WET News

MAY 2016 WET NEWS 9 INTERVIEW " I think it's going to be totally di erent because I don't think we should underestimate the di erence that retail competition will make next year," says Paul Mullord, UK director at British Water, on the subject of whether the transition from AMP6 to AMP7 will be smooth. Mullord continues: "We've spent „ ve years or more focusing on customers and suddenly we're going to have disconnect between the [water] companies and their non-domestic customers. They're not going to be sending them their bill anymore. It will be a new retailer. That's not totally true because they may still retain a few of their customers." Non-domestic retail competition will open up in England from April next year and Mullord is concerned about the impact it may have on the transition from AMP6 to AMP7. "What could happen is that you could end up with a complete shake-up, and the water companies no longer having customers who use their water but having customers who sell their water to who was their customer. I think that disconnect could be quite disruptive, and if retail competition for domestic customers comes in in 2020 as the government has hinted, then I'm not quite sure how that's going to shake things up for the next AMP period," he says. WET News caught up with Mullord recently to learn not only about the possible e ect retail competition may have on the transition to AMP7 but that the start to AMP6 was "disappointing", British Water is to survey members to gauge the impact of the AMP cycle on the supply chain. Mullord says that anecdotally the start to AMP6 has seen some companies reporting that they did not lay o sta at the end of AMP5 as they had expected do and had done in the past. "That was good news, and they were all quite hopeful that we would see a prompt start to AMP6," says Mullord. But generally, he says, it has been the same again for a number of reasons: • Changes to regulation so water companies struggles to work out what totex is and how to deal with it • The Outcome Delivery Incentives (ODIs) and trying to work out what an outcome is rather than an output • Having to reorganise completely in preparation for non-domestic retail competition • A tighter than expected price determination "All those things together gave almost a perfect storm which meant they weren't able to get on with spending the money as we hoped they would," says Mullord. Paul Mullord, UK director, British Water "All those things together gave almost a perfect storm..." The "money" is the £440M transition expenditure that Ofwat allowed to be brought forward from AMP6 into the „ nal year of AMP5. Of that £440M only about three quarters of that was actually spent. "It wasn't as good as it could have been." The transition investment was one of the major achievements to come out of the Cyclicality Working Group, which was tasked with ironing out the negative impact traditionally associated with the „ ve-yearly regulatory cycle. Five years ago, British Water carried out a survey to establish how its members had been impacted by the AMP cycle, the job losses in particular and the struggle of recruiting sta when work starts to ramp up. Mullord says he is already hearing that companies are struggling to recruit more sta again. "They're looking for people and it's a challenge to get hold of them, which is what we've always had at this time in the cycle." He says that having waited for the cycle transition to "bottom out" to avoid clouding the results, the survey can now go ahead. It will ask the same questions as before regarding the smallest levels of sta at the beginning and the end of the AMP cycle, and the largest at the peak. The survey will also try to establish how the move to AMP6 has been compared with the start to AMP5 – whether it has been better, worse or the same. He adds: "It's fair to say we're still challenged by that cyclicality and with that being the case I think there's a reason for the [cyclicality working] group to continue if it has the appetite for it. The group did all that it could do and achieved all that it could have hoped to achieve. But having done that things changed which stopped the full e ect of those achievements from coming to fruition." Mullord continues: "With the cyclicality working group there was an issue to address, we'd address the issue and wouldn't then need to be around anymore. But it hasn't quite panned out like that." He says it is a bit like privatisation, when it was expected there would be a "short, sharp shock" to the system and things would then settle down and return to normal. An enormous amount of expenditure would be delivered, and then things would settle down but it has not happened like that. "Here we are 25, 30 years later and we're still spending the same volumes of money, and delivering assets and maintenance and it hasn't quietened down at all." Will the Cyclicality Working Group continue? "I'd hate to think we'd just give up. I'd like to think we'd carry on trying to do something," says Mullord. "Perhaps the results of the survey will inform that decision."

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