As we reach the closing stages of the current Strategic Review of Charges, and given the wider context in which we are operating (as set out in section 2), the Commission’s Board took time last year to refresh its strategy. 

Underpinning the strategy was an acknowledgement that there is substantial value from moving to more flexible, transparent and collaborative ways of working and making decisions.

Our strategic objectives

Through a series of workshops and discussions, the Board identified the following strategic objectives:

• To support the sector to achieve its long-term vision and the Scottish Ministers’ Objectives for the regulatory control period.
• To challenge Scottish Water to achieve best in class levels of service for its customers and communities.
• To become an international leader in the field of economic regulation. 

These objectives are focused on ensuring that we continue to meet our statutory obligations to current and future customers. They will also ensure that we contribute fully to the delivery of the industry vision (including the ambition to develop Scotland as a Hydro Nation). This is particularly important given the need to achieve net zero emissions by 2040 and to maintain service levels by repairing, refurbishing and replacing the industry’s assets in a timely way. 

Developing a new regulatory approach

Having considered a number of potential approaches to help the sector address the long-term challenges it faces, and to address the limitations of the current regulatory model (including a focus on the short term), we believe that the most appropriate regulatory model going forwards is one based on the principles of EBP and EBR. Over the past 18 months or so we have been working with the Scottish Government, Scottish Water and other industry stakeholders to establish the necessary conditions for EBR and to start the transition. Fully embedding EBR and EBP will take time.

Developing trust and confidence between Scottish Water, the licensed providers, customers and stakeholders lies at the heart of EBR. Its key elements can be summarised as follows:

• Businesses should continually demonstrate evidence of their commitment to fair and ethical behaviour that will support the trust of regulators and enforcers, as well as of all levels of management and employees, customers, suppliers, investors and stakeholders.
• Regulatory systems need to have clear rules or expectations and be based on collaboration if they are to support an open, balanced and altruistic regime, as well as maximising performance, compliance and innovation.
• Where there is unethical behaviour, people expect a proportionate response. This is consistent with strong sanctions for intentional wrongdoing.

We have adopted the principles of EBR before Scottish Water has had the necessary time to implement EBP fully. A key focus for the period covered by this Corporate Plan will be on ensuring that Scottish Water demonstrates to customers, communities and stakeholders how it will transition to EBP through the development and implementation of its Transformation Plan. 

Finally, it is worth noting at this point that implicit within our EBR approach is the commitment, on our part, to act in a way that is fully in line with the principles of EBP.