The Scottish Government

Setting of future prices

The process to determine the level of resources Scottish Water requires is called the Strategic Review of Charges and is run by the Water Industry Commission for Scotland. The Commission's aim is to establish the lowest reasonable overall cost to meet the objectives Ministers want and determine price levels that are consistent with Ministers' principles of charges. The process determines the level of charges customers must pay.

The period for which prices are set is called the regulatory period and the current regulatory period ends in March 2010. The process of setting prices for the next regulatory period, 2010-14, will take approximately 3 years from start to finish.

Stages in the Strategic Review of Charges 2010

All the stakeholders of the Scottish water industry are involved in the Strategic Review of Charges.

Ministers play a key role in setting the framework for the Strategic Review of Charges. They initiate the Review process and determine the length of the next regulatory period. Following consultation with the customers and the regulators and Scottish Water, they also set the service standards (Objectives) Scottish Water is to achieve and the principles by which customers should pay for the services they receive from Scottish Water (Principles of Charges).

The SRC for 2010-14 has the following key stages:-

• Throughout 2007: The Water Industry Commission consults on the methodology to be used, to ensure the process is open and transparent.
• Autumn 2007: Scottish Ministers consult on the principles of charges.
• May 2008: Scottish Water submits a first draft business plan to the Water Industry Commission setting out how much it will cost to deliver Ministers objectives.
• September 2008: Ministers issue guidance on the principles of charging and objectives to be delivered.
• March 2009: Scottish Water submits a second draft business plan to the Water Industry Commission which sets out its final view on the costs of delivery.
• June 2009: The Water Industry Commission provides a scrutiny of the plan in the form of a Draft Determination.
• September 2009: Scottish Water, and anyone else, makes representations on the Draft Determination
• November 2009: The Water Industry Commission produces its final view of what the costs of delivering Ministers' objectives should be. This is called the Final Determination.

• January 2010: Scottish Water can either accept the conclusions of the Final Determination or appeal it to the Competition Commission.

Current Position and next steps

The then Deputy Environment Minister wrote to the Water Industry Commission on December 15 2006 to commission the next Strategic Review of charges. The Minister stated that the next regulatory period should run from 2010 to 2014 and that the service level (or objectives) that Scottish Water should achieve are those which were previously laid out in the Minister's statement of September 2005. This was possible because the planning for the service levels Scottish Water is required to achieve (called Q&S 3) was carried out in 2004 and covered the period 2006 to 2014.

Following this letter, the Water Industry Commission published a consultation on its approach to the Strategic Review on December 20 2006 including a draft timetable. The consultation closed on March 30 2007.

Since then, Ministers have published their draft 2010-14 principles of charging Statment, on May 30 2008, and Scottish Water has submitted its first draft business Plan to the Commission. The Commission's final determination of charges for 2010-14 will be published in November 2009.