No waves on water merger

l ROLE: Chairman, West of

Scotland Water

l AGE: 57

l Education: Possil and Albert

secondary schools and

Glasgow University

l FAMILY: Married, one son

and one daughter

l EARLIER CAREER:

Lakehead University,

Ontario; Reading

University; Strathclyde

University, where he is

professor emeritus of local

and public management

l HOBBIES: Rambling,

theatre, cinema, opera

and avoiding gardening

IT could have been portrayed as the first state-owned monopoly to be created on these islands since British Steel in 1967 or British Shipbuilders 10 years later. But last week's announcement by Sam Galbraith, the

environment minister, that Scotland's three regional water authorities are to be merged into one, Scottish Water, triggered scant ideological backlash.

No Tory spokesman proposed privatising Scotland's water. News of the organisational shake-up, first broken by The Herald last Wednesday, was greeted by MSPs of all persuas-ions on the environment

committee with equanimity.

Since the overwhelmingly anti-privatisation Strathclyde Region referendum in advance of the last reorganisation of

the water industry in 1996, poli-ticians already know the limits of what is possible on this issue.

The Galbraith decision was driven by a clear political imperative, to reduce the growing

gulf between domestic water charges in the North of Scotland Water Authority area and those in the east and west authority areas.

Charges in three are growing at a double digit rate to fund re-investment in crumbling infra-structure. But left as it was, consumers in the north would have been paying more than 60% more on average on their water bills in a few years time. Some people even questioned the north authority's long-term solvency.

That could have opened the door to an SNP grievance

campaign and put Highland

Liberal Democrat seats at risk. The existing electoral arithmetic and the ruling Executive partnership at Holyrood would have been undermined.

So action to even out domestic water charges across Scotland became inevitable.

But it comes at a time when the publicly-owned Scottish water industry is having to respond to growing competitive pressures, from large business customers who see water and waste water services as yet another cost to be managed downwards, and from the implications of the 1998

Competition Act, which will eventually allow private sector suppliers from outwith Scotland to cherry-pick the most lucrative business here, using the Scottish industry's infrastructure.

How does the advent of a merged Scottish Water Authority affect all that? On the day Sam Galbraith made his announcement I talked to Professor Alan Alexander, the man who chairs West of Scotland Water (WoSW).

Alexander, a recently retired academic who specialised in public sector management,

welcomes the merger as the best way forward. ''All of this arises, in my view, from the fact that nobody thought through what the problems would be of having a private sector industry and a public sector industry sitting side by side on this little island,'' he argues.

''There is a respectable intell-ectual case for privatisation. No doubt about it. And that in

an unspoken way defines the challenge we face. What we have to show, and we've got to 2006 to show it, is that we can, in a

public sector etting, deliver water and waste water services as effectively and, crucially, as

efficiently as the private sector can. On the numbers we have not done that so far.''

On price, compared with some of the privatised English water companies, the efficiency gap is somewhere between 25% and 35%. ''You can't sustain a public sector model by asking the

public to pay that much more per litre of water,'' says Alexander bluntly.

In England, water companies draw 70% of their revenue from domestic customers and only 30% from the commercial sector. Here the balance is nearer 50:50. With big industrial customers able to tap their own supplies and co-invest in their own waste water treatment plants, and with competitive supply under the competition legislation just around the corner, that pattern too looks unsustainable.

Alan Sutherland,Scotland's water commissioner, has already set the three authorities challenging efficiency targets - in the west authority's case, taking #66m (some 18%) out of operating expenditure by 2006. So there's no escape, whatever the future structure of the industry.

Those in charge now, like Alexander, know their English peers have gone further in automating plant operations in the field, using telemetry and other techniques commonplace in other privatised sectors, like electricity supply. They also know there are a long way from optimising new investment which has been going into

Scotland's water infrastructure.

At the last reorganisation, in 1996, Alexander's authority was given control of one of the two main water sources in Scotland, Loch Katrine. But the East authority was given control of the other, Loch Lomond, and has recently completed major investment in a new treatment works at Balmore on the northern fringes of Glasgow.

The WoSW treatment plant for Katrine water lies just a few miles away, at Milngavie. It lacks a membrane plant and is, arguably, the least modern asset of its kind in the west's port-folio. Were a five-mile pipeline to be put in connecting the two, a proposal under consideration, the efficient use of these assets could be optimised.

''It will simply be much more effective to do all that within a single authority,'' says Alexander. But he is only too aware that the pursuit of efficiency affects

people's jobs. Already there is speculation that meeting targets set by the commissioner and clawing annual water charge increases back nearer inflation could cost up to 2500 of the 6000 jobs in the Scottish industry. The trade unions are growing defens-ive.

The advent of a single authority, which the Executive will try to put in place by the summer of next year, offers plenty of scope to rationalise through a single headquarters and streamlined back office functions.

And, adds Alexander, a single authority will have the critical mass to create a new domestic billing system and take the job out of the hands of Scotland's local authorities.

Change on that scale will be necessary. The organisational transition will have to be

sensitively managed to ensure that the temporary paralysis that accompanied the previous move from local auhority control is not repeated.

Building a more efficient, more competitive, unified state-owned water company is a huge and delicate challenge.

I asked Alan Alexander if he wanted to play a part in it. ''Yes I do,'' he replied. ''If I didn't I'd feel it was leaving the job only half done.''