Water & Wastewater Treatment Magazine
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www.wwtonline.co.uk | WWT | XXXX 20XX | 13 The reward for UU, Severn Trent and South West Water will be to have their plans approved and an early confirmation of the prices they can set customers, with their dra determinations published on April 11th. The other companies, mean- while, must go back to the drawing board and submit revised plans by April 1st, with their dra determinations following in July. So what have the successful compa- nies done right, and what do the other companies need to do to raise their game? Resilience The regulator said that United Utilities and South West Water "set the standard for other companies to reach" on resil- ience in the round. United Utilities earned praised for its 'systems thinking' approach to resilience, which recognises the water and wastewa- ter networks as interconnected systems and considers the effect of combinations of threats and risks on the entire system. Ofwat said in its assessment that UU's plan "covers a wide range of risks as- sociated with operational, financial and corporate issues and uses both qualitative and quantitative approaches to assess these." It also liked the way that UU had spelled out what its had learned from pre- vious events – such as the Cryptosporidi- um outbreak in 2015 and Storm Desmond in the winter of 2015-6 – and had built these learnings into the plan. While UU intends to deliver most of its resilience improvements through its regular Totex budget, it is carrying out one large capital project – the Manches- ter Pennines Resilience Scheme, worth around £750M and set for completion in AMP8 – which it intends to finance through the new mechanism of Direct Pro- curement for Customers (DPC). South West Water, meanwhile, earned praise for collaborating with other sectors to formulate a resilience model, through its involvement in the EU SIM4NEXUS project. The regulator also liked the way the company had engaged with custom- ers for their views on resilience risks. The water company had been comprehensive in considering a large number of potential risks in its planning, said the regulator, although it did call for more integration, adding that there was "little convincing evidence of how the long list of resilience risks considered in the plan has been prioritised and whether these have been considered in combination." Cost Efficiency As was the case five years ago in PR14, Ofwat has placed a strong emphasis on value for money for the customer, and is asking water companies to do more with less. Overall, water company's business plans envisaged spending £56.3BN over the five-year period, but Ofwat's response shows that it believes they should only be spending £48.8BN to achieve the same outcomes – a required cost reduction of 13.4%. Not surprisingly, the three fast-tracked companies have the lowest cost efficien- cies to make, with each asked to make just over 3% of cuts to spending plans. By contrast, Thames Water has to find a whopping 19.7% efficiency. Southern Water, Dwr Cymru and SES were also given a 'D' for cost efficiency and need to find above-average cost cuts, while surprisingly for some, Anglian Water find themselves in the same boat and need to www.wwtonline.co.uk | WWT | MARCH 2018 | 13 find a hey reduction of 18.6%. The regulator said that the costs that Anglian had attached to activities such as leakage reduction, lead pipe reduction and metering were in excess of the bench- marks set by its peers, while the water company also "provides limited evidence to explain the significant expenditure associated with both supply-side options and interconnections." The suggested efficiencies mean that companies will need to put even more em- phasis on operational rather than capital solutions, making the most of existing assets, Keith Gardner, Head of Strategic Business Consulting at Black & Veatch, tells WWT. "Water companies are going to have to look at how they can deliver AMP7 differ- ently. There's definitely going to have to be a greater focus on asset stewardship and asset management, because the avail- ability of capital to deploy is going to be • WATER COMPANY VIEW • OFWAT'S ASSESSMENTS: TEST AREAS A=excellent, B=meets expectation, C=falls short of expectation D=requires significant improvement