Scottish Government Investment Group minutes: October 2024
Minutes from the meeting held on 7 October 2024.
Attendees and apologies
- Rosemary Greenhill, Scottish Government (SG), Chair
- Darren Knox, SG
- Jo Blewett, SG
- Alex Plant, Scottish Water (SW)
- Rob Mustard, SW
- Wendy Kimpton, SW
- Tracey Gee, SW
- Aileen MacKenzie, SW
- Dave Reynolds, Drinking Water Quality Regulator (DWQR)
- Matt Bower, DWQR
- David Satti, Water Industry Commission for Scotland (WICS)
- Colin McNaughton, WICS
- Gail Walker, Consumer Scotland
- Sharon Forrester, Scottish Environment Protection Agency (SEPA)
Items and actions
Welcome and apologies for absence
There were apologies from Simon Parsons, Scottish Water, Lin Bunten, SEPA, and Catherine Williams, Scottish Government.
Jo Blewett, Transport Scotland, will join SG as Deputy Director for Water Policy and DECC Operations from 14 October 2024 and attended as an observer.
Minutes and actions arising from meeting of 3 July 2024
The previous SGIG minutes were agreed.
Summary of actions arising from meeting of 3 July 2024
- action 18.03 - Urban Wastewater Treatment Directive (UWWTD) group to scope and feedback to this group at a future point. Some of answer may be in legislation - complete - To be closed and addressed through Policy group. Updates can be provided to this group as required
- action 19.01 - SW to set out Whole Life Cost (WLC) impact of Investment Planning Scenario (IPS)24.1 allocations for water infrastructure - in progress - the revised Management Approach (MA)111 for Water Distribution will be presented at February Scottish Government Investment Group Working Group (SGIGWG)
- action 20.01 – Scottish Water to confirm the revised timescales to develop alternative options for Rockcliffe - complete - this was covered in the completion deep dive at the SGIGWG in August - see paragraph 22 in the minutes
- action 20.02 - SG to submit Q4-23/24 Proposed Needs List (PNL) to Ministers for approval - complete - these were approved by the Cabinet Secretary on 2 September 2024
- action 20.03 - What is completion risk in figure 1 in paper IG/20/24-05 (Progress to Development List) that is included in this. Action to confirm for Working Group (WG) - complete - an update on this was provided at the SGIGWG in August
- action 20.04 – Provide SEPA with an update on the work required at Fedderate Reservoir - complete - update provided which has been acknowledged by SEPA
- action 20.05 – Separate Terms of Reference (TOR) for WG and Main Group. Plus TOR for future group too. Diagram with different levels of groups too - in progress - this is being progressed by SG. The revised ToR for this group (and its working group) will be shared with members for comment by email
Working Group report
The paper taken as read and there were no questions.
Progress Report of performance against the Committed List – Q1 2024-25
The report shows delivery of the overall programme is “on track” and within the target range at the end of Q1 2024-25, demonstrating that Scottish Water are making sufficient progress with the delivery of committed projects. The water supply and wastewater programmes are ahead of forecast. However, the completion of projects from the previous Strategic Review (SR)15 regulatory period (2015-21) and the water quality programme are behind.
There was a discussion around the phasing of projects into SR27 and if this was making Indicator of Progress of Overall Delivery (IPOD) scores look better. It was confirmed that phasing into SR27 is being done prior to commitment.
There was discussion around lessons learned from the SR15 completion projects. This is being factored when planning new projects and was covered in the presentation at SGIGWG in August.
Actions
- action 21.01 – SGIGWG to consider how IPOD is managed and reported across SR21 and SR27
- action 21.02 – Scottish Water and WICS to consider how we manage the transfer of projects from SR21 into SR27 and how this is documented (this is part of the joint workplan). This is to be tested at SGIGWG and then taken to Future Investment Group (FIG) in Spring 2025
Proposed Needs List – Q1-24/25
No paper this quarter.
Update on IPS24.2
£105 million (in 2017/18 prices) has been identified to be reallocated to high-risk areas of the investment programme in need of additional investment. These include water quality risks associated with treated water storage, and remedial works associated with Reinforced Autoclaved Aerated Concrete (RAAC). Funds are being re-directed because of a reduction in Scottish Water’s overheads (an efficiency of £85 million), and reduced demand to comply with legislative requirements (£20 million) in relation to the New Roads and Street Works Act due to delays to major roads projects.
There was discussion around how the reduction in overheads was identified. This is due to Scottish Water outperforming their original forecasts for supplier rebates, driven by initiatives they have taken, e.g. get to site in half the time, LEAN, and so on. There was also a discussion on whether there are wider lessons to be learned.
It was felt this is positive and the challenge is to ensure Scottish Water delivers more for customers as a result.
Actions
- action 21.03 – SW and WICS to discuss how overheads are applied to projects and the breakdown of this against projects
- action 21.04 – SG to update the Cabinet Secretary on this
Progress Report on interventions to meet the needs on the Development List
The report demonstrates that Scottish Water are making sufficient progress with the development of their investment programme, and that it remains “on track” to meet its overall programme and financial spend targets for the period 2021-27.
It was observed that the investment in plan, prepare, and deliver seems to be consistently above where it was expected to be last quarter. Scottish Water were asked is this reflected the volume of investment coming through or market conditions. It was explained this was due to volume but there are impacts from inflation and optimism bias.
It was noted that appraisal approvals do not seem to be slowing down, and that Latest Best Estimates (LBEs) are in some case three times higher than the original forecasts. It was queried if too many are progressing at the planning stages. Scottish Water explained that the number of appraisals progressing was due to phasing of projects into SR27 to reduce the investment in SR21 in line with available funding.
The amount of investment planned for delivery in SR27 was discussed. It was noted that, working with the Future Investment Group, we need to be able to assure Ministers this investment is of essential nature. There must be flexibility so Ministers can shape what will be delivered in SR27 through their Ministerial Objectives.
This was noted by Scottish Water. Scottish Water commented that due to demand there will be more projects that have to planned for delivery in SR27. From a supply chain perspective, it is good to have visibility of what is ahead. Scottish Water noted the need for flexibility to enable it to respond to policy reforms that may come through in the future.
Transfers to the Committed List
The drivers for the approximately £45 million increase for MA037 Treated Water Storage were queried. This investment need has resulted from a Scotland wide enforcement notice. Scottish Water are inspecting assets and identifying where investment is required to comply – there will be more to come on this. The next IPS review should clarify what will need to be phased to allow this investment to be financed.
Action 21.05 – Scottish Water to review the forecasting versus what has been identified under MA037 and confirm if further increases are expected. Are there other programmes where inspection and construction delivery are under the same programme, and these inspections could uncover more than expected. Report to SGIGWG
Any other business
No items raised.
