Environment, Climate Change and Land Reform Committee

Meeting date: Tuesday, February 25, 2020

Official Report 675KB pdf

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Scottish Water Investment Plan

Item 3 is an evidence session on Scottish Water’s investment plan. I welcome our witnesses, who are representatives of Scottish Water: Dame Susan Rice, chair; Douglas Millican, chief executive; and Professor Simon Parsons, director of strategic customer service planning—that is a bit of a mouthful, but I got there.

I will open up the discussion by asking about the timeline for delivery. How does the 25-year strategy fit in with Scottish Government budgeting, priority setting, price determinations and policy?

I will place the issue in context. For a long time, we have operated in multiyear regulatory periods, with the Scottish Government initiating the process by asking the Water Industry Commission for Scotland to conduct a strategic review of charges. It did that a couple of years ago and produced some updated guidance last year. Although the ask is for investment plans and price setting for the next six years—from 2021 to 2027—behind that was a request for us to set that in a longer-term context. As an industry, we and the regulators looked at developing a long-term vision for the water sector. That vision, which was launched last October, sets the context for the strategic plan. Our strategic plan is rooted in achieving the long-term vision that ministers asked us to achieve.

For the nearer term, the Government set out in a consultation on its objectives and principles of charging for the next six years exactly the sort of financial framework that it would like us to apply. Our plan is absolutely rooted in the requests that Government has made of us, which in turn will be joined up with other aspects of wider Government planning.

Claudia Beamish will ask about some of the goals in the plan.

How has alignment to the sustainable development goals influenced the strategic plan, and how will that influence delivery?

The water industry vision that I referred to a moment ago is completely aligned to the sustainable development goals—most obviously to SDG 6, with regard to access to water and sanitation for all. When we did the mapping, we reckoned that, actually, we contribute directly or indirectly to 10 of the 17 SDGs, so the vision is absolutely aligned to that and, indeed, to the national performance framework.

Our strategic plan is aligned to ensuring that we are on the right path to achieving the water sector vision. Over the course of this year, we will produce a delivery plan that will set out our key actions and milestones in the next six to 10 years for the delivery of the first part of that strategic plan.

I was also going to ask you about NPF 4. Have you had discussions with the Customer Forum for Water, which we heard from in our previous session on Scottish Water, about your plans in relation to NPF, which is an inclusive structure?

Over the past couple of years, we have had extensive discussions with the customer forum. Its role and the challenges that it has presented us with have been highly influential on the form and content of the strategic plan that we published at the beginning of February. Indeed, ahead of that, it agreed that the plan reflected fairly the priorities of customers and citizens across Scotland.

With regard to NPF 4 or, indeed, any other form of guidance or instruction that comes out in the years ahead, our plan will be flexible, so that we can accommodate whatever new expectations are placed on us.

When it comes to NPF 4 specifically, there is a lot in our plan about, for example, trying to encourage a blue-green infrastructure. We do a lot of work in partnership with authorities across Scotland in that regard, and we ensure that, when areas are prioritised for development, land is set aside to ensure that there is sustainable management of drainage. Over time, we will be encouraging the use of water-efficient systems in new houses and renovations and will be promoting other aspects of sustainable drainage. Indeed, our surface water policy is aligned with that, so that we can minimise the risk of flooding from sewers for customers and for the protection of the environment.

Has the climate change plan, which we have had a particular interest in, informed your strategy? Will you be feeding into the updated plan that will be published in April?

At the heart of our strategic plan are the two critical dimensions around climate change: adaptation and mitigation. At a high level, we are closely aligned in that regard. Professor Parsons can pick up some of the particulars.

Within our strategic plan, we call out the need to adapt for climate change and to mitigate our impact on climate change. One of the three outcomes in our strategic plan concerns going beyond net zero by 2040, which is five years ahead of the Scottish Government’s commitments.

Could you give us a bit of detail about how your strategy is developing in that regard?

