Building a Hydro Nation - A Consultation

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5. DEVELOPING SCOTTISH WATER - ADDITIONAL FUNCTIONS

As previously mentioned, the 2002 Act sets out the existing regulatory framework for the water industry in Scotland and specifies the functions of Scottish Water. In particular it specifies Scottish Water's core functions which broadly are the delivery of high quality drinking water and collection and treatment of wastewater and that Scottish Water has general powers under Section 25 to undertake other functions, commonly called non-core functions.

Section 4 covered whether Scottish Water's powers to develop commercial opportunities could usefully be clarified. Another issue to explore is whether there are other activities which are less commercial or even non-commercial that Scottish Water should develop, and if these activities should be statutory functions.

It may be that different approaches are appropriate for different functions. There may be a difference in approach between commercial functions and non-commercial functions. Legislation for some functions might have to be complex and take account of other relevant legislation. In all cases, the interaction with the current core functions and the regulatory and financial framework governing Scottish Water would have to be carefully considered bearing in mind the principles set in section 3.

Below is a range of possible functions of a largely non-commercial nature and areas of activity that Ministers have identified in recent months.

5.1 International Development

In Scotland we recognise our good fortune in having a plentiful water supply and infrastructure that provides safe clean drinking water and removes and treats dirty wastewater. Not everyone in the world shares this good fortune.

One in eight of the world's population does not have access to clean water. Worldwide, 2.5 billion people live without access to basic sanitation. This lack of clean water and safe sanitation results in over two million people dying from water-related diseases every year. It also affects people's time, livelihoods and quality of life.

The most obvious benefit of access to clean water and sanitation is a reduction in disease. Although, the economic position of poor families is often dramatically improved when they gain access to these basic services. Clean water and sanitation are therefore key to eradicating poverty and helping developing countries. This is formally recognised in the Millennium Development Goals relating to access to clean water and sanitation (see The Millennium Development Goals Report).

Scottish Ministers are committed to advancing Scotland's place in the world as a responsible nation. The Scottish Government's International Development Policy recognises the longstanding commitment of organisations and individuals in Scotland to international development, building upon both the historical and contemporary relationships that exist between Scotland and many countries within the developing world. Scotland already contributes to UK efforts through the Department for International Development and this policy reflects how the Scottish Government, as a devolved administration, can enhance Scotland's contribution to the global fight against poverty.

Scottish Water already plays an active role by supporting WaterAid, the UK's specialist development charity working to help some of the poorest communities in Africa and Asia to help provide them with a safe drinking water supply, provide better sanitation and promote hygiene. WaterAid relies on the support of the water sector and Scottish Water holds WaterAid as its charity of choice. Scottish Water staff regularly organise fundraising events, with all donations going towards WaterAid. Scottish Water has also provided emergency relief by donating equipment during times of natural disaster such as the recent floods in Pakistan.

Find out more about the Scottish Government's policy on International Development at:
http://www.scotland.gov.uk/Topics/Government/International-Relations/internationaldevelopment

The Government wishes to build on these efforts so that Scottish Water can do more. It will involve them more closely in this element of Scotland's International Development policy. Scottish Water has the resources that can make a critical difference, including skills, expertise, equipment and funds. The Government intends to direct Scottish Water to allocate a limited amount of financial resources to international development and to work with the Scottish Government in partnership to ensure this funding makes the most effective contribution to Scotland's international development objectives.

The Government believes that such resources should come from the financial surpluses generated by Scottish Water's commercial subsidiaries. The funding would be delivered in line with the Paris Declaration on Aid Effectiveness, and would contribute to the achievement of Millennium Development Goals, particularly relating to access to clean water and sanitation. Scottish companies specialising in providing small scale purification and filtration equipment may also have a role to play.

Consultation Question:

4(a). Do you support the proposal that Scottish Water should work with the Scottish Government to identify areas where they may contribute to water-related international development activities?

4(b). Should Scottish Water be asked to use part of their own resources to support the proposed water-related international development activities?

4(c). If yes, should Scottish Water be given a statutory obligation to do so or should they take responsibility for deciding how best they can contribute resource and expertise?

5.2 Research and Development

The maintenance of a clean safe water supply to populations around the world and the technologies and management approaches used to achieve this rely heavily on having an effective science and technology base to underpin them. The need for innovation to maintain global water supplies will increase with the effects of climate change and population and economic growth presenting significant economic opportunities for Scottish knowledge and products. Alongside this, the legislation underpinning water management has become much stronger over recent years and all governments within the EU now have clear responsibilities in terms of maintaining water quality.

