Board minutes Oct 2023

Approved Minutes of 152nd Commission Board meeting October 2023


Minutes of the 152nd Board meeting of the Water Industry Commission for Scotland on 5 October 2023


Donald MacRae (Chair)
Alan Sutherland (Chief Executive)
Ann Allen (Member) 
Jo Armstrong (Member)   
In attendance:

David Satti Director of Strategy, Finance and Governance
Donna Very, Director of Corporate and International Affairs
Andrea Mancini, Director of Price Review 
Colin McNaughton, Director of Analysis

Chair’s opening remarks

The Chair opened the 152nd meeting of the WICS Board and welcomed Board Members.

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

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

2.2    Minutes of the 151st meeting

The Board approved the minutes of the 151st meeting.

2.3    Summary of action points

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

  • Action 1: This action is ongoing. The IPPG has changed to IPPDG. The Chair has signalled his intention to attend the next IPPDG and has requested that the office help facilitate this.  
  • Action 3: This action is ongoing. The office will provide an overview of the financial projections and direction of travel in November. 
  • Action 4:  This action is ongoing.  
  • Action 5:  The risk workshop is now planned for 2nd November 2023.
  • Action 6:  This action will be covered in item 3 of the agenda. This action will be revised and merged with action 11 to cover the methodology for the next price review for December. 
  • Action 7: This action has been delayed until the first board meeting in the 2024 calendar year since action 3 is an important input into this work.  
  • Action 10:  This action is planned for December 2023.
  • Action 11: See action 6. 
2.4    Non-Executive Members Update

Updates included the impact that HS2 changes could have on the construction industry and the opportunity this might present for Scottish Water’s capital programme delivery. 

The Board also discussed the proposals submitted to Ofwat by water companies in England and Wales. These discussions included the estimated 30% real terms increase in customer charges, given the increase in enhancement and growth requirements and the impact this would have in Scotland.

3.    Strategic discussion  

3.1    Strategic Review of Charges  

The Chief Executive provided an overview of the methodology for the Strategic Review of Charges 2027-33. This work is ongoing and an initial draft is expected in December.

The key messages that underpin the SRC around the need for significant price increases over time to replace assets, while adapting to and mitigating climate change, remain. However, WICS will learn the lessons from the last review and set prices based on the evidence presented by Scottish Water. The top-down analysis is necessary but not sufficient.

The Board discussed three foundational issues that require resolving before WICS can set prices. These are 1) clearly defining core and non-core activities, 2) revising regulatory accounting rules, in particular rules around capitalisation of operating costs, and 3) defining clearly replacement expenditure versus what is enhancement or growth expenditure.

Board Members questioned the resource implications of this approach. They sought assurances that this approach wouldn’t negatively impact the desire for Scottish Water to be more innovative in the way it solves future needs.

The Chief Executive highlighted the experience within the leadership team in conducting such price reviews. WICS can also draw on expertise within its economic consultancy framework contract if need be. The Chief Executive also explained that this regulatory approach wouldn’t act as a barrier to appraising and prioritising innovative solutions. 

4.    Business update

4.1    Expenses policy

The Board reviewed and approved the expenses policy following a six month trial. 

4.2    CEO update

The Board worked through the paper section by section with discussions focusing on the lessons learned work following SRC21, the annual return process, and the KC review of Business Stream.   

The Chair thanked the Head of IT for organising the cyber security workshop.

Meeting close 

The Chair closed the formal meeting and thanked Board Members and the office for their contributions.

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