Water & Wastewater Treatment

industry leaders 12 Water & Wastewater Treatment March 2014 A rriving at Southern Water's headquarters in Worthing in the middle of southern England's wettest winter on record, it is hard to remember that this is actually a region of high water stress. Chief executive Matthew Wright shares my view that flood or drought, there is always a 'crisis' in the region. "In the three years since I've been here we've had one pretty serious drought and two pretty serious floods, so when you talk about planning the business on the basis of 'normal' weather, you actually find that in any given year you actually have something abnormal happen, " he says. While heavy rainfall does cause some hydraulic capacity issues, the biggest issue facing Southern and other flood-hit utilities at this time is groundwater and surface water infiltration of sewerage systems. Sewage is escaping from submerged manholes and entering already flooded homes exacerbating the misery of householders. Wright says that while from the utility's perspective, it is evident that while much of the responsibility for flooding infrastructure and management falls to other bodies, like the Environment Agency, the county councils or the drainage boards, "the customer doesn't understand that." He says that rather than try to explain, or risk reputational damage, it is easier to accept that in the customers' eyes sewage is Southern's responsibility and get on with addressing the issues. "Whether we are directly or indirectly involved, I see our responsibility to work with all agencies to mitigate and where possible avoid entirely flooding of properties," Wright says. Cost burden As to where the cost burden for the necessary works and infrastructure might fall, Wright believes the traditional boundaries need to blur. "The reality is we suffer cost as a result of [flooding], whoever's to blame. I'm trying to find ways to contribute on a partnership-funding basis, maybe where we are contributing to assets that Three years into his role as chief executive of Southern Water, chief executive Matthew Wright shares his views on what the supply chain and the industry can expect in AMP6 with natasha Wiseman Regulatory change brings Southern comfort may not actually be within our ownership." Wright believes that the regulator, Ofwat's move to an outcomes-based approach helps the utility with that kind of decision-making. He gives the example of the Hampshire village of Hambledon, which, on this day in early February, has a river running down the high street, and a costly sewage- tankering operation underway. "The solution to this is to divert this scheme into a big underground pipe that wouldn't technically be our asset," Wright says. "But should we contribute to it? Because then we can avoid additional costs in years where there would be groundwater and surface water flooding in the village." For Wright, the redefinition of 'outcomes' by the regulator is "extremely helpful" for utilities in interpreting the role they can play in resolving customer issues. Looking at water utilities' business plans, they have done "a really good job" of consulting with customers, he says. "We have to look at non-traditional ways of solving problems that probably do push the boundaries of what is a regulated service and what is a regulated asset," he says, "but we should have the freedom to solve customer problems. "It's in our customers' and bill payers' interest Smart liquid lime www.neutralac.co.uk Derek Thompson Product Manager T: 01298 768 670 M: 07976 391 673 Lhoist UK, Hindlow Buxton, Derbyshire derek.thompson@lhoist.co.uk Non Compliance What could this mean to you? Pollution, closure, heavy fines, negative publicity, loss of profits? Industries treat acidic effluent in different ways, but many are now turning to Neutralac SLS45, the UK's fastest growing, high strength liquid lime. Utilities, Metals, Chemical and Food manufacturers are all under compliance pressure to meet increasingly stringent wastewater treament legislation - and why many are harnessing the benefits of Neutralac SLS45. Test the water with a no-risk FREE field trial. Southern Water: 'We're here to deliver on the 26 promises made in our business plan,' says Southern Water's Matthew Wright "The redefinition of 'outcomes' is extremely helpful for us to interpret the role we can play in resolving customer issues" Industry leaders 13 March 2014 Water & Wastewater Treatment to do so, because they end up paying less. I think that's exactly what the whole 'outcomes' and 'totex' approach is about." Supply chain Wright says the shift to 'totex' (total expenditure) decisions on investment has changed the way Southern Water uses its supply chain. With above- inflation increases in customer bills ruled out, improvements to service, continuing investment and improvements to the environment have to be achieved through innovation and efficiency. "We're making quite big changes to how we use our supply chain for delivery of projects," Wright explains. "First of all, we have to reflect this