient. I am also keen that Scottish Water is encouraged to be innovative.
This will require a quite different approach from us as economic regulator. It will be a case of ‘away with the black box’. We will work with Scottish Water to identify and agree some of the key inputs to the price review – such as the level of ongoing operating costs, capital maintenance and the appropriate financial strength of the company. We will also encourage Scottish Water to take a longer term view of its strategy and to engage with customers on their priorities.
After the initial business plan is published we will facilitate meetings between a new Customer Forum, the quality regulators and Scottish Water and will publish our views on Scottish Water’s business plan for discussion. Hopefully this will ensure that our draft determination reflects our considered views. There should be no surprises. As such, we would hope that the final determination is much more similar to the draft than has, perhaps, historically been the case. The goal of reduced regulatory risk and greater upside for good management may be within our grasp!