Water services - investing in and paying from 2027: consultation

2. Introduction

2.1 How the water industry in Scotland works and how you have a voice

Scottish Water supplies clean water to 97% of households and businesses in Scotland and provides wastewater services to 93%. Scottish Water is a public corporation accountable to the Scottish Ministers and the Scottish Parliament. It is regulated to ensure services are efficient, meet mandatory standards and operate in an environmentally sustainable way.

Customers pay for these services and ongoing investment through charges, which are collected from households alongside council tax.

Plans for water and wastewater services, and the costs involved, are set out in six-year periods (known as regulatory cycles). This consultation concerns planning for the next regulatory cycle, which will run from 2027 and 2033.

We need to balance several priorities – high-quality water, a safe and reliable water supply and wastewater treatment, and reducing environmental impact – all while keeping services affordable. This consultation on Ministerial Objectives asks for your views on what matters most for spending in the next cycle. Your feedback on the Principles of Charging will also help us understand how you would prefer to pay for those priorities.

2.2 Roles and responsibilities of SG and sector partners

One of the benefits of our publicly owned water model is that our public bodies (sector partners) can work closely together to maximise the quality of water services. This means that the Scottish Government meets regularly with our delivery partner, Scottish Water, together with our regulators^[1] and Consumer Scotland to plan and agree changes to the investment programme in the light of new evidence or new priorities. Collaborative planning and monitoring of water services in this way is unique to Scotland and puts value for money at the heart of our water system.

To guide this collaboration, a Vision was developed in 2019, in response to a request (see Scotland the Hydro Nation: annual report 2019) from the then-Cabinet Secretary for the Environment, Climate Change and Land Reform.

The sector partners have agreed a vision for the water industry to help shape our actions:

The Water Sector Vision

Scotland's water sector will be admired for excellence, secure a sustainable future and promote a responsible Hydro Nation.

Together we will support the health and wellbeing of the nation. We will ensure that all of Scotland gets excellent quality drinking water that people can responsibly enjoy. We will involve and inspire Scotland's people to love their water and only use what they need.

Scotland's waste water will be collected, treated and recycled in ways that generate value and protect people and the environment. We will promote access to the natural environment and encourage communities to enjoy and protect it.

We will enable the economy to prosper.

We will transform how we work to live within our planet's resources, work with the natural environment and maximise our contribution to Scotland achieving net zero emissions and adapting to climate change.

We will be agile and collaborate within the sector and work in partnership with others to be resilient to the challenges that face us.

We will keep services affordable by innovating and delivering the greatest possible value from our resources, helping those who need it most. We will serve all customers and communities in a way that is fair and equitable to present and future generations.

We are a vital part of a flourishing Scotland.

As with any collaborative model, the roles and responsibilities of the partners must be respected. It is essential that risks are managed by the right partner and that the roles of the regulators are fully respected. The following sets out those roles and responsibilities of the partners:

The Scottish Ministers own the policy framework for water services in Scotland. This generally involves setting directions, or creating orders or regulations.

The Scottish Ministers provide the Ministerial Objectives for the six-year regulatory period which define the standard of services to be delivered in the regulatory period 2027-33 and set a policy statement outlining the Principles by which customers will be charged (the Principles of Charging).

The Scottish Ministers wish to ensure that the policy framework takes full account of the views and concerns of customers and stakeholders. This consultation document therefore seeks views on the drafts of these documents.

Scottish Water is a publicly owned statutory body accountable to Scottish Ministers and the Scottish Parliament. It is funded through customer charges and borrowing from Scottish Government. It has a statutory duty to provide public water, wastewater and sewerage services at the lowest reasonable overall cost. Any surpluses (profits) generated from its operations are fully reinvested in maintaining and improving services for the benefit of charge payers. No money is taken out of the system by shareholders.

Scottish Water is responsible for delivering a business plan that meets the Ministerial Objectives for the regulatory period. It must also provide the information needed for proper review of that plan. This allows the independent economic regulator, the Water Industry Commission for Scotland (WICS), to determine the maximum charges for the period. This cost envelope must be sufficient to achieve the Ministerial Objectives and meet the standards required by the Drinking Water Quality Regulator (DWQR) and the Scottish Environmental Protection Agency (SEPA) at the lowest reasonable overall cost.

The Water Industry Commission for Scotland (WICS) is responsible for ensuring that the interests of those connected, or could reasonably be connected, to the water or sewerage networks are protected. WICS must determine the maximum amounts of charges payable by Scottish Water’s customers (household and business) in line with its assessment of the efficient cost of providing water, wastewater and sewerage services and meeting the Ministerial Objectives.

WICS must take into account the views of Scottish Government, DWQR, SEPA and Consumer Scotland in determining charges. WICS must also provide assurance to the Scottish Ministers that Scottish Water are performing adequately.

DWQR, SEPA and Consumer Scotland are concerned with ensuring that outcomes are met.

DWQR’s role is to ensure that Scottish Water complies with drinking water quality duties and to supervise enforcement by local authorities. They ensure that drinking water in Scotland is safe to drink, meets strict standards to protect public health, and has the confidence of consumers.

SEPA is Scotland’s principal environmental regulator. With respect to water, SEPA’s functions include monitoring, reporting and enforcing compliance with legislation relating to the quality of the water environment.

Consumer Scotland’s role is to ensure current and future consumer interests are at the heart of a fair, transparent and sustainable water sector. It does this by using its evidence, analysis and consumer expertise to provide challenge and scrutiny to Scottish Government, Scottish Water and regulators to achieve positive consumer outcomes.