Scotland has a long history of outstanding science innovation and Scotland's science and research base continues to be among the best in the world today. A report compiled in 2009 confirms that Scotland's research is cited by other researchers around the world more often than any other country, in comparison to its Gross Domestic Product ( GDP). Within the Scottish research base, Scotland has a tradition of researching into the management of water resources and how the sustainable use of the water resource can be achieved.

Examples of Existing Water Research in Scotland

  • The Scottish Government supports water related research at the Macaulay Land Use Research Institute exploring key issues related to catchment management and water quality.
  • The Dundee UNESCO Centre for Water Law, Policy and Science undertakes research on International and National water law, the regulation of water services, catchment studies and scientific research into water and wetland ecosystem services.
  • The Civil Engineering Department of Strathclyde University explore issues relating to water resources that include flooding and the rehabilitation design and optimisation of water distribution and wastewater systems.
  • The University of Abertay hosts the Urban Water Technology Centre (UWTC). Established in 1993, the Centre's stated mission is to provide a service to the water industry (in the UK and overseas) through research, academic expertise and consultancy.
  • Heriot-Watt University works as part of the flood risk management consortium and has a drainage research group that focuses on the design and management of urban drainage.

Water-related research and work is also ongoing at many other Scottish Universities and research establishments as well as in Government bodies such as SEPA and Scottish Natural Heritage.

Science, technology and innovation are essential in increasing competitiveness and improving Scotland's economic performance in today's knowledge-based economy. The Scottish Government wishes to capitalise on the strengths we have in Scotland by supporting the creation of a Scottish Centre of Expertise that is modelled on the Stockholm International Water Institute to foster commercial and humanitarian innovation.

The Government has already begun the process of establishing such an Institute by seeking tenders for a centre of expertise to provide scientific advice to policy makers. The possibility of commercially driven research requires to be added to this framework. We are now seeking views on how wider aspects of the Centre should be developed: where should it be based and how should it be organised; what should it focus on and how should it be funded?

We believe Scottish Water could play a key role in such a Centre: they are well connected into the water industry research networks as well as having their own water quality testing laboratories and are constantly looking to drive innovation and the effective use of technology to deliver the best possible outcomes for Scottish Water customers. Scottish Water's involvement in the science and research networks in Scotland could be used to coordinate the world-renowned expertise in Scotland's universities and research institutes to develop Scottish products and knowledge appropriate to the emerging global markets and policy interests in water efficiency and management.

Consultation Question:

5(a). Which areas of water science and innovation in Scotland could contribute to assist in the initiative, and how could this input best be achieved and organised?

5(b). What role should Scottish Water play in any such Centre?

5.3. Canals

Scotland has a 137 mile (220km) canal network consisting of the Caledonian, Crinan, Forth & Clyde, Union and Monkland canals. The canals are transit canals linking our east and west coasts, rather than forming a purely inland network as in England and Wales. Our canals are all of historical importance, and so are classed as Scheduled Ancient Monuments.

The renaissance of Scotland's canals got underway in the 1990s and was greatly assisted by devolution, which enabled the Scottish Government to provide sufficient grant-in-aid for the maintenance of the canals and to set a clear and comprehensive policy for their future.

The Forth & Clyde and Union canals, which had closed to navigation in the 1960s, were brought back to life through the Millennium Link project. The project made these waterways navigable once more, created the Falkirk Wheel, and proved a catalyst for regeneration. These canals are assets valued by their communities and the Falkirk Wheel is now a symbol of modern Scotland and a major tourist attraction. A 10 year works programme on the Caledonian Canal revitalised the waterway and ensured that it maintained its position as an economic driving force in the Highlands - the Great Glen is a major tourist destination. The canal is used by overseas yachts accessing our world-class west coast sailing waters. Similar work was undertaken on the Crinan canal which is also used by yachts accessing the west coast.

With the improvements to the canal infrastructure secured, activity is now underway to maximise their benefits to Scotland. Current major regeneration projects include the Helix (near Falkirk), as well as Speirs Wharf and Maryhill in Glasgow.

Today, the canals are managed by British Waterways Scotland, an operational unit of British Waterways. British Waterways was originally established by the Transport Acts of 1962 and 1968. British Waterways Scotland is funded by grant-in-aid from the Scottish Government and commercially generated income and is responsible for the maintenance and upkeep of the canal network, as well as a number of aqueducts, bridges, reservoirs and weirs. Their turnover is around £18 million a year.

