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UK water industry claims Scottish system is 'ambiguous and confusing' for property developers

THE UK water industry has accused its Scottish counterpart of "ambiguity and confusion" over its treatment of property developers, the Sunday Herald has learned.

In a report that is set to pave the way for England to follow the Scottish system and introduce competition for offering water and sewerage services to business customers, Scotland has been accused of making things unnecessarily difficult for mixed-use property developers by forcing them to hire different water suppliers for residential properties compared to commercial or industrial ones.

The market blueprint document published several days ago by Open Water, an industry group that includes stakeholders from across the UK industry, instead proposes the English system allow developers to engage a single service provider regardless of the purpose of the different properties on a site.

"We recommend that developers interact with a single retailer for household, non-household and mixed-use developments, which is not the case in Scotland," the document said.

"We believe this will provide a better experience for developers and addresses issues advised to us by Scottish market participants regarding ambiguity and confusion for mixed-use developments."

From 2017, England is preparing to move away from its current system, where only the biggest water users are able to choose between suppliers. At present, all other businesses have to buy their water services from the private monopoly in their region.

This is different from Scotland, where all residential users buy from Scottish Water via their local council while businesses have since 2008 in theory been able to choose from a range of suppliers.

In practice, however, the market is seen as too small and the margins between wholesale and retail rates so narrow that few private players are making an effort to compete. The result has been that 95% of the market is still with Business Stream (BS), the Scottish Water subsidiary that started with the entire market at the point of liberalisation six years ago.

The possibility of being able to offer water services to a company across England and Scotland for the first time is expected to change this. As many as 13 private players including a number of the big English water utilities have obtained licences to retail in Scotland.

According to industry figures, the Scottish system cost £22 million to set up but has saved businesses about £65m.

This has not been enough to tempt the Welsh to follow the English into liberalisation. The Welsh Government and many of its opponents were sceptical about the estimated savings and costs of such a move. They were concerned residential users would end up having to pay more to cover the cuts to wholesale business charges that would make it worth the while of private players entering the market.

In Scotland, domestic water services rates last year rose for the first time in five years. Dan Macdonald, chief executive of developer Macdonald Estates, had not personally encountered the water supplier problem but recognised the potential issue. "If there's an advantage to be dealing with two suppliers then fine, but more often than not there's going to be an advantage in dealing with just one," he said.

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