At the last Strategic Review of Charges, we set out the reasons why a new approach to regulation was necessary, one that would support the sector to address the challenges it faces by enabling long-term thinking. In coming to our decisions we had taken account of the wider debate about how to drive companies to ‘do the right thing’ for their customers and communities. Our review included in particular the conceptual frameworks of ‘Ethical Business Practice’ and ‘Ethical Business Regulation’.
An important element of our new regulatory approach is that there should be much greater levels of candour in all interactions between Scottish Water, us as regulator, and other sector stakeholders. This renewed candour has the potential to strengthen regulation by allowing much greater levels of understanding – of the current position, the work that needs to be done, and how much this might cost.
But what do we mean by candour? And how might this play out in what has traditionally been more of an adversarial relationship (that of regulated and regulator)?
Well first of all we as regulator have to allow Scottish Water to be open about the extent of the challenges it faces, any gaps in understanding, mistakes and failures of the past, what now needs to be done, and, ultimately, how much this might cost. Genuine discussions of this nature can only take place within an environment based on openness and transparency. It is this more constructive culture that we are setting out to create with Scottish Water and other stakeholders.
Another important element of our approach is that Scottish Water should take ownership of its role in society: to deliver water and sewerage services efficiently and in a way that will allow the industry to achieve net zero emissions (both operationally and on an embodied basis). This entails Scottish Water taking ownership of its strategy, investment plans and its relationship with customers. In particular, by Scottish Water following through its commitment to “take all decisions as though customers were in the room”.
Underpinning this level of candour there will need to be high-quality analysis and evidence on Scottish Water’s part. This combination – candour + analysis – will determine the confidence that customers, communities and all stakeholders can have that Scottish Water is ‘doing the right thing’ (both for current and future customers). And in doing so that it is contributing to the journey towards the sector vision.
Candour + analysis = confidence
| Candour: Scottish Water will be balanced in what it says and what it does. Stakeholders have to be candid in their interactions with Scottish Water. There should be no surprises. | Analysis: Scottish Water needs to evidence the challenges and opportunities it faces. How has it prioritised? How will it deliver? How has it taken into account the views of customers and communities? |
This level of transformation will not be easy, and we are working now with Scottish Water as it transitions to a more collaborative and engaged way of working. It will take time for stakeholder confidence to develop. It will also take time and courage to create the environment and culture that enables Scottish Water to report ‘warts and all’ performance.
For our part, we are also making changes in the way we operate – looking beyond some of the more traditional regulatory approaches that, while successful to date in keeping bills low, have arguably prevented a truly long-term perspective. So for example the way we measure and comment on efficiency will have to be different – although those customers who pay will still want reassurance that their money is being spent as efficiently as possible.
So a time of great change for us all. But a small price to pay for us as a sector to be able to say we took the steps necessary so that future generations of customers will enjoy the same high-quality services as we enjoy today.