Colin Skellett’s Industry Champion trophy – awarded to him just before Christmas at the Utility Industry Achievement Awards 2012 in London – is proudly displayed outside his office in Wessex Water’s Bath HQ. Proudly, but not exactly in pride of place, because it is surrounded by a sea of other trophies, awards and mementos gathered across his 38 years at Wessex, 24 of them as its chief executive.
For such a decorated achiever and someone who has held his position as head of a top-performing water company through thick and thin, Skellett is remarkably modest. He jokes of being named Industry Champion: “It’s a bit like the Oscars where they give you an award on the basis that ‘we’d better give him something this year as he might not be around next year’.” Throughout our discussion, he also emphasises that the success is not his alone, but a result of the hard work and dedication of his staff.
But like it or not, he is a champion, and in an industry that by his own admission is well run, led and executed. “This industry is full of really good people,” he says. “The way we manage to maintain – improve – quality of service year on year, time after time, is a real tribute to the people in the industry.”
Skellett says he does not intentionally champion the industry. He confesses to have stumbled into it in the first place. “I didn’t grow up thinking ‘I really want to be in the water industry’,” he smiles. “I did sciences at school. I left school at 16 and there happened to be a job at the sewage works as a chemist. So I got into this purely by accident. That was 1961 and it’s been a fascinating industry to be in. There’s always something different, something new.”
That said, he stresses that the company and the industry are closely related. “My main focus has to be the Wessex business, but the fact that we are viewed as ‘the water industry’ means it’s really important the industry is successful as well as Wessex.” So “while not consciously seeking to be a champion”, Skellett does consciously use his experience “to speak on some of the things that matter to the industry – and because I’ve been around a long time, occasionally people take notice of it”.
He warms to his theme: “I’ve got a pretty clear view about what matters and doesn’t matter in the industry. Quite often we overcomplicate this industry. It is pretty basic… you can go off on all sorts of esoteric issues and forget that we are providing a fundamental public health service. What customers want is pretty easy: clean, safe drinking water and reliable services – it’s as basic as that.”
Skellett’s credentials as a voice of experience are unshakeable. If it is water industry-related, he’s pretty much got the T-shirt. Since his 1961 debut, he has seen what is the present day Wessex Water formed in 1974 as a regional water authority; operate as a local water board and then as more like a private sector water board; full privatisation in 1989 and ten years as a quoted company; four years of Enron ownership; and now coming up to 11 years with its present owner, Malaysian infrastructure specialist YTL.
So has the industry fundamentally changed since he joined it? Skellett says privatisation was a watershed. “We would never have made the improvements the industry has made without access to private capital that came from privatisation,” he asserts. “I remember before that when we had to go each year to government to ask for funding. There was always more priority on transport or whatever, and water – sewerage especially – was always bottom of the list.”
The other major change he cites is the rise of the customer. “The industry was incredibly paternalistic,” he recalls. “We knew what was best and you were jolly well lucky to get the services we were providing. We now treat customers as individuals who have individual expectations. That’s a major change.”
The Wessex boss is clearly proud of his company. He mentions specifically the absence of supply restrictions since 1976; never failing to outperform a regulatory output; and being awarded Utility of the Year at the Utility Industry Achievement Awards in 2011. Privatisation was a personal high. “The freedom in the first period of privatisation was tremendous,” Skellett says. “The sheer stimulation of privatisation was great.”
A personal low? “Getting arrested was a fairly low point,” he says with a wry smile. “It was interesting in hindsight, but not an experience I’d recommend.” Clearly he can see the funny side now of being accused – and exonerated – of taking a £1 million bribe for facilitating the YTL takeover. A pair of furry handcuffs and a prison survival kit grace his mementos table – joke gifts from colleagues.
So, having lived through various incarnations of Wessex, does Skellett believe ownership matters? We are often told it is irrelevant, given the strength of the regulatory ringfence. He endorses the ringfence, saying it offers “powerful protection”, especially teamed with Ofwat’s system of requiring independent directors to sit on boards, exclusively to look out for customers. This started during the Enron period, and Wessex has three such directors today.
This means customers are protected come what may. But different owners do make a difference internally. Skellett recalls: “The Enron period was extremely difficult because as a shareholder, its interest was in maximising short-term profit. We were able to use the independent directors and the regulatory ringfence to frustrate that… I used to go out to Houston once a month to be sort of beaten up.
“We now have a shareholder that understands long-term investment and that’s great… that understands these are really long-term businesses and you’re investing for the really long term.”
And how have politicians and regulators measured up over the years? Stressing that he is “always polite” on this front, Skellett says the crucial ingredients are having politicians and civil servants in place “who understand the business and that you don’t get quick fixes”. In political terms, he recalls with scorn: “There was a period when we used to have constant summits. It was ‘something must be done so we’ll have a summit!’ It didn’t achieve an awful lot.”
Regulation has had its ups and downs, he says. A particularly bad period was when there was infighting between Ofwat and the Environment Agency and companies were left as “the meat in the sandwich of these regulators with their conflicting pressures”. That situation is now much improved, as is planning for longer than five-year stints.
So the trajectory is upwards for the relationship between regulated and regulator, although the recent Section 13 licence change fallout shows that it is clearly not entirely a case of happy families. The issue now seems close to resolution. Ofwat has put a new deal on the table, amounting to a massive concession to the industry, which scraps the notion of moving up to 40 per cent of a company’s revenues outside the inflation-linked wholesale price control.
The official response deadline for companies is 23 January. Skellett seems confident a consensus will be reached and a trip to the Competition Commission averted. But he comments: “My concern is it is symptomatic of a lack of trust that’s developed over a period of time for lots of reasons. We need strong independent regulation, but it needs to be based on a trust and a mutual understanding.
“I think we are getting back there. Some of the things that have happened recently have been really helpful in starting to rebuild that trust.”
Putting Section 13 to one side, what industry issues does the Wessex chief feel need championing now? Top of his list is the draft Water Bill, and specifically what it doesn’t do. He is disappointed that, unlike the Water White Paper, it is mainly focused on competition, which he considers something of a “sideshow” compared with the genuinely pressing issues of resilience, security of supply and affordability stemming from climate change. “Climate change means we are going to be carrying out major investment programmes for a long time yet. At the time of privatisation, the theory was that ten years of investment would get things back together and meet European standards, and after that it would just be maintenance. That clearly is not going to happen.”
He concedes that some actions – such as promoting more interconnection and more metering – can be taken without primary legislation. But he says their exclusion from the Bill will likely mean “they won’t get the priority and regulatory support they really need”.
Another issue that needs championing is encouraging more women to join the industry, particularly in technical roles. “These businesses are still seen as a man’s world,” Skellett says. “We’ve got to change that.” He says that addressing climate change will drive new ways of working – for example, less reliance on capital solutions, more innovation, a higher profile for behavioural science in encouraging customers to change their behaviour. “And that will start to change the way the industry looks. It doesn’t look like heavy engineering; it looks like an industry that’s about creativity, about doing things differently.”
Skellett intends to stay put at Wessex for the foreseeable future, so he will no doubt be playing his part in championing key issues as well as flying the flag for focusing on the basic business of delivering a clean, safe service. Given the wider economic picture, he says, the industry will meanwhile be expected to keep bills down, “so I think the idea of anything much more than inflationary bills is pretty unlikely”. A voice of experience and reason will be most welcome.
This article first appeared in Utility Week’s print edition of 11th January 2013.
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