Excerpts from THE WATER REPORT
July/ August 2020 issue 62
FULL STORIES AVAILABLE ONLY IN THE MAGAZINE IN PRINT AND PDF
CONTENTS full contents of the magazine
INTERVIEW Anthony Ferrar takes the chair at Water UK.
INDUSTRY COMMENT NEA calls for a social tariff review.
REPORT British Water’s latest set of Better Together calls.
INDUSTRY COMMENT Advice for the CMA on long term incentives.
REPORT CMA redeterminations latest.
INDUSTRY COMMENT A vision for future economic regulation.
EVENT REPORT Young professionals want a greater say on social purpose.
REPORT Customer consultation for business planning.
INTERVIEW Christopher Deacon, new chair of Portsmouth Water.
REPORT PAC hearing on water resource resilience.
NEWS WICS delays SRC21 draft determination.
REPORT WRSE’s regional resilience framework.
INTERVIEW Energy & Utility Skills’ outgoing CEO Nick Ellins.
FEATURE The UK Centre for Ecology and Hydrology’s new strategy.
REPORT The latest on Ofwat’s Innovation Fund plans
It said it will consider on this:
Where and to what extent customer evidence can give useful guidance on forming business plans, Performance Commitments (PCs) and Outcome Delivery Incentives (ODIs), and whether there are aspects of the regulatory process where customer evidence may be less likely to be informative.
Whether the evidence collected by the water companies is robust and of high quality.
How Ofwat has interpreted and made use of customer evidence (including comparisons between different companies’ research) in assessing business plans and in forming its determinations.
The CMA left how it will handle Covid 19 impacts an open question. It said it could do anything from not address the impacts of the virus at all, to taking account of them or proposing principles for Ofwat to apply in future.
Anthony Ferrar knows how the water sector ticks. As managing director of SES Water for the 11 years until February 2020, and finance director and company secretary of Bournemouth & West Hampshire Water for the 15 years before that, he has been able to hit the ground running since being appointed as chair of Water UK in April.
That has been a massive benefit, given the shifting sands Water UK and its members have had to grapple with on the back of Covid 1 playing a major role in a green recovery, and looking afresh at things, ties in with Water UK’s broader ambitions. Ferrar says he as chair and McGourty as new CEO are “absolutely not happy to just carry on as we [Water UK] are”.
He continues: “Christine’s coming in with new ideas, new energy and experience from other sectors she’s been in. We are developing a five year strategy for Water UK. We’ve had the early conversations with the board. We want to get that finalised as soon as we can. I think it’s important the industry comes together with a longer term vision. So that’s where the focus is going to be in particular, and that’s where we have started.”
REPORT Ofwat to consult on next steps for coping with Covid.
REPORT Where next for the retail market? Views from The Water Report Expert Forum.
REPORT Waterscan’s Self-Supply Users Forum.
REPORT MOSL’s new Market Performance Operating Plan.
NEWS REVIEW WICS refines Wholesale Deferral Scheme options.
Ellins also highlights a number of other developments that have emerged over the past few years that are less tangible but incredibly significant. First, “getting HR into the boardroom”. Typically, he says, boards only got interested in HR conversations if the questions were “is the workforce constrained or can it go down?”
But now: “What we’ve managed to do is get the discussion focused on human capital.” He comments that investors now call workforce “a key driver of value creation – we never talked like that in the early days. We talked about ‘are you doing enough skills training?’, ‘how many apprenticeships have you got?’
"So there’s a fundamental change there in that the new strategy is starting from a very different place.”
Others indicated a review is long overdue, pandemic or no pandemic. Perhaps the harshest comment was: “It is currently a zombie market and a reputational risk to the water sector.” But others echoed a similar sentiment. For instance: “It should be clear to any observer that the market is not working well” and “Absolutely. The market has been open for three years now and many of the market frictions identified by Ofwat are not new issues. What’s needed now is concerted effort to fix the issues.”
Others who supported a high level view did so with provisos. One respondent had an eye to not making things worse. “Yes, but [any review] needs to be coordinated. The danger is that another review will just add further cost and inefficiency.”
Among those who did not support a review were those who felt the market, given time and encouragement, could work through its problems without any fundamental shifts. For example one said: “Any market intervention as a result of the review would be more likely than not to prevent the market developing.
Pendle picked up the point about incentives. He reported self-supply retailers had made a large number of applications to Thames Water’s usage reduction incentive scheme. While this was “administration heavy and difficult,”
Thames was to be praised for blazing the trail and for giving retailers sight of how efficiency incentives might work. He reported that Severn Trent had been in touch about a new fund, which he hoped was a good sign of things to come from other wholesalers.
Pendle wrapped up by saying of the self-supply community: “We’d really like Ofwat to look at an incentive programme”. He added that the community would welcome more data sharing from wholesalers on their water supply situation, and praised Yorkshire Water’s open data approach as very useful.