Utility Week

UTILITY Week 26th May 2017

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8 | 26TH MAY - 1ST JUNE 2017 | UTILITY WEEK Interview "The commercial directorate takes on board some of the non-regulated activi- ties – how we manage contracts, how we manage energy, which is a big bill for us – and looks at them from a more commercial perspective to ensure better value." So is this the end of the changes McAulay plans to make? "Probably not," he says. "As the sector starts to evolve and we see new market entrants, we will have to keep adjusting. I still see a significant period of change ahead for the next 25 years." McAulay stepped down from resource-management company Viridor somewhat abruptly in September last year, with a brief statement from the company saying that he had le to "pursue other opportunities". When pressed on whether he le with the Southern Water job – which he took up in January this year – in mind, he brushes the question off as irrelevant. He does, however, say that what drew him to the role were the new opportunities and challenges it presents. "I've always been drawn to the water and environ- mental sector," he says. "So, to have the opportunity to take up the chief executive's role at one of the bigger water and sewerage companies in the UK was pretty much irresistible – it was something I'd always wanted to do." McAulay also admits that he doesn't like to stay in the same place too long. He has lived and worked all over the world, in Colorado in the US, India, Scotland and various parts of the UK to name a few. "This was another move for me," he says. He brings with him a wealth of experience, most recently from Viridor. "That sector has, in a relatively short period of time, gone from being a waste sector to a resource sector, and the value of resources is increas- ing. Viridor moved from being a landfill company to a resource-management company and, in a very short period of time, we managed to bring the company from being hardly recognised to being quoted as one of the top three companies in the UK." Oen, the challenge is to get the public, custom- ers and politicians on board with what you're trying to achieve. "There was a lot of learning there in terms of how you move things through the political agenda, and how you interface with customers to encourage them to recognise the value of what you do, the branding of things that you do, how you use technology." This experience will be vital in the water sector, where schemes such as meter installation are not always popular with customers. Southern was the first water company to launch a widescale metering programme. Between 2010 and 2015, the company installed about 450,000 meters across Kent, Sussex, Hampshire and the Isle of Wight. Almost 90 per cent of households in the Southern Water area are now metered, and per capita consumption in the South East is the lowest in the UK. But this is just the start. Having completed the offi- cial scheme in 2015, and having achieved the base level of water consumption metering, the company is now looking at how it can move the programme forwards again. "We're looking at other ways to work with smarter meters to provide a more enhanced level of service to customers." McAulay believes that "inevitably" smart meters will be rolled out in the water sector. "As we move towards metering, technology has moved into smart," he says, "so I think the meter that you have to install will almost by definition be a smart meter." But, he points out, meters are only as smart as you want them to be and how much you want to use them. They may provide the information, but the key is how that information is used to help customers manage water and energy use more efficiently. Such water-saving behaviour becomes increasingly important as the threat of drought looms and the South East, as one of the driest regions in the UK, suffers. Demands on water are changing and water scarcity is a reality. "I think water usage in the future will be dif- ferent," says McAulay. "Having lived around the world, where water reuse is common. I can see a different water world in the years ahead." One thing he suggests is a "systems-thinking" approach. "If we look at the South East, we have quite a number of water companies operating in the region, and water does not respect arbitrary boundaries drawn on maps. We have to be looking in the future, how do we take a systems-thinking approach to water production, water storage and water distribution across boundaries." The most significant, and certainly the most visible, change in the water sector in recent months has been the opening of the non-household retail market to competi- tion. Southern Water bowed out of the non-household market and, although McAulay hails this as "the right decision for now", he doesn't rule out the possibility of the company joining the retail sector at some point in the future, perhaps if domestic competition happens. But there are many different ways in which the water sector can move and change, and McAulay believes the biggest changes to the non-household sector have occurred in wholesale companies. "I think this is good," he says. "The retail separation makes us look very hard at our cost-base and our wholesale productivity. It allows us to look at doing things differently and more effec- tively, and it really does challenge this organisation to think 'what could we do?' You can't just rely on being steady in this market for the next 25 years." As is probably now evident, McAulay is never one to shy away from change. He says the snap election, which prime minister Theresa May announced would be hap- pening in June, will bring further change to the sector but, from a water sector point of view, is "a good thing" because it should bring certainty. "The one thing that helps business to operate well is certainty, and that's what we're looking for." He continues: "I'm never resistant to change, but cer- tainty is what we have asked for, and generally I think we have a pretty good relationship with the Department for the Environment, Food and Rural Affairs." McAulay is not complacent about the fact that South- ern Water has a long way to go, but his vision for the company is clear: "I'd like our regulators to say we've gone from being the most-improved company to being one of the best companies. "I'd love to see our customers say they value the ser- vice that we provide and what we do. To have a really high engagement score with our staff, and having staff that genuinely will openly articulate the benefits of being in this company, I think would be terrific as well. And I would like to have other companies, and not just water companies, come to look at how we do things here." "These would all be really good measures of suc- cess, and I'd be delighted if all four of those things were to happen." "The retail separation makes us look very hard at our cost-base and our wholesale productivity. It allows us to look at doing things differently."

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