The Water Industry Commission for Scotland has today published a report on Scottish Water’s performance over the five year regulatory period 2010-15, together with its 2014-15 Performance Report for the final year of the 2010-15 regulatory period.
The report assesses Scottish Water’s actual performance across key performance areas, including customer service, operating costs, the investment programme, financial outperformance and levels of leakage, and finds that significant benefits to both customers and the environment have been successfully delivered.
The report also highlights some areas of concern which the Commission said it would be monitoring closely, particularly regarding ongoing slippage in some specific elements of the investment programme.
The report states:
“While we are pleased to note that there has been outperformance in some programme areas, we have also noted ongoing slippage throughout the period in other programme elements, including in the important areas of improvements to water treatment works and wastewater discharges. While the number of projects involved is relatively small, this has resulted in delays to the delivery of customer and environmental benefits.”
WICS said Scottish Water had acknowledged the concerns raised by both the Commission and the environmental and drinking water quality regulators about the delays, and had provided assurance that the remaining projects would be delivered as soon as possible.
According to the report, performance in this area will continue to be monitored closely. The Commission is also working with Scottish Water and the Outputs Monitoring Group to further enhance the output monitoring mechanisms for the 2015-21 period, as well as ensure that output delivery progress remains transparent to stakeholders and is based on a realistic assessment of delivery capabilities.
Scottish Water has consistently met and outperformed its targets
Commenting on Scottish Water’s Overall Performance Assessment (OPA)targets, for which the maximum achievable OPA score is 418 points, the report says Scottish Water has consistently met and outperformed its targets; the score of 400 in 2014-15 was 20 points higher than the target for that year. Only one company in England and Wales has ever exceeded 400 points year-on-year. The best comparable score ever achieved by a company is 409, which was reported by Wessex Water in 2008-09.
Scottish Water must “continue to pursue opportunities to generate additional cash from within the business”
Over the period 2010-15 Scottish Water has invested around £2.5 billion in maintaining and improving the industry’s assets - around £300 million less than that allowed in the final determination. WICS said a “broadly equivalent portion of investment expenditure” has been deferred to the 2015-21 regulatory period to deliver the remaining outputs.
Looking forward, for the 2015-21 Strategic Review of Charges WICS regulated operating expenditure and capital expenditure together as total cash expenditure. The report says that regulation based on total cash expenditure means that some of the bias in favour of capital-based solutions that resulted from benchmarking of operating expenditure has been removed and that as a result the water company “should be neutral to the full range of options available.”
WICS says the new approach allows Scottish Water, where agreed with the Customer Forum, to “cover the costs associated with the occasional failure of a novel solution, while allowing for innovative solutions to be implemented where appropriate. “
Looking ahead, the report says it is important that Scottish Water “exploits these changes to the regulatory framework and continues to seek out and pursue opportunities to generate additional cash from within the business.”
Alan Sutherland, Chief Executive of WICS, said:
“At the start of the 2010-15 regulatory period we set Scottish Water a number of challenging and significant targets. Now that the period has drawn to a close, we are able to look back to the past five years as a very positive chapter in the development of the water industry in Scotland.”
“Scottish Water’s performance is encouraging and suggests that the clear incentive framework that is in place to regulate the public sector water industry has served the interests of customers well. However, this does not mean that we can be complacent, and we must continue to ensure that the industry is properly equipped to meet the challenges that lie ahead.”
Click here to download WICS 2010-15 Performance Report
Click here to download WICS 2014-15 Performance Report
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