Q: There have been a number of significant changes to the Open Water programme – where do we stand?
“There are a series of milestones ahead of us and the industry is focused on implementation. Clearly there have been some anxieties and the preparations at a national level have not been as straightforward as you would like, but I am confident that South West Water is on track to be ready.”
Q: What has South West Water learnt from its Scottish retailer, Source for Business?
“We were a bit more cautious in getting a licence in Scotland compared to some other firms but we have now and we’re winning our first contracts. We are reasonably new to the Scottish market, so we’ve not tried to be market leader or anything close to that.
“We’re happy with the processes in place, and we have people on the ground up there, but it is too soon to say what lessons have been learnt. There is an element of learning for 2017, but it is very early days.”
Q: What will South West Water’s target market be post-2017?
“It is part of our plans to retain as many of our customers in our incumbent areas, including Bournemouth, as possible. We are also thinking about approaching the market beyond our own boundaries, including Scotland.
“We certainly have a strategy to focus on areas where we have some unique expertise or selling points. An obvious place for us to start is to think about what is our core customer in this part of the world, which is tourism, agriculture and food processing. So those are the more natural places for us to offer something over and above just cutting prices.”
Q: How is the Bournemouth Water takeover progressing and how will that affect your retail plans?
“We do not expect there to be any issues with the takeover from the Competition and Markets Authority (CMA) but we are taking things one step at a time.
“The deal is bringing two very good companies together. The combined business will provide an enhanced platform for innovation and growth ahead of market liberalisation in 2017 and will better serve both area, delivering tangible benefits to customers and shareholders. They have a different business mix to ours, and that adds value to what we can offer customers.”
Q: What concerns have you got about the level of non-household retail margins for the English market?
“I think most commentators would say there is a larger margin available in the Scottish model than proposed for England for 2017. Most have said they wonder if those margins are appropriate and whether they are large enough to create a vibrant market. I guess we wouldn’t dissent from the commentators’ views.
“But it is wrong to look at it as just the margins. Some of the things our customers in our current areas are very keen on is not just the price, it is very much the service and the added value we can give.”
Q: With AMP6 under way, how has South West Water benefited from its enhanced status?
“The enhanced status was very good in many ways. The ability to get on delivering our business plan, and largely it was our business plan, was an advantage. But in hindsight it was even more than I thought at the time.
“It really has been an advantage to have six to nine months, and possibly towards a year, of advantage over our peers who had to refine their business plans and work with Ofwat to get to an appropriate position. We got ours signed off much earlier and I know from what we did five years ago, when you get a final determination which isn’t exactly what you were asking for, you have to work through how to deliver it, which is where you get to in the 12 months. It means we’ve been able to get off to a very good start.”
Q: South West Water has recently been fined for two pollution events. What is the company doing to rebuild its image following these incidents and the fines?
“It is one of the most important things for us, the protection of the environment. It is one of our guiding principles. We are working hard to protect the environment but from time to time, unfortunately, things go wrong. I wish they didn’t but we have done a lot to reduce the likelihood of any future events.
“We’ve invested around £2 billion in the Clean Sweep programme since privatisation. About 40 per cent of raw sewage went straight out to the beach at the time of privatisation, but as a result of our investment, that is no longer the case. Generally speaking when bathing waters don’t meet the required standards it is not because of sewage but agricultural runoff and runoff from the highways. That wasn’t the case 30 years ago.”
Chris Loughlin will be part of a panel discussion debating the future delivery of the utility sector at the Utility Week Congress 2015 in October. Together with the other panel members he will explore the impact of the government’s new policy agenda, how emerging technologies will revolutionise the sector, and what the future shape of the market will look like.. Visit: www.uw-congress.net