Into the unknown: AMP8 challenges, smart metering and Portsmouth’s Kraken adoption

Water companies are heading into new territory in AMP8 as they prepare for a brave new world of water metering, consumer behaviour change and reputational rehabilitation. How are they beginning to do things differently today? Business leaders joined Utility Week for dinner to share insights.

AMP8 is going to ring some big changes in the water sector, for companies and customers alike. Adapting for them is unlikely to be a comfortable process, warned a group of senior sector leaders at a Utility Week dinner debate, held just prior to the festive break.

The event, hosted in association with consultancy WNS, convened senior water sector figures to share examples of the ways in which they are seeking to deliver business and service transformations in a challenging environment. Where do leaders see the real opportunities to make sorely needed efficiency gains or access growth when their options are constrained by regulation, statutory duties and social expectation?

Success stories, it must be said, were thin on the ground – the balance of debate weighing heavily towards the obstacles water companies face in building trust and understanding with consumers, as well as establishing constructive discussions with the regulator around proposed changes – designed with better customer experiences and efficiency in mind – in problem areas like billing and complaint handling.

Gear shift

While a smattering of small wins have been achieved, the group accepted that the coming AMP will require a gear shift in transformation across the sector. The primary forces driving this? Climate change and a worrying escalation in strains on water resources.

Authoritative reports from bodies like the Committee on Climate Change warn that diminishing water resources combined with growing water demand across the country point towards the extinction of our current national supply-demand surplus from the beginning of the 2030s if substantial action is not taken now.

Recognising this imperative, water companies have long been striving to engage consumers with water efficiency measures and tackle leakage. But meaningful change has remained elusive. With the unpalatable prospect of widespread water shortages and supply interruptions becoming an ever closer reality, companies have adopted a more assertive stance with their PR24 proposals, centering on a potential £2bn sector-wide investment in smart metering. With accurate consumption monitoring in place, companies hope to be able to drive sharper, more targeted messaging to consumers about how to change their behaviours, including through the introduction of new pricing and tariff structures.

Delivering on smart meter plans will be a gargantuan task – but the actual rollout only represents the tip of the iceberg of change, said our debate participants. To successfully use smart metering to shift the dial on water consumption, the industry will need to mobilise for a major consumer communications offensive and, in most cases, rapidly upgrade IT systems for customer relationship management and billing – current technology infrastructure is broadly incapable of handling the expected increase in data feeds and too clunky to support agile customer interactions, we heard.

Pioneering Portsmouth Water  

One company has taken radical action to prepare for this new world order. While the debate was hosted under the Chatham House Rule to encourage open and honest exchanges between our participants, Bob Taylor, chief executive of Portsmouth Water was willing to go on the record with his reflections on the factors which drove Portsmouth to become the first water company to adopt Kraken – the customer relationship platform which has shaken up the energy industry.

“We are taking a journey into the unknown,” admits Taylor, speaking again to Utility Week post-event. “But while Kraken will not be a silver bullet, it is an essential part of the wider changes we need to see…its all about being able to deal with smart metering and achieve changes in customer behaviour. It will bring new capability in the way we engage with them.”

Talking about Portsmouth’s specific customer engagement challenge, Taylor says the company has a mountain to climb in convincing customers there is a water scarcity problem to be addressed. It boasts the cheapest water in the country and has been blessed with access to the natural chalk aquifer beneath the South Downs.

“While Kraken will not be a silver bullet, it is an essential part of the wider changes we need to see…its all about being able to deal with smart metering and achieve changes in customer behaviour.” Bob Taylor, CEO, Portsmouth Water

This source has always seemed bountiful and Taylor says customer have an almost “emotional connection” to the springs. Its proving hard convince them that, as of 2021, Portsmouth’s license area is classified as being in serious water stress, that this means expensive infrastructure investment will be needed – impacting bills – and that they must change the way they use water on a daily basis.

