Minutes of the 168th Board meeting of the Water Industry Commission for Scotland on 11 December 2025

Present:

Ronnie Hinds (Interim Chair)
Morag Sheppard (Member, Chair of OCAG) 
Jo Aston (Member)
Heather Reid (Member)
David Satti, Chief Executive  

Apologies: Robin McGill (Member)

In attendance:    

Colin McNaughton, Director of Pricing – Item 4 
Mark Cassidy, Director of Markets - Item 5
Anthony Daye, Director of Finance and Corporate Services - Item 3
Shona Coan, Head of Finance - Item 3.2 to 3.4
Valerie Lindsay, Head of HR - Item 3.5 to 3.6
Stephanie Capaldi, Secretary to the Commission 
Jo Blewett, Scottish Government– Items 1-3 (Observer)

Chair’s opening remarks

The Chair opened the 168th meeting of the WICS Board.

1.    Apologies for absence

There were apologies from Robin McGill. 

2.    Minutes of the last meeting and regular updates     

2.1    Declaration of conflicts of interest in relation to the agenda

Morag Sheppard is a Member of the Environmental Standards Scotland Board and confirmed there is no conflict in relation to the agenda. 

2.2    Minutes of the 167th meeting

The Board approved the minutes of the 167th Board meeting.

2.3    Summary of action points

The Board reviewed the summary of actions with material updates covered under other agenda items. 

Action 368: The CEO confirmed that a paper will be brought to the January meeting setting out how the investment group will operate going forward. The group will support WICS and industry stakeholders in monitoring Scottish Water’s investment delivery throughout the regulatory period. 

The paper will set out the remit, format, and governance of the investment group, how it will support WICS’ monitoring of investment delivery, and how this aligns with regular performance reporting. It will also provide an overview of all key industry groups and forums, and WICS’ representation on them.

2.4    Members Update

Permanent Chair appointment 

Jo Blewett advised that the decision on the permanent Chair remains under consideration by the Cabinet Secretary. Options are under review, and the Scottish Government will provide an update as soon as possible.

Cabinet Secretary engagement 

The Chair and CEO reported on their recent meeting with the Cabinet Secretary, which provided assurance regarding organisational changes within WICS and considered key regulatory matters. Discussion included the deliverability of Scottish Water’s significantly enhanced investment programme, and the importance of ensuring that investment decisions fully reflect wider societal benefits. An example discussed was the need for robust option appraisal for projects such as the West Central Bioresource. 

The meeting also addressed the Cunliffe review recommendations and the need for improved coordination across government and regulatory bodies. The Board agreed that establishing a regular pattern of engagement with the Cabinet Secretary would be beneficial.

WICS-Scottish Water joint board meeting

The Board reflected on the recent joint meeting with the Scottish Water Board, noting the strong emphasis placed on the role of Scottish Water’s Board in providing the assurance WICS expects to accompany the final business plan submission. 

The Board discussed the level of evidence and assurance that should accompany Scottish Water’s submission, including the need for clear, well-supported appraisal of major investment programmes and evidence of deliverability. Members agreed that it is important to understand how the Scottish Water Board has tested and challenged the robustness of the Business Plan, supported by appropriate governance arrangements.

It was noted that a new Scottish Water Board sub-group has been established to oversee development of the business plan. The Board considered whether further engagement with this group may be helpful. 

The Board reiterated that Scottish Water’s Final Business Plan should include explicit Board-level assurance, supported by evidence across key areas such as investment appraisal, application of efficiencies, operational performance, technology and innovation, and compliance with environmental requirements. Members also highlighted the value of benchmarking in assessing Scottish Water’s performance. 

The Board agreed that the joint session was valuable and strengthened shared understanding of assurance expectations. Members expressed interest in continuing such engagement on a periodic basis, including opportunities for site visits.

Recent developments 

The Board noted that a potential contingent liability relating to pensionable remuneration may feature in Scottish Water’s 2025-26 financial accounts. 

3.    Finance and Corporate Services

3.1   Finance update

The Board reviewed WICS’ financial results noting that expenditure remains under budget largely due to vacancies. The CEO confirmed that approval is now in place to recruit five priority vacant positions. 

