Minutes of the 156th Board meeting of the Water Industry Commission for Scotland on 14 February 2024

Present:

Donald MacRae (Chair) 
Jo Armstrong (Member)   
Robin McGill (Member) & (Chair Audit & Risk Committee) 
                  
In attendance:

David Satti, Director of Strategy
Andrea Mancini, Director of Price Review
Donna Very, Director of Corporate and International Affairs
Michelle Ashford, Chief Operating Officer

Apologies:     

Ann Allen (Member) 

Chair’s opening remarks

The Chair opened the 156th meeting of the WICS Board and welcomed Board Members.

1.    Apologies for absence

There were apologies from Ann Allen. 

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 155th meeting

The Board approved the minutes of the 155th meeting.

The Board also approved the minutes of an additional Board meeting on 30 January 2024 to review Scottish Water’s 2024-25 charges scheme.

2.3    Summary of action points

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

• Action 1: This action is ongoing. 

• Actions 2 and 3: These actions will be amalgamated, and a paper covering how the organisation plans to work together moving forward is scheduled for April 2024. 

  Board Members noted that we require direction and clarity from the Scottish Government on the future of WICS’ role in Hydro Nation and an appropriate governance structure that would support this.  

  The Board and leadership team recognised that there is more to do to build a high performing leadership team. There is a need to rebuild relationships and to establish trust within the team. The Board noted the leadership team’s efforts to consider options for leadership coaching.

  The Board noted the absence of the Head of Finance from this meeting. Board Members reiterated the value of finance expertise and the importance of hearing views from the finance team. Board Members asked that the Head of Finance or an appropriate deputy from the finance team attend all future Board meetings.

  The Board asked the leadership team to clarify roles, responsibilities, accountabilities, and overall ways of working for the organisation. This will be critical to drive the organisation forward during this interim period until the appointment of a permanent Chief Executive. Board Members noted this will create direction and stability for employees throughout the transition period. 

  Board Members asked that project-based management is taken forward within the organisation where there are project sponsors (at leadership level) who have overall accountability for delivery. This would be supported by a project manager and other resources across the office.  Budgets should be set and managed in line with these accountabilities.

  The leadership team committed to develop a forward plan for the organisation for the next 12 to 18 months and confirm roles and responsibilities including those relating to budgets and project governance.

• Action 6:  The Board agreed to retain this action and timeframe for August 2024. 
• Action 7:  This action is scheduled for completion in June 2024. 
• Action 8:   A paper on the options around Business Stream governance arrangements will be brought to the Board at its April 2024 meeting.  Members asked whether there is a need to make faster progress on this work. The Director of Price Review assured the Board that the current timeframe is appropriate and there is no immediate requirement to accelerate this work further. 
• Action 11: The Board were pleased to note that we have now received an information submission from Scottish Water which establishes an investment baseline.  Members noted Scottish Water’s progress in this area and reiterated the importance of work in this area to ensure a data driven SRC27. 
• Action 4, 5, 9 12 and 13:  These actions are now complete. 

2.4    Non-Executive Members Update

There were no updates from Non-Executive Members. 

3.    Discussion 

3.1    SRC27 timeline

The Director of Price Review provided an overview of our thinking on a timeline to deliver SRC27.  He explained that in developing this timeline we have engaged closely with Scottish Government and Scottish Water.  Some key considerations include: 

• The political timetable and Purdah publication restrictions.
• The timeframe for the industry policy development work and prospective legislation being progressed by the Scottish Government. 
• Our internal work plan and resourcing to deliver the SRC27 process.
• Ensuring appropriate time for Scottish Water to deliver its Business Plan and associated information submissions. 

Board Members noted that in SRC27 there will be an explicit requirement for Scottish Water to produce a draft and final business plan.  The Director of Price Review reiterated that there will be collaboration amongst stakeholders but there will be very clear accountabilities.   We plan to consult widely and publicly on the proposals set out in our methodology.

The Director of Price Review confirmed that SRC27 will be data driven and evidence based focusing on delivering a sustainable water industry. We will require detailed bottom-up evidence from Scottish Water from which prices will be set – this will incentivise Scottish Water to produce a robust case for the investment it requires. 

The Board discussed the timeline and asked for assurance regarding the organisation’s capacity to deliver against the key milestone dates. The Director of Price Review confirmed that the programme of work is challenging but deliverable.

Board Members agreed that we must demonstrate we have met our obligations as set out in the new Consumer Duty which will come into force in April 2024.  The Director of Price Review explained that our methodology will set out how we intend to ensure customers’ views are embedded in the SRC27 process.

Action: Members also noted the internal project governance arrangements in place to manage SRC27 and requested sight of the SRC27 Project Board’s terms of reference. 

