Changes will follow a highly critical report

Holyrood's finance committee called for an improved regulatory structure in a document published on Friday.

It was critical of Scottish Water and its watchdog, the Water Commissioner, and is looking to replace the post with a new team structure.

The executive proposes a small board of experts to act as a new regulator.

The convenor of the finance committee, Labour MSP Des McNulty, told BBC Radio Scotland, there had been a "lack of consultation", particularly to business users, over changes taking place in the water industry.

'Clearer accountability'

Mr McNulty also said there had been a "lack of accountability in the system".

He said: "Changes that are coming in are needed, we need to get investment into the industry, but some of the decisions have not been well explained.

"What we want to see is a more systematic system of consultation, clearer accountability and for consumers to understand what is going on and be able to make their voices heard in any decision-making process."

The changes will provide for greater continuity and consistency in economic regulation Ross Finnie Environment minister

Environment Minister Ross Finnie has outlined several proposed changes following the publication of the finance committee's report.

He said: "Improving the efficiency of Scottish Water is the only sustainable means of raising standards and keeping charges for customers as low as possible.

"We agree with the committee that robust, transparent and economic regulation has a crucial role to play and we recognise that this requires a number of changes to the current regulatory regime."

Changes include transferring the functions of the Water Industry Commissioner from an individual to a small board of non-executive experts and appointing a chief executive.

The new look watchdog will also be given powers to set limits on Scottish Water's charges at the lowest efficient cost to customers.

Mr Finnie said: "The changes will provide for greater continuity and consistency in economic regulation.

"They make a clear distinction between ministers' responsibility for setting Scottish Water's objectives and the economic regulator's duty to ensure that the objectives are delivered as efficiently as possible."

The Federation of Small Businesses also welcomed the recommendations, saying it was glad that the adverse impact on small businesses had been acknowledged.

It said it was pleased the Water Commisioners role would be perfomed by a committee which it believed would be more accountable

A new look water watchdog is to be formed

However, Scottish National Party MSPs Fergus Ewing and Jim Mather, along with Senior Citizens' Unity Party MSP John Swinburne, criticised the report.

They claimed their colleagues had not accurately reflected the evidence presented to the committee.

Their minority report pointed to "serious mistakes" in the management of the financial control of the industry, concluding that charges for Scottish Water users had been set too high, probably by at least �300m over the period 2002-06.

In a joint statement, they said: "This has meant that water users in Scotland have suffered needless financial hardship, and that Scottish industry and its competitiveness are being damaged.

"In addition, the high level of charges, combined with the under spend on the capital investment programme, has meant that Scottish Water has been operating with a financial cushion, which is not consistent with forcing them to achieve the efficiency gains which are required of them."

Scottish Water said it welcomed the main committee report, and the executive's plans to change the regulatory framework.

A spokesman said: "These recommendations come at a time that there is increasing evidence that Scottish Water is working.