Utility Week

UTILITY Week 8th September 2017

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UTILITY WEEK | 8TH - 14TH SEPTEMBER 2017 | 15 Policy & Regulation Alex Plant, regulation director, Anglian Water Q&A O fwat published its dra methodology for PR19 last month. The document included details of tougher performance commitments, a greater focus on resilience and innovation, and a new customer service incentive mechanism. Utility Week asked Anglian Water's director of regulation Alex Plant about how the company is responding to the PR19 challenge. How will PR19 change the way you do business? It shouldn't fundamentally change what we do, however we recognise what the regulator is saying in relation to strengthening the focus on resilience – which is some- thing we've been speaking a lot about anyway. We also absolutely recognise the Ofwat focus on innovation and markets, and we agree. Innovation is an area where we see ourselves pioneering, through our "shop window" initiative. And, of course, we continue to recognise that affordability is an issue – particularly for those struggling to pay. All the way through the PR19 process, we will be making sure the customer is at the heart of what we do. We recognise the broad thrust of what Ofwat is flag- ging in PR19. It doesn't change the fundamentals of how we operate. How could PR19 change how you work with your supply chain? One of the things we've done over the past few years is to really push our supply chain structure, I think prob- ably further than most others in the sector. We've got a long-term pan-alliance modelling approach. We see that as being more beneficial than a "repeat procurement exercise" model. We're drawing on the strength of those alliance models as we bring our business plan together. I'm not sure it's PR19 itself that's changing this, but I do feel we have a much more integrated approach to how we're pulling together our plan with our alliance partners now than in the past. How complex is PR19 compared to previ- ous frameworks? Undeniably it is more complex than before. If you circle back to the way that price reviews were envisaged when profes- sor Stephen Littlechild was first dreaming them up, they were supposed to be rela- tively simple and, actually, he felt the regulation would become simpler over time. What we've ended up with is definitely more complex. It's difficult to explain the price review process now, and I think that is a bit of a problem. It's inevitable that we end up with more price controls, it's a logical outcome of the position we're taking with the develop- ment of new markets, and we support that. However, as ever, we must balance the need to get the right refined outcomes against the cost of greater complexity. Will the price review be as tough as Ofwat claims? That is impossible to answer really, we will have to wait and see. All I'm sure of is that Ofwat won't be giving anyone an easy ride. Nor should they. How confident are you that Anglian will achieve "exceptional" status? In general terms, we've done a lot that shows we're a leading company in the sector. Most recently this was recognised in being named as Responsible Business of the Year by Business in the Community, something of which we are all very proud. And we will keep talking to our customers and engaging with them – we've done more on that than ever before. We're leading the sector in areas like leakage, which is a really important issue for customers, particularly in an area like ours which is very dry and water scarcity is a real issue. Whether that leads to a judgement from Ofwat on our plan being exceptional, I don't know. But I feel we're recognised as leading the industry in various areas, and we want to continue to contribute to both the development of the sector as a whole, and to the wider aims of growth and development in our region. That's where we start from in developing our business plan. How much of a challenge is the fact that Ofwat isn't allowing a glide path for the performance commit- ments in the 0next price review? We've performed well on the Outcome Delivery Incen- tives we agreed for this AMP. That places us in a good position and allows us to hit the ground running in the next price review. But it's true that regulatory prec- edent tends to be that, when there are significant shis proposed, there is a glide path element, which avoids cliff edges. It's something we're considering, and I'm sure we'll make comment on in our response to the dra methodology. The full version of this article can be found at: utility- week.co.uk "All the way through the PR19 process, we will be making sure the customer is at the heart of what we do."

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