Minutes of the 172nd Board meeting of the Water Industry Commission for Scotland on 14 May 2026

Present:    
Morag Sheppard (Acting Chair) 
Jo Aston (Member, Chair of Future Regulation Group) 
Robin McGill (Member, Chair of ARC)
David Satti, Chief Executive

In attendance:     
Colin McNaughton, Director of Pricing - Item 4 and 5
Danny Taylor, Experienced Analyst – Item 4 
Snezha Hristova-McKinlay , Experienced Analyst – Item 4 
Stephanie Capaldi, Head of Corporate Office & Comms and Secretary to Commission
Shona Coan, Head of Finance Procurement & Risk – Item 3.1 and 3.2
Tom Hall, Director of Performance and Reporting – Item 5
James Simpson, Scottish Government (Observer) Items 1 to 3
Sam Ghibaldan, CEO Consumer Scotland – Item 6
Gail Walker, Head of Water Policy, Consumer Scotland –
Item 6
Shane Dorney, Water Policy Manager, Consumer Scotland - Item 6

Apologies:
Heather Reid (Member, Chair of People Committee)

Chair’s opening remarks

The Acting Chair opened the 172nd meeting of the Commission Board. The Chair welcomed James Simpson, Scottish Government participating in items 1-3 as an observer. 

1.    Apologies for absence

There were apologies from Heather Reid.

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 171st meeting

The Board approved the minutes of the 171st Board meeting.

2.3    Summary of action points

The Commission noted the summary of actions with material updates covered elsewhere on the agenda.   Members noted that action A410 has now been completed.

The CEO agreed to take forward a new action to provide a paper outlining the total costs associated with employment law matters (A414).
 

2.4    Members Update

Jo Aston provided an update on the Future Regulation Group, noting good progress on short-term actions, most of which are being taken forward through the Draft Determination. The Group will meet again in July, following publication of the Draft Determination, to identify longer-term actions for inclusion in the Final Determination.

The Chair noted that the process to appoint a permanent Chair is on track.

2.5    CEO report

The CEO provided an overview of key engagements and priorities during the period, including discussions with the Drinking Water Quality Regulator, the Permanent Secretary and the Director General for Net Zero, and participation in a recent future regulation conference.

Members noted that the CEO report will be shared monthly, in addition to its inclusion in Commission Board papers.

The CEO updated Members on a recent FOI request relating to employment matters and legal costs and agreed to provide a further update alongside an information paper (A414).

Members noted the successful recruitment of a permanent Engineering Manager and the importance of this role in strengthening scrutiny of Scottish Water’s investment programme.

Members noted a delay to the review of Business Stream’s Governance Code, primarily due to the election and the time required to brief a new Minister. Revised timings are now expected to extend to around December, subject to external factors. Work is ongoing with Scottish Water and Business Stream to mitigate any interim risks.
 

3.    Finance and Corporate Services

3.1   FCS dashboard reporting

The Commission noted an update on key performance metrics for the Finance and Corporate Services Directorate and welcomed plans to extend dashboard reporting to other Directorates, with Markets being next.

The CEO highlighted that the Directorate is operating under resource pressure during the busy SRC27 period, with recruitment for two roles underway.
The Commission welcomed a 50% rent reduction achieved through recent negotiations. High desk utilisation was noted, with further consideration being given to optimising office space in the short term.

Members noted the recent cyber resilience exercise and that a full report will be presented to the next Audit and Risk Committee. Cyber assurance relating to the payroll supplier remains outstanding and is being progressed.

Members also provided feedback on the presentation of budget monitoring information and on the Scottish Government’s governance hub training system noting usability issues.  

3.2   Moray House update

The Commission noted an information paper providing an update on progress with the Moray House lease extension, arrangements to share space with other public bodies, and work underway to consider future office accommodation options.

Members noted that, subsequent to the paper, an updated VAT position for one sharing body’s property management charge will slightly increase costs to WICS. Further VAT advice is being sought in relation to the MoTU agreement.

Members observed that standard public sector benchmarks on cost per square foot may be challenging for WICS to achieve, given the organisation’s size and evolving use of space, with greater emphasis on collaborative and meeting areas. It was agreed that WICS should clearly define its needs and space requirements.

The Commission noted ongoing engagement with the Scottish Government’s Property Division on future accommodation needs. A full project plan is being developed, led by the Director of Finance and Corporate Services and managed as a formal project.

The Commission congratulated the team on their work and thanked them for the positive progress achieved to date. 

3.3   Commission Board self-effectiveness review

The Commission Board discussed the self effectiveness review report and agreed the actions, which will now be assigned to owners.

Members emphasised the importance of timely progress in appointing a permanent Chair to support effective succession planning.

The Commission also considered the distinction between a ‘Commission’ and a ‘non executive Board’, and the implications for WICS’ governance framework and scheme of delegation. The Acting Chair suggested a facilitated session to support further development of the governance framework, focusing on the key differences identified and how these should inform and strengthen both the framework and the appointment of Commission Board Members.

Members reiterated their support for attending events and conferences to represent WICS and strengthen stakeholder engagement. Robin McGill agreed to re-establish regular participation in the Audit and Risk Committee Group. 
 

