One of the main ways in which we promote the interests of customers is by setting limits on the prices they pay for water and sewerage services. This process is called a Strategic Review of Charges (or price review).
At each price review, we set price limits that deliver ministerial objectives for the water industry at the lowest reasonable overall cost. The objectives include improvements in water quality, environmental performance and customer service.
At the price reviews in 2001 and 2005 we challenged Scottish Water to provide value for money by requiring it to deliver its statutory objectives at £2.5 billion less than the company had proposed in its Business Plans. Scottish Water accepted this challenge. As a result of Scottish Water's response to the regulatory framework, average household bills are today around £110 a year lower than they would otherwise have been.
Current prices were determined at the price review 2010-15, which we announced in November 2009. We made sure that customers continue to get value for money, with maximum charges set at 5% below inflation between 2010 and 2015. Scottish Water is outperforming our determination and in January 2012 announced that household charges would be frozen for 2012-13 (this follows price freezes in 2010-11 and 2011-12).
In between each Strategic Review, we monitor and report on Scottish Water’s performance in delivering the benefits that customers have funded through their bills.
Looking beyond 2015
We started planning for the next price review, when charges are set for the period beyond 2015, shortly after the end of the last review in 2009. We have been working closely with water industry stakeholders and technical experts to examine the many and wide-ranging aspects of economic regulation, under a project called ‘Incentives, innovation and involvement’.
Our aim is to make sure that the industry is equipped to face the challenges of the future and continues to provide high-quality water and sewerage services at the best value price.
A key aspect of this work is to simplify the regulatory system and encourage greater customer participation in decision-making. We set out our initial thoughts on encouraging customer participation in a leaflet ‘Putting customers at the centre of the price review process’. We also developed a ‘ready-reckoner’ that illustrates the impacts of new investment on future bills.
More recently, we have worked with both Scottish Water and Consumer Focus Scotland to establish a Customer Forum. The Forum will represent both household and non-household customers at the next price review. It will be empowered to negotiate the delivery of appropriate levels of service within the policy framework set by the Scottish Government.