Minutes of the 165th Board meeting of the Water Industry Commission for Scotland on 14 August 2025
Present:
Ronnie Hinds (Interim Chair)
Robin McGill (Member, Chair of ARC) - Items 1-3
Morag Sheppard (Interim Member, Chair of OCAG)
David Satti, Chief Executive
In attendance:
Colin McNaughton, Director - Item 4
Head of HR - Item 3.1 and 3.2
James Simpson, Scottish Government - Items 1-3 (Observer)
Amber Hamilton, Azets (Observer)
Chair’s opening remarks
The Chair opened the 165th meeting of the WICS Board and welcomed Members.
The Chair also welcomed James Simpson, on behalf of the Scottish Government Sponsorship team, and Amber Hamilton Internal Audit participating as observers.
1. Apologies for absence
There were no apologies.
2. Minutes of the last meeting and regular updates
2.1 Declaration of conflicts of interest in relation to the agenda
It was noted that Morag Sheppard is a Member of the Environmental Standards Scotland Board but that no conflicts of interest are present in relation to the agenda for this meeting.
2.2 Minutes of the 164th meeting
The Board approved the minutes of the 164th Board meeting and the May and June 2025 update meetings.
Members noted that the Parliamentary debate on the Public Audit Committee’s report on WICS is scheduled to take place on 4th September.
2.3 Summary of action points
The Board reviewed the summary of actions and agreed that material updates would be addressed under other agenda items.
The CEO will prepare a paper outlining the broad cost savings arising from the revised organisational structure (A302).
Members agreed to review the timing of the proposed risk strategy session at the September meeting, recognising that a November 2025 date may be premature given the anticipated start of new Commission Members (A184, A260).
2.4 Members update
Members discussed recent press coverage and heightened interest in the water sector following publication of the Independent Water Commission’s (IWC) review of the industry in England and Wales.
Morag Sheppard provided an update on a cyber resilience event attended in her role as Cyber Champion and recommended a Commission-level cyber incident response exercise. Timing will be confirmed following the appointment of new Members.
The CEO reported increased involvement in planning for the IWA World Water Congress and Regulators Forum in Glasgow next year. Members agreed this will be a valuable opportunity to showcase WICS’ regulatory approach and the Scottish model internationally.
The Chair confirmed the appointment of three new permanent Members, with induction planned for early September. Recruitment for a permanent Chair will commence in late August, with a recommendation to the Cabinet Secretary expected in November 2025.
3. Finance and Corporate Services
3.1 HR matters
The Board agreed to delay the Finance and Corporate Services Directorate role review until after the Director has taken up post. Recruitment will proceed for priority vacancies, with proposals submitted together for Scottish Government approval.
The CEO will prepare a paper for the September meeting outlining the total costs and savings from the revised structure and how these are being redeployed (A302).
The Chair thanked colleagues for their work noting that progress made to date has been a significant step in reshaping the organisation, using resources more effectively and building internal capacity.
3.2 HR policies
The Board approved the HR policies, standard contract of employment, and the removal of non-contractual allowances. It was noted that policies have been reviewed by the Leadership Team, Organisational Change Assurance Group (OCAG), and the Audit and Risk Committee (ARC), and informed by staff engagement.
The CEO reported that while hybrid working changes raised some concerns, policies were broadly welcomed and benchmarked against other organisations. The Head of HR confirmed training for line managers to support implementation.
Members discussed pay progression and performance, noting that the Scottish Government approves the overall pay policy, banding structure and renumeration quantum but not individual progression decisions. Directors would define the level of progression within their directorate.
The Board agreed in principle to establish a non-executive led People Committee to provide oversight of HR policies, employee engagement (including surveys), and pay progression (A325). Details on the committee’s remit, protocols and resourcing will be developed in the coming months.
3.3 Organisational change update
The Board approved minor amendments to OCAG’s terms of reference and received an update on organisational change activities.
The CEO highlighted the risk associated with securing office accommodation beyond early 2026 without a lease extension, noting Scottish Government approval is contingent on achieving lower rent and sharing space with other public bodies.
The Board requested that Scottish Government take a broader view of WICS’ circumstances, recognising limited alternative options and the need to balance cost, operational continuity, and staff considerations.
The Board confirmed its preference for a short-term lease extension that allows for appropriate time and resource to consider longer-term accommodation options. Members also stressed the importance of securing a lease extension to support the wider organisational change programme underway.
The CEO confirmed that next steps include progressing a rental valuation to inform extension negotiations and continuing discussions with other public bodies regarding potential space sharing.
3.4 Annual work plan progress update
The Board received an update on annual work plan delivery. The review of Business Stream’s governance code will now conclude by December 2025 to allow for expanded scope and further discussion with stakeholders. Consultation with Scottish Water and Business Stream is expected in September.
