Letter to the Chair from The Water Industry
Commission for Scotland
I watched the Environment, Food and Rural Affairs
Select Committee's second evidence session with Water UK and was
rather surprised to hear their response to your question on whether
the Scottish model is working.
We recently briefed Water UK on the positive
impact introducing water competition to all non-household customers
has had in Scotland. At the IEA Water 2010 conference I repeated
these benefits and explained that the entire Scottish public sector
water business was about to be out to tender.
I attach a draft report prepared by Grant Thornton
on the costs and benefits of retail competition in Scotland. But
to summarise, some 45,000 businesses and public sector organisations
have already benefited through lower charges and/or an improvement
in customer service. Business Stream's recent annual report states
that the company has offered over £9 million of discounts
to the market and has helped customers save over £10 million
in water consumption costs.
Business Stream has also begun to trial new
tariffs and gain share models in order to support businesses and
public sector organisations during the current economic climate.
This represents a new and growing activity, which has increased
its revenue by 12% in the last year and will likely contribute
to significantly lower carbon emissions.
Another benefit that comes with the introduction
of water competition is that service is tailored to the needs
of the individual organisation that is being supplied. There is
now a much greater incentive for the retailer to provide water
efficiency and effluent reduction advice to the customer that
was ever the case under the vertically integrated model. Billing
for water is now based on both service and consumption and the
focus of competition is therefore not just on price but on offering
more tailored value adding services such as water use comparisons
across a single site or across a chain of outlets.
We can see no reason, nor can our colleagues
at Ofwat, as to why the benefits realised in Scotland cannot be
achieved south of the Border.
You will have received the Water Industry Commission
for Scotland's submission I sent to the Committee. If I can be
of any further assistance to the Committee then please do not
hesitate to contact me.
Alan Sutherland
Chief Executive
29 October 2010
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