In our strategic plan, we state that, this year, we will draw on external expertise and expertise within Scottish Water to produce a route map to get to net zero by 2040. That concerns not only our operational activities, on which we have made year-on-year improvements, but our capital activities, which are directly associated with our investment programme. The route map will cover a whole range of different activities, including—for example—our use of renewable energy and the work that we will do on looking at alternative materials and alternative techniques in our capital programme. At a high level, for both our operational and our capital programme, our emissions today are around half a million tonnes a year, so there is significant work for us to do to reduce that.

Will you be able to feed into the updated climate change plan?

Yes. The work that we are doing is aligned, and we will be able to enable activities around, for example, blue-green infrastructure and access to our land. There is probably a big theme for us in there around peatland restoration in particular, which has multiple benefits to us in relation to climate change and securing high-quality source water for our treatment works.

The net zero target is the national goal for Scotland. Some sectors will struggle to meet that and will make a smaller contribution; other sectors will go way beyond that and be able to hit net zero earlier and perhaps even become carbon positive through the production of renewable energy or peatland restoration. Where do you sit? Your target is the national target of net zero, which is great. However, we look at your landholdings and at the catchments that drain into your water. I am not denying the fact that you have a lot of challenges in relation to electricity production, but you have a lot of assets as well. There is a sense that you are a highly innovative public company, which is great to see—it is great to see a utility in that space. However, if the economic regulator said that you can put more customer money into that, because climate change is an existential crisis for customers as well, how quickly could you go?

We are being hugely ambitious in that area. The mindset that we are trying to create among all our people and our delivery partners is thinking about what is the art of the possible on an end-to-end basis. I hope and believe that we can, ultimately, get into an overall positive position.

Some elements of our emissions will probably be very difficult to completely eliminate, but we will absolutely be able to make a positive contribution in other areas. However, it is complex, because it goes from where raw materials are extracted for the manufacture of steel or pipes, for example, right the way through to the processing of those raw materials into finished goods and their transportation, as well as what we use here in Scotland. We are trying to take a holistic and global perspective, which is about asking what the emissions footprint that is associated with any of our activities is, and doing all that we can on any individual element to get as close to zero as possible, as well as being positive in all the areas where we can be.

So you could meet the target quicker than 2040.

I do not want to overcommit. We have made the commitment to Government that we will publish our route map by late summer. We are being highly ambitious, and the challenge that Mr Ruskell just gave me is the challenge that I am sharing with our people internally.

There are other challenges, such as those around our exit from the European Union, that you will have factored into your strategic plan. Will you give us an overview of how you have factored those in? There are a lot of things that we do not know about environmental standards and payment regimes, for example. How did you manage to factor into your strategic plans the fact that we do not know what is happening and that there might be a changing landscape? That seems impossible.

At one level, it is impossible to do. However, the thrust of our strategic plan is to look at the four fundamental main challenges that are ahead for us. One of those is making sure that we keep delivering excellent services for our customers, particularly in the context of our having to adapt to the changing climate as well as replace our ageing infrastructure. Then there is our commitment to net zero. However, through it all, we have to make sure that we keep the support and trust of our customers, who will, over time, need to pay more for their services. That is at the heart of the challenge that we face.

11:30  

Between now and 2040 or 2045, there are clearly lots of uncertainties—things will come along that we cannot envisage. In the same way, we do not know exactly what the post-Brexit implications will be. Therefore, our plan is there to guide us on a direction of travel, but we will need to have lots of flexibility to adapt to challenges or to take advantage of opportunities that come along in the years ahead.

Specifically on EU environmental regulations and so on, we are assuming that, based on the statements that it has made, the Government is committed to preserving the current standards. Over time, as there are perhaps new insights or research into the environmental or drinking water dimensions, those standards may change and we will need to address whatever changes in standards come down the track.

I will ask about charging and investment. Last week, the Water Industry Commission for Scotland published its strategic review of charges. What is your initial reaction to that report?