The Board formally note two items of expenditure approved by correspondence relating to temporary engineering and project management resource. The Chair confirmed that the expenditure approval process is working effectively, including obtaining timely Scottish Government approval where required.

Members welcomed acknowledgement from Audit Scotland in its audit report that WICS’ expenditure will increase when vacancies are filled and the organisation is fully resourced. 

3.2   Audit report and annual report and accounts

The Board approved the annual report and accounts for Accountable Officer signature.  

Members noted the significant milestone of achieving unmodified accounts, recognising its importance in building trust and a strong foundation for future work. The Board welcomed Audit Scotland’s intention to write to the Public Audit Committee to formally close the audit.

Members made the following observations: 

• Positive feedback in Audit Scotland’s report was welcomed, particularly regarding staff professionalism and responsiveness to change.
• Key areas of ongoing focus include embedding risk management, governance of change, key performance measures, reserves planning, and further development of organisational culture.
• Minor clarifications were noted regarding updates to the 2021–27 corporate plan, references to the Board’s decision to pause international consultancy work, and a request for the Chair’s statement to be translated into Gaelic; these will be addressed in accompanying communications rather than amending the report.

The Board noted that the report and accounts will be laid in Parliament on 19 December, with supporting coverage in Holyrood Magazine, and that further engagement with MSPs and stakeholders is planned in January. Members recognised the report as providing a clear and honest narrative on the organisation’s reform activity and a strong basis for WICS’ future work. The Chair offered the Board’s support in relation to future communications and engagement activities.

3.3   ARC update

Members noted the update on the Audit and Risk Committee’s work, including the introduction of a controllability assessment for risks.

Heather Reid queried whether ARC undertakes deep dives on specific topics. It was confirmed that areas for deep dives are determined from assurance maps, with flexibility to adjust the internal audit plans to address emerging issues.

The Board approved the Data Protection and Breach Reporting policies, noting the quality of work undertaken to address recommendations from the DPO audit. It was agreed that the guidance outlining roles, responsibilities, and the breach reporting process would be circulated to colleagues alongside the policies.

3.4   Budgeting work (financial sustainability)

The Board discussed a paper on budgeting and financial sustainability, building on the previous decision regarding an appropriate level of cash reserves for WICS. Members reviewed projected financials for the next corporate planning period, considering the impact on cash balances and levies. 

The Board noted WICS’ commitment to efficiency and responsible use of resources, consistent with the standards expected of those it regulates 

Members made the following observations: 

• The Board discussed opportunities for engagement with licensed providers (LPs) and likely preference for the mechanism and timing of refund. 
• The use of reserves and strategic shift from consultancy to in-house resource were considered. Members noted that the agreed reserve policy provides for flexibility.  
• Staff cost projections reflect sensible assumptions for staff pay and progression; executive travel and subsistence are reviewed transparently and within policy, with trends monitored to provide additional assurance. 

The Board approved the return of surplus to Scottish Water and Licensed Providers, subject to further engagement to determine the timing and mechanism of reimbursement.

Members thanked finance colleagues for their robust analysis and the oversight provided by the Organisational Change Assurance Group (OCAG).

The Chair highlighted the need to provide a clear rationale for any proposed increase in expenditure, including how staffing and the nature of work support organisational priorities. The Director of Finance and Corporate Services confirmed that workforce planning will inform this work, ensuring a structured approach aligned with organisational and regulatory objectives.

3.5   People Committee ToR

The Board approved the People Committee Terms of Reference and the closure of OCAG, subject to a Board Member acting as Deputy Chair and replacing references to ‘firm’ with ‘organisation’. 

The committee will review remuneration and reward at an aggregate level, support workforce planning and organisational culture, and its role will be communicated to staff to provide assurance that policies and processes are applied consistently. The Board welcomed the committee as an important step in supporting the change programme and maintaining focus on people.

3.6   Managing underperformance policy

The Board approved the managing underperformance policy.

3.7   Organisational change update

The Board noted that the work of the Organisational Change Assurance Group (OCAG) is now complete, with a lessons learned exercise planned to formally close the project. The CEO confirmed that the recruitment of the Director of Performance and Reporting is complete, ensuring that WICS will enter the new financial year with a full leadership team.