In October 2010, the UK Government confirmed that it will transfer British Waterways' functions and assets, in England and Wales, to a new waterways charity with effect from 1 April 2012. Scottish Ministers are very aware of the valuable contribution that canals make to supporting Scotland's sustainable economic growth - through regeneration, tourism and healthy lifestyles - and have decided that Scotland's canals should remain in the public sector.

This decision provides us with an opportunity to consider what structure within the public sector delivers greatest value for Scotland. Scottish Water manages considerable water related assets and has extensive framework contracts with surveyors and civil construction firms. British Waterways Scotland manages similar assets and has wide experience in regeneration and the exploitation of cross-cutting benefits. Likewise, Caledonian Maritime Assets Limited manages water-related assets in terms of piers and harbours. How can Scottish Water work together with British Waterways Scotland and Caledonian Maritime Assets Limited to achieve additional public benefit from all our water-related infrastructure, both inland and maritime?

Consultation Question:

6(a). What opportunities are there for creating additional public benefit from Scotland's water infrastructure, both inland and maritime?

6(b). What role could Scottish Water play?

5.4 Flood Risk Management

In the Flood Risk Management (Scotland) Act 2009 (the 2009 Act), Scottish Water's important role in managing flood risk across Scotland was recognised and the 2009 Act requires Scottish Water to work with a range of other bodies in that role, principally local authorities and SEPA.

In preparing the legislation the Government considered and, with widespread support, rejected the possibility of identifying a single flooding agency for Scotland, in which all the planning and delivery functions would be vested. The Government sees no reason to revise this conclusion. The roles of SEPA and Local Authorities must remain central to effective flood risk management. However, the Government considers that the potential of Scottish Water to play a more significant role in flood risk management, making greater use of its particular skills and expertise should be examined.

Addressing surface water flooding, which occurs when heavy rainfall overwhelms the drainage systems in urban areas, is a major challenge. Significant investment is often required, which has to be carefully coordinated between Local Authorities and Scottish Water. Contaminants can also enter the system at several points and lead to pollution of land and watercourses. SEPA has an important role in ensuring that integrated drainage solutions that deliver flooding and environmental benefits are adopted.

Consultation Question:

6(a). What opportunities are there for creating additional public benefit from Scotland's water infrastructure, both inland and maritime?

6(b). What role could Scottish Water play?

The Metropolitan Glasgow Surface Drainage Partnership ( MGSDP) www.mgsdp.org/has made significant progress in analysing and presenting solutions to the problems in Glasgow. This has been an effective voluntary partnership between a number of agencies in particular Scottish Water, Glasgow City Council and SEPA. This partnership model to delivering integrated urban drainage will be promoted in Ministerial Guidance on managing flooding sustainably due to be issued early next year. Ministers would be interested in hearing views as to whether such partnerships should be given a stronger statutory basis so delivery of projects could be simplified. This would involve requiring Scottish Water and relevant Local Authorities to establish a formal Board to formulate and deliver on an explicit partnership basis and appropriate drainage plan for the designated area.

Consultation Question:

7. Should Scottish Water and Local Authorities be given powers to establish Partnership Boards to address the issues of surface water flooding and implement solutions?

Good surface water management will also involve increased use of Sustainable Drainage Systems ( SUDS) and surface water flow routes, through the design and planning of the whole urban fabric, as the capacity of the landscape to store and convey water is much greater than the below-ground system. There are a wide range of structures and techniques for surface water drainage, which are considered more sustainable than conventional piped systems, because they can offer improvements in environmental water quality, reduced flood risk and amenity benefits.

Consultation Questions:

8. Could Scottish Water fulfil a proactive role in promoting the use of more sustainable urban drainage techniques for flood management?

9. Is there a role for Scottish Water to be required to undertake urban surface water flooding studies that examine above and below ground drainage?

10. Are there further steps Scottish Water can take with respect to SUDS that provide flood management benefits?

Urban drainage needs are an important consideration in planning decisions, and development plans can play a key role in prompting the use of sustainable urban drainage.

Consultation Questions:

11. Would a greater role for Scottish Water in surface water flooding detract from the important role that planning authorities play in this area?

