Scotland’s water, Scottish Water, climate change and the south east

(Updated 15.00) On Tuesday (19th June) the Scottish Government announced that the UK government ‘is willing to discuss how Scotland’s plentiful water resources may help the continuing pressure on water supplies in South East England’.

Alex Neil, Cabinet Secretary for Infrastructure and Capital Investment, recently wrote to the UK Government, suggesting that Scotland might be ale to contribute to the water supply in distressed areas south of the  border.

This would be a long term initiative undertaken only if it could be commercial and practically viable.

Westminster response was that it was prepared to enter exploratory talks with Scottish Government officials.

The issue is that climate change is seeing the south of England and the populous south east short of water while Scotland has plenty. Scottish Government thinking is that Scotland;’s water is a resource with commercial potential and that the south of the UK mainland is a ready market.

This is, of course the farthest distance from Scotland so the planning and infrastructural costs would be complex and substantial.

Sections of the national media were quickly saying it would never happen. This is nonsense.

The real danger is that it may not happen in time to have a ready supply to the south east when it is urgently needed. Short term governments encourage short term planning. The genre of media-obsessed political lightweights leading the UK, from Blair to Cameron, are not of the substance to lay down major infrastructural foundations to secure the future.

The prospect of the south east seriously starved of water, as is a real likelihood, is genuinely frightening. In a single island, a networked water supply has always been wise but short term governments…

Alex Neil was speaking at the Making Scotland a Hydro Nation Conference in Edinburgh when he said that exploratory talks on the issue were in the frame.

At the same time he restated the importance of maintaining Scottish Water as a publicly owned corporation.

Yet it was not long after the SNP came to power in 2007 as a minority administration that it was later shown that the First minister, Alex Salmond and Cabinet Secretary for Finance, John Swinney, had, as early as 2008, held talks on a possible sale of Scottish water to Australia’s Macquarie Bank, owner of Thames Water.

It was later revealed that in 2009 into early 2010, the Scottish Futures Trust was considering alternative models for future ownership of Scottish Water and was actively reviewing its possible sale.

Never believe what politicians say. Watch what they do.

The political reality is that any attempt to sell our water resources, of all things and in the changing climatic circumstances we are experiencing, would be a fuse for widespread activism only fools would light.

Water and land are, rightly, visceral issues.

Scottish Water – how is it governed and what does it own?

We have been working our way through the Water Industry (Scotland) Act 2002 in order to try to discover exactly what is the statutory position of Scottish Water – and asking the daft questions you have to ask to start to get clarity on what is a matter of the highest importance.

Scottish Water was born in 2002 as a statutory corporation formed by merging West of Scotland Water Authority, East of Scotland Water Authority and North of Scotland Water Authority under the Water Industry (Scotland) Act 2002, an Act of the Scottish Parliament.

We are as yet unclear as to its specific corporate structure. Statutory corporations vary considerably in the status of direct government authority.

We were interested in the nature of the authority with which the Cabinet Secretary for Infrastructure engaged in opening discussions with Westminster.

We were also primarily concerned as to the legal ownership of water sources like reservoirs and could find no clear statement on this anywhere.

Asking daft questions produced the following information from the government information service who were provided it by Scottish Water:

“Scottish Water only uses and stores less than two per cent of the water which falls from the sky. In Scotland we have 153 reservoirs and 55 lochs with total loch and reservoir storage of 600,986 MI.

‘In Argyll and Bute there are 20 reservoirs and six loch sources with total loch and reservoir storage of 10,549 MI.’

The first paragraph raises the immediate question of the low rate of rainfall storage. However, semantically, we could not be sure what the second sentence in that paragraph meant.

‘Scottish Water only uses and stores…’ is unequivocal. On the other hand, ‘In Scotland we have 153 reservoirs…’ is equivocal. It might mean:

• Scotland has 153 reservoirs… which does not have to mean that they belong to Scottish Water.
• Or that ‘we’ is not ‘Scotland’ but ‘Scottish Water’, in which case the sentence suggests that Scottish Water not only owns these but has water resources outside Scotland. This is interesting because it implies extra-territorial state acquisitions.

Why are we interested in these matters?

We’re interested in them in order to try to establish the level of vulnerability the Scottish people have to Scottish government administrations whose political interests may not always align with the needs and instincts for  self-preservation of the people.

The current administration did indeed consider selling off Scottish Water and some of its corporate limbs may still be doing so.

We need to know what exactly might be sold off and, in the absence of easily discoverable clarity, we considered what the corporate arrangements for Scottish Water might be.

Take, as an example,  the structures by which the Scottish Government owns and manages lifeline ferry services. European legislation attempting to enforce the break up of unitary service and the ‘unbundling’ of the ferry routes brought a corporate structure which separated the infrastructure from the service.

With the west coast services, CMAL owns the infrastructure – the ships, ports and harbours etc. It leases the ships and charges for use of the ports and harbours. Caledonian MacBrayne is a service provider employing staff to run and support its services and leasing its ships from CMA.

We wondered if reservoirs were in the same corporate ownership stuacture as ships – and we wonder if there may be a value in such an arrangement.

Is Scottish Water sellable as a company only if it comes with Scotland’s water resources and reserves? Not necessarily.

At the moment, it appears that Scottish water do own the reservoirs and lochs; and are in the same position as BT in the telecoms industry. Other water and sewage service suppliers operating in Scotland and competing with Scottish Water in the market must buy water and infrastructural access from Scottish Water and then sell on to customers.

Competing water suppliers trading in Scotland

These include:

• Aimera – which was granted water and sewerage services licences in April 2009.
• Business Stream – a sSottish Water servich which became an independent subsidiary company in November 2006. It serve around 100,000 customers and over 130,000 properties spread over Scotland and ranging from small independent businesses such as shops, hairdressers and guest houses to large industrial, commercial and agricultural companies.
• Osprey Water – part of the Anglian Water Group, offering specialised water and wastewater services to leading industrial businesses.They say ‘We have existing contracts with key industrial clients in Scotland and are looking to offer further water and wastewater services to non-domestic customers.’
• Severn Trent Services – part of the Severn Trent Group who say: ‘By obtaining a license in Scotland it is our intention to provide a choice for customers, who may have sites in Scotland, Wales or England, to purchase their water services from a single national recognised supplier.’

The ‘what ifs?’

Might one of these suppliers, theoretically, offer to supply the south east of England at some point? Without listing the range of arrangements and sources of infrastructural development necessary to make this possible, the point is that if the political will and the commercial opportunity are there, this ks not impossible.

This could see Scotland’s water sold south without the involvement of the Scottish Government as they currently envisage it; and with the profits going to a competitor of the state owned company.

In the climatic context where profound need for water is experienced in the heavily populated south east of England, there are other water resources in Scotland which are not owned by the Scottish Government; but by private sector profit driven companies.

Might Scottish and Southern Energy (SSE), for example, find it more profitable to sell the water from its hydro dams rather than the power they are capable of producing?

There are a number of complex issues embedded in the very notion of a thirsty south east and a lush Scotland that need to be thought through in good time.

What is certain is that if they are not, the profit driver of forces beyond Scotland’s control will shape what happens in their own interests – which are  not necessarily Scotland’s.

15.00 update

In relation to our uncertainty as to the specific authority with which the Cabinet Secretary for Infrastructure had spoken to the UK Government on Scottish Water supplying the south east, a spokesman for Scottish Water says: ‘Scottish Water has a close relationship with our owners and we are always happy to discuss any options with other experts and share relevant experience.’