3.2    CEO recruitment

The Director of Corporate and International Affairs introduced a paper which outlines the requirements and route to market options for the recruitment of a Chief Executive Officer. 

The Board discussed the options available and agreed to progress via an open tender procurement route.  This will involve approaching a wide range of suppliers including those listed as part of the Scottish Government framework contract.

The Chair will lead the recruitment of the Chief Executive with Board support at key stages and project management provided by the Director of Corporate and International Affairs.

The Board noted that an expenditure appraisal form will now be completed and considered by the internal approval panel. However, the Board will have final approval of this expenditure.  The invitation to tender documentation to support this procurement is underway and will be signed off by Board Members before publication.

3.3    Leadership  training

The Director of Corporate and International Affairs provided an overview of the requirements and options available for leadership training and development.

The Board agreed the need for an external support to facilitate both team and individual leadership coaching.  The Board and leadership team agreed the importance of building trust within the team to ensure we can challenge constructively and hold one another to account.

Board Members asked the Chief Operating Officer and Director of Corporate and International Affairs to lead on the scope of this work and progress towards a procurement exercise.

4.    Business update

4.1    Workplan response to external audit

The Chair thanked the executive team for preparing the work plan response and their efforts to progress actions.  A fortnightly update will continue to be shared with the Board and a further update will be provided later this week. 
The Director of Strategy explained that the key updates relate to the completion of an initial phase of staff training and receiving clarity on the dilapidations budget for Moray House.

Board Members wished to formally record thanks to the Head of Finance for her work delivering staff training on financial procedures. Board Members noted that there is a formal training log and personnel system which records the training staff have received.

The Board discussed expenditure approvals processes and the role of approval max as a decision-making tool.  The Director of Strategy explained that a review of approval flows and delegated authorities is planned and will also be considered by our internal audit function.

The Chair of the Audit and Risk Committee reiterated that the ARC will soon review the revised expenses policy and financial procedures and provide an update to Board Members.

Action: The Board asked that the leadership team consider whether there may be an option to return to Moray House. Board Members requested an update at a future meeting considering the options available regarding office space. 

4.2    Finance report

The Director of Strategy summarised the key points from the financial report and financial position.  Board Members noted the report.

The Chair of the Audit Committee raised a query relating to the ring-fenced fund for international business development and travel expenses. He agreed to seek clarification from the Head of Finance.

Action: Board Members asked for a breakdown of costs relating to the departure of the former CEO and the recruitment of a new CEO to be included for next meeting. 

4.3    Staff secondments

The Director of Strategy introduced our approach to date towards staff secondment opportunities. He highlighted the importance of staff secondments in training and development.

The Board noted that a decision was made by the former Chief Executive for a Director to take up a secondment opportunity in an economic consultancy firm. The Board stated it was not aware of this decision in advance and would have expected to have sight of a business case prior to this decision being made.  Following the resignation of the former Chief Executive, the leadership team made a collective decision that the Director would return to the organisation earlier than planned.

The leadership team committed to document the business case, rationale, and analysis of future opportunities for staff. It was agreed that depending on the seniority of the individual involved, this may be a Board decision.

Action: The Board requested a policy outlining the approach to staff secondments and the relevant decision-making process.

4.4    Executive's update report

The Director of Strategy explained that WICS is no longer cited in Scottish Water’s legal argument relating to its recent developer dispute and will not be part of the court proceedings. We will continue to engage with Scottish Water to ensure clarity on our role in reasonable cost disputes moving forward. There will be some legal support required to clarify our role.

The Director of Price Review provided an update on our work to establish a code of practice for licensed suppliers in the competitive retail market. A draft document is available, and Consumer Scotland intend to carry out research to ensure the provisions are consistent with the views of business customers.  We intend to finalise the code by spring and then focus will turn to implementation during summer.

The Board noted that progress on the code of practice has been slow and asked if there are any risks.  The Director of Price Review assured board members that our intention is to put in place a robust code of practice which is fit for purpose. There are no significant risks with the current pace, but steady progress is important to ensure market stakeholders do not disengage in the process.

The Board noted the executive’s update report.

AOB

The Chair thanked Jo Armstrong for over seven years of service on the WICS Board. He wished her the very best in her new role as Chair of the Accounts Commission.

The Director of Corporate and International Affairs shared we held a dedicated session on wellbeing at our all staff meeting this month and our employee assistance programme is available for staff to use.

Board Members noted this update and asked that the leadership team continue to review staff wellbeing and ensure that we are meeting duty of care obligations.

Meeting close 

The Chair closed the meeting and thanked Board Members and the leadership team for their contributions.