12. Should Scottish water be given a stronger role in planning decisions that could affect surface water flooding?

The 2009 Act requires the production of flood risk management plans that will identify and coordinate the implementation of a range of actions to reduce the impacts of flooding. These plans are led by SEPA, and are underpinned by joint working arrangements between SEPA, Local Authorities and Scottish Water. The plans will incorporate a wide range of actions, including flood defences, flood warning, urban drainage and more natural actions like land management and river or coastal restoration.

Coordinating implementation of these plans was seen as a significant concern during the passage of the 2009 Act, particularly in the context of the pressure on Local Authority resources and expertise. Scottish Water has extensive experience and expertise in procuring and managing large scale capital projects, could its role be expanded in this area?

Consultation Question:

13. Should Scottish Water be given a formal role to support local authorities in relation to flood defence projects?

A further development might be to consider the extent to which it is appropriate for Scottish Water to contribute financially to the implementation of actions set out in flood risk management plans prepared by SEPA and local authorities. This could include actions that are beyond its present responsibilities for surface water and sewer flooding.

To achieve this, specific flood defence projects would have to be identified in the Ministerial Objectives set for Scottish Water. These would then form part of the cost package subject to the charge review and the Water Industry Commission for Scotland would determine charges on water customers to take account of those projects. To provide the basis for this the core functions of Scottish Water would have to be extended to include wider functions in relation to flooding. If this were accepted in principle, the detailed structure of the 2009 Act would require careful examination to draft appropriate provisions.

The benefits of such a move would be to create a greater certainty in the implementation of flood risk management plans and develop a greater integration on the ground between the activities of Scottish Water and Local Authorities. However, a significant role for Scottish Water in taking forward schemes could have implications for local accountability and engagement. There would also be implications for Local Authorities in creating a clear division of responsibilities between Scottish Water and Local Authorities in taking forward flood protection schemes and their long-term maintenance. The implications for water customers would have to be assessed carefully and these are discussed in the next section, and in particular section 6.3.

5.5 Other Areas

The sections above explore the potential new functions that the Government has identified for Scottish Water. The Government would welcome further ideas that utilise Scottish Water's assets and expertise and Scotland's abundant water resources to deliver economic and social benefits.

5.6 Legislative Requirements

The above discussion highlighted additional functions Scottish Water could potentially undertake. There are various ways of conferring such additional functions on Scottish Water: decisions could rest with the Scottish Water Board; Ministers could use present powers of direction; an order making power could be enacted under which Ministers could impose additional functions on Scottish Water; specific additional functions could be identified in statute.

Ministers have powers, under of the 2002 Act as amended, to confer by order on Scottish Water additional functions relating to the provision of water and sewerage services. The relevant legislation is shown in the box below.

Section 56B of the Water Industry (Scotland) Act 2002:

(1) The Scottish Ministers may by order confer on Scottish Water such additional or supplementary functions relating to the provision of water and sewerage services by Scottish Water as the Scottish Ministers considered appropriate so to confer.

(2) The Scottish Ministers are to consult Scottish Water and the Commission on any order they propose to make under subsection (1).

Functions conferred on Scottish Water by an order under Section 56B of the 2002 Act would become part of Scottish Water's core functions to deliver water and sewerage services. As a consequence they would fall within the legislative framework regime that applies to those functions. This framework, including economic regulation, requires Scottish Water to provide these functions and is designed to ensure that customers receive an efficient and high quality service in return for the charges that they pay.

The order making power under Section 56B is restrictive in that it can only be used for functions relating to the provision of water and sewerage services. It also may not be appropriate for some of the possible developments highlighted above to be part of the framework applying to core services. This is particularly the case where customers would not receive a direct service as a result of Scottish Water undertaking a function, as would be the case with Scottish Water's role in relation to the Centre of Expertise on water management.

However, it may be appropriate for Scottish Water to have a particular function that is separate from its core functions. The legislative framework for Scottish Water could develop so that Scottish Water has a number of functions, one of which is the provision of water and sewerage services, with a distinct legislative framework applying to each function (or group of functions). This would allow the current framework that applies to the provision of water and sewerage services to remain in place.

Consultation Questions:

14. Do you think Scottish Water should be given additional functions? Please give details.

15. What would be the most appropriate way to confer such functions on Scottish Water? For example it could be done on a statutory basis or through Ministers' powers of directions. If it were done on a statutory basis, is it appropriate to extend Scottish Water's core functions to include the additional functions or is it more appropriate to have separate legislative frameworks for the functions for water and sewerage (core functions) and any other functions?