The Water Industry Commission has taken a very courageous position. It has not done what utility regulators typically do, which is just to look at the needs for the next five-year period. It has said that it has a duty to look at the interests of both current and future customers and that, therefore, it is right to look at what the requirements will be over a 20 or 25-year horizon—for example, what the implications will be for the future scope for efficiency in Scottish Water, for investment demands and, ultimately, for customer charges.

It is not easy for an economic regulator to say that, looking at all the facts, the consequence for customers will be slight increases in prices. It is interesting that all the research that we did with customers in producing our plan told us that they want us to be honest about the financial consequences and they do not want us to put off price increases if those are necessary to replace our assets and protect the environment. Against that backdrop, what the Water Industry Commission has come out with will be challenging for us to deliver, but it is acting very much in the interests of future customers as well as today’s customers.

Do you believe that your model of planning and investment will deliver on a preventative spend model that will give you long-term security to meet those outcomes?

It should. It is certainly an improvement on what we have had so far, which has worked well. We have set investment priorities for a five or six-year period, which has given us a lot of clarity in planning. The new model will enable us to take account of emerging priorities and continually to reprioritise, which is one of the most important things to focus on. We will not just be driven by five or six-year periods, which will be good and will enable more effective and efficient delivery.

The shared vision that was published in 2019 said:

“Together we will support the health and wellbeing of the nation ... We will promote access to the natural environment and encourage communities to enjoy ... it.”

Is there a shared commitment across other portfolios such as health, the environment, transport and energy, and do your budget allocation and spending plans reflect that?

I will answer with reference to the short term and the long term. In the short term, the Water Industry Commission has suggested that the theoretical range for price change would be between 1 and 2 per cent above inflation per year. However, to be prudent, that should probably be between 1.5 and 2 per cent. On top of that, the Government is increasing the amount of borrowing that will be made available in the next period to more than £1 billion. Taken together, that should enable about 10 per cent more investment to be made in the next period than we have delivered in the current one. That is absolutely in line with the sort of investment that it will be sensible for us to make in the next period.

However, when we look towards the middle of the century, there are lots of unknowns, as we say clearly in our strategic plan. We can get a pretty good handle on what it might cost to replace our ageing infrastructure, but I cannot say today that I know exactly what it will cost to adapt to the impacts of our changing climate. There will be impacts right across our systems and we can make an estimate, but it is clear that new factors will be revealed. Equally, we are on a journey to try to work out the cost of getting to net zero. There will be uncertainties there.

We have said that we are committed to engaging with you and our customers, as the costs of delivering the plan become clearer, so that you know what the long-term financial consequences are and so that they can be taken into account in future strategic reviews, such as the one that will happen ahead of 2027.

You have ambitious, significant plans to replace old infrastructure. Do you have any contingency budget that will support businesses and communities that will be adversely affected, even just in the short term, by the works that you will carry out? We have talked about this in previous sessions. I believe that Scottish Water has a duty of care: it should be a good community partner when it comes to upgrading infrastructure and the impact of that on communities. Have you factored in any sort of contingency budget to ensure that communities are not disadvantaged?

In our plan, we have made a significant commitment to try to empower customers and communities through everything that we do. One aspect of that will be to involve communities ever more not just in how we deliver investment but in what investment is delivered and when it is delivered.

We recognise that often, when we do investment, it creates inconvenience, and we are committed to minimising any negative impact and, wherever possible, finding positive impacts for communities. If, when we are assessing a particular project, it comes out that the community has a definite ask—with modest financial consequences—that we should take account of, we will do that.

The Water Industry Commission suggested

“optimising management of the PFI contracts”.

How might that work in practice?

We inherited nine private finance initiative projects when we were set up, covering 20 waste water treatment plants and a large sludge treatment centre. When one of those contracts came on to the market last year, we took advantage of that and we brought it back in-house. That is a good example of how we optimise things. If there are other situations where we have a willing seller, we might well take advantage of that and buy the contract back.

We might choose to extend the life of some contracts. A good example of that would be our contract for sludge treatment and disposal at Daldowie. That is due to expire in 2026 and we are actively exploring with the PFI company whether it would be in its interest and ours to extend it. We are considering whether that would be good to do commercially and whether we could choreograph it to expire when other PFI projects expire around 2030.