“Kraken will help us with that behavioral change challenge,” says Taylor. “It will equip us to deal with the volume of smart meter reads and to do useful stuff with that data. It will be possible to analyse usage patterns, identify continuous flows where leaks are likely and talk to customers in an agile way about their usage.”

Acknowledging that these capabilities exist in other solutions, Taylor shrugs and says simply that “the team at Kraken were the best people I talked to about what we needed to be able to do – we went through a full procurement process.”

Among the offerings which made Kraken so convincing – beyond the core technology – was Kraken’s eagerness to establish a “water lab,” adds Taylor. This is a dedicated resource being spun up by the Kraken team to support innovation in the water sector by providing a safe space for quickly trialing ideas and using data creatively to see how customers can be influenced.

“It’s key attraction is that it can help us really quickly test ideas,” Talyor continues. “We really don’t want to have to spend years in long innovation projects. We need to be able to try things in a more nimble way and see the results.”

Portsmouth Water’s pioneering adoption of Kraken is being closely watched by other in the water sector. Following its lead, Severn Trent announced in October that it too will use the technology platform to help drive per capita consumption reduction across it 4.6 million customers. Utility Week understand other major water companies are considering going the same way.

Kraken has made waves in the energy sector in recent years, powering the growth of Octopus Energy from startup to dominant player in less than a decade. It has also been adopted by three of Octopus Energy’s rivals, including market incumbents Eon and EDF. And Kraken has reached its tentacles well beyond the UK too. The platform now serves more than 30 million customers globally.

“There is considered to be a game changing opportunity [in AMP8] to improve customer service interactions, through accurate billing and consistent service levels as well as to enhance water companies knowledge of customers behaviours and needs.”

Hayley Monks, SVP sales at WNS, offers her reflections on leadership sentiment and experiences shared at this event. Full article here.

Kraken’s high profile success in the energy sector had no small influence over Taylor’s final decision to take them on, he admits. “Their track record was certainly compelling,” he comments. “Around 40 near-faultless implementations in the energy sector world-wide. You can’t ignore that – there are some horror stories – not so much in this industry as in energy – when it comes to billing and CRM system changes that have gone wrong.”

What has helped Kraken’s success, opined Taylor, is its measured approach to migration and the sheer energy and enthusiasm of the dedicated team it stands up. “It’s a joint development process. The team is extremely keen and its proving to be a really exciting and different approach to billing and CRM,” says Taylor, adding that around 35,000 accounts have now been migrated with a view to completing the customer book by the end of April 2024. “No one would have believed that we would achieve that, but we’re on track.”

But while Taylor certainly hopes Kraken will help Portsmouth make a material difference to customer engagement and consumption in AMP8, supporting and enhancing its investment in smart metering, he knows the scale of behaviour change needed in coming years cannot be met with technology alone.

Returning to themes discussed with fellow guests at Utility Week’s round table debate, Taylor reflects on the water sector’s immature approach to campaigning and public messaging.

“What we have always been good at doing is just making sure the water comes out of the tap and goes down the toilet,” he comments. “If that’s happening, everybody’s happy. We just get on with it behind the scenes. We’ve not been used to advertising and standing on a soapbox and shouting about what we do or what needs to be done. It’s never happened. We’ve always thought that that’s not the right way to spend customers money properly…but things are changing.”

The challenges ahead of water companies will demand collective effort and investment in more sophisticated and high profile campaigns designed to educate and engage consumers in the seriousness of our water resource challenges. At the same time, Taylor says companies also need to  “mobilise a quiet revolution” by engaging and equipping their workforces to do more to win hearts and minds at home, in pubs and sports centres.

This will be a tough task given the sector’s poor public profile on the back of Combined Sewer Overflow scandals and the headline-making financial troubles of Thames Water which have tarred the industry in the eyes of the Joe Public and damaged the confidence, pride and morale of many working within it.

As attendees at Utility Week’s debate accepted, for some companies more than others, the fight for engagement with water consumption in AMP8 and beyond will need to start at home with concerted action to understand the state of employee confidence and commitment to ushering in the change.