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MAY 2021 edition

This website includes excerpts from the latest edition of THE WATER REPORT.

PUBLISHED BY

KEW PLACE

Full coverage is available only in the print and digital editions of the magazine

The long view

Thames Water's chief, Sarah Bentley, sees a turnaround for the company across multiple price controls.

Eight months into her role as Thames Water’s chief executive, Sarah Bentley is candid about the challenges she faces. "People keep asking: what has surprised me about the job? The good news is," she says, "there aren’t any surprises, it’s exactly what I was expecting; the bad news is, it’s exactly what I was expecting.”

Bentley joined in September 2020, nearly half way into year one of a highly stretching price settlement, mid pandemic, and after the company had gone more than a year without a permanent leader. “Expectation wise, having been in the sector a few years…I did come in eyes wide open," she says.

"Thames’ reputation is poor, and its performance has been poor. On some level, it doesn’t make sense. Thames is the biggest company in the sector, we’ve got all these amazing assets and resources, incredible people. But actually when you look at our performance, it’s just unacceptable on a number of different fronts.” There is, she says, "a massive turnaround plan ahead of us, and it’s

definitely not for the faint hearted."

We’ve got to leak less, cause customers to complain less, pollute

less, and start really investing in our assets.” Sarah Bentley

RAPID: high movement

Regulators' alliance, RAPID will get its teeth into regulatory conundrums and oversee two more strategic water resource scheme checkpoints.

Managing director of the Regulators’ Alliance for Progressing Infrastructure Development (RAPID), Paul Hickey, says the year ahead will bring the fruits of extensive policy thinking and development to ensure the progression of water resource infrastructure schemes, for construction from 2025.

Hickey: "The way that we work is centred on collaboration and candour."

That will include two more major milestones in RAPID’s work to provide strategic oversight of scheme development; the crystallisation of regional water resources plans; and tackling in earnest the multitude of regulatory and commercial issues that strategic

schemes raise. “This is a pivotal year for a lot of this work to come to fruition,” Hickey enthuses.

Focus on the environment and be clear are our Expert Forum’s key asks of Defra as it prepares its next Strategic Policy Statement.

This summer, Defra is expected to consult on a Strategic Policy Statement (SPS) for Ofwat, to set high level priorities for PR24. In this month’s Expert Forum, THE WATER REPORT and Accent asked for views from our panel of experts on what this SPS should contain. We first asked how effectively the priorities and objectives set by Defra in the last SPS, issued in 2017 ahead of PR19, have been delivered. Forum members were not overly positive: nearly half said the priorities and objectives have not

been delivered very effectively.

Green and clear

New ideas take off

Winners announced in the inaugural round of Ofwat’s Innovation in

Water Challenge.

The first competition to be staged as part of Ofwat’s £200m AMP7 Innovation Fund was five times oversubscribed. “There’s a hell of a lot of innovation out there…we’re starting to tap into a rich vein,” says Ofwat senior director, John Russell. The results of the inaugural round of Ofwat’s Innovation in Water Challenge (IWC), were announced last month. and Russell is clearly pleased with the outcome of what was the regulator’s initial attempt to accelerate transformational innovation in the sector.

Eight lead water companies involved in 11 winning partnerships secured funds of up to £250,000 to get their ideas off the ground through round one of the IWC. The successful applications included bids for: seed funding for the water sector’s new innovation Centre of Excellence; nature based solutions; and an

industry-first, green hydrogen project.

Willison:

“crystal clear.”

The right environment

Renowned environmentalist, Toby Willison has joined Southern Water because green transformation there is “manifestly happening” and he plans to accelerate it.

Last November, distinguished environmentalist Toby Willison took up post as director of environment at Southern Water. It was an impressive appointment for the company. Willison came with 20 years experience working at the Environment Agency, including as executive director of operations and with a stint as acting chief executive.

He has expertise, reputation and relationships that both endorse, and are likely to further, the corporate transformation that Southern Water’s chief executive, Ian McAulay, is trying to execute. He also has very practical experience that will help steer the company through the many pressing green challenges it has ahead, not least in Hampshire where supply/demand projections are particularly tight and there are high-profile sensitivities relating to chalk streams.

Tried and trusted

Repairing relationships was Bob Irvine’s priority when he became the Scottish government’s water lead. Fifteen years on, the trust and value ministers’ place in Scottish Water is unrecognisable.

