Thames: We started too late to meet PR19 commitments

Thames Water has “too much to do in too little time” to meet performance commitments in the current regulatory period, according to Cathryn Ross.

In the final ‘Your water, your say’ customer feedback session for water companies in England and Wales, Thames’ executive team spoke about business plan proposals for PR24 as well as performance issues and a loss of public trust.

They said their business plan for 2025 to 2030 is based around realistic commitments and includes improvements that were due to be addressed during the current asset management period (AMP7).

Interim co-chief executive Cathryn Ross explained these would be rolled forward into AMP8 or even beyond, but stressed that projects were not being abandoned.

“In the current period there are things that we are not going to be able to do,” she said, attributing this to “a very, very slow start to delivery” in AMP7.

This slow start was the result of changes to the organisation, which began the period without a chief executive, and a “more difficult” than expected settlement from Ofwat that forced the team to re-examine its plans.

Ross said just £100 million of capital works were undertaken with its supply chain in the first year of AMP7 compared to more than £800 million this year, leaving “too much to do in too little time” to make up for the delays.

Faced with questions about underinvestment, Ross told customers that Thames had prioritised keeping bills at or below inflation since privatisation. She agreed there had been underinvestment but denied customers had already paid for undelivered work.

“We sought to keep bills down, rather than we’d had lots of customer money that we should have been spending on our assets that has been sucked out to pay our shareholders,” she stated. “We have an asset problem. I do think there has been underinvestment and we should rectify that now, but I don’t agree it’s the case that customers have paid for but not received that investment in the past.”

For AMP8, the business plan proposes £18.7 billion of spending to start to reverse the current “asset deficit”. Ross said addressing this gap will make a big difference in driving down leakages, supply interruptions and pollution incidents.

‘Your water, your say’ feedback events were introduced for PR24 to allow Ofwat to compare how companies communicated plans with billpayers in a like-for-like way.

The session’s independent chair, Kevin Johnson, said there had “clearly been leadership and management issues” at Thames and asked if the company also faces deficit in management capabilities.

Ross, who became interim chief executive in July following the resignation of Sarah Bentley, acknowledged that some decisions taken in the past would not be made today. She said there is more to company leadership than a single person and highlighted the experience of Thames’ executive team as well as the continuity of its board, save its new chair.

Members of both were subjected to two hours of questions from more than 150 attendees, covering water supply and quality, wastewater and combined sewer overflows, bills and affordability, and corporate behaviour and trust.

The questions included why investments in the asset base had not been made and if financial mismanagement had taken place, which Catherine Lynn, non-executive director, denied.

“Thames is where it is, and we can only move the business forward from where we are now with our infrastructure and with the massive investment we are putting into the next review period,” said Lynn. “We can always look back and blame the past, but the board is challenging the executive team to deliver for the future.”

She reiterated that it would take time to improve the standard of Thames’ assets: “There is so much to do and only so much we can deliver from a supply chain and customer bills perspective.”

The final question of the session was why customers should trust the company to deliver on its plans after previously failing to do so. Ross acknowledged this as “the question that matters most” and said the company’s current position saddens her.

“I don’t think we are trusted, as Thames Water and as a sector,” she lamented. To rectify the issue, Ross said: “We need to be unafraid of going out and having the conversation and being transparent to explain what we’re doing and why we’re doing it, dealing with questions and queries in as open way as we can. The only other thing that matters is to do what we said we’d do. We have to deliver.”

“You’ve seen what’s set out in the plan and what we think we can deliver,” she concluded. “I know it’s not the plan everybody wants or the bill level everybody wants but it’s the plan we feel we can deliver.”