Water & Wastewater Treatment Magazine
Issue link: https://fhpublishing.uberflip.com/i/1083348
www.wwtonline.co.uk | WWT | MARCH 2019 | 7 The Talk: opinion JAMES BROCKETT, EDITOR, WWT Moment of truth for water companies Ofwat's response to water companies' PR19 plans reveals the central challenge facing the utilities: they must innovate while operating in a cost-constrained environment, requiring both a technological and cultural change J anuary 31st was a red-letter day for the water companies as they received their first indication of what regulator Ofwat thinks of the 2020-25 business plans that they have cra•ed so carefully over many months. Reputations were on the line, not to mention millions of pounds of customers' money, as the verdict was awaited. The results did not make happy reading for many water company boards. No utility was awarded the top ranking of 'Exceptional' status, and only three – Severn Trent, South West Water and United Utilities – made it into the second best category of 'Fast Track'. The rest will have to go back to the drawing board to rework and resubmit substantial elements of their plans, and in many cases find multi-million pound efficiency savings. Thames Water was given the most resounding rebuff, having been asked to slash its £11.7BN spending plans to £9.4BN, an efficiency saving of 19.7%. The tough stance by the regulator will not have come as a big surprise to many watchers of the industry over recent years. The theme of 'doing more with less' that was present at the last price review in 2014, has only been amplified since then amid a political atmosphere which has seen hostility to investor dividends, concern over corporate structures and a lingering threat of nationalisation. There's an expectation that the sector meet ambitious targets on metrics such as leakage – partly to atone for the sins of previous years where performance was allowed to slide – while keeping customers' bills flat or declining. How can the industry square this circle? One route is the use of technology, with digitalisation providing the basis for better asset management, predicting and detecting failures before they develop into more costly problems. It's undoubtedly the case that the industry could do more to make the most of its existing assets, that technology can help it do this, and that the sector no longer has to immediately resort to pouring concrete and investing in a capital solution. A move towards smart infrastructure could create a more intelligent, efficient operation all round. Another key element will be to bring customers on board. It may be no coincidence that the companies which face the biggest challenges as a result of Ofwat's assessments – Thames, Affinity and Southern – are those in the water stressed regions of the south east which have the fastest growing populations. With more customers living in densely populated areas having to be served by the same infrastructure, water companies are going to need a helping hand from their customers to make this equation add up, both in the form of reduced domestic water use and in not abusing the sewer system by flushing undesirable items. However, for this to happen, the sector has to get better at embracing innovation and changing long-held working practices, while also bringing about a cultural change amongst its workforce and the population – both things that are notoriously difficult to achieve. So as well as considering the opportunities, it's also important to note the dangers of a cost-constrained environment. Contractors and the supply chain might be squeezed into going bust; talented people might decline to join the sector and choose alternatives; ageing infrastructure that we are counting on for our future resilience might not be replaced at the optimum time. All these things may happen if a continuous focus on cutting cost means that society gets the message that water is not valued. Avoiding these pitfalls will require new approaches, which is why embedding innovation has been described as the overarching theme of PR19, enabling progress on the other goals of affordability, customer service and resilience. Let's hope that necessity will be the mother of invention. It's a challenging time for the water sector, but it may also turn out to be a critical moment which ends with the sector proving its worth.