Bob Irvine has just retired as head of the Water Industry Division for the Scottish government, where for the past 15 years he has led the development of the policy and financial framework for the water industry in Scotland. In that time, Scottish Water has journeyed from zero to hero, and very fractious relationships between company, regulator and ministers have been healed to the point that they are now the envy of the rest of the UK.

Irvine was already a very experienced senior civil servant when he took the water role, having been deputy director for the Scottish Government for the preceding 15 years. His experience included playing a lead role in the privatisation of the Scottish power industry in the late ‘80s and early ‘90s and working under Stephen Littlechild in designing the regulatory regime.

He says all that stood him in good stead for working with Scottish Water, which was still a relatively new entity having been formed in 2002. In the early days, Irvine says his number one priority was “restoring the relationship and focusing everyone on delivery”.

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Irvine: "My deal for the board was: you outperform the regulatory settlement and ministers, or indeed civil servants, will not interfere and second guess you. They were the basic parameters.”

Irvine recalls: “Basically Scottish Water had to present the progress it was making on its investment programme, which was driven by our objectives and standards…For me, the key thing was that I – Scottish government and officials – were not delivering.

"There is no way that I can make a judgement on whether this wastewater treatment plant should be sited there, or angled this way, or that high or so on, or when to do it or how to plan it. That should all be Scottish Water’s. Previous to that there had been quite a lot of expectation that the government would actually almost approve every element of the investment plan.”

will keep you on top of the threats and opportunities emerging from retail and upstream competition.

It's the eye on the competition.

B-MeX concept endorsed

Report for Ofwat recommends piloting an incentive for wholesalers based on business customer sentiment.

Specialists conmissioned by Ofwat have endorsed the idea of introducing an incentive mechanism to track wholesaler service provision to customers the business retail market has been.

Europe Economics advised Ofwat that a B-MeX incentive that focuses on the qualitative aspects of service could “fill important gaps in the

existing regulatory framework” and incentivise wholesalers to improve their service offering for non-household customers.It noted: “Many of these qualitative aspects would be difficult to quantify objectively, yet in other market settings would be something that firms subject to competitive pressures would be keen to do well for fear of losing customers to their rivals. A B-MeX regime could potentially provide wholesalers with a similar incentive to seek to improve end

customer experience.”

Going fourth

The Institute of Water took stock of where the market is and where it’s going as it turned four last month.

Speaking at an Institute of Water webinar to mark the English water retail market’s fourth birthday CCW chief executive, Emma Clancy, gave a powerful account of the customer experience in the market. It was hard to see much good in it, save to note that some retailers are now providing significantly better service while others are “lagging behind”.

Ofwat director, Georgina Mills recapped data from last year’s State of the Market Report including the identification of three principal market frictions: poor data quality; wholesaler/retailer interactions; and inadequate wholesaler performance.

MOSL’s chief, Sarah McMath, gave a presentation laced with customer experience stories to illustrate her key

point that one size does not fit all in the market.

Squeeze out the value INDUSTRY COMMENT

From fruit juice to green pharmaceuticals and seawater to sustainable electronics, innovative technologies are laying the foundations for a circular economy of water.

Society has evolved to extract water from limited resources, but new circular economy technologies are turning the tide on this linear mind-set by tapping into an unexploited reservoir of sustainable raw materials. One such lucrative circular opportunity is emerging from the fruit juice industry. Washing and processing fruit for this sector generates a large volume of dirty water, but this leftover "waste" also contains a range of valuable materials that can be recovered for pharmaceutical applications. There is also unused biomass, like fruit skin and seeds, which can be sold as animal feed or fertiliser.

Retailers exempt from annual meter reads until September

Ofwat has implemented an urgent change proposal exempting retailers from their obligation under the Customer Protection Code of Practice (CPCoP) to use a meter read to provide an accurate bill to metered customers at least once a year. This is in light of meter reading difficulties being experienced by retailers, contractors and customers during pandemic restrictions.

The regulator made some slight adjustments to CP0008, which it consulted on in February, but the fundamentals of its proposals stood. To qualify for the exemption, retailers must demonstrate they have made all reasonable efforts” to contact the customer, and provide evidence that they have met the criteria for the exemption.