more to the totex environment, so we are going to have an entity called the 'strategic solutions partner' (SSP) that will partner with us to try to find the best outcome, be that opex or capex." Providing an example, Wright says, "If we're looking at meeting a higher environmental consent, let's say, classically what we would have done is bolted-on an extra tertiary or secondary treatment option. It would have been a 'build' option." Totex is encouraging the company to question whether a 'build' option the best thing to do in a given scenario, or whether it is possible to do something with the existing works. "We will sit down with a SSP, who will have access to the latest techniques from around the globe… to figure out what the best solution is," Wright says. Southern is deeply into its SSP selection process for its construction and delivery partners and is "thrilled" with the submissions it has had. Wright says the company is days or weeks from announcing its partner, which will need to be "a global company … with a very strong innovation track record." Tendering for an operational partner for repair and maintenance is also underway. "We have impressed upon our supply chain that ultimately what we're here to do is to deliver on the 26 promises that we made in our business plan. "It's not just about going building stuff and earning a margin on construction, it's about delivering customer outcomes. So that ethos permeates all of our supply chain arrangements, or certainly will." AMP6 will see increased improvements to bathing water quality, not because European legislation says so, but, Wright says, because that is what customers say they want. Universal metering (maximising at 92% coverage) is reaching completion, which will help the utility deliver better information and advice to customers, which they also say they want. A social tariff for those struggling to pay their bills is being piloted this year, for introduction next year. The utility expects to tie consumption to the tariff to drive water efficiency. Regulatory cycle The company should have its partners on board well before the start of AMP6 in April 2015, but, Wright says, the company still has a big final year of AMP5 to deliver. So big, in fact, that the chief executive believes that the supply chain's traditional experience of 'boom and bust' around the regulatory cycle, will not be an issue at Southern. Wright says his ambition for Southern is for it to be the UK's leading water company "and recognised as such". Having languished in the lower half of some of the industry league tables, he concedes that the company's outcome in the 2009 Price Review (PR09) was poor. One problem was that the company could not robustly support its investment plan. "We had lost some of the core competencies within the organisation around asset management," Wright says. "So for the last three years we have been rebuilding that capability and it's yielded some really good results." Ian Kirkaldy has joined the utility from consultancy Black & Veatch, as chief engineer, and the recruitment of some 80 engineers into the business has just got underway as the company rebuilds competencies like engineering, design, project and programme management and cost estimation. "We are certainly an 'intelligent' client, and one with its own capability to drive innovation, value, efficiency," Wright says, "so that has been an important agenda for us over the last three years. It has got some really good results and it is a key part of our AMP6 strategy." nnn Regulatory change brings Southern comfort Path to the top Now three years into the role as Southern Water's chief executive, Matthew Wright's life-long career in the utilities reflects the changes that water and energy utilities themselves have navigated in recent decades. Starting off in energy, with the Merseyside & North Wales Electricity Board (MANWEB), he saw privatisation of the company in 1990, with the selling-off of public utilities under the government of Margaret Thatcher, which was followed by the liberalisation of the energy markets. Five years later, MANWEB was taken over by Scottish Power (SP), which then acquired Southern Water in 1996 (selling it on in 2002). However, Wright's big break at that point came not with Southern, but through SP's next acquisition, of US electricity supplier Pacificorp in 2000. He took the opportunity to move to the company's headquarters in Portland, Oregon, where he worked in the transition team and gained experience of most aspects of managing a utility. Returning to the UK when SP sold Pacificorp in 2007, Wright then worked at United Utilities', first as managing director – operations, latterly running the capital programme and asset management function. He took up the post as chief executive of Southern Water in 2011. Southern Water is owned by a group of infrastructure, pension and shareholder funds including JP Morgan Asset Management, UBS and CKI. A river runs through it - the Hampshire village of Hambledon

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