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UTILITY Week 19th June USE

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UTILITY WEEK | 19TH - 25TH JUNE 2015 | 15 Policy & Regulation Analysis R esilience was the buzzword flying around the industry early last year, fol- lowing the addition of the duty of resil- ience on the regulator in the then Water Bill – now the Water Act 2014. But there was a big problem. Resilience meant different things to different people and companies, as admitted by Ofwat's director of parliamentary and public affairs, Nicci Russell, in December last year. So get- ting the sector to work towards a solid goal would have been impossible because that goal would have been a shape-shiing target. This is all set to change because the resil- ience taskforce, established by Ofwat early this year, has answered the first of its three major questions: what is resilience? The other two questions – what do sup- pliers need to consider as they think about providing resilience, and what does Ofwat need to consider in relation to resilience – will be answered as the year progresses. The group has come up with the working definition: "Resilience is the ability to cope with, and recover from, disruption, trends and variability in order to maintain services for people and protect the natural environ- ment." The phrase "now and in the future" is likely to be added. This definition, and the work packages set out by the taskforce, is an important first step. The definition, the ways of building resilience, and the ways of measuring resil- ience the taskforce is set to come up with, will help to form the PR19 price review, and the ways in which water companies can make – and lose – money. Without a set and accepted definition, resilience would remain a vague concept with no way of monitoring and rewarding progress, or penalising for a lack of it. That is why the taskforce, chaired by Waterwise managing director Jacob Tomp- kins, was established by the regulator at the start of this year: to initiate, to inform and to lead the debate. The definition of resilience is the out- come of the first two meetings held by the taskforce. Albion Water chairman Jerry Bryan said that while it is still early days, the task force has "made good progress" in set- ting the definition, while Alastair Chisholm, head of policy and communications at the Chartered Institution of Water and Environ- mental Management, told Utility Week it is "robust and builds on the content in the [Water] Act". Chisholm added that innovation within the industry will be vital to building resil- ience, and that industry best practice has to be shared and built upon. The taskforce is in the process of identi- fying best practices within the sector; in the second of its work programmes it is working with students from the universities of Cam- bridge and Oxford and the London School of Economics to review the existing structures in the UK. Once these have been collated, it will help to shape the next two work packages of the taskforce: creating a matrix setting out how the sector interacts with others, and compil- ing a list of questions to put to stakeholders regarding resilience. This part of the process is crucial, accord- ing to Andrew Bainbridge, chair of the Major Energy Users' Council, which has a policy group that looks at water. "Listen to the people with experience who know what has gone wrong and understand what needs to go right," he said. "Encourage feedback." That feedback will come – but only once the consultations have gone out. This is expected to take place in the coming weeks, starting the much-needed process of engag- ing with the industry on what can be done to boost resilience and how it can be measured. Once this feedback has been collected, a formal report needs to be created and passed to Ofwat, which will then use the findings to shape its PR19 framework, and to form a cen- tral plank in its Water 2020 strategy. This will dovetail with the shi away from capital expenditure and operating expendi- ture to a total expenditure regime, which was introduced for the PR14 price review period. Tompkins sees this as an important foun- dation of the resilience agenda. "Resilience isn't about removing big infra- structure and moving towards service-based models; it is about both," he told Utility Week. Key to this approach will be the freedom, like that afforded by Ofwat to the companies for AMP6 with its outcomes-based approach, to deal with the resilience in the way every company sees as most appropriate for its own region. Holly Yates, from the Department for Environment, Food and Rural Affairs' water reform team, agreed that the water compa- nies must have that freedom, stating: "Resil- ience is not an answer, it is not a tick in a box, it is a spectrum." But before any work to meet resilience targets can be started by the companies, or even for those targets to be set by Ofwat, the taskforce will have to complete its work pro- grammes and submit a final report and rec- ommendations to the regulator, expected in the autumn. At that stage, the industry will have a bet- ter idea, not only of what resilience is, but also of how to achieve it. A definition of resilience The inclusion of a duty of resilience in the Water Act 2014 created a challenge for the industry: what exactly does resilience mean and how can it be measured and improved? Mathew Beech reports. Resilience taskforce members Kat Austen, head of design and research, Information Innovation Lab Richard Aylard, external affairs and sustainability director, Thames Water Sarah Bentley, chief customer officer, Severn Trent Tim Bowen, corporate development director, Costain Jerry Bryan, chairman, Albion Water Diane McCrea, vice chair, CCWater Rose O'Neill, freshwater expert , WWF Nicci Russell, director of parliamentary and public affairs, Ofwat Heather Smith, academic fellow, Cranfield University John Spence, head of environment and quality, Southern Water Jean Spencer, director of regulation, Anglian Water Jacob Tompkins, managing director, Waterwise (chair)

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