Board minutes Dec 2022

Approved Minutes of 148th Commission Board meeting December 2022

Published •

Minutes of the 148th Board meeting of the Water Industry Commission for Scotland 

on 9 December 2022

Present:

Donald MacRae (Chair) 

Alan Sutherland (Chief Executive) Agenda Items 1 to 3 

Jo Armstrong (Member)

Robin McGill (Member)

Ann Allen (Member) Agenda Items 2.3 to 3

                 

In attendance:    

Michelle Ashford (Chief Operating Officer)

Colin McNaughton (Director of Analysis) Agenda Item 3 only

David Satti (Director of Strategy and Governance)

Andrea Mancini (Director of Price Review) Agenda Items 1 to 3

Chair’s opening remarks

The Chair opened the 148th meeting of the WICS Board and welcomed Board members. 

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

No Members declared any conflict of interest in relation to the agenda. 

2.2    Minutes of the 147th meeting

The Board approved the minutes of the 147th meeting and noted the November update meeting note.  

2.3    Summary of action points

The Board noted the summary of actions. The following points were arising:

  • Action 1:  This action is ongoing.  IPPG will be covered in more detail in later in the agenda. 
  • Action 2:   This action will remain, and a further update given in the New Year. The Board noted the next likely step will be for WICS to begin the process of reinstating the Governance Code.  The office will continue to make its views clear in relation to ensuring Business Stream can demonstrate the appropriate level of financial strength. 
  • Action 3:  These actions are now complete and closed.
  • Action 5:  This action is ongoing, and a date will be set in 2023. 
2.4    Non-Executive Members Update

The Chair asked Members to provide an update on any particularly relevant areas of interest to WICS. 

Jo Armstrong provided an update on her involvement with the Office for the Internal Market. She signalled there is a peat sector report due to be published as well as an annual report which will be laid before both the UK Parliament and Scottish Parliament.  There will likely be a requirement for joint working across the United Kingdom on these issues and we should maintain a watching brief identifying any synergies with water industry issues.

Ann Allen signalled that there is a growing concern in the construction sector about the next 12 months and beyond. There is traditionally a lag between the changes in the economy and construction industry response but the impact is now beginning to be felt. 

The Chair attended an event hosted by the Royal Society of Edinburgh on net zero.  A report has been published on Scotland’s progress towards achieving the net-zero target.  This report contains a level of criticism about the level and pace of Scotland’s progress to date.

3.    Strategic discussion

 3.1    Annual Report and Accounts

 The Director of Strategy and Governance presented the Annual Report and Accounts for 2021-22.  The Board:

  • Approved the Annual Report;
  • Approved the Annual Accounts for the financial year 31 March 2022;
  • Recommended that the Chief Executive as Accountable Officer sign the accounts; and
  • Asked that we proceed to lay the completed annual report and accounts before the Scottish Parliament. 

The Chair thanked staff, particularly the Head of Finance and her team, as well as the Audit and Risk Committee (ARC) for their work on the 2021-22 Annual Report and Accounts. 

3.2    Performance Report

The Director of Analysis gave an overview of the content and context of WICS’ draft report on Scottish Water’s performance for 2021-22.  He explained that each year, we set out our view of Scottish Water’s performance. This year, our reporting format is different given our move towards a regulatory framework based on EBR.  The report outlines our view on Scottish Water’s progress transforming its business to meet the expectations set out in our 2021-27 Final Determination.  Ultimately, the report recognises that Scottish Water is taking steps to transform but progress is slower than expected in three key areas. 



The Board discussed and the following observations were made: 

  • The Board agreed with the assessment of Scottish Water’s performance but noted a need to be clearer about our key messages and our intended audience. Members agreed that adding a short executive summary to the beginning of this report would help to ensure it can be understood by all. 
  • The Board requested that the office develop a revised version of the performance report with the addition of an executive summary. The Chair asked that this is then circulated with the Board for review.
  • A January 2023 publication date was agreed to ensure there is sufficient time to prepare key messages and to allow for any further briefing of stakeholders on the content of the report. 
  • The Chief Executive agreed to look at developing an executive summary but made clear our commentary must remain appropriately robust and this will be difficult to achieve in a short form summary.
 

3.3    SRC timeline and approach

The Director of Strategy and Governance provided an update on the office’s current thinking on the timeline for the Strategic Review of Charges 2027 (SRC).  He explained that there are a series of external factors that may impact our traditional timelines for the Strategic Review of Charges. For example, one element of uncertainty is in relation to the Scottish Government’s work developing the Water Bill and the timeline for this important work.

The Board noted the level of uncertainty in our operating environment and the impact this may have on our future timeline of work.

The Chair informed Members that, as a result, there will be a level of flexibility required next year around future Board meeting dates and discussion topics to support the work of the office. 

4.    Business update

4.1    CEO update

The Chair asked Members to indicate any areas they would like to discuss or seek further clarification on. The Board made the following observations on the content of the CEO report:  

Engagement

The Chief Executive informed the Board that he has now met with the incoming Scottish Water Chief Executive, Alex Plant.  The conversation was positive and touched on the extent of the challenge Scottish Water faces to transform its business in order to deliver in the new regulatory framework. 

The Chief Executive also provided an update on giving evidence at the Net Zero, Energy and Transport Parliamentary Committee on 22 November.  Members noted that there was less scrutiny than expected from Parliamentary Committee Members on Scottish Water and its performance. 

IPPG/DAG

The Director of Strategy and Governance gave an overview of recent investment planning and prioritisation group (IPPG) and Delivery Assurance Group (DAG) meetings.  He explained that we are still not seeing the level of transparency and information we would expect from Scottish Water.  

Board Members noted this update. 

International

The Chief Executive informed Members that work is progressing well in New Zealand. There have been very positive interactions with Minister Mahuta and just this week the creation of the four entities became law.  We have received a very positive response from New Zealand stakeholders on our analysis and our analysts have been leading excellent work with Watercare on the information tables.

The Chief Executive explained that future work with New Zealand post January 2023 is looking very likely.

Members noted Scotland’s experience of water sector reform and the tensions that can exist between the public, companies, governments and regulators. They asked that the office consider carefully any reputational risk for WICS that may exist in relation to working on water sector reform in New Zealand. The Chief Executive explained that WICS is at arms length of these issues and provides independent advice to NZ Government. 

Finance

The Director of Strategy and Governance provided a brief overview of year to date finances.

There were no major variances or issues to note. 

The Board recognised that staff costs in future years may need to increase given levels of inflation and expectations around pay increases.  It was noted in the context of this risk, generating international revenue will become even more important for the office. 

Expenses policy

The Board noted the changes to the expenses policy and the Chair thanked the Head of Finance, Director of Strategy and Governance and the ARC for their work to update this policy. 

Meeting close

The Chair thanked Board Members and the office for their contributions throughout this year and brought the meeting to a close.  

 

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