Water Industry - Scottish Government Investment Group - Development List performance progress report: quarter two 2023-2024

4. Progress of the development of interventions with Level 1 and 2 appraisals

The purpose of this section is to provide:

• An overview of the progress of interventions in Q2 that are subject to Level 1 and 2 appraisals^[1]
• Highlights from significant Level 1 or 2 project investment appraisals completed in the last quarter.
• A review of lessons learnt from the delivery of PIA forecast in the last quarter and a look ahead to the next quarter.
• The full list of interventions with Level 1 and 2 appraisals, with an indication of the anticipated timing, is shown in Appendix C, which is an additional document to this paper.

Quarterly review of progress of appraisals

Good progress has been made in project level decision making within Q2:

• 9 Project Investment Appraisal stages were completed within the quarter. This includes the additions to the forecast (3 or 8% of the initial demand).
• 9 of 9 projects progressed through first time at Investment Group or through offline approval. These projects had a value of c.£139m.
• 2 of the approved Stage 3a and Stage 4 Project Investment Appraisal documents were shared with sector stakeholders in November. The third will be shared by the end of November.

Highlights from project investment appraisals completed within the quarter are included in Table 1.

Table 1: Project Investment Appraisal Highlights

Rockcliffe Bathing Water Improvement to Sufficient Status - Stage 3b - September 2023

Rockcliffe bathing water had been historically poor, and in 2021, against a backdrop of potential de-designation, it was agreed with SEPA and Scottish Government that Scottish Water would undertake ‘best endeavour’ to maintain Rockcliffe’s bathing water status. Temporary chemical disinfection was deployed in bathing water season 2021. SEPA applied to the Minister for a ‘step change’ dispensation of previous year’s results, which was successful. As part of this submission, Scottish Water confirmed that it would deliver a new secondary treatment works at Kippford.

In October 2022, in light of significantly increasing costs, Scottish Water approached SEPA to understand if SEPA would accept permanent chemical disinfection instead of a new permanent secondary treatment works.

Temporary chemical disinfection is classified as a short term, temporary measure to protect Rockcliffe bathing water and SEPA cannot licence it for permanent use, therefore a new secondary treatment works is the only option available to improve Rockcliffe bathing water.

This project initially underestimated the public feeling against construction of a conventional WWTW which became apparent during the community consultation. The Scottish Water response to the consultation was to engage the community to agree the site location from a series of options, which has increased the complexity of the project.

The proposed solution is now more remote and designed to be largely below ground to mitigate visual impact. The presence of hard rock at the chosen location is adding considerable cost.

Concerns were raised at IG relating to the high cost of this project relative to population. The project estimated cost is £21.3m to serve a permanent population equivalent (p.e.) of 382 which increases to 1,407 p.e. during the tourist season.

Eela Water - Stage 3b

Eela Water WTW was built in 1978 and is located near Ollaberry in the North Voe area of Shetland, supplying up to 4.3Ml/d of water to 5,400 customers. The WTW is a conventional treatment plant incorporating coagulation, clarification and filtration stages, prior to chlorine disinfection and chloramination. A treatment facility at this location will be retained in the long term to provide resilience of supply to the north of Shetland. 

Eela WTW was originally identified for investment following an operational incident in November 2018, attributed to a hydraulic restriction in the clarifiers. The ongoing performance and poor condition of the clarifiers remains a risk to supply as does the condition of the clear water tank (CWT). Other priority needs agreed with DWQR are: microbiology, disinfection by-products (DBPs), water supply resilience and Operational Technology (OT). Additional needs also identified include: health and safety, asset condition, and discolouration (due to manganese) in both the final water and in the network.

At Stage 3a, Option 2b (upgrade existing WTW with new inlet works, CWT and a new dissolved air flotation (DAF) clarification stage) was identified as the preferred option. In addition, to reduce the current risk to supply, interim measures to secure water quality have been delivered. These included improving systems to allow in-service sludge removal and clarifier cleaning to be undertaken safely, whilst also improving flow control and water quality monitoring for the existing clarifiers. The development of options between Stage 3a and Stage 3b identified two options for the replacement of Eela WTW (Options 2b and 3a). Based on the additional water quality benefits and risk reduction coupled with reduced complexity, Option 3a – New upsized Ceramic Membrane WTW is considered to represent the best value option. This option is now being developed to Stage 4.

A review of lessons learnt from the delivery of PIA forecast in the last quarter.

An overview of the appraisals at stage 2/3a/3b/4 that were forecast to be delivered during Q2 2023/24 and the appraisals delivered is shown in Appendix C (provided as a separate Excel table).

The purpose of the table in Appendix C is to provide internal visibility to enable forward planning for Level 1 and 2 needs and to ensure enough work is being appraised to support the investment programme. It is not intended to be a fixed set of dates and the dates presented are the earliest that those will be achieved.

There are three main themes driving the reduced performance against forecast:

• Prioritisation/workload. This affected 16% (6) of the forecast projects which had forecasts adjusted to the following quarters in line with the dynamic programme. For example, within the water portfolio, projects at Winterhope WTW, Glendevon WTW and Roberton WTW were being progressed through the PIA process. However, new and emerging projects at Mannofield WTW and Daer WTW have become a higher priority requiring resources to provide technical information and evidence for the value management workshops for their stage 1 and 2 PIA. This is positive change as Scottish Water is reacting to the needs of the business, sector stakeholders and customers.
• Investment Phasing/priority adjustments. This has affected 13% (5) of the forecast projects. This has impacted both flooding and growth projects where projects are now being hoppered at Gate 50 rather than progressing through the later gates.
• Scope and costing. This affected 18% (7) of the initial projects. There has been a delay in completing Net Present Cost and Carbon (NPCC) assurance in these cases.

Projects reforecast by 12 months

There are no additional projects reforecast by >12 months this quarter. However, reviews of prioritisation lists for Flooding, Growth and Water Quality are being undertaken which will lead to the reforecast of some projects in these areas.

Forecast for 23/24

The forecast for 23/24 is shown below (Table 3).