Utility Week

26 | MAY 2021 | UTILITY WEEK Policy & Regulation Interview A s in England and Wales, customer input is an increasingly important part of the price control process north of the border. To facilitate this, ahead of the price review in 2015 a customer forum was created between the Water Industry Commission for Scotland (Wics), Citizens Advice Scotland and Scottish Water. Scottish Water CEO Douglas Millican explains that regulatory acceptance was dependent on the company's plans being approved by this group, making it a power- ful player. He says it was the forum that made the company look beyond six years for the 2021 price review. "This is a long-term industry needing long-term decisions over assets that last typically for decades or centuries. We have to make sure we are rooting investment planning as much as possible in the longer term." He adds: "As an industry we're really good at eking out the life of assets for an extra five or six years but not at looking at what is needed longer term." The com- pany worked out that widespread replacement would be needed in the 2040s, and it worked backwards to cal- culate what it would take to manage that, and how to fund it. The overwhelming feeling from the forum was that payment should be spread out rather than delayed. "The forum clearly said don't put the necessary work off, and don't back-end load bill increases. Even with the pressures of Covid-19 people said they did not want it put off. We might find better ways to manage assets and the work can wait to the 2050s, but it won't be the 2080s – we've got to face that asset challenge between now and the middle of the century." For the next two years billpayers will see a rise of consumer price index plus 2 per cent per annum to meet those future needs. "We're in danger of undercharging the current generation with the consequence of future generations picking up the tab," Millican says. "It's an inter-generational equity issue." The consumer forum found that billpayers were pre- pared to contribute more if time was taken to talk them through the issues and the complexities of the vision for the sector and the climate. Inspiring excellence Millican says that in exchange for the increased charges, Scottish Water developed a vision backed by ministers to "inspire excellence" through three key ambitions: ser- vice excellence; going beyond net zero emissions; and delivering value and sustainability. The service excellence pillar recognises that the high- est standards must be pursued, but also that what con- stitutes excellence will change over time. This applies at all stages of abstracting, transporting, cleaning and distributing water, as well as managing catchments and resources and encouraging households to use them efficiently. Millican says that for wastewater there will be a move towards more smart management of networks, storm overflows, wastewater treatment and recovering value from waste. "Implicit in all of that is dealing with whatever our climate throws at us, climate change adaptation is a key part in pursuit of service excellence," Millican adds. "Thankfully the days of climate change deniers are behind us and everyone recognises the challenge. "Scotland is committed to reaching zero emissions by 2045 and for our part we are committed to getting there by 2040 for operational and investment emissions. We host twice as much renewable energy than we use in operations and are looking to reach three times as much as we consume by 2030, so for operational emissions we are nearly there." He believes it must be about more than setting targets if the massive global and societal challenges are to be met. The company has further work to be done around energy efficiency and environmental improvements, but Millican says a greater concern is emissions from its investments and the supply chain. "We're going to be doubling our capital investment over the next 20- odd years because of the asset replace- ment issue, so this is a real opportunity for partners that deliver in a decarbonised manner. Those parties that deliver smart, low or no carbon solutions will be our long-term partners." Ruth Williams, water correspondent "Climate change adaptation is a key part in pursuit of service excellence" Douglas Millican CHIEF EXECUTIVE, SCOTTISH WATER For Ruth Williams' full in- terview with Douglas Millican, visit https://utilityweek.co.uk

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