Water for sale? Market liberalisation and public sector regulation in Scottish water services

In Scotland, water services are provided for almost the whole population by Scottish Water, a vertically integrated public corporation established in 2002. Scottish Water replaced three regional authorities, which in turn had taken over service provision following local government reform in the 1990s – Scotland did not follow the English model of divestiture of the industry. Scottish Water is however subject to a form of economic regulation very similar to that in England and Wales. In April of this year, the Scottish Government and the economic regulator opened up the monopoly market by allowing licensed suppliers to compete with Scottish Water, in the delivery of retail services, to the non-household market. The move has been described as being of global significance; it is consistent with the new options for competition being developed in England, and with the way competition has operated in other service industries globally. This article will examine these reforms, in the context of the history and development of Scottish Water; it will assess whether the claims made are justified, and whether the Scottish model – both the system of economic regulation, and the new licensing regime - can be of interest to other countries, given that the emphasis across the globe is on delivering water services efficiently and effectively and within the public sector.