Utility Week

10 | JUNE 2022 | UTILITY WEEK Interview for these multi-sector investments in unison to achieve the needs of our future. Even with the National Infra- structure Commission, I've not observed any real sense of long-term planning where infrastructure comes together in a meaningful way." He believes infrastructure planning and investment need to look beyond water to where other infrastructure investment is headed over time to recognise the inter- connectedness of these systems. Incorporating these into the price review framework will be a challenge, but Cain says he's hopeful that PR24 will present a step change. While some sector commentators have already written off the upcoming price review, saying there will not be sufficient time to see the change needed, Cain disagrees. "I don't think it's too late for PR24. It's down to whether people can step back and be brave enough quickly enough," he says. "In order to have different outcomes in the long term the modelling needs to appre- ciate the outcomes and how you get there. We have to assume they've been working hard on that." There will be some serious questions to ask if the framework isn't different, Cain believes, and adds that this is the opportunity to make it "different enough to genuinely have a longer-term outlook than price reviews of the past" but getting there will take bold decisions in key areas – "specifically around environmental points and a sensible and informed approach to affordability". Even without a major overhaul of the existing regula- tory framework, Cain believes the way incentives and penalties are looked at, or how innovation spend is allocated, could still be different, as could performance commitments to sharpen focus. Although the cost of living crisis may influence cus- tomer sentiment around bill affordability, Cain believes consumers still want their water company to act in a sustainable way. With a longer-term focus, SES is setting bold goals to become a trusted company with a clear purpose that Cain envisions for customers and the environment. Environmental ambitions run deeply through the business, and as such the board has established inde- pendent scrutiny panels, which Pelczer says "keep our feet to the fire on our responsibilities". This independent voice championing the environment will be instrumental in the board's PR24 decisions. Dave Shemmans, who has been appointed to sit as chair until 2024, describes the current price review for SES as "very much about operational integrity, water quality and economic value". He wants the next to be more progressive. "It's not just five years, it's part of a 25-year journey that allows us to look at other aspects building on the core priorities from PR19," Shemmans says. "There no excuse for doing things in a short-term way that will cost more in the future and we simply can't store up long-term expenditures for the last of the five-year period of the 25-year plan," Cain says. "Price has been a dominant factor for too long in the price review cycle, it is possible that other things are then de-emphasised." Reflecting on the first two years of this Asset Manage- ment Period (AMP7), Cain describes the pandemic and start of lockdown as exacerbating an already challeng- ing business plan. "PR19 le™ many water compa- nies with significant challenges and performance to deliver that were very stretching in nature. I inherited a very ambitious business plan, rightly, but one we were looking further off trying to achieve based on where we had finished the previous AMP." Tough performance commitments include per capita consumption rates, which went up instead of down during 2020 lockdown, making already stretching targets harder to meet. However on leakage the company is expected to perform well against its PR19 target in the opening years of this AMP, thanks to data-gathering devices across its network running on Vodafone's narrowband Internet of Things network, allowing the company to access near real-time data. Cain describes the additional data, along with so™ware from Royal Haskoning, as "an absolute game-changer" to the company's ambition to detect and repair leaks proactively with minimum leak runtime. The data informs the teams about the condition of pipes to understand where vulnerabilities are, and also pres- sure changes in the network that could lead to leaks. He describes the benefits not only to customers but poten- tially to the wider sector. "If we can do it across our entire network, then so can others in the industry," Cain says, explaining that here "the company can play its size to an advantage". Cain expands on this theme: "We could set ourselves up as a company that really hot houses new technology at relative scale, with or on behalf of the industry. Our scale can be turned to our advantage on behalf of many, not just those we serve." SES Water is already a respected voice in industry conversations about leakage, having met its target for 21 years, so Cain believes this influence could apply to other areas if the company continues to work at pace to trial innovative practices. Ruth Williams, water correspondent "Price has been a dominant factor for too long in the price review cycle, it is possible that other things are then de-emphasised." continued from previous page Board punches above its weight Jeremy Pelczer chaired SES Water's board for nine years, including the tail end of writ- ing PR14 business plans, and the PR19 planning process in its entirety. He has now passed the baton to Dave Shemmans who has himself sat on the board since 2014 as a non-executive director. For the size of the organisation, Pelczer says the board's non-executive directors "punch above their weight for the size of the company". Indeed it boasts the general manager of CocaCola UK & Ireland, who brings retail and customer perspective; the former chief executive of engineering giant Ricardo; and an ex-partner at Price- Waterhouse Cooper, who brings audit experience as well as pensions and energy knowledge. The two major shareholders, both from Japan, are Sumitomo Corporation and Osaka Gas. Pelczer was assured that when the former sold 50% of its shares to Osaka Gas they would "speak with one voice, because I didn't fancy my chances of negotiating between two companies with different opinions on how to run the business. They have honoured that and they take a long term view , which is really important to the board." The new chair believes having agility to allow companies to react will be "an interesting question for the regulator" when considering network and asset improve- ments as well as climate change and resilience. "The reality of the world we're living in is it's very volatile for us and our customers," Shemmans says. He describes it as "a wonderfully complex situation we find ourselves" but admits he would not be interested in a status quo job as a chair. "That would be boring. I'm really excited about how to solve complex situations."

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