Price setting

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 average household charge in Scotland continue to be less than the average household bill in England and Wales.

In November 2014, we published our final determination for the period 2015-21. This determination set out that household customers’ bills will increase below the rate of inflation over the six-year regulatory control period. This means that typical household bills will increase by £5 or less each year.

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.