Transcript Supply and demand balance Slides - Water Industry Commission for

Workshop
takeholder Workshop 5:
S
Supply & Demand Balance
Strategic Review of Charges 2010-14: 2009 workshops
Stirling, 9th April 2009
Programme for the morning…
Overview of the price review process and progress to
date
The process by which investment objectives are set
Overview of Supply/Demand Balance
Some key questions for stakeholders
Your views
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Strategic Review of Charges 2010-14
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The price review process focuses on delivering
value for money for customers. The process can
be summarised in three high level steps….
1. Ministers set objectives for the industry over the regulatory
control period, and define the principles of charging that
must be followed.
2. Scottish Water proposes how it will deliver these objectives,
and the financing it will need to do so.
3. We scrutinise Scottish Water’s proposals and set final caps
on prices that finance Scottish Water to deliver the
Ministers’ objectives at the lowest overall reasonable cost.
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Strategic Review of Charges 2010-14
Workshop 5: 9th April 2009
At the end of the process, we are able to determine
the following:
1. Limits on the amount Scottish Water can charge household
customers annually between 2010-14.
2. The ‘default tariffs’ that licensed suppliers in the newly
competitive market are required to offer all business and
public sector customers in Scotland.
3. Limits on the wholesale price Scottish Water can charge
retail suppliers of business and public sector customers.
The final outcome is a regulatory contract setting out what
Scottish Water must achieve and the financial parameters in
which it must do so.
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Strategic Review of Charges 2010-14
Workshop 5: 9th April 2009
We’re now approaching the final stages of the price
review...
When?
What?
Why?
30 Jun 2009
Draft determination
published
We publish our draft view on price limits – a
12 week consultation period follows.
23 Sep 2009
Ministers issue
directions
Ministers issue formal directions to Scottish
Water, revising where appropriate in the light
of the draft determination.
30 Nov 2009
Final determination
published
We publish our final view of price limits.
31 Jan 2010
Competition
Commission appeal
deadline
Scottish Water has a two month period to
accept or reject our determination.
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Strategic Review of Charges 2010-14
Workshop 5: 9th April 2009
In their draft statement, Ministers have set Scottish Water
objectives in the following areas...
• Capital maintenance and service standards
• Strategic capacity for new developments
• Drinking water quality and water resources
• Environmental protection
In each case, Ministers have set:
•
‘Priority 1’ objectives (which must be achieved and financed during
2010-14); and
•
‘Priority 2’ objectives (which will only be financed if possible within a
profile of broadly stable bills).
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Strategic Review of Charges 2010-14
Workshop 5: 9th April 2009
Scottish Water has a duty to ensure that it has adequate
provision of water and wastewater services to meet the demands
of customers whilst maintaining quality standards (protecting
the environment)...
... ideally supply must meet demand.
In order to comply Scottish Water must:
• Secure the reliable supply of drinking water to protect public
health;
• Facilitate economic growth;
• Abstract, use water, treat and dispose of wastewater in a
sustainable way; and
• Provide value for money for customers
.
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Strategic Review of Charges 2010-14
Workshop 5: 9th April 2009
Drinking Water Supply/Demand Balance
Non-Household
Resource/Asset Capacity
Growth
Household
Standards
Demand
Adjustments
(Leakage)
Current
Demand &
Forecast
Current
Supply &
Forecast
Gap
(deficit)
intervention
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Strategic Review of Charges 2010-14
Workshop 5: 9th April 2009
Operating
Constraints
Supply
adjustments
(-ve/+ve) i.e.
WFD, Climate
Change,
Imports and
Exports
Wastewater Supply/Demand Balance
Non-Household
Capacity/Compliance
Growth
Household
Standards
Demand
Adjustments
(Infiltration)
Current
Demand &
Forecast
Current
Supply &
Forecast
Gap
(deficit)
intervention
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Strategic Review of Charges 2010-14
Workshop 5: 9th April 2009
Operating
Constraints
Supply
adjustments
(-ve/+ve) i.e.
WFD, Climate
Change,
Imports and
Exports
Some key questions for stakeholders with regard to the 2010-14
investment period.
(1) Defining appropriate standards
• Objectives directly and indirectly relate to demand/supply
e.g.
o Drought Orders no more than once in 40 years
o Restore Security of Supply in deficit zones (Band ‘D’ to ‘B’)
• What impact will the setting of these standards have on
the investment programme?
• What is the level of existing risk and residual risk following
investment?
• How much of this can be managed through operational
measures rather than ‘hard’ (capital intensive) solutions?
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Strategic Review of Charges 2010-14
Workshop 5: 9th April 2009
Some key questions for stakeholders with regard to the 2010-14
investment period.
(2) Understanding Growth
How confident should we be with the growth forecasts?
• GROS predicts uplift in Scottish domestic population between
66,869 and 177,300 (2006-2018)
• Forecast demographic changes within Scotland
• No significant commercial demand
What is the impact of this demand on existing resources,
existing infrastructure and investment?
• There is uncertainty on growth predictions and the assessed
demand deficit because information on asset capacity, for
example, may not be fully understood.
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Strategic Review of Charges 2010-14
Workshop 5: 9th April 2009
Some key questions for stakeholders with regard to the 2010-14
investment period.
(2) Reducing Leakage
What must be done to better understand and reduce water lost
through leakage?
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Strategic Review of Charges 2010-14
Workshop 5: 9th April 2009
Some key questions for stakeholders with regard to the 2010-14
investment period.
(3) Reducing Infiltration
What are the appropriate activities to target and reduce the
effects of surface/groundwater entering sewer systems?
• Historically infiltration is not well understood; it is difficult to
measure and locate. It can exacerbate sewer surcharging,
flooding and pollution. It can create wastewater treatment
difficulties.
• The inability to target infiltration can lead to potentially premature
or over-scoped investment.
• Our view is that this needs to be treated in a similar way to
leakage – integral to decision-making and systematically
addressed before committing to ‘supply-side’ solutions
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Strategic Review of Charges 2010-14
Workshop 5: 9th April 2009
Some key questions for stakeholders with regard to the 2010-14
investment period.
(4) Other Constraints such as climate change
How could climate change, for example, influence the
Supply/Demand balance?
• Predictions are uncertain but shown to change water availability.
On the wastewater side higher intensity rainfall, for example, may
affect the performance of sewer systems.
• Impacts need to be better understood
• We shall continue to support sustainable approaches that
mitigate against these effects
What other Supply/Demand constraints should we be
considering?
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Strategic Review of Charges 2010-14
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We seek ….
• Your views
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Strategic Review of Charges 2010-14
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For more information on the price review please go
to:
www.watercommission.co.uk/view_future_prices.aspx
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Strategic Review of Charges 2010-14
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