CHALLENGES FOR WATER AND SEWERAGE NETWORKS
Speech by Scottish Water Chief Executive Richard Ackroyd
To Pipeline Industries Guild at Scottish Branch Prestige Lecture
On October 10, 2008.
Opening 1- Glass of Water
Good afternoon, ladies and gentlemen.
In March, this year I joined the UK’s fastest improving water company.
Publicly owned and answerable to the Scottish Parliament and the people of Scotland Scottish
Water was formed as recently as 2002 and has not benefited from the same sustained investment
enjoyed by the companies south of the border for the last 20 years.
Slide 2– Achievements so Far
To meet and match the efficiency and service delivery of these companies was a daunting
challenge. In those first four years 2002-2006 SW saved its customers more than £1 billion. It also
cut its running costs by more than 40 per cent.
We also made major strides in delivering the investment in the water infrastructure that Scotland
needed – bringing many assets up to European standard - while keeping charges low.
Slide 3- The Sheer size of Scotland
Now, just over six months into the job I can see further significant progress. While there is still
much to do, and we cannot afford to be complacent, we are rapidly closing the gap with England
and Wales in all aspects of our business.
But there are also many new challenges - not least, continuing to deliver real value for money for
our customers in these tough economic times while at same time continuing the improvements our
customers and Scotland need.
As a country Scotland presents unique challenges. Scottish Water and its partners are investing in
the future of the country’s infrastructure by transforming the water network to world class
Let me explain something of the challenges of working in the water industry in Scotland, starting
with the sheer size and geography of the network.
Scottish Water is responsible for one third of the land mass of Scotland with 10,000 kms of
coastline. We are also the fourth largest water company in the UK.
With five million customers from Shetland to Stranraer we have 29,306 miles of water pipes, now
delivering the best ever drinking water Scotland has ever had to our customers’ taps.
That amounts to hundreds of millions of litres of safe, clean drinking water from 307 water
treatment works to 2.4 million households.
We also have 30,921 miles of sewer pipes, more than 1,800 waste water treatment works. We take
away almost 700 million litres of waste water and treat it before returning it safely to the
We are regulated by three main bodies. The Water Industry Commission which regulates customer
charges and the levels of service; the Drinking Water Quality Regulator monitors performance to
meet legal standards set for drinking water; and the Scottish Environment Protection Agency
monitors performance in meeting UK and European standards. Let me say that I am a strong
believer in the benefits of firm regulation. It is a powerful impetus on Scottish Water to continue to
up our game.
Scottish Water is now in its second regulatory period. In the first investment programme 2002-2006
we delivered £2.3 billion worth of investment for £1.8 billion, saving £500 m, adding to the savings
which resulted in reducing the cost of running the business by more than 40 per cent.
The programme for 2006-2010 is worth, at out turn £2.4 billion, one of the biggest investment
programmes in the UK.
There are some interesting tasks ahead for the water industry and I will talk more on these later.
But the most interesting challenge - and I look forward to working with many of you here today - is
to find ways to deliver the levels of investment Scotland will need for the years ahead while
keeping charges to our customers steady and increasingly affordable. That is your job as much as
Slide 4 of 2002-2006 partners
We created a unique arrangement in 2002 that brought clear benefits to our partners, Scottish
Water and our customers. And it helped us deliver the efficiencies our owners and regulators
demanded. Furthermore, it enables Scottish Water to transfer some of the risk in such a large
construction programme. Something that is very important to a Public Sector body that lacks
equity in its balance sheet.
It also provided thousands of construction jobs in Scotland and allowed a transfer of skills from our
partners with experience of many investment programmes in other parts of the country to Scottish
Water secondees. It brought benefits to everyone. For many of our partners working in small
communities in Scotland that in itself brought new challenges. Working so closely with small
communities and, often living and working in those communities, brought its own pressure to the
Slide 5– Fair Island
Let me give you an example. One of our guys went to Fair Isle, and for those of you who think that
is a jumper, it is actually a small island about half way between Shetland and Orkney - 25 miles
south west of Shetland and 30 miles north east from Orkney. The ferry from Shetland takes four
and a half hours.
One of our guys went for one day to check on work and was stuck for six days by bad weather. In
Fair Isle we have invested half a million pounds on improving the water quality for 70 people.
