Utility Week

8 | 9TH - 15TH FEBRUARY 2018 | UTILITY WEEK Policy & Regulation Analysis B ristol Water has had a tough few price reviews. Appeals against its dra determinations at both PR09 and PR14 put the company at odds with the regu- lator. With a poor outcome for the company from its last outing to the Competition and Markets Authority, it was clear something at the UK's oldest water company needed to change, and quickly, if it wanted to avoid another bad experience at PR19. Happily, it appears that is exactly what is happening. Utility Week went to Bristol Water's head office to visit its senior team and talk about the metamorphosis the com- pany is going through. Over the past year, the company has launched itself on an ambitious transforma- tion journey, starting at the very top. A new chief executive, Mel Karam, joined on 1 April 2017. Coming from global "big four" professional services firm KPMG – where he was global head of asset manage- ment – Karam brought a new perspective on business improvement. He hopes a more analytical approach to running and improv- ing the company will allow it to move from being a respected – but unexceptional – local firm, to becoming a "global exemplar". The company also has a new majority shareholder – Icon Infrastructure – and, thanks to investor support for Karam's reforming zeal, a new board, including several new independent non-executive directors. Karam estimates that 25 per cent of employees at Bristol Water have now been with the company for less than two years – a phenomenon almost unheard of in the water industry, he claims. This is not to say, how- ever, that there aren't also some old hands – some of whom have been with the company for more than 20 years. New mindset But is an executive and wider workforce overhaul enough to boost Bristol Water's PR19 prospects? Even with its new team and mindset, industry experts suggest Bristol Water is a candidate for Ofwat's "significant scrutiny" at PR19 – the worst stamp companies can receive from the regulator and one which comes with swingeing procedural and repu- tational penalties, not to mention significant financial disadvantages. As part of a premium report conducted by Utility Week (and available in full to sub- scribers), industry leaders predicted that, of all the water only companies in England and Wales, Bristol Water is still the most likely to end up on Ofwat's naughty step. They suggested its legacy of conflict with the reg- ulator, alongside ongoing operational per- formance issues, are simply too great for the new management team to overcome before business plans are submitted in September. There's no denying that the day-to-day business of running Bristol's water supply without incident remains challenging, and potentially a distraction from longer-term improvement work. Urgent action In the past six months or so there have been several disruptions to supply that called for urgent action. In July last year, a large water main burst in Willsbridge on the outskirts of Bristol, cut- ting off supply to 35,000 properties. Then, on 11 January, the company issued a boil water notice to 7,000 properties aer it discovered cryptosporidium at its Clevedon treatment works. The challenge, say Bristol Water's leaders, is to turn these emergencies into opportuni- ties for engagement and brand enhancement with customers and communities – which also happens to be key focal point for the upcoming price review. The key to success is swi action – and a visible presence on the ground at the site of bursts and in communities affected by water quality disruptions. In the case of the Willsbridge bursts, Bris- tol Water started receiving customer calls about loss of water at 1.16am on 19 July. By 7am supplies were restored to 21,000 prop- erties and 8,000 further properties had supplies restored around 10pm, with the remainder by 5.30am on 20 July. Karam even rolled up his sleeves and got stuck in personally, putting in a 2am shi at a water refill station, to prove Bristol Water's top-to-bottom commitment to serv- ing customers. Prescriptive supervision In the case of the Clevedon contamination, Bristol Water flushed the network in the area, meaning it received a fresh supply from other sources. It kept customers informed of the work and was able to li the boil water notice on 15 January. All affected proper- ties received an automatic compensation payment. But effective firefighting and community spirit will not be enough on its own to con- vince Ofwat that a company does not require constant and prescriptive supervision. The regulator's increasing scrutiny of company data quality recently caught Bristol Water out and highlights another area where the firm will have to work hard to improve its standards and processes. In November last year, Ofwat once again put Bristol Water on the prescribed assur- ance category of its Company Monitoring Framework – a key indicator of the regula- tor's confidence in water company informa- tion and governance practices. Despite some improvements at Bristol Water since the pre- Bristol's tough road ahead After a tough couple of price reviews, how does Bristol Water plan to keep itself out of Ofwat's swingeing "significant scrutiny" category in PR19? Lois Vallely asks some of its top team. Bristol Water supply area

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