Utility Week

8 | 15TH - 21ST MARCH 2019 | UTILITY WEEK Interview West Water in 2006. He was subsequently made group chief executive of Pennon in January 2016. He is also chairman of British Water, a director of Water UK and a trustee of the industry's charity WaterAid. He began his career as a chartered engineer working in both the consulting and contracting sectors. Prior to joining Pennon, he was chief operat- ing o„ cer at Lloyds Register and before that, executive chairman of Magnox Electric. He was also a senior diplo- mat in the British Embassy in Tokyo. Asked what drives him, he jokingly replies: "my wife", before answering seriously that he is driven by values and principles. "I want to do the right thing and make a di' erence," he says. "I think it's quite a modest aim, but that's really what drives me." Loughlin has certainly made a di' erence. In the time he has been at Pennon, South West Water has moved from being the laggard at the bottom of pretty much every league table, to being well regarded and well respected and, by many measures and independent assessments, being a leader of the industry. Two successive fast-track approvals by Ofwat serves to highlight this. To achieve what he has achieved, Loughlin has needed the buy-in of everyone in the company. Big egos, he insists, are not welcome at Pennon. "I've always held the belief that you're only as strong as your team. I wanted to create an environment where we can all input our thoughts and ideas and they're all valuable. It's not an autocratic organisation, it's not in my nature to be like"that." This inclusive philosophy extends to the way South West interacts with its customers. As part of its PR19 business plan – which it titled "A New Deal" – the com- pany will o' er customers a £20 million shareholding (about £25 per customer) from 2020 onwards. This builds on its "ground-breaking" Watershare scheme – launched as part of its previous business plan – which rewards customers for the company's outperformance and pro- tects them from underperformance in the current ž ve- year period. The New Deal plan began with a huge amount of cus- tomer research. Loughlin says he was surprised to see public support for nationalisation was high. "It wasn't a surprise to me that Mr Corbyn and his colleagues put in a reasonably le¡ -wing manifesto with thoughts on rena- tionalising some utilities including water." But what was a surprise to him was the public's reaction. "I looked at the Legatum research that was done by the Conservative party, as it happens, and it seemed to give a strong level of support for nationalisation as well." Even more surprising for Loughlin was that there was no age di' erentiation. "I thought younger people perhaps wouldn't remember how bad it was in the old days." South West did its own research as well. This was never published, but it did throw some light on what was driving the public's perceptions. "It was not about the quality of service, it wasn't about the prices, it wasn't about how well or otherwise we interacted with our cus- tomers," says Loughlin. "Instead, it was a broad social issue about not having conž dence in companies to pro- vide local support and services to the local communities – they felt they had a lack of engagement and a lack of control." The company's New Deal plan was all about moving from customer engagement to customer empowerment. "Rather than just asking 'what would you like as a cus- tomer?', we asked 'what would you like and how would you like to be involved in delivering it and how would you like to be in control of what is delivered?'. We wanted to create a New Deal whereby the interests of all our stake- holders are much more aligned." The plan is an evoluction of Watershare. "It builds on what was there before – it's not just a knee- jerk reaction to any political pressure." And it was the company's customer-driven philoso- phy, Loughlin says, that propelled South West Water into the regulator's fast-track category twice in a row. He insists there was no "magic formula" to getting fast-tracked. "We never sat around the board table say- ing: 'we are targeting this, we are doing that'." When it came to PR19, instead of trying to second guess what Ofwat may or may not think about its plan, South West put all its e' orts into producing what it considered a "good plan", based primarily on customer research. "We have tried to produce a quality plan that is not only quality in terms of its research and the way it's put together but is also delivering what Ofwat wants and competent in terms of its ž nances. That must be a nor- mal business thing, to deliver what you're supposed to as e„ ciently as possible. It isn't complicated really." Things in the water sector are changing. "Not so long ago, business plans and water resource management plans put to the Environment Agency were predicated on a planning assumption that we'd have standpipes in the street every 20 years, that's just not acceptable any- more," says Loughlin. Today, the sector has a lot to be proud of, he insists. "Last summer was the hottest, driest summer on record and we didn't have any water restrictions in the industry. We got close in certain parts and there was a lot of public outcry and political comment about it and yet it was the hottest, driest ever and that's going to carry on, so you'd expect it to be a bit di„ cult, and yet we all managed." Going forward, Loughlin says, it is incumbent upon all water chief executives to stop their companies becoming distracted by issues such as nationalisation. "We need to focus on reality, which is all about meeting our cus- tomers' needs, meeting the extreme volatility of climate change, weather volatility, population growth, growing customer expectations – those are the real challenges facing the industry. A lot of other things, for example the debate about legitimacy, or social purpose, or renation- alisation, or share ownership, although important, are distracting attention from the main thing." His vision for the future of the sector, therefore, is simple: he wants to see a water industry at peace with itself and focused on the important things. "We need to focus on the far horizon as well as the near horizon," he"says. "Climate change, weather volatility, population growth, growing customer expectations – those are the real challenges." Pennon Group • Supply area: Cornwall, Devon and parts of Dorset and Somerset • Headquarters: Exeter • Chairman: John Parker • Chief executive: Chris Loughlin • Workforce: 5,000 • Subsidiaries: South West Water, Viridor, Pennon Water Services • Asset value: £6.2 billion • Revenue: £1.4 billion (2018) South West Water supply area

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