14 November 2003
Water customers in Scotland were warned this week that they face another increase in their bills unless Scottish Water makes faster progress to boost efficiency.
Water industry commissioner Alan Sutherland said customers were paying about £80 a year too much. He claimed in a report that domestic bills in 2003/04 included 'significant costs' not incurred by customers of the leading water companies in England and Wales.
Sutherland said the future success of Scottish Water would depend on a 'significant change in the culture within the organisation'. He believed that current progress would not be enough to meet targets and would leave a shortfall in performance of about £47m in 2005/06.
His warning comes as the Scottish Parliament announced that it is to hold an inquiry into the industry, which has been the subject of increasing controversy over soaring bills and the rising cost of capital investment.
Scottish Water, which remains in the public sector, was set up last year as the successor to three separate authorities.
Business leaders have voiced their concern over the effects of a plan to standardise charges across Scotland. It resulted in 'winners and losers' with some businesses experiencing rises of up to 500%.
In a submission to the committee, the business leaders organisation, CBI in Scotland, said there had been no consultation before the 2003/04 charging scheme was introduced and that many firms had complained of substantially higher bills.
Two economists, Jim and Margaret Cuthbert, who run Edinburgh-based Analytical Consulting, claimed in a paper that an accounting error had led to businesses being overcharged.
They argue that a review of charges carried out by Sutherland used borrowing figures much lower than those later published by the Executive.
The figures suggested that the maximum the industry could borrow would be cut from £229m in 2001/02 to £67.8m in 2005/06.
However, the Executive intends to make about £200m available in 2005/06. The economists claim the charges set as a result of the review were potentially too high 'by a significant amount'.
Scottish Water, which recently announced a capital investment plan of £1.8bn, told the finance committee that it inherited a debt of just over £2bn which increased by £51.3m over the past year.
It said it took over water mains and sewers that were in much poorer condition than those in England and Wales.
PFnov2003