We had to ship everything including 80 tonnes of cement over on a hired boat. It was difficult to
find accommodation but thankfully the job is done and the good people of Fair Isle now get the
same high quality of drinking water as everyone else in Scotland. That is really at the core of what
Scottish Water does. The same service and the same charges for every single home across
Scotland. It’s not just in the big cities although we are investing heavily in those urban areas well.
We have a man on the Fair Isle and he will do water and probably 17 other jobs as well. Fireman,
lands the weekly plane, delivers the post and checks the water quality is good. I think this is the
real meaning of multi tasking.
How about Foula - 20 miles west off Shetland and only 3 miles long? We have invested £360,000
on better quality drinking water for 30 people. That’s £12,000 per person.
Slide 6– 2006-2010 (the delivery partners now and CID)
In this investment programme 2006-2010 we have brought some of the work in house. Capital
Investment Delivery helps with some of the less defined parts of the programme allowing SWS to
deal with the defined part of the investment.
Slide 7 -The Queen at Milngavie
This approach is helping us deliver the benefits that Scotland needs. In November 2007 we
switched on the new £120 million new Milngavie Water Treatment Works which provides clearer,
fresher water to 700,000 people in Greater Glasgow and provides an effective barrier to
cryptosporidium which affected the supply in 2002.
In the last few months we were granted planning permission to build a new water treatment works
for Edinburgh at Glencorse. This will solve a long standing issue with discoloured water from
Alnwickhill and see the closure of our works at Fairmilehead in 2011.
In this period alone we are improving or replacing 187 water treatment works.
Delivering £2.4 billion worth of investment was always going to be a challenge. Planning
applications, land acquisitions, consultation with customers all play a part. But the biggest
challenge is always to understand and to ensure that the priority of everyone who works with
Scottish Water is to deliver projects on time, in spec and on budget while understanding our
customers concerns and needs. Only then will we be a real success.
About half of the programme is Capital Maintenance. This investment is vital to maintain our
existing assets in an operable and reliable condition. The balance of the programme comes from
objectives set for us by Scottish Ministers. This includes new legal standards to improve drinking
water quality and waste water standards but also Ministers’ policy objectives such as reducing the
risk for sewer flooding and allowing capacity for new development in Scotland.
These are broken down into annual outputs, so the company knows what must be achieved each
In 2006/07 we delivered just over £400 million. Last year 2007/08 it was a massive £625 million.
This year we are working towards £670 million worth of investment.
By 2010 Scottish Water will have invested £4 billion in real terms on transforming the water
infrastructure in Scotland.
Today we are already planning ahead. We have submitted our first draft business plan for 2010-
2014. This plan proposes an investment programme that is slightly smaller than the current one
but still amongst the biggest in the UK water industry. At the same time we aim to hold our
charges to customers at below inflation levels. We believe we have a business plan which is
focused on continuing to deliver real value for money for our customers during that period. We are
already talking to our potential new partners for 2010-2014.
Slide 8 - charges table
It’s worth taking a moment to reflect on how charges for our household customers in Scotland
compare with other companies.
Today our average household charge is £310. The average household charge is cheaper than the
average in England and Wales by £20 a year. We are cheaper than seven of the companies south
of the border and by next year our regulator believes we will be cheaper than eight of them. This
can be done only by continuing to be efficient both on opex and capex.
Slide 9- House Charges Girl on pipe
This is a golden opportunity for Scottish Water. At a time when other utility bills are hitting the
headlines because of massive rises, we are keeping prices down for our hard pressed customers.
Beyond that we are looking at what the Scottish Water industry will need for many years to come.
One thing is certain - the work cannot and will not stop now. There will have to be much more
investment for many years to come.
Before I go on to the challenges for the future I want to talk about another of the other
achievements of the last six years.
On April 1, 2008 we successfully separated the retail and wholesale divisions. Within the Scottish
Water family there is a new retail arm - Business Stream. Scottish Water, the wholesaler,
supported the opening of the business customer market to retail competition, a first in the UK. We
are actively involved with all new entrants to the market and committed to providing a first class
service as the wholesale provider. Not for the first time the eyes of the other companies are
watching Scotland as we lead the way.
Slide 10- Water footprint
The future and Innovation. It’s always difficult to predict what will happen in the future. But one
thing is certain. We must continue to improve the water infrastructure in Scotland.
Our customers are becoming all too aware of a changing climate. Severe storms and the sheer
volume of rain water this summer have brought new problems to light.
We need to change to keep pace with the changing climate and climate change will drive one of
my favourite hobby horses - innovation.
