Scottish Water Flotation
10 Jun 2006
A letter from Tom Miers published in The Scotsman
Sir Ian Byatt, the chairman of the Water Industry Comission for Scotland, is right to call for the Scottish Executive to float Scottish Water. This will give it access to the capital markets which will in turn put pressure on the utility to provide decent returns by improving efficiency.
However, he is even more right to propose that a separate company retails water to business customers from 2008. The lesson from the reform of the gas and electricity markets is that the full benefits of liberalisation only come through with competition on the retail and production sides.
This means that the monopoly carrier must be separated from these functions, otherwise potential market entrants will be deterred by the fact that the incumbent retailer (or producer) also controls the pipes, and so has an unfair advantage.
Competition is harder in water than in gas or electricity because the “natural monopoly” element - transport through the pipes - is more dominant. Also, the network is broken up, so producers can’t sell into the whole grid.
However, this should not hinder the Scottish Executive from attempting to maximise competitition where it can to the benefit of business - and eventually householder customers.