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ARTICLE 16[2006/2007]4 ULR MARKET LIBERALISATION & REGULATION IN SCOTTISH WATER SERVICES – HENDRY 157

for integrated water use licences. Part 3, the ‘water services’ Following the passage of the 2005 Act, a five-person part-
part, was relatively minor, with enabling powers on reasonable time committee was appointed under the chairmanship of
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costs (see further below) and definitions for sustainable Sir Ian Byatt, with Alan Sutherland moving to the role of Chief
drainage. To have included the technically and legally complex Executive. Ian Byatt was, famously, a ‘low tax low spend’
provisions on competition would have seriously limited the Director General of OFWAT and has fulfilled expectations
parliamentary time available to hear evidence, and then by taking a firm approach to SW’s efficiency targets and
scrutinise, the broad environmental provisions. From a especially to the management of its significant infrastructure
comparative law perspective, water resources and water services investment programme. In its provision for the licensing of
are different reform agendas that should be legislated for new entrants, and to ensure that the new system only affected
separately. This was again a sensible approach. It would be retail services, the 2005 Act made it a criminal offence for
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another three years before the licensing of new entrants was anyone except SW or its agents to introduce water to, or draw
enabled, and in a more limited form. waste water from, the public systems. 64
The other major change in the 2005 Act affected the
The Water Services etc (Scotland) Act 2005 system of customer representation. Under WISA there were
five Water Customer Consultation Panels chaired by the same,
The Water Services etc (Scotland) Act (‘the 2005 Act’) that independent, convenor. After the establishment of SW there
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65
went through Parliament in 2004–05 brought in a very different were statutory requirements to produce a Code of Practice on
regime from that envisaged in 2000, with a much more limited Customer Standards and a Consultation Code ; the Panels
66
67
liberalisation. It did make significant changes to the regulatory had to be consulted and were critical of both drafts. The
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framework, partly to facilitate the new market and partly to Water Services (Scotland) Act 2005 expanded their role
respond to other identified difficulties and problems. These considerably. Although the Act still refers to the Water
included the role of the Commissioner and the system for Customer Consultation Panels, the body is now called
customer representation. Waterwatch for all of its public and business activities, reflecting
Alan Sutherland had not had an easy time acting alone as the model in England before the Water Act 2003 reforms and
Commissioner. He had been criticised by Parliamentary no doubt intended to make it more user-friendly and perhaps,
Committee and by the press; it was unsurprising if he more memorable. Waterwatch now investigates complaints
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welcomed a move to a committee-based approach to regulation, independently and as well as the existing power to make
in line with developing UK practice. Of more general recommendations to the WICS, may also make
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importance was the change in the role of the new Commission, recommendations to the Ministers, SEPA and the Drinking
which would no longer advise Ministers as to prices, with the Water Quality Regulator. It may make representations to SW
Ministers making the final determination. Rather, the WICS about any complaint it investigates, and SW must provide
would now set the prices, with the policy objectives set by information when reasonably requested. There are various
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the Ministers. Final determination in the event of dispute reporting functions, principally in relation to complaints. 69
61
would lie not with the Ministers but with the Competition
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Commission, who have the requisite economic expertise. This
has also been controversial, with some witnesses at committee Licensing of New Entrants
preferring an appeal to the Ministers, with their awareness of The licensing scheme set up under the 2005 Act has been
the Scottish policy context. An appeal to a general competition developed through regulation, policy statements and a series
regulator is common in many jurisdictions, and perhaps we of directions issued by the WIC. In order to establish a level
can trust the Competition Commission to familiarise playing field, SW was required to make a full separation of its
themselves with the Scottish political and social dimension retail services to businesses, by the creation of Scottish Water
within which the WICS will have been expected to act.
Business Stream Ltd, (now known as Business Stream, and
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described in the 2005 Act as ‘the undertaking’ ) as a separate

56 One exception to this is where a single piece of legislation covers
water resource management, bulk supply and rural water services delivered
via irrigation boards or similar rural water institutions. For example, in 63 The 2005 Act, section 1, schedule 1 inserting a new section 1 and
Queensland, the Water Act (Queensland) 2000 No. 34 covers all of this; schedule 1A into the WISA.
but urban supply, which is provided mainly by local governments, is 64 Ibid., sections 4 and 5 respectively.
separately enacted under the Local Government Act (Queensland) 1993 65 WISA, Note 23 above, section 2 and schedule 1. The Commissioner
No. 70. Generally it is preferable to legislate separately for resource was required to have regard to representations etc from the Panels and
management and water services, as has usually been the case in the UK to investigate complaints to the Panel, or give reasons for not doing so;
jurisdictions. whilst the panel had a duty to refer complaints (section 3). Five panels
57 Water Services etc (Scotland) Act 2005, the 2005 Act, Note 4 above. were established under the Water Customer Consultation Panels
58 Scottish Parliament Finance Committee Report No. 2 of 2004 Report (Scotland) Order 2002 SSI 2002/473, and were involved in the
on the Inquiry into Water and the Water Industry. The Report and the Evidence, development of SW’s code of practice, and reporting to MSPs on
as well as the Executive’s response, are available at http:// charging policy and protecting low income users.
www.scotland.gov.uk/Publications/2008/03/11131725/0 last accessed 66 WISA, above, sections 26 to 27, approved by the WIC and
10 June 2008. incorporating the Guaranteed Minimum Standards
59 For example the change within OFWAT from the Director General 67 WISA, section 28, and approved by the Ministers.
to the Water Services Regulation Authority, under the Water Act 2003, 68 WCCP 2003 Comments on Draft Consultation Code, WCCP 2003 Comments
Note 48 above. on Draft Customer Standards Code of Practice available at http://
60 The 2005 Act, section 21, inserting new section 29B into the WISA. www.waterwatchscotland.org/web/site/publications/responses.asp last
61 Ibid., section 21, inserting new section 29D into the WISA. accessed 16 May 2008.
62 Water Services etc (Scotland) Act 2005 (Consequential Provisions 69 The 2005 Act, Note 4 above, section 3, substituting provisions of
and Modifications) Order 2005 SI 2005/3172, a Westminster Order as section 2 and adding new sections 6A to C into WISA.
competition is a reserved matter. 70 Ibid., section 13 ff.

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