Water services - investing in and paying from 2027: consultation

4. Process for planning the regulatory cycle – the Strategic Review of Charges

The Strategic Review of Charges is the process undertaken to determine the charges payable by Customers for the next regulatory period.

The current regulatory period runs from 2021-27.

The first step in the statutory process was for Ministers to send a commissioning letter to WICS, in April 2024, confirming that the next regulatory period will run for six-years from 2027-33. A copy of the commissioning letter is provided in Annex A.

WICS then published a methodology outlining how they will determine the maximum charges for the regulatory period and invited Scottish Water to propose how it planned to meet the Ministerial Objectives for the period.

In October 2025 Scottish Water published its draft business plan setting out how it plans to invest in services and infrastructure to meet customer needs for the regulatory period. The draft business plan also indicated the customer charges that Scottish Water felt would be necessary to deliver the plan.

Also in October 2025, WICS published their initial response to that draft plan seeking further detailed justification on the extent of the plan and the charges proposed.

To support discussions between Scottish Water and WICS, Ministers are now inviting public comment on draft Principles of Charging and Ministerial Objectives. In particular, the Ministerial Objectives will help determine what the priority investment areas are for the next regulatory period.

Scottish Water will then produce a final business plan which will enable WICS to issue a final determination setting out the maximum charges for the 2027-33 period in time for the start of the new regulatory period on 1 April 2027.

Timeline

Commissioning Letter to WICS – April 2024

Publication of WICS methodology – December 2024

Scottish Water Draft Business Plan shared with stakeholders – June 2025

WICS comments on Scottish Water draft business plan shared with stakeholders – August 2025

Consult on Principles of Charges* – January 2026

Consult on Ministerial Objectives* – January 2026

Scottish Water shares its final business plan with water industry stakeholders – February 2026

WICS Draft Determination – June 2026

Final Principles of Charges – September 2026

Final Ministerial Objectives – October 2026

WICS Final Determination – October 2026

Start of New Regulatory Period – April 2027

* These documents are the subject of the present consultation

4.1 Challenges for the Water Industry that will shape the Ministerial Objectives

The water sector is facing three main challenges:

1. Our infrastructure is ageing, giving rise to increased maintenance and improvement costs, and a greater likelihood of needing replacement.
2. Climate change is driving higher temperatures, which in turn lead to drier summers and more intense rainfall events throughout the year particularly in the winter. Scotland's water and wastewater infrastructure, some of it dating back to the late 1800s was not built to accommodate these extremes.
3. We are using more water – due to population growth and increased demand by households and businesses. This means that without a new approach to water as a country, we will see an increasing risk of water shortages particularly in the east of Scotland.

The Scottish Government consulted on some of these wider issues in the water, wastewater and drainage policy consultation in late 2023. The documents for that consultation give further background which you may also find helpful context: https://www.gov.scot/publications/water-wastewater-drainage-policy-consultation

The consultation showed that, as customers, we have a good understanding of the link between current challenges and areas where we must focus investment. The consultation concluded that

“…there was wide agreement that we should recognise that the water industry provides three services: water, wastewater and drainage and that suitable infrastructure is required to support the delivery of each of these services. Given the growing likelihood of drought and water scarcity, respondents agreed that Scotland needs to plan its water resources to ensure water resilience. Furthermore, Scotland’s households need to become more water efficient… This is preferential to building new reservoirs and water treatment works which would be expensive.

In relation to wastewater, there was a recognition that wastewater networks need to be improved to reduce the frequency of sewage spills and to support a circular economy through resource recovery. Given the increasing likelihood of more intense rainfall, respondents agreed that building blue-green infrastructure to handle rainwater was preferable to building ever larger wastewater systems and sewers.

Furthermore, the removal of rainwater from sewers today would lessen the frequency and impacts of current sewage spills. Responses acknowledge that improvements must be funded…”

An analysis of responses to that consultation can be found here: https://www.gov.scot/publications/water-wastewater-drainage-consultation-analysis-report/ .

Further information on how the current challenges for our water industry have shaped the draft Ministerial Objectives can be found in Section 5.

4.2 Scottish Water – Performance in the current regulatory cycle

During the current regulatory period Scottish Water has continued to perform well:

• Scottish Water is investing over £1 billion per year to improve services, protect the environment and contribute to the economy.
• Scottish Water has provided connections to more than 70,000 new homes and businesses.
• Scottish Water's service performance continues to improve, exceeding targets set for both its household and non-household customer service measures.
• Its performance against the Outcome Performance Assessment (a basket of measures that look at a range of service aspects, including low pressure, leakage, drinking water quality, sewer flooding and pollution incidents) remains high, and in 2024/25 Scottish Water achieved its highest score ever, exceeding the target range.
• Water lost to leaks reduced in 2024/25 by 8 million litres per day compared with the previous year. However, climate change, drying soils and ageing infrastructure make leaks more likely, so Scottish Water continues to prioritise this area, with ongoing investment in training, detection and repairs.
• Drinking Water compliance continues to be high, with 99.94% of tests complying with strict regulatory standards in 2024.
• While there was a very small increase (1.5%) in pollution incidents since 2023/24, serious pollution incidents (Categories 1 and 2) reduced from 11 to 4. Huge improvements have been made over the years, with totals incidents reducing from 796 in 2010/11 to 199 in 2024/25.
• Average household charges remained £100 lower than the average in England and Wales in 2025/26.
• In 2024/25, Scottish Water delivered over ten thousand tonnes of carbon reductions (10,892 tCO₂e) as part of Year 5 of its Net Zero Routemap, through activities such as peatland restoration and energy projects.
• In view of an overall economic assessment, WICS wrote in its 2024-25 performance report that while there is room for renewed focus on specific areas, Scottish Water continues to provide a high standard of service for customers overall.

Looking to the future, it is important that the Ministerial Objectives continue to support Scottish Water to build on these achievements and improve the standards of service it provides to all customers over the long term.