Rachael Hamilton has some questions on flooding.

Can you set out how the strategic plan and the delivery plan, together with NPF4, will clarify responsibility for flood planning? What benefits will that bring?

At the moment, multiple organisations have roles in dealing with flooding. We deal with flooding from the sewerage network, and obviously the Scottish Environment Protection Agency, local authorities and the Scottish Government also have roles. The recent report of the Infrastructure Commission for Scotland called for a bit more clarity on the roles and responsibilities around flooding.

There are some really good examples of where things can work very well. We are in two drainage partnerships with local authorities, SEPA and the Scottish Government, of which one is in Glasgow and the other is here in Edinburgh and the Lothians. Those are really good examples of where we can get true alignment and organisations working closely together to deal with surface water and the multiple causes of flooding. There are examples of really good work that already happens.

The national planning framework calls for proactive management of surface water, and we will see lots of new developments. We are talking more and more about blue and green infrastructure and surface water management. We are seeing lots of very positive action, but there is more that we can do. We hope that the drainage partnerships that we run are good exemplars of how we can get alignment between us and other organisations to help to solve the problems of flooding for communities.

Do you have any examples of where you have made improvements to the sustainable drainage systems—SUDS—network? How do you view the current efficiency and efficacy of the SUDS network?

I will give an example that I mentioned the last time that we were here, which was a while ago: the smart canal system in Glasgow. It is a fantastic example of collaborative working between us, Scottish Canals, Glasgow City Council and other organisations in the metropolitan Glasgow strategic drainage partnership. The smart canal system is an example of clever management of the surface water that means that we can open up areas of north Glasgow for development. What we have put in place there is based on SUDS infrastructure. That is a good example of how collaborative working and a focus on surface water really manage the issue.

The implementation of SUDS has been around in Scotland for a number of years. There are historical issues with the maintenance and design of the SUD systems and we are in the process of vesting significant numbers of those systems. New developments and much clearer guidance and information on the design and maintenance of the systems will make them easier for us to vest and easier to operate and maintain.

There is a legacy of poor design and implementation of SUDS. We now have much clearer guidance, although I am sure that there is more that we can do in terms of clearer shared guidance across Scotland and the UK on the design of SUDS, which will be an important part of our future infrastructure.

I want to push you a bit on that. With climate change, the threat of flooding and more surface water is imminent. How are you mitigating against the impacts to the environment and indeed the cost of surface water to businesses, for example?

Last year, we launched our surface water strategy, which calls for two things. First, it calls for no more surface water to go into our networks. That is about how we work with businesses—for example, new developments—to make sure that no new surface water enters our sewerage network, to avoid putting additional pressure on our existing assets. There is no doubt that the forecast for climate change, surface water and rainfall will put more and more pressure on our existing assets. We have two phases—one is to make sure that no more surface water goes in and the other is to find opportunities for taking what surface water is going into our networks out of them. Our focus is on no more going in and on getting what is in, out.

Are the mitigation practices that you use to control surface water in urban and rural areas the same or different?

There tend to be more pressures in urban environments where there is hard standing and the green spaces are being reduced. Anything green is pretty good at slowing down the amount of surface water that is going in.

The challenges tend to be in urban environments such as Glasgow, Edinburgh, Aberdeen and Dundee, where hard standing and roof area mean that much more surface water is captured and transferred quickly into the sewer network.

I will push you on my question regarding the financial pressure on businesses caused by extra surface water. What is in place to help businesses with those increasing costs, particularly in relation to climate change?

If you look at our cost base, you will see that over half of our costs are to do with waste water activities, relative to the water side, and the handling of surface water is a massive part of the waste water costs. The size of sewers that are constructed are designed to cope with all the surface water that goes in; foul sewage, in volumetric terms, is a much smaller part of that. Waste water treatment plants are designed to cope with volumes of water up to three times the amount of foul sewage. The transportation and treatment of surface water through the sewerage system is inherently expensive.