Slide 11- POD and the new pipe manufacturing plant at the Glencorse Water Treatment
Innovation is what marks out a company above others. For Scottish Water the geography of the
country and the extremes of weather will drive innovation. But we need to do more. I have just
appointed a new Director of Technology and Innovation specifically charged with bringing fresh
ideas into the business.
I believe many of you can help Scottish Water become more innovative. You can help us find ways
to replace aging water mains without digging up the streets, causing disruption to our customers or
turning their water supply off.
You can help us reduce our electricity bill, our transport costs; help us as we strive to become a
more sustainable business. We are the largest consumer of electricity in Scotland whilst simply
heightens the need for us to use less of it and generate our own renewable power.
Climate change also leads me to more challenges facing the industry in Scotland. We are working
to encourage our construction partners to use sustainable energy sources for portacabins on our
construction sites. We have been working with a supplier to develop cabins that use no diesel but
use LPG and researching if we can use solar panels and wind turbines. Not using diesel also
reduces the risk of contamination. So benefits all round.
A further example is our composting facility at Deerdykes. It takes green waste collected by
Councils and turns it into compost for parks, gardens and land reclamation. We also hope to
shortly construct a digestion plant to generate power from the composting process.
And once again let me mention the new water treatment plant being built at Glencorse to serve
Edinburgh. This has a number of innovative features. All the pipes we need will be manufactured
on site to reduce lorry movements and save money. The plant will also incorporate hydro
generators in the inlet and outlet mains. This will generate two thirds of its power consumption.
Slide12- of leakage teams
Reducing the amount of water we lose through our old pipes will become an increasingly important
measure as we continue to invest in expensive treatment for our water supply and our customers
start to value the increasingly better tasting product. It also reduces the amount of waste to be
pumped thus reducing our carbon emissions.
Leakage had never been an issue in Scotland until recently as water was abundant and cheap.
Then in 2006 SW agreed targets with our regulator to reduce the amount of water leaking from our
The first job was to put the monitoring and measuring equipment in place to allow us to measure
accurately how much was being lost. These DMA’s now cover 94% of all properties in Scotland.
I was disappointed that we missed our targets in the first two years. Although we did not miss by
much, that was still not good enough. We have doubled the engineers and technicians to ensure
we meet all future targets. Our regulators and customers expect it and so do we. We now have
300 people working on leakage and will reduce it by over 8% this year.
Slide 13- Flooding
One thing Scotland is not short of is water. We are seeing more extremes of weather and rainfall.
For example, figures suggest the West of Scotland is getting wetter. This is consistent with the
latest predictions for the UKCIP research work, which also suggests that Scotland will incur more
short duration high intensity “thunderstorms”. In August 2008 Edinburgh rainfall was 207mm which
smashed the previous record of 128mm in a month.
We are all aware of increased risk of flooding both in urban and rural areas. We take our
responsibility to deal with flooding issues seriously. But at the moment the responsibilities
surrounding flooding are complex and we welcome a clarification of the roles. We look forward to
playing our part in the new Flood Risk Management Bill which is being discussed in Parliament.
Under the new arrangements SEPA will be the coordinating authority for flooding.
But in terms of flooding Scottish Water is leading the way in how we deal with surface water.
We are actively engaged with local authorities across Scotland to look to the future. We are
starting to develop Surface Water Management Plans for urban areas in partnership with a number
of agencies including local authorities, SEPA, Scottish Enterprise and the Scottish Government.
These take a holistic view of how to manage rainfall in the urban environment with the increasingly
changing weather patterns.
It may mean Scottish Water investing in larger sewers, it may mean opening up historic water
courses to allow nature to take its course. Or it may mean innovative plans to deal with surface
water through the use of SUDS (Sustainable Urban Drainage Systems) to you and me. That could
lead to the creation of “green corridors” and amenity areas to allow the surface water to be dealt
with locally without overloading the sewers, drains or watercourses.
Glasgow has led the way in this innovative approach. There is that word again. The Metropolitan
Glasgow Strategic Drainage Partnership (MGSDP) is a National Planning Framework priority
encompassing seven local authorities.
At the core of this partnership approach is Scottish Water, SEPA, Glasgow City Council and
Scottish Enterprise. The MGSDP has undertaken a considerable amount of work to evaluate
Glasgow’s complex drainage infrastructure. Computer modelling is revealing how rivers, sewers
and watercourses work and interact during normal and storm conditions. This helps us all
understand the problems and identify the most effective integrated solutions.
