South West Water is currently awaiting the final go ahead to run the Isles of Scilly water and wastewater infrastructure pending the outcome of a consultation by Ofwat.

The water industry regulator has launched a new consultation on its proposal to vary the water company’s licence to include the Isles of Scilly (IoS) within its area from April 2020 onwards.

In 2016, the Department for Environment, Food and Rural Affairs invited expressions of interest in operating the public water and wastewater networks on the IoS - South West Water (SWW) was the only company that responded.

Substantial investment, estimated to run into tens of millions of pounds, is required for the Isles of Scilly to bring its water and wastewater infrastructure up to the standards of mainland England.

However, Ofwat’s consultation paper describes the necessary level of investment as “well beyond what the islands’ small number of bill payers could collectively afford.”

Since March 2016, South West Water has been assessing the condition of the water and wastewater infrastructure on the islands and prepared a proposed plan for extending its area of operation to the IoS and of investment. South West Water’s AMP7 business plan submitted to Ofwat in 2018 as part of the 2019 Price Review process takes into account of the Isles of Scilly.

The water company is planning to invest £34 million from 2020 to 2025, and a further £17 million from 2025 to 2030 in the IoS. The programme of investment includes improving the resilience of groundwater sources, water mains renewal, improvements to water treatment and the installation of smart meters.

South West Water is also proposing to have a small operational team based on the islands supported by colleagues in Devon and Cornwall, together with recruiting additional staff from the Islands to work in the operational team.

The water company would take on responsibility for the relevant infrastructure of the Council of the Isles of Scilly (the Council), the Duchy of Cornwall and the Tresco Estate

According to the consultation paper, although the proposed IoS investment costs are high per head of the IoS population, SWW is proposing to spread the costs over all its customers, so that IoS customers pay equivalent charges to its mainland customers. The impact on customers’ bills is expected to be on average £2.10 a year for 2020 to 2025 and £4.20 a year for 2025 to 2030. However, this would be “more than offset by expected bill reductions due to increased efficiency”, also secured through PR19, the paper says.

It is also intended that arrangements for business customers will be on an equivalent basis to the rest of England - they will be served directly by a licensed retailer and will also be able to switch retailer.

The investment that SWW proposes for the IoS would be funded primarily by SWW’s customers through the 2019 price control (PR19), with an “initial significant contribution” from the Duchy of Cornwall on the transfer of its assets.

Since privatisation, Cornwall and Devon has required substantial investment by South West Water to improve its coastal environment. In recognition of these costs, the UK Government has funded an annual reduction in each household bill of SWW’s customers of £50 a year from April 2013 which runs until 31 March 2020. The Government is considering the position for April 2020.

Ofwat is proposing to accept the water company’s application to vary its licence, subject to the relevant legislative framework being put in place and the responses it receives to the consultation.

Deadline to submit responses to the consultation by 9 April 2019 – click here to access the consultation paper