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 Stakeholder Workshop 5: Supply & Demand Balance

 Stakeholder Workshop 5: Supply & Demand Balance. Workshop. Strategic Review of Charges 2010-14: 2009 workshops Stirling, 9 th April 2009. Programme for the morning…. Overview of the price review process and progress to date The process by which investment objectives are set

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 Stakeholder Workshop 5: Supply & Demand Balance

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  1. Stakeholder Workshop 5: Supply & Demand Balance Workshop Strategic Review of Charges 2010-14: 2009 workshops Stirling, 9th April 2009

  2. Programme for the morning… • Overview of the price review process and progress to date • The process by which investment objectives are set • Overview of Supply/Demand Balance • Some key questions for stakeholders • Your views Strategic Review of Charges 2010-14

  3. The price review process focuses on delivering value for money for customers. The process can be summarised in three high level steps…. • Ministers set objectives for the industry over the regulatory control period, and define the principles of charging that must be followed. • Scottish Water proposes how it will deliver these objectives, and the financing it will need to do so. • We scrutinise Scottish Water’s proposals and set final caps on prices that finance Scottish Water to deliver the Ministers’ objectives at the lowest overall reasonable cost. Strategic Review of Charges 2010-14

  4. At the end of the process, we are able to determine the following: • Limits on the amount Scottish Water can charge household customers annually between 2010-14. • The ‘default tariffs’ that licensed suppliers in the newly competitive market are required to offer all business and public sector customers in Scotland. • Limits on the wholesale price Scottish Water can charge retail suppliers of business and public sector customers. • The final outcome is a regulatory contract setting out what Scottish Water must achieve and the financial parameters in which it must do so. Strategic Review of Charges 2010-14

  5. We’re now approaching the final stages of the price review... Strategic Review of Charges 2010-14

  6. In their draft statement, Ministers have set Scottish Water objectives in the following areas... • Capital maintenance and service standards • Strategic capacity for new developments • Drinking water quality and water resources • Environmental protection • In each case, Ministers have set: • ‘Priority 1’ objectives (which must be achieved and financed during 2010-14); and • ‘Priority 2’ objectives (which will only be financed if possible within a profile of broadly stable bills). Strategic Review of Charges 2010-14

  7. Scottish Water has a duty to ensure that it has adequate provision of water and wastewater services to meet the demands of customers whilst maintaining quality standards (protecting the environment)...... ideally supply must meet demand. • In order to comply Scottish Water must: • Secure the reliable supply of drinking water to protect public health; • Facilitate economic growth; • Abstract, use water, treat and dispose of wastewater in a sustainable way; and • Provide value for money for customers • . Strategic Review of Charges 2010-14

  8. Drinking Water Supply/Demand Balance Non-Household Resource/Asset Capacity Growth Operating Constraints Household Standards Supply adjustments (-ve/+ve) i.e. WFD, Climate Change, Imports and Exports Current Demand & Forecast Current Supply & Forecast Demand Adjustments (Leakage) Gap (deficit) intervention Strategic Review of Charges 2010-14

  9. Wastewater Supply/Demand Balance Non-Household Capacity/Compliance Growth Operating Constraints Household Standards Supply adjustments (-ve/+ve) i.e. WFD, Climate Change, Imports and Exports Current Demand & Forecast Current Supply & Forecast Demand Adjustments (Infiltration) Gap (deficit) intervention Strategic Review of Charges 2010-14

  10. Some key questions for stakeholders with regard to the 2010-14 investment period.(1) Defining appropriate standards • Objectives directly and indirectly relate to demand/supply e.g. • Drought Orders no more than once in 40 years • Restore Security of Supply in deficit zones (Band ‘D’ to ‘B’) • What impact will the setting of these standards have on the investment programme? • What is the level of existing risk and residual risk following investment? • How much of this can be managed through operational measures rather than ‘hard’ (capital intensive) solutions? Strategic Review of Charges 2010-14

  11. Some key questions for stakeholders with regard to the 2010-14 investment period.(2) Understanding Growth • How confident should we be with the growth forecasts? • GROS predicts uplift in Scottish domestic population between 66,869 and 177,300 (2006-2018) • Forecast demographic changes within Scotland • No significant commercial demand • What is the impact of this demand on existing resources, existing infrastructure and investment? • There is uncertainty on growth predictions and the assessed demand deficit because information on asset capacity, for example, may not be fully understood. Strategic Review of Charges 2010-14

  12. Some key questions for stakeholders with regard to the 2010-14 investment period.(2) Reducing Leakage • What must be done to better understand and reduce water lost through leakage? Strategic Review of Charges 2010-14

  13. Some key questions for stakeholders with regard to the 2010-14 investment period.(3) Reducing Infiltration • What are the appropriate activities to target and reduce the effects of surface/groundwater entering sewer systems? • Historically infiltration is not well understood; it is difficult to measure and locate. It can exacerbate sewer surcharging, flooding and pollution. It can create wastewater treatment difficulties. • The inability to target infiltration can lead to potentially premature or over-scoped investment. • Our view is that this needs to be treated in a similar way to leakage – integral to decision-making and systematically addressed before committing to ‘supply-side’ solutions Strategic Review of Charges 2010-14

  14. Some key questions for stakeholders with regard to the 2010-14 investment period.(4) Other Constraints such as climate change • How could climate change, for example, influence the Supply/Demand balance? • Predictions are uncertain but shown to change water availability. On the wastewater side higher intensity rainfall, for example, may affect the performance of sewer systems. • Impacts need to be better understood • We shall continue to support sustainable approaches that mitigate against these effects • What other Supply/Demand constraints should we be considering? Strategic Review of Charges 2010-14

  15. We seek …. • Your views Strategic Review of Charges 2010-14

  16. For more information on the price review please go to: • www.watercommission.co.uk/view_future_prices.aspx Strategic Review of Charges 2010-14

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