Scottish Water starts planning for the long term

For SR21, Scottish Water is moving away from the traditional approach to business plans and developing a blueprint for the decades to come. The company's director of strategic customer service planning, Simon Parsons, tells Robin Hackett why Scotland has decided to do things differently

As the water companies in England and Wales prepare for the next five-year AMP cycle, Scotland is taking a different tack: rather than a traditional business plan, Scottish Water has been tasked with developing a new ‘strategic plan’ that looks to the long term.

While the next regulatory period takes place from 2021 to 2027, the utility will be working alongside stakeholders to prepare a plan for the next 20 years.

“Traditionally, we like everyone else have produced five- or six-year business plans that agree charges and the long list of investment and improvements we’d make over that period,” Simon Parsons, director of strategic customer service planning at Scottish Water, says.

“That’s worked very well in the past for many customers in terms of giving certainty of what will be delivered and where services will be improved, but we’ve got a couple of issues that mean that wouldn’t necessarily work for us going forward.”

For one thing, the Scottish Government has stated its ambition to reach net-zero greenhouse gas emissions by 2045 at the latest, and Scottish Water is expected to play an important role in achieving that.

“The Scottish Government is setting a new vision for the water sector in Scotland,” he says. “There’s a big theme around carbon and the circular economy for us – how do we go beyond zero carbon and move to become a positive carbon sink for Scotland? They want us to embrace circular economy thinking in everything we do.

“What they’re really asking us to do is to think longer term, looking to the middle of the century in terms of where the whole water sector in Scotland should be.”

Scottish Water has also been working alongside regulators WICS, DWQR and SEPA to establish the scale of the asset replacement challenge.

“Like many other water companies, Scottish Water have invested hugely over the last 20 or 30 years and we have lots of new water and wastewater treatment works and infrastructure,” Parsons says.

“That’s all ageing and, over the coming decades, the vast majority of it will need replacing.

“We’ve been working with the economic regulator [WICS] primarily to look at what this means in terms of future demands on investment, and a very substantial increase is going to be needed at some point over the next couple of decades.

“This is why we have to think longer term rather than shorter term. When we started preparing for SR21 it was very much a six-year plan but, prompted by our stakeholders, I think we’ve all come to the conclusion that it needs to be over a longer period.”

Parsons highlights four primary areas of focus for the strategic plan. As well as carbon reduction and asset management, Scottish Water has been tasked with improving its water quality performance – taking on a changeable environment with challenges around organic material and algae – as well as providing leading customer experience.

The company is already making strong progress on that point: customer satisfaction reached its highest ever level last year.

“That was done against the climate of fairly significant weather challenges for the year, both in the summer and winter,” Parsons says. “We had our lowest ever level of customer complaints and that’s really down to a proactive approach.”

When the strategic plan is finalised, it will outline Scottish Water’s direction and core activities over the next couple of decades, setting out likely charges over that period. However, the investment programme will be decided on a rolling basis.

“There’s no longer a fixed investment programme,” Parsons says. “It will just be constantly topped up and tested and evaluated as we go forward – it could be done on a one- or two-year basis or it could allow us to look much further ahead than that.

“That combination of setting charges for the long term and setting a rolling investment programme means we’ve moved very significantly away from a traditional business plan. It’s a huge benefit for Scottish Water doing it this way – it allows us to really make some progress with some of the big challenges.”