Water services - investing in and paying from 2027: consultation

7. Annex A – Draft Ministerial Objectives

7.1 Context and Scottish Ministers expectations

These objectives are being set under sections 56 and 56A of the Water Industry (Scotland) Act 2002, which enables Scottish Ministers to set objectives for Scottish Water in relation to:

• the standard of the services to be provided in the exercise of Scottish Water's core functions; and
• the time by which:
  • a particular standard of any of those services is to be attained; and
  • any particular work required for or in connection with the provision of those services is (in part or whole) to be commenced or completed.

The Ministerial Objectives build on the range of statutory obligations that Scottish Water must deliver.

As set out in the Commissioning Letter, Ministers expect this regulatory period (1 April 2027 to 31 March 2033) to build upon the successes of previous regulatory reviews, which have ensured a financial and regulatory environment within which Scottish Water has significantly improved levels of efficiency and service delivery.

Ministers’ general expectations are that:

• Scottish Water should build on the current good performance to make further progress with particular focus on the areas that Ministers identify in the proposed objectives for 2027-33.
• Scottish Water must demonstrate to the Scottish Ministers, the relevant regulator and customers that they are meeting these objectives.
• As set out in the Commissioning Letter, Ministers expect that the outputs necessary to achieve the objectives reflect the best possible value for money in terms of the improvement in outcome achieved for the investment made.
• Ministers’ policy with respect to customer charging is set out in the draft Principles of Charging. Ministers expect that Scottish Water develops a balanced investment programme, in consultation with the water industry stakeholders, namely Consumer Scotland, DWQR, SEPA, and WICS, that ensures it is able to deliver on its statutory duties and these objectives, mindful of the charges requires from customers to fund this.

These Objectives establish specific outcomes Scottish Water must deliver in the period 2027-33 and the type of investment activity Scottish Water should be undertaking to enable it to play its part in achieving the long-term Water Sector Vision.

These Objectives have been informed by other Scottish Government policies and strategies and also by the views of Scottish Water, Consumer Scotland, DWQR, SEPA and WICS.

7.2 Standard of Services, Investment Planning, and Asset Maintenance

The Water Sector Vision states:

“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.”

Objectives 1 to 3 are intended to enable Scottish Water to play its part in achieving this.

Objective 1: Standard of Services

Scottish Water must, in general, maintain or improve levels of service in the 2027-33 period compared to the position at 31 March 2027.

Scottish Water’s performance will be monitored via the levels of service measures in WICS’ methodology.

Scottish Water must:

• engage with its customers and stakeholders (in particular Consumer Scotland, DWQR, SEPA, and WICS) to establish appropriate targets for its performance against these measures for the 2027-33 period, consistent with WICS’ methodology; and
• deliver on these, subject to any revisions in a Delivery Plan approved by Scottish Ministers.

Furthermore, Scottish Water must:

• work with WICS to maintain public-facing access to data on its performance against these targets in each year of the 2027-33 period, showing how this has evolved over time; and
• improve public access to data on its performance more generally.

Objective 2: Investment Planning

Scottish Water must:

• align with the Scottish Government’s definition of infrastructure and its Infrastructure Vision set out in the Infrastructure Investment Plan (IIP) (as may be amended or replaced from time to time);
• undertake an approach to investment that aligns with the Scottish Government’s Common Investment Hierarchy (set out in the IIP) and the Environmental Impact Assessment Mitigation Hierarchy;
• produce investment plans that show how it will invest in its assets to spread the cost of necessary investment fairly across generations, using borrowing to spread the costs of enhancement and growth projects, in order to contribute to the achievement of the long-term Water Sector Vision;
• demonstrate how investment activity is contributing to the whole life of the asset, ongoing levels of service, the resolution of known service issues and good environmental outcomes; and
• provide WICS with any information they require to enable them to provide assurance to Scottish Ministers that this objective is being fulfilled.