11:45  

On the specific issue of businesses, the Government sets the charging policy framework, and the way that the policy works at the moment means that if a business does not discharge any surface water into the sewerage system, it does not pay any surface water charges. Clearly, however, if it does discharge surface water, it has to pay surface water charges. We are undertaking exploration with the Government on whether there should be changes to those charging arrangements that might incentivise the removal of surface water from the sewers. We will keep looking at that along with the Government, while recognising that, if it is successful, there is still a substantial cost burden associated with all the surface water infrastructure that needs to be borne by the rest of the customer base. We continue to explore that area, but there are not necessarily any easy answers.

There is certainly a grey area over grey water in towns. Do we need clearer lines of responsibility when it comes to surface water and sewerage water? As you know, we have had issues with flooding in towns and fingers being pointed at Scottish Water when it is the local authority’s responsibility to look after surface water on roads or whatever. Do we need to see more clearly where responsibility for that falls? Will that become clearer as you upgrade the Scottish water and sewage works?

I am not sure that there is such a thing as a perfect framework. Different countries tackle the issue in different ways. The arrangements that we have in Scotland are that Scottish Water, local authorities, landowners and so on have distinct responsibilities. The heart of the approach that is enshrined in the relevant legislation is the whole notion of partnership working. Together with other public bodies, we have got a lot better at that and we need to get better at it in future.

We have done a lot of work in conjunction with local authorities to develop integrated catchment studies on, for example, understanding the flows of water that are unique to local authority or Scottish Water responsibility, and what flows are shared between the two. We also support local authorities in their duties around surface water management plans.

I suspect that the future challenges will be to get ever better at our joint working, and to make sure that, where local authorities have responsibilities, they can access the finance that they need to do upgrade work as well as us doing ours. Equally, when the answer is to do something together, we need to find ways of funding and delivering that work together.

We are in a better place than we were a few years ago, and I hope that, in a few years, we will be better still.

We now move on to questions on natural infrastructure.

You have already touched on the role of natural infrastructure, and you will be aware of the Infrastructure Commission for Scotland’s report that says that natural infrastructure is not being embedded enough in strategies and investment programmes. Where does that sit within your priorities? Is it at the top of the hierarchy in terms of preventative spend and long-term investment, or does it go into the too-difficult-to-do box in some cases because it is about partnership working and working on a catchment-wide basis?

Nature-based solutions have been mentioned a couple of times. They play a huge role in how we produce high-quality drinking water and manage surface water in our daily activity across Scottish Water.

The first step that we will look for around water quality is making sure that we get the best quality of source water that we possibly can. That involves active catchment management, whether of our own catchments or in partnership with others. In our decision-making hierarchy, for example, making sure that we have the best quality source water and managing it are pretty much at the top. Controlling any pollutant at source is far better than having to invest in energy-intensive treatment.

That is the case where the asset is Scottish Water’s, such as Loch Katrine, for example.

Yes.

What about areas where you do not have control of the surrounding land use?

In those areas we can work in partnership with landowners, such as Forestry and Land Scotland, and the people who own the peatland catchments around us, to ensure that there is active management in the area. There are ways in which we work with Forestry and Land Scotland to ensure that the forestry land around our catchment is actively managed and protecting the source water is a key part of any management in and around the catchment.

Are there examples of where you are struggling to bring that partnership approach together, where something like a land use strategy at a regional level might be more effective? Is it all plain sailing? Do you approach landowners and they say, “Oh yes, that’s great and it fits our objective, too”?

No, there are lots of differences. The vast majority of the time it works very well: catchment owners understand the impact that they have on waters and recognise the importance of that management. SEPA has a key role in that. Sometimes it is complicated. If we take the River Ugie up in the north-east, there are hundreds—or even thousands—of farms and catchment owners who have an impact on that source water. We are going out and being very proactive there in terms of what we can do to protect the source waters. That is a lot more complicated than it is in an area where we own the catchment or work very closely with other Government agencies in managing catchments.