3.5 Finance update and financial results
The Board noted the update on financial results. The CEO highlighted that remuneration is above budget due to a non-recurring item of expenditure, but overall outturn is expected to be below budget due to current vacancies. He also noted below budget expenditure on training and conferences as a function of staff focus on the Strategic Review of Charges and vacancies and lower spend in consultancy as more work is being undertaken in-house.
The CEO highlighted that external audit is commencing initial preparatory work, with a targeted start date of the formal review in September.
Scottish Government confirmed that the delay to WICS’ levy payment is due to a procedural issue and that the direction will be issued to Scottish Water as soon as possible. The process will be clarified going forward to prevent similar delays.
The Board noted approval panel expenditure and cumulative recruitment spend.
3.6 ARC update
The ARC Chair provided an overview of the risk register and the Committee’s recent work. He highlighted a valuable session with the Data Protection Officer and commended the quality of training in this space. Members noted that information governance colleagues are an important resource available to the Board.
The ARC Members raised the possibility of appointing an external Audit and Risk Committee Member with public finance expertise and the introduction of quarterly assurance statements.
The Board discussed the performance metrics related to sewer flooding and discharges related to risk 4. The CEO confirmed that the methodology requests additional information from Scottish Water to support oversight in this area.
Members agreed whistleblowing policies should be revised for clarity and supported by training for staff. The Board agreed the concept of a non-executive whistleblowing champion but paused implementation for further consideration as part of the proposed People Committee.
The Board approved the policy on policy management.
The Chair thanked ARC for its assurance to the Board and noted significant progress on risk management.
3.7 Communications strategy
The Board approved the communications strategy, including the proposed resourcing and delivery model.
Members emphasised that communication and public reporting are important regulatory tools and should be fully integrated into WICS’ regulatory functions. Members also endorsed a greater focus on public engagement, including collaboration with stakeholders to identify shared opportunities and learning.
The Board requested a short-term communications plan to build understanding of WICS’ role ahead of key publications such as the annual report and draft and final determinations (A324).
4. Pricing
4.1 Feedback on Scottish Water's business plan
The Director of Performance and Reporting introduced the proposed feedback on Scottish Water’s draft business plan submission, noting that a subset of Commission Members participated in a dedicated session that looked at the key components of our feedback in more detail.
Members discussed specific aspects of the draft business plan, including the efficient scale of investment, sewer flooding outcomes, asset health measures, and the impact of the Daldowie PFI on operating expenditure. It was noted that Scottish Water has responded to requirements set out in methodology, but that supporting evidence needs to be strengthened across a range of key areas ahead of final business plan submission.
The CEO confirmed that engagement will follow to allow Scottish Water to clarify any points raised in the feedback. A joint Board session will also be scheduled prior to Scottish Water’s final business plan submission (A326).
Members noted that further engagement will be required between WICS, the quality regulators, Scottish Water and Scottish Government to determine investment priorities and that WICS has agreed to take a leading role in facilitating those discussions. A key area of focus will be on understanding how proposed investment meets Scottish Ministers’ objectives and statutory requirements.
The Board approved feedback on Scottish Water’s draft business plan and fully endorsed the publication of this feedback, highlighting WICS’ role as an independent economic regulator and the importance of transparency.
4.2 Cunliffe review
Members discussed the key findings of the final Independent Water Commission’s review of the water industry in England and Wales, and the potential learnings for Scotland. Particularly, Members discussed the focus on local and regional planning, performance monitoring and the recommendation for a combined regulator.
The Board agreed to set up a sub-committee to consider the recommendations made in the IWC report. It was noted that an incoming Commission Member may be best placed to lead this committee (A298).
The Chair asked colleagues to begin preparing a terms of reference and scope of work for this group.
5. Markets
5.1 Clear Business Water remediation
The Board noted an update on Clear Business Water’s (CBW) remediation and the decision to close the case.
Members noted that CBW has provided the information requested and that there is no longer evidence of a systemic issue. The introduction of the Code of Practice has also led to improvement, with blocked transfers largely eliminated and voluntary compensation offered.
It was agreed that this case provides an example of the effective application of the Ethical Business Regulation in practice.
Members discussed the potential value of seeking information from CBW and other retailers on the operation and targets of their customer retention teams, noting this could be explored through the Market Health Check.
5.2 MWES licence application
The Board reviewed the MWS licence application and agreed it is minded to grant water and sewerage licences, subject to any representations received. Authority was delegated to the CEO to make final decisions on granting the licences and issuing any related notices, directions, waivers or consents.
Members noted that the applicant intends to operate across England and Scotland. Markets colleagues confirmed that cross-subsidy issues were reviewed during the application process, with no concerns identified. MWES has also committed to adopting the Code of Practice.
Markets colleagues highlighted that the application underwent two rounds of review and queries, with the applicant demonstrating sufficient knowledge, expertise and financial standing to meet licence requirements. Any representations will be assessed for their material impact on the evidence provided and presented to the Board in an information paper.
Meeting close
The Chair closed the meeting by thanking participants for their valuable contributions.