Objective 3: Asset Maintenance

In line with the Scottish Government’s Infrastructure Investment Plan, Scottish Water must maximise the useful life of its existing assets by prioritising enhancing and maintaining them over building new ones, while ensuring its assets have the appropriate capability and resilience. This means that Scottish Water must:

• promote sufficient asset maintenance to deliver the required levels of service while having due regard to the condition of the infrastructure passed on to future customers; and
• demonstrate how investment, or lack thereof, in asset maintenance is contributing to a change in the condition of its assets and thus levels of risk, levels of service, and environmental outcomes.

Furthermore, Scottish Water must continue to evolve its evidence-based strategy to inform the long-term asset maintenance needs of the industry. This strategy must:

• set out the asset health, including condition, of its assets insofar as current evidence can support for each water and wastewater system;
• set out a programme to be undertaken (to be agreed with WICS) to address gaps in its asset knowledge and advance its understanding of the condition of its assets in each water and wastewater system, in particular those of a critical nature for maintaining service delivery;
• outline the long-term sustainable level of investment to maintain the overall condition of its infrastructure such that it can deliver the required levels of service in the face of a changing climate; and
• be subject to consultation with, and have the broad support of, its regulators.

7.3 Supporting Sustainable Economic Growth

The Water Sector Vision states:

“We will enable the economy to prosper.”

Objective 4 is intended to enable Scottish Water to play its part in achieving this.

Objective 4: Supporting Sustainable Economic Growth

Scottish Water must:

• identify and provide new strategic capacity that will meet the demand of all new housing development and the domestic requirements of commercial and industrial development, and provide connections to its assets at a reasonable cost;
• work with stakeholders to influence strategic development in areas where there is already capacity, and to consider all possible measures to release capacity in existing assets before requiring enhancement of water and wastewater infrastructure;
• ensure that such strategic capacity is delivered in support of committed investment so as to minimise the likelihood of redundant capacity; and
• support the delivery of National Planning Framework 4 while fulfilling its role as a statutory consultee in the planning process, as set out in planning legislation, acting in the best interests of its current and future customers.

Scottish Water must work with the industrial sector to facilitate the provision of capacity that will meet the non-domestic needs of new and expanding industry. However, it is not obliged to provide capacity to meet non-domestic needs if doing so would endanger its obligations to supply water for domestic use to current or future customers without having to provide new strategic capacity at an unreasonable cost.

7.4 Drinking Water Quality, Resilience and Demand Management, and Cyber, Physical and Personnel Security

The Water Sector Vision states:

“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.”

Objectives 5 to 7 are intended to enable Scottish Water to play its part in achieving this.

Objective 5: Drinking Water quality

When failures or the risk of failures to comply with its drinking water quality duties (as amended or replaced from time to time) are identified, Scottish Water must prepare and deliver investment plans or improvements in its operational practices to address these by dates to be agreed with the DWQR.

Scottish Water must undertake risk assessments of its drinking water supply systems, from source to the point of supply, that identify where there are risks of it supplying unwholesome water.

Scottish Water must collaborate with the DWQR, Scottish Government, and other stakeholders to play its part in delivering a lead-free Scotland. This includes advising customers how to identify lead piping in private ownership.

Objective 6: Drinking Water Resilience and Demand Management

Scottish Water must review and update its existing plans to address the resilience of supplies (including raw water), and take steps to secure further improvements to resilience.

By 31 March 2028, Scottish Water must provide to Scottish Ministers a report setting out the range of options to address the forecasted gap between supply and demand in 2050 (due to changing climate and demographics). The options explored should include:

• demand management – the role of monitoring, price signals through customer charging, widespread public awareness campaigns and behaviour change, water efficient appliances, location of new economic growth etc.; and
• increasing (e.g. new reservoirs) and redistributing supply.

This report should set out the considerations of each option: contribution towards reducing the gap, cost (capital and operational), delivery timescales, deliverability within Scottish Water’s current legislative powers, impact on customers etc.

The information will be necessary to inform the development of Scottish Ministers’ future policy for the subsequent regulatory periods. This policy development will be informed by stakeholders, in particular Consumer Scotland and WICS.

Furthermore, Scottish Water must work with its customers to encourage, and subsequently monitor and evaluate, behaviour changes that promote water efficiency.

