Water & Wastewater Treatment Magazine
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Project focus Asset management Yorkshire Water's decision-making for PR19 uses 'five capitals' approach Project focus ● New decision-making framework quantifies natural and social factors ● Retrospective case study at Rivelin WTW incorporates natural capital ● Work with AECOM helps shape resilient PR19 plans Ofwat is encouraging water companies to account for natural capital in PR19 business plans 20 | MAY 2017 | WWT | www.wwtonline.co.uk by James Brockett Y orkshire Water has overhauled its decision-making framework so that it takes quantifiable account of environmental and societal factors when it is evaluating options for its PR19 business plan. Both economic and environmental regulators have in recent times encouraged water companies to consider the effects of their actions on nature in a numerical way - an approach known as natural capital accounting. However, in partnership with AECOM, Yorkshire Water has developed this thinking further in an approach which adopts a 'five capitals' philosophy: the belief that value can take the five forms of financial capital, manufactured capital, natural capital, social capital and human capital. The utility will use a specially- adapted soˆware tool to quantify how the various types of capital are affected by possible projects it might undertake, and then another tool to work out, given these figures, which option is the optimal one to meet its priorities. Underpinning the project was the understanding that actions taken by large businesses – whether they involve building assets or other types of interventions – affect not only the business's finances and stock of built assets, but the natural resources available for future use, and the wellbeing and quality of life of individuals and society at large. It is only when those factors are quantified and brought into the decision- making process that a company can demonstrate it is making sustainable and responsible decisions. "As a regulated monopoly it is incumbent on us, probably more than other companies, to be legitimate in the eyes of those paying the bill," explains Liz Barber, Director of Finance, Regulation and Markets at Yorkshire Water. "This need to demonstrate legitimacy has to be at the heart of the business. Before we started discussions with customers in our next price review, we were thinking about how we capture this. Thinking about multiple 'capitals' is really just about sense-checking the business and checking that the business is resilient in the eyes of our customers." An example of this, says Barber, would be reducing sewer flooding, which was one of Yorkshire Water's priorities in AMP6. Flooding a customer's home with sewage not only has a financial impact on that customer but disrupts their life in several ways, which hits social capital in the sense that the customer and surrounding community will lose trust in the water company. By showing that it understands and measures all the negative effects of such incidents, the utility can ensure that it is given the correct priority in its future investment decisions. On a more positive note, it is also important to ensure that all the beneficial effects of an intervention are measured – for example, a sustainable drainage project might improve the local environment for people's recreational use, as well as reducing the risk of flooding and the burden of stormwater in the treatment works. Yorkshire Water had already done some work on measuring environmental impacts for individual projects as part of an 'ecosystems services' approach following the last price review, but its recent thinking came together in 2016 when it carried out a retrospective analysis of a recent decision to rebuild and