There are some case studies of places where we are being really proactive. For example, at the moment we are working on the Isle of Lewis, where we have a small treatment works at North Lochs. The catchment for that is not owned by us, but we are working with Scottish Natural Heritage and the local catchment to improve it, from both a carbon capture and a water quality perspective. If that work is successful, it may be preventative spend that puts off investment in that treatment works for 10 or 15 years. There are more and more examples of that type of investment.

Are the wider Government objectives for biodiversity directly factored in? Do you build those objectives into the outcomes in the investment strategy and where does that sit? Are there investments that you might make to deliver a climate change objective that would have an impact on biodiversity or is it all win-win?

Not quite. We take our biodiversity duties very seriously and we report on them in our sustainability report and show examples of our reporting. In our strategic plan we are setting out changes in our decision making for the future. We had tended to be focused on whole-life costs for investment, but we are now thinking more about the six capitals and the natural and social capital contributions that any investment will also make. That is a growing part of our investment strategy. Peatland and carbon sequestration is a good example of that.

As part of our work with the Customer Forum for Water we have agreed to audit our assets and estate to look at greater opportunities for us to support biodiversity gains. That might mean allowing access to our sites or pathways through them. That kind of natural and social capital will form a much greater part of our decision making.

That is an important part of what the Infrastructure Commission for Scotland has also called for, which is a need for wider ways of thinking about investment decisions. The commission calls that out as a need for better decisions that cover not just costs, but also natural and social capital.

How does that relate to current EU regulations, which relate in part to biodiversity, and in part to other indicators, such as the bacterial quality of bathing waters and so on. At the moment, the Government wishes to stay broadly aligned to European Union regulations, but is your thinking evolving on how you balance environmental interests in that context?

We focus strongly on meeting all our regulatory requirements and all the expectations that are on us, a lot of which are end-of-pipe regulations from an environmental point of view. However, there is much more in terms of our conversations with SEPA, for example, whose water sector plan highlights the wider benefits that can be made from investment in our operations. There are more and more opportunities in looking at the multiple benefits of investment, rather than it being all about end-of-pipe compliance.

I have a fairly targeted supplementary question. Last year, the committee visited Inverness and saw some interesting work in which culverts were removed, leaving what I would describe as a burn, although it was artificial to some degree. Repairing and planting was done and biodiversity was improved, and there was the possibility of a day centre being involved to improve mental and physical wellbeing from being in such surroundings. We also briefly saw an example of controlled flooding in which water could flow into part of a football pitch, meaning that there would be far less flooding further downstream. Are you involved in projects—even those that are not on your land—that provide what I see as positive and semi-nature-based solutions?

Very much so.

We are involved, but we have to be careful with regard to our responsibilities. On the waste water side, our primary responsibility is sewage and keeping it in the sewer system. From an economic as well as an environmental angle, our big driver in the management of surface water is to ensure that we keep surface water out of and, crucially, sewage in the system. We want sewage to go safely from somebody depositing it in their house right the way to a treatment plant, and we want to ensure that it does not overflow on to a playing field or the like. Our biggest challenge is to reduce the extent of sewage surcharging from sewers, which is an increasing challenge with greater storm intensity.

Returning to the essence of your question, we want to work in whatever ways are appropriate, in partnership with others, to deliver better outcomes for communities. As we adapt the way in which we work at Scottish Water, part of our challenge is to get all the people in Scottish Water who are involved in such matters thinking sufficiently laterally when they are working on projects, so that they take account of all the opportunities that they can contribute to, as well as delivering our narrow objectives.

Do you agree that the type of project that I described might be considered as preventative work for you, as it might be that, in dealing with sewage, you are challenged by surface water?

It would depend on the specifics, but that might well be the case. What is key in partnership working is that, just as we make asks of partners, they make asks of us, and it is about how we work together most effectively to deliver the best outcome.

