The value of water

Water plays a unique role in all our lives. It is critical to keeping our communities healthy, our villages, towns and cities running, and our economies growing.

Ian McAulay, chief executive, Southern Water Ian McAulay, chief executive, Southern Water

The water sector has served customers in the UK consistently and reliably for many years. It has quietly met customer needs and environmental demands and challenges well, albeit relying on what are mostly conventional approaches.

However, as we enter the PR19 planning cycle, I believe our world of water is at a point of inflection. Water scarcity is becoming more common, the frequency and intensity of extreme weather events is increasing, our population is expanding and urbanising, environmental and economic demands and challenges are growing, customers’ needs and preferences are changing, and technology is becoming ever more available, capable and affordable.

The combination of these factors means previous thinking and convention upon which we have relied must now be integrated with substantially more innovation and change.

In his keynote speech to the Water UK City Conference in March Ofwat chairman Jonson Cox’s challenged the sector to “break all known frontiers” whilst recognising of course the need to maintain affordability for customers.

That’s a bold and exciting challenge which highlights both opportunity and need to implement a step change shift in the strategic direction of the industry for the first time in many years.

We need to create new approaches to managing water, new ways of thinking and more innovating ways of implementing. We live in times where the world is changing faster than at any time in history and will continue to do so. Looking forward 25 or 50 years is therefore a much different proposition now from earlier AMP periods.

It’s important to remember that we start from a sector position of having well established methodologies, extensive asset bases and a regulatory approach that have worked well for many years. That has great value which should not be lost. The time is right though to adapt and integrate our past into a future where innovation and technology are harnessed to create an environment where the optimum value of water is realised.

Water in its many forms and uses, including our sector’s infrastructure and services, is essential. However, for a variety of reasons the value of water is not always or consistently recognised in the public domain

It is obvious that in times of drought or flood, when there is too little or too much water, or in water pollution events that the value of water is considered. That does need to change. Within the water sector we have a clear need to work within our communities in a clear, creative and collaborative way to raise awareness of the value of water and the often-hidden challenges that can threaten supply or impact on our ability to provide these critical services.

We also need to think and work outside our conventional “boundaries” whether these be defined or self-imposed. There are for example opportunities to use systems thinking to manage supplies and demand more holistically and to connect other sectors in new approaches. In that regard, the water-energy-agri nexus affords much scope for new thinking and approaches.

In this way, we can support widespread changes in how people use and value water – for example being more water efficient, more knowledgeable of the impact of water in the environment or more aware of the importance of water to deliver economic growth potential.

By working together, we can better protect our network as well as the rivers, watercourses and bathing waters that are lifeblood of our local communities.

Moving towards ‘future water’

I have been the chief executive of Southern Water for just over three months and in that time, we have been working hard to change at pace to become an organisation which seeks out innovative solutions to issues and uses new and existing technology in more agile and meaningful ways. We are endeavouring to raise the bar in terms of the value we deliver for our customers and communities and will continue to do.

At the beginning of April, we held an event we called ‘Momentum’ which brought together our customers, regulators, community, NGOs and members of our customer advisory panel and board. The event was designed to co-imagine a future world and the role that water and water companies could play in that.

There’s no doubt that looking far into the future and trying then to put that in nearer term context is difficult. We looked at global issues and developments and then scaled that down to the future needs of the South-East region, its society and communities.

We discussed the possibilities of grey water market and infrastructure which could service agriculture and other industries reducing demand on potable supplies, improving resilience and potential to create jobs whilst at the same time helping to keep future bills low. We also considered new ways of bringing water and energy management together and how microgeneration technologies can be used to produce electricity and heat from renewable sources.

Investing for future generations

When I think of investing in water for future generations I am always struck by the importance of working now to support schools through curriculum input and offering apprentices and job opportunities.

In common with many other companies we have a long history of doing this. Many of our programmes look at the ways in which water impacts on our lives. An unusual but great example of this of which I am immensely proud of is our Learn to Swim programme. It celebrated its 25th anniversary this year with 700,000 children having learned a skill which is particularly relevant in the region given the bathing waters we are surrounded by.

As well as providing free interactive talks to schools in our supply area we are also creating new assets that are closely aligned to the curriculum to help support teachers. Just this year we have worked with Google to create a free 3D app that allows students to view the waste water treatment cycle at our ground-breaking Peacehaven Treatment works.

Listening to our regulators

I have spent a lot of time in the last few months visiting our regulators and listening to their feedback. It’s clear that in the immediate future as an organisation we face significant challenges and need to do a number of things differently now – while maintaining and building on the things we already do really well.

Whether it’s Ofwat, the Consumer Council for Water, the Environment Agency or the Drinking Water Inspectorate, the message is unequivocal: we need to be an open, transparent and accountable organisation that not only gets the basics right but also leads by example and embraces innovative solutions.

That’s why my senior leadership team is now focused on developing a clear roadmap to transform the business, which will help us build on our strengths, perform to our potential and adapt and thrive in a changing sector.

Customers at the heart of the business

In terms of future planning as we enter the PR19 planning cycle, we need to balance investment for future generations with affordability for current customers and this is recognised by government.

Earlier in the year in the draft strategic policy statement (SPS) to Ofwat, Defra outlined two key priorities – securing long-term resilience and protecting customers.

Let me tackle the latter first. We have seen a steady improvement in our customer service at Southern Water but we are still an outlier.

The opportunity presented through the opening of the non- house hold market this month and the prospect of household market reform on the horizon means we need to develop a much better understanding of our customers immediate and long term needs.

Our challenge at Southern Water is to find the best way to meet current customer need and anticipate customer future customers’ demands.

I believe collaboration is key to really supporting vulnerable customers. So, we are actively seeking proactive partnerships which will enable us to see the whole customer and develop streamlined services which help rather than complicate people’s lives. For example, we’re working in partnership with Local Authorities such as Brighton and Hove City Council to help provide water saving devices in housing association homes and linking in with other support agencies such as the Citizens Advice Bureau.

Back to the here and now

To set some context, this is just not a regional view, the government highlighted water and waste water is a key deliverable of the National Infrastructure Plan for the next five years – targeting a reduction in customer bills of 5 per cent in real terms. We need to be acutely aware of those customers most in need of our help and what we can do to make it easier for them to afford their charges. This is backed by the National Audit Office’s recent report which challenged the sector to do more to meet the needs of customers in vulnerable circumstances.

As we move through Brexit negotiations this will also bring challenges that we must rise to and opportunities we need to be ready for.

All this is happening now… not in the next 25 years or even in the next AMP. The water sector is changing at an unprecedented pace and it is an exciting place to be.

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