Water UK, the body which represents the UK water and wastewater companies at national and EU level, has published its response to the Scottish Government consultation on Scottish Water: 'Building a Hydro Nation.' The consultation included proposals for Scottish Water to develop its commercial activities, to take on new functions and addressed how such developments might be financed.

Water UK's comments make interesting reading in the context of the upcoming Water White Paper which is due to be published later this year.

In response to the question whether Scottish Water should be under an obligation to seek to develop commercially attractive opportunities, Water UK said that its members had had considerable experience in investing in commercial activities outside the core water business - some of which had been very successful, while others might be judged less so.

In general, the companies would have found it unhelpful to be compelled to develop non-core businesses because it would have constrained their ability to make decisions which reflect appropriate risk/reward balance at any particular time.

Water UK said it would be unhelpful –and unnecessarily restrictive – to put Scottish Water under an obligation to make investments which might be inappropriate. More generally, its members’ experience in investing in non-core activities underlined the importance of ensuring that new activities – particularly ones which are complex or involve unfamiliar characteristics – are not allowed to unreasonably distract management focus from the core activities of the business.

On the issue of whether Scottish Water and Local Authorities should be given powers to establish Partnership Boards to address the issues of surface water flooding and implement solutions, Water UK said:

“In England and Wales the topic of management and ownership of flood risk management assets is proving difficult to address. Water UK’s members have considered the opportunities of water companies to take a bigger role in managing flood risk and flood assets. Some have expressed a keen interest in doing so and see a business benefit of taking holistic approach to water management.”

With regard to whether Scottish Water should be given a formal role to support Local Authorities in relation to flood defence projects, Water UK said the use of Surface Water Management Plans provided an opportunity for all stakeholders involved to contribute specific skills, expertise and resources. Water companies had considerable expertise in hydraulic modelling, data management and interpretation and would be able to support Local Authorities in ensuring that urban flood defence projects are integrated with their own assets.

In a separate response to the Department of Energy and Climate Change consultation on 2011 Electricity Market Reform, Water UK said that industry members were concerned that there is already a multitude of instruments designed to incentivise and stimulate investment in low/zero carbon technology in support of both generation and demand-side measures i.e. Renewable Obligation, FIT, CCA, EUETS, Climate Change Levy and the CRCEES Scheme.

Water UK said the “plethora of initiatives” designed to promote reduced carbon emissions had already created a degree of confusion potentially leading to uncertainty and lower levels of investment. The addition of carbon support pricing, further changes in FiTs and the EPS might also add to the uncertainty and to a perception of increased regulatory risk.

Currently the measures added considerable cost to the electricity supply chain and so to customers' bills. However, Water UK said that while it was concerned that the further proposals would serve to add complexity, risk and cost, the reforms also presented an opportunity to simplify some measures in a diverse mix of initiatives.

One such simplification of the CRCEES would be to treat renewably generated electricity (i.e. with REGO status) as zero carbon regardless of any other subsidies – which would send a stronger signal to renewable electricity developers and would help the water industry bring forward marginal projects that might not otherwise be constructed. It concluded that while the water industry could see the potential long term benefits of the proposals, it remained concerned about the short term impacts.