Wearing my hat as chair of the board, I note that the board has governance responsibility for the company delivering its strategy, and that the board is tuned into those matters and understands the strategy fully. We have a number of non-executive directors who come from a range of sectors and who have a lot of experience, which is often international. That means that the challenge that our executives receive at the board is strong and informed. I hope that my colleagues would say that they find that helpful. From that end, these are good discussions.

I have some questions on the security and quality of supply. What challenges are there in ensuring that the quality of source water is to the same standard across Scotland?

12:00  

There are significant challenges. At one level, we are fortunate and blessed with our lochs and reservoirs and the soft water that people really enjoy drinking. However, that water can be full of lots of naturally occurring materials that can create by-products when it comes into contact with things that we use in the treatment process. We need to do quite a lot in many catchments from a filtration and treatment angle to remove some of those naturally occurring elements in our source water to make sure that it is always safe to drink. That is the stable state, if you like.

Beyond that, we face some wider long-term challenges—for example, we face more intense storms, which cause greater run-off of material into receiving waters, particularly up in the north-east, where a lot of our water is extracted from rivers. You just need to look at a river to see how the condition of the water can change in a very short period. We need to make sure that our treatment plants are robust enough to cope with that variability.

Occasional hazards can emerge. A live hazard that we are dealing with well is in a catchment where, yesterday, we discovered some oily substance in the loch that serves a treatment plant. We traced that back to a breakdown related to an oil tank serving somebody’s Aga—it had overtopped into the septic tank, which had overflowed into the burn that runs into the loch. The good thing is that we have plenty of days’ storage in that supply, so we have turned off the treatment plant. We have contained the issue and we are managing it very well.

That is good example of the sort of left-field hazard that we face all the time. We have an important job to do 24/7 to understand the static environment and all the dynamic changes that can happen.

We have talked an awful lot about flooding and you have alluded to some of the issues that can affect the quality of the source water. We have not talked about drought. Not so long ago—it was a couple of years ago—we had that period over the summer that impacted those who rely on water for feeding their animals and so on. How have you factored that such historic events into your future planning to ensure that we have that water supply?

That is another element that we need to take into account in our adaptation strategy for climate change. How we deal with potentially more severe and more extended periods of drought, such as the one that we experienced in summer 2018, is built into our assessments of the water supply and demand balance. We look at the likely long-term demand in a particular area and the potential variability in supply—for example, if consecutive dry periods are expected. That will lead us to improve security of supply in particular areas.

There will always be elements where the best and most efficient way of doing things relates to our just responding when the event occurs. It is not all about hard engineering; lots of it is about having good response and recovery plans for when events occur. Nonetheless, because our systems face multiple hazards—whether drought, diesel contamination that might come in from left field or failure of our infrastructure because of a power outage or a major burst pipe—we determined that we needed to build much more resilience into our water supply systems over time.

Our aim—over a significant period—is for all large communities to be dual fed. That means that if something affects the water supply, which usually comes from one source, there will be an alternative supply that the water can come from. However, we have a long journey ahead. We reckon that by the time we have completed the current Ayrshire resilience scheme in two to three years’ time, about a third of Scotland will be able to be dual supplied. There is a long way to go to ensure that all major communities are dual supplied, but we will address that in the delivery of our strategic plan.

Another issue is capacity of supply, particularly for growing settlements. I see that expansion in Ellon in my area, and you will know about the issues there. Projections show that there will be more of a rise in populations towards the east of Scotland—people have obviously heard how great the east of Scotland is. That will have to be factored into your long-term plan, because quite a lot of the larger towns and cities in the east have only one reservoir. How will you factor that in?

We will take a multifaceted approach to addressing that pressure. First, we have to keep bearing down on leakage in our water networks. We are now well into the economic level of leakage, effectively, but we keep driving that down as we get ever more efficient at finding and fixing leaks. We have driven year-on-year reductions in leakage and we need to keep bearing down on that over the years to come.