Objective 7: Cyber, Physical and Personnel Security

To ensure continuity of service, Scottish Water must prepare and implement plans to improve the cyber, physical and personnel security of its network and systems to protect them from malicious attack. Such plans must be prepared in line with advice from the Scottish Government, DWQR, and be informed by industry best practice.

7.5 Environment, Wastewater Treatment, and Network Performance

The Water Sector Vision states:

“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.”

Objectives 8 and 9 are intended to enable Scottish Water to play its part in achieving this.

Objective 8: Environment

Scottish Water must:

• publish an Improving Urban Waters Routemap (IUWR) covering the period 1 January 2028 to 31 December 2033 which sets out how improvements to its infrastructure are expected to contribute effectively to river basin management planning (RBMP) objectives;
• agree any commitments in this IUWR with SEPA; and
• publish annual updates setting out its progress in delivering them.

Scottish Water must maintain public-facing access to a list of all of its intermittent discharges that are unsatisfactory, providing information on location, priority for investment, and when it expects to deliver upgrades. This information must be agreed with SEPA and publicly available by 31 December 2027.

Scottish Water must:

• continue to implement measures to protect designated bathing waters achieving ‘sufficient’ or better classifications from its assets, avoiding deterioration; and
• prepare and implement investment plans that address known impacts of its assets on designated bathing waters classified as ‘poor’, to increase the status to ‘sufficient’ or better classification, by dates to be agreed with SEPA.

Objective 9: Wastewater Treatment and Network Performance

When Scottish Water fails to comply with the Urban Waste Water Treatment (Scotland) Regulations 1994 (as amended or replaced from time to time), or there is a risk of it failing to comply, it must prepare and deliver investment plans or improvements in its operational practices to address these by dates to be agreed with SEPA.

Scottish Water must provide public-facing access to data on overflows from all intermittent discharges in its network by 31 March 2033. This may include data from hydraulic models where they indicate intermittent discharges are unlikely to overflow or the cost to install a monitor is unreasonable.

Furthermore, Scottish Water must work with its customers to encourage, and subsequently monitor and evaluate, behaviour changes that ensure only appropriate items are disposed to sewer.

7.6 Management of Rainwater and Flood Resilience

The Water Sector Vision states:

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

Objective 10 is intended to enable Scottish Water to play its part in achieving this.

Objective 10: Management of Rainwater and Flood Resilience

Scottish Water must identify and pursue opportunities to work with stakeholders to clarify roles and responsibilities and respond to opportunities proposed by stakeholders, to transform how rainwater is managed in new and existing communities.

In particular, Scottish Water must, in collaboration with other parties as appropriate, adopt and encourage an integrated urban catchment management approach to sustainably drain rainwater wherever practical, to define governance, reduce the risks and impacts of sewer flooding, reduce pollution from sewer overflows, enable growth and create flood resilient places that include natural spaces for customers and communities to enjoy.

7.7 Climate Change Adaptation, Mitigation, and Circular Economy

The Water Sector Vision states:

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

“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 are a vital part of a flourishing Scotland.”

Objectives 11 and 12 are intended to enable Scottish Water to play its part in achieving this.

Objective 11: Climate Change, Adaptation and Mitigation

In support of the Scottish Government’s vision for a Scotland that is resilient, inclusive and well-adapted to climate change, as set out in the Scottish National Adaptation Plan, Scottish Water must:

• identify the impacts of climate change on its assets and assess the risk and likelihood, having regard to the UK Climate Change Risk Assessment and advice from the Climate Change Committee;
• continue to implement and evolve plans for measures necessary to adapt its assets and services to the impacts of climate change, while building resilience, and protecting and enhancing nature and biodiversity; and
• help to deliver the Scottish National Adaptation Plan, including the objective (PS3) on managing Scotland’s water resources.

To support the transition to a net zero emissions Scotland, Scottish Water must ensure it maintains its trajectory towards achieving net zero emissions.

Objective 12: Circular Economy

Scottish Water must:

• have regard to Scotland’s Circular Economy and Waste Route Map to 2030 in its provision of water and wastewater services; and
• assess the potential for resource recovery from its sewage systems and the sustainable reuse of bioresource and effluent.