Members discussed risks associated with staff recruitment and noted ongoing engagement with the Scottish Government to clarify arrangements for approval of staff appointments. The Board thanked OCAG and colleagues for their support in delivering organisational change.

Members also received a verbal update on a recent employee survey, with a full report to be provided at the January meeting.

3.8 Annual work plan progress update

The Board noted the update on annual work plan delivery, including the status of amber items and areas completed since the previous meeting. 

The CEO advised that the format of the work plan progress update report is being reviewed to ensure it does not duplicate other reporting.

4.    Pricing

4.1    SRC27 project update

The Director of Pricing confirmed that SRC27 is progressing as planned and provided an overview of the project’s reporting arrangements. The Board noted that two key vacancies are contributing to resourcing being behind forecast, with recruitment for these roles planned for January. The Director of Pricing confirmed that the necessary consultancy contracts are being put in place to support delivery, with key work on the efficient size of the investment programme now complete. An update on this work will be provided at the January meeting. Members noted that the critical path and project plan are still being finalised and will be presented at the next Board meeting.

The Board discussed risks related to WICS’ role, and that of other stakeholders, in providing assurance on Scottish Water’s delivery of statutory duties and legislative requirements. The CEO confirmed that it is for Scottish Water to provide robust technical assurance as part of its final business plan submission. Members suggested preparing a table identifying Scottish Water’s key duties, the expected assurance, and the role of stakeholders, to help clarify responsibilities and mitigate risk.

The Director of Pricing provided an update on the task and finish group established to take forward Scottish Water’s delivery plan. This includes defining the governance process, the content of the plan, the change control arrangements, and how assurance will be provided on Scottish Water’s progress delivering investment outputs. The Chair highlighted the importance of ensuring that intended investment benefits are realised and highlighted the important role of SEPA and DWQR in verifying and monitoring the investment programme.

The Board noted the update and confirmed it was satisfied with the reporting format and the value of the project management approach being applied.

4.2 Mutual Investment Model (MIM)

The Director of Pricing provided an overview of the Mutual Investment Model, including examples of its use in other sectors. Members noted that the Scottish Government has now confirmed its final policy position, requiring Scottish Water to consider a MIM for the West Central Bioresource project and seeking assurance from WICS.

The Board noted that WICS has written to Scottish Water requesting further information to support this assurance and has engaged engineering expertise to review the project. The CEO confirmed that WICS will scrutinise the project closely, given the potential material impact of this project on future charges. Members highlighted the importance of understanding the risk, complexity and timescale implications associated with a MIM option.

The Board noted the update and requested further updates as the assurance work progresses.

4.3 Customer research contingency plan

The Board noted the proposed contingency plan and associated risks and agreed to proceed while maintaining close oversight and increased engagement as the customer research programme progresses. 

5. Markets

5.1 Business Stream Governance Code

The Director of Markets presented the options available for progressing work on the Business Stream Governance Code. 

The Board emphasised the importance of returning to first principles to ensure the Governance Code is robust and future-proof. Members noted that while this may introduce some delay, taking the time now would help manage longer-term risks more effectively. The CEO confirmed that consultation responses to date indicate no significant concerns from market participants. 

The Board agreed that option 3 provides sufficient reassurance on delay and risk and supported progressing on this basis. 

5.2 Market Health Check update

The Director of Markets provided an update on the Market Health Check (MHC), confirming that it is progressing as planned and noting the positive engagement with Licensed Providers to date.

The Board discussed options for publishing the outcomes of the MHC. The Director of Markets highlighted that this first iteration offers an opportunity to establish a clear baseline, support constructive engagement with market participants, and encourage continuous improvement. He also confirmed that formal investigation routes remain available should any findings merit further scrutiny.

The Board noted the update and agreed with the proposed approach for sharing MHC outcomes in a way that supports constructive engagement at this early stage.

Meeting close

The Chair closed the meeting by thanking colleagues for their valuable contributions. He reflected on the significant progress made by WICS over the last two years. He noted that, given the delay in appointing a permanent Chair, it is not yet clear whether this would be his final Board meeting. However, he confirmed that he would leave assured that the organisation is in a stronger position and well placed for the future.

Board Members thanked the Chair for his leadership of WICS and expressed their appreciation for his commitment, support and stewardship during his tenure thus far.