Secondly, over time, we need to encourage our customers—the people of Scotland—to become ever more efficient in their use of water. Some of that will need to happen upstream, in terms of building standards and the refurbishment of existing properties, but over time we will try to engage folks in the benefits of water efficiency. We held events across Scotland last summer at which we spoke to about 20,000 people. We wondered beforehand how well people would respond to that, given the joke about it forever raining in Scotland, so why would we need to use water wisely? However, we were hugely impressed by how people responded. They remembered the summer of 2018, so they realised that, even when it is chucking it down—as it is in February 2020—we are under water stress at times and might be under more water stress in the future, so they need to play their part in addressing that. We have a big job to encourage that in the years ahead.

No doubt, there will be further discussions over time, particularly with SEPA, around making sure that there is fair use of water that balances the needs of agriculture, business and the public water supply system. We might need to augment supplies in some areas, for example by raising reservoir levels. A scheme that we are likely to launch shortly involves augmenting the water supply for the Inverness area and out along the A96 corridor to the east, because of all the growth there. The two lochs that sit above Loch Ness to the south, which supply Inverness, might not have enough water in a really dry year to cope with huge demand, so the scheme will abstract from Loch Ness to supplement our existing supply. That is a good example of how we are thinking and planning ahead to ensure that we can support growth, even in the context of a more challenging climate.

Thank you.

The water network will potentially face more stress and demand in the future. With a view to tackling climate change and ensuring more efficient use of resources, businesses and commercial properties are already metered. If your ambition is to make the public more aware of water wastage, can you see individual metering of water usage happening in the future?

That is, for a variety of reasons, very much a policy matter for the Scottish Government. The Government’s current policy position is to support household charging being primarily linked to council tax bands. However, if a household wants a water meter, we will supply one—albeit for a charge.

We can never say never to anything that might need to change from the policy angle, particularly when we are looking decades ahead. However, based on current metering infrastructure and costs, providing meters would be an expensive addition to the infrastructure. The regulator in England—Ofwat—did some work a few years ago and reckoned that the cost of installing, maintaining and reading meters worked out at an average of an extra £50 a year for the average household bill. In addition to all the benefits that our charging system in Scotland gives from a social protection angle, it is inherently a lower-cost one for all customers.

Who knows what the future might bring and what technologies might be available? If it is proved that people understanding usage helps to drive down consumption, perhaps we will have meters. However, we are doing work at the moment with the Energy Saving Trust to look at the fact that about a quarter of the energy bill in a home is for heating water. We are trying to raise awareness of the link between the use of water and the use of energy and people’s energy bills. If we compare the size of energy bills to that of water bills, we see that driving down energy consumption through smarter use of hot water creates far more savings for households than they will achieve through reducing their water charges, given the fixed-cost nature of our water supply system.

I go back to Mark Ruskell’s point about land use strategy and linking that to water treatment plants. Has any assessment been done of whether planting trees, for example, mitigates acidification and therefore puts less pressure on water treatment plants?

There is a trend not just here but across northern Europe regarding de-acidification. Among the benefits of cleaning up the atmosphere are the changes in the pH of raw waters, with more organics coming in. That is a side impact of the investment in the clean-up that took place many years ago. There is not necessarily a link between forestry and acidification; the biggest change is an atmospheric one.

There have been challenges in the past year for our water treatment works and our source water because of wash-off from our catchments—that is, from particles being washed off into our reservoirs. Certain kinds of forestry practice can slow down that process. Good forestry management practices in and around our catchments therefore have benefits. There is not necessarily a direct link with forestry in that way, but we would welcome any good catchment management that is linked to managing the risks for our source waters.

Thank you for giving us your time this morning. I think that we have exhausted our lines of questioning.

I neglected to say earlier that we have apologies from Stewart Stevenson and Angus MacDonald, so that is on the record now.

At its next meeting on 3 March, the committee will take evidence on draft regulations establishing a register of persons holding a controlled interest in land and draft regulations on the right to buy land to further sustainable development.

That concludes the committee’s business in public and we now move into private session. I ask that the public gallery be cleared.

12:12 Meeting continued in private until 12:46.