A longer term approach

WICS's approach to regulation is evolving to make sure that the industry is able to address the long-term challenges it faces.

We are working together to tackle big challenges

The Scottish Water industry has a vital role to play in helping Scotland to deliver net zero emissions by 2045. Scottish Water has its own challenging target to achieve net zero by 2040. 

At the same time, Scotland’s vast network of water and sewerage assets are ageing and need to be replaced. We need to keep investing in this vital infrastructure to maintain the same high standards of service as we enjoy today.

We are working together in a different way to make sure the industry can address these challenges.

Why change?

The traditional regulatory model has delivered significant benefits to customers since Scottish Water was created in 2002. It ensured the improvements in service levels, investment and efficiency necessary for Scottish Water to compare comfortably with privatised companies in England.

This approach, which focuses on how much money is spent in short-term regulatory control periods, did not provide the right incentives or level of flexibility required to tackle the big challenges we face today.

An evolution of the way we communicate

So, we are now moving away from the short-term thinking inherent in traditional regulatory models. Instead, the focus now is on working together with other stakeholders to deliver the best outcomes for Scotland’s current and future customers.

Together with Scottish Water and other stakeholders we’ve agreed that there should be clear, open and transparent discussions about the work that needs to be done, and how much this might cost.

We hope this will give us the best possible chance of addressing the big challenges that span much further than just one or two regulatory control periods. Our aim is to make sure that our water system is still fit for purpose more than 30 years from now.

Our approach to regulation is evolving. We’re working in new ways to achieve better outcomes for customers.

Our work has only just begun

Taking early inspiration from Professor Chris Hodges ‘Ethical Business Regulation’, we have been taking the first steps on the long journey to change regulatory behaviours. As a result, our last 2021-27 Strategic Review of Charges was one of our most collaborative and open price reviews to date.

Our approach allowed for very candid discussions about the challenges we face and how we might address them. It even paved the way for our very first joint sector vision.

It has been, and will continue to be, a voyage of discovery for our stakeholders but we have agreed that Scottish Water needs more investment and more flexibility to address future challenges. We expect Scottish Water will take full ownership of its strategy, investment plans and relationship with customers.

Open and candid discussion lies at the heart of our regulatory approach. An environment that encourages full transparency is critical.

  • Businesses should continually demonstrate their commitment to fair and ethical behaviour to support the confidence of regulators, as well as all levels of management, customers, suppliers and other stakeholders.
  • Regulatory systems need to have clear rules on expectations and be based on collaboration if they are to support an open, balanced and altruistic framework, while maximising performance, compliance and innovation.
  • Where there is unethical behaviour, people expect a proportionate response. This is consistent with strong sanctions for intentional wrongdoing.

Our journey continues

We understand that working in this way requires a fundamental change in the way we communicate and work together. Fully embedding this new approach will take time. We made good progress at the last Strategic Review of Charges but now the real work begins!

Scottish Water is transforming its business to meet the challenges of the future. Including transforming the way it communicates to us as economic regulator, customers and communities and other stakeholders.

WICS will assess how candid and forward-looking Scottish Water is being, commenting regularly on its performance. And we’ll continue to check the quality of information and analysis it’s using for decision making.

We believe that if Scottish Water is being appropriately open and candid in the information it provides and uses robust analysis to underpin the decisions it makes, we can all be confident that it is delivering the best outcomes for current and future generations of customers.

Candour + analysis = confidence

Candour: Scottish Water will be balanced in what it says and what it does. Stakeholders have to be candid in their interactions with Scottish Water. There should be no surprises. Analysis: Scottish Water needs to evidence the challenges and opportunities it faces. How has it prioritised? How will it deliver? How has it taken into account the views of customers and communities?
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