4.    Pricing

4.1   Board workshop reflections

The Acting Chair and CEO reflected on the draft determination focused Board workshop held on 12 May. Members noted that the session was very helpful in informing the Commission Board’s final decision on the Draft Determination in June. Members requested a further workshop in May, with a specific focus on capital maintenance expenditure.

4.2 SRC27 dashboard

The Commission noted that the Strategic Review of Charges is progressing to plan, with key milestones met and delivery on track.

Members discussed the highest rated risks. It was noted that risk level may reduce following the election, although some uncertainty remains.

The timing of the Ministerial Objectives (MOs) and Principles of Charging (PoCs), including confirmation of borrowing, remains a key risk. The level of borrowing is yet to be confirmed through the Scottish Government’s final MOs and PoCs. Elements of the investment programme have been explicitly linked to borrowing assumptions to ensure the implications are clear if funding does not materialise. Members emphasised the need for clarity on borrowing ahead of the Final Determination.

The Commission also highlighted the need for greater clarity on the Scottish Government’s timescales, governance and approval processes for MOs and PoCs.

The Director of Pricing highlighted challenges in recruiting a Head of Strategy. Members noted plans to review the role specification and continue testing the market to secure the right candidate.
 

4.3 Customer research

The Board discussed the headline findings from the latest phase of customer research on whether Scottish Water’s Final Business Plan commands customer support.

Members noted the collaborative approach taken to commission this research for SRC27 with Scottish Water and Consumer Scotland.

The Commission Board welcomed the findings, which indicate broad customer acceptance of the overall direction of the business plan and proposed charges.

The Board also agreed key areas of focus for engagement with Consumer Scotland at agenda item 6: 

• Customer research methodology and robustness – including cohort selection, and representativeness.
• Interpretation of findings – how to assess stated preferences versus willingness to pay in practice, and how Consumer Scotland will position the research in informing decisions. 
• Implications for the Draft Determination – which findings should materially influence the Commission’s approach. 
• Priority service issues for customers – particularly internal sewer flooding and associated performance expectations. 
• Transparency and communication – views on how performance and investment information is communicated to customers, and the role of WICS in strengthening trust and understanding. 
• Affordability and customer protections – including views on inflation impact and potential safeguards for customers.
   

4.4 Conditional charge cap

The Commission discussed a paper on the use of conditional charge caps, including the proposed conditions governing Scottish Water’s access to the full charge cap and the approach to monitoring through the annual charges scheme.  It was noted that this topic was also covered in detail during the 12 May Board workshop.

The Director of Pricing introduced the paper and outlined the supporting legal advice. The Board noted that WICS’ legal advisors will review the Draft Determination to ensure consistency and was satisfied that the advice is comprehensive.

It was noted that the conditional charge cap is designed to mitigate the risk of delayed investment or investment not delivered. The importance of proactive monitoring of the investment programme and use of regulatory levers was emphasised.

The Commission also considered the treatment of pension and energy costs, noting these may be influenced by factors outside management control. It was agreed that the Draft Determination should provide greater clarity on what is and is not included within the scope of the conditional charge cap (with particular reference to pension and energy costs) (A415). 

 

5. Performance and reporting

5.1 Water Industry Investment Group (WIIG) Terms of Reference

The Director of Performance and Reporting provided an overview of the Terms of Reference (ToR) for the Water Industry Investment Group (WIIG).

Commission Members discussed the ToR and agreed that the current version does not yet reflect the intended future state. It should be revised to align with WIIG’s purpose of monitoring delivery of the SRC27 investment programme, with Scottish Water’s annual delivery plan as a key input.

Members emphasised the need to strengthen the ToR, including clearer roles and responsibilities, with appropriate seniority of representation to support effective stakeholder participation.

The Commission approved the ToR on a transitional basis, subject to the following amendments (A416):

• Clearer definition of roles, responsibilities, and seniority within the current ToR. 
• Inclusion of an outline of the revised ToR for the SRC27 period, with a clear timetable for its development. 

6. Stakeholder session: Consumer Scotland

The Commission received a presentation from Consumer Scotland on the programme of customer research undertaken on Scottish Water’s business plan.
 
It was noted that research found support for, and acceptance of, Scottish Water’s Final Business Plan, which was broadly considered to be balanced and sensible by the participant household and non-household consumers.

Key points of discussion included:

• Overall support for Scottish Water’s Final Business Plan, which was viewed by participants as balanced and addressing key challenges. 
• Value of the deliberative research approach in strengthening customer insight and engagement in SRC27. 
• Importance of effective regulatory oversight, with a clear expectation that Scottish Water should be held to account for delivery and outcomes. 
• Need to improve transparency and communication, particularly in making performance and investment information more accessible and meaningful to customers. 
• Priority service concerns, including the impacts of climate change and flooding, particularly internal and external sewer flooding. 
• Affordability pressures, especially for low income households. 
• Long term funding considerations, including the impact of borrowing assumptions on charges and the importance of protecting customers from adverse impacts. 
• Opportunities to strengthen engagement, including improved community engagement on capital investment.

The Commission thanked Consumer Scotland for their contribution and looked forward to their continued engagement and input to the Draft Determination consultation.

Meeting close

The Chair closed the meeting by thanking colleagues for their valuable contributions.