Utility Week (24 June) reports some comments that I made to the Water UK Innovation Seminar and attempts to contrast these with those of Richard Flint of Yorkshire Water. This is a rather mischievous misrepresentation. Indeed, I do favour removing the bias that exists in favour of capital expenditure but this does not mean that I am biased against capital expenditure.
One of the points that I made in my talk (available here) is that capital expenditure was unlikely always to break down neatly into five year periods and, as such, we should be ready to consider committing funding for the duration of the project. I also noted that I would be pleased to see proposals for capital expenditure or other initiatives that had a positive net present value but paid back in longer than a standard regulatory control period.
Our approach for the next price review will be to consider the total expenditure of Scottish Water. Yes, we want to see Scottish Water become more innovative and to plan for the long term - but in our view the best way to do that is to allow Scottish Water the flexibility to choose the best solution available. It should not feel a bias in favour of capital expenditure or that experimentation in approach may lead to automatic criticism.
A clear and stable regulatory framework should help - particularly if we can remove the regulatory barriers to doing the best things for customers and for the environment.