It has already led to informed and innovative decisions which ensure that the MGSDP plays its part
in the success of the Clyde Gateway – the redevelopment of the River Clyde artery – and the
Commonwealth Games in 2014.
That is when too much water can cause problems.
Lovely slide of reservoir
Slide 14 Loch Katrine
But in Scotland that rain provides us with a more than plentiful supply. We are blessed with some
of the best natural water in the world. None of our drinking water comes from recycled waste
water. All our water is sourced from natural sources such as spring, reservoirs and boreholes.
We must ensure that we have the ability, in the short term and in the decades to come, to continue
to supply our customers during peak demands and drought events.
In exceptional circumstance, such as a 1 in 40 year drought, we must have the plans in place to
ensure the service to our customers is not compromised.
While Scotland is a water rich country, this does not mean that we have unlimited water available
for treatment and supply. Scotland covers a third of the UK land mass with only 8% of the UK
population. Due to the geography and large numbers of small communities Scotland has 239 water
zones. This is double the whole of England and Wales. This is a unique water supply system with
70% of the zones accounting for just 1% of the population.
We have inherited a water supply system which has developed over the last 100 years. Therefore
there are regional variations in the capability and flexibility of the water supply systems.
We have some areas, where the water supply system is community-focused with limited or no
interconnectivity between population centres. This means if there was a shortage of water to treat
in that area then SW is limited in how we supply our customers.
Our inherited water resource assets may be stretched in some areas during exceptionally dry
periods. These issues are now being addressed in our water resource plan. On the other hand,
areas such as the Central Belt have a high population density with reasonable interconnectivity
enabling flexibility in the distribution system.
A “supply versus demand” balance assessment is used to measure our current and future ability to
maintain a secure supply to our customers. The assessment follows a standard UK water industry
methodology and identifies whether a supply area would be in surplus or deficit should there be
exceptionally dry weather. This helps identify what investment or work will need to be carried out to
ensure a reliable and consistent supply.
In our 2010 to 2014 Business Plan we are promoting additional prioritised investment to meet the
challenge of securing the long term supplies in selected zones
The way we take water from the environment must strike a balance between the impact on the
water body, other environmental impacts such as carbon emissions, the economic affordability to
our customers, the security of supply during drought events and adaptability to climate change
We are already assessing and implementing schemes to comply with the Europe-wide Water
Framework Directive. We are working closely with other interested parties on this.
Our treatment plants and infrastructure are usually designed to last for at least 60 years so it is
essential that investment decisions taken today provide robust long term solutions.
In the future Scottish Water will be much more sustainable, in every sense, than it is today.
slide 15- of contact centre
Now to the most important part of our business – the customer.
Putting the customer at the heart of everything we do is paramount to the future of the business. It
is central to our desire to continue to deliver value for money for every single customer.
In fact, we are working towards delivering a guaranteed level of service to all our customers, to
focus on first time resolution where problems occur, and provide rebates of charges should we fail,
under normal operating conditions, to deliver our normal high standards.
We measure customer service on the same measures as companies in England and Wales. The
OPA (Customer Overall Performance Assessment) is up 50% in the period 2006-2008 from 165
points to 248 points.
However we still have to catch up with standards south of the border. As well as improving the
OPA score, we also place great importance on listening to our customers to find out if we are
meeting their needs and how to improve our service. They tell us that they are, on the whole,
satisfied with Scottish Water and that their levels of satisfaction improve over time. However, we
must not be complacent. Customers’ expectations of a publicly owned water utility may be low;
certainly they will be lower than other service providers such as retailers or the leisure industry.
We must expect customers’ expectations to increase and up our game in anticipation of this.
Slide 16 – Highland Cow
One thing I am proud of is our customer contact centre, staffed her in Scotland 24 hours a day. I
heard recently from the editor of The Herald in Glasgow who lives in Lanarkshire. He called our
contact centre one Sunday morning when his home was out of water. A friendly Scottish voice told
him “never mind son, it will be back on in a couple of hours”
A friendly but informed and helpful voice is all that it took. No press button one, then press button
two or three.
This is a service our customers appreciate. And one I hope we can improve on. I want Scottish
Water to be one of the best water companies in the world. I want our directors and senior
managers and all our stakeholders to be extolling our success and proud of their part in it and
working to meet the challenges of the future.