Water & Wastewater Treatment Magazine
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www.wwtonline.co.uk | WWT | OCTOBER 2018 | 9 The Talk: opinion JAMES BROCKETT, EDITOR, WATER & WASTEWATER TREATMENT Ambition front and centre for PR19 Water company business plans for PR19 are strong on ambition, but will they deliver? AMP7 will define the future of the industry's regulatory system I t's that time again. Water companies submitted their business plans for the 2020-25 period to Ofwat at the beginning of September, kicking off the long process which will see the regulator scrutinise, chew over and respond to the various priorities, projects and spending plans contained within them. The headline figure was that £50BN will be invested over the course of the five years among the English and Welsh water utilities; an impressive amount, representing a significant 13 per cent increase on spending compared to AMP6. Average bills, meanwhile, will go down by 4 per cent in real terms. Promises have been made that wastage in the form of leaks will be slashed by a projected 16 per cent, while the environment will benefit to the tune of a 90% cut in serious pollution incidents. The simple fact that each water company is promising to 'do more with less' speaks volumes about how the climate for our heavily-regulated water industry has changed in the last five or ten years. Not so long ago, it would have been taken for granted that greater investment meant more treatment plants, more concrete and more pipes in the ground, and that this would require higher bills to pay for it. Now, in the Totex-enabled, post-austerity world, there is an expectation that the industry invests in and uses technology and innovative approaches to get more out of its existing assets, raising performance; and that this improvement ought to come without tapping the customer for more money. With the threat of potential re-nationalisation hanging over the sector, the equation will be squared by a squeeze on shareholders, with the pill sweetened by the potential financial efficiencies of direct procurement for large projects and by money-generative activities in bioresources and renewable energy. Against this backdrop, the targets and goals set by the water companies, whether on leakage reduction, pollution reduction or improving resilience, are certainly ambitious, and will require innovation to achieve them. But will these ambitions be realised? No water company went into AMP6 saying that leakage was going to stay the same or worsen – yet over five years, that was what happened. Performance on other key metrics, such as reducing pollution incidents and water consumption, has been better, but outcomes in these fields are always more unpredictable as they are reliant on variables such as the weather and the behaviour of customers. Building resilience, which is one of Ofwat's professed priorities, is also not something that can happen overnight: and even if reasonable progress is made, the industry's mettle may be tested, and its reputation once again put on the line, by the next big storm or period of drought. AMP6 has been a success from a water customer perspective, in that bills have been kept down, but the performance gains in many areas have been relatively modest, compared to the era where larger sums of money were being spent. This will now need to change. In cranking up the expectation of big performance gains in 2020-25, water companies may be about to silence their critics by achieving a technology-enabled step change; on the other hand, they may have made a rod for their own backs if they fail to deliver. The coming years should be an intriguing time. Highlights of the business plans include: -Thames Water (which will spend £11.3BN in AMP7) plans to reduce pollution incidents by 18 per cent and leakage by 15 per cent. -Yorkshire Water has the most ambitious targets, aiming to cut leakage by 40 per cent and to reduce internal sewer flooding by 70 per cent. -Severn Trent (spending £6.6BN) is aiming for a 15 per cent leakage reduction and an 8 per cent reduction in sewer flooding, as well as a real terms reduction in customer bills of 5 per cent. -Southern Water (spending £4BN) says it will lead the industry in water efficiency, reducing usage to 120 litres per person per day and cutting leakage by 15 per cent by 2025. -United Utilities will deliver a major water resilience scheme with estimated construction costs of over £750m in AMP7 and AMP8, to be directly procured for customers in Manchester and the Pennines. Bills will come down by 10.5 per cent in real terms over AMP7.