Water & Wastewater Treatment

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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