Annual review summary 2022-23

Introduction and overview

It is our duty to provide safe, reliable and affordable water and wastewater services to all our customers, and to protect the environment in which they live.

Last year was testing. Drought and unprecedented heat in the summer required careful operational management.

It has been a tough year for many of our customers, with extremely high energy prices and food bills fuelled by high inflation. The rapidly accelerating cost of living inevitably squeezed their budgets and it made affordability difficult for many, particularly for those in vulnerable circumstances.

We devoted a lot of attention to our range of support packages, which are collectively called our tailored assistance programme (tap), to help our customers afford their bills through very difficult times. We made a number of changes to tap to enable quicker and easier access and to make it available to more people.

Throughout the last year, as in every year, we strived to be the top performing water company in all aspects of our services. We remain the best company on customer satisfaction, water supply quality and resilience. We also managed to improve our performance on supply interruptions and sewer flooding.

However, our environmental performance, as rated by the Environment Agency, fell to two stars – following many years where we had been the leading performer. We have undertaken a root-cause review out of which a pollution reduction plan has been developed to enable us to regain our industry leading position.

We will continue to champion innovation and markets to drive down costs and, as a result, bills. In particular, we are seeking to implement nature-based solutions and partnerships, which would have multiple benefits in keeping costs down, having a lower carbon footprint, supporting nature recovery and improving resilience.

Robust risk management is essential to our business so we regularly look to identify material risks that could impact our ability to deliver the services on which our region depends.

We have a systematic company-wide approach under which risk management reviews progress through a hierarchy of expert colleagues, senior managers and executive directors, overseen by a dedicated Risk Management Group that meets quarterly and reports to the Board.

We are excited to be piloting a brand-new engagement scheme, Community Connectors, through which we aim to transform how we work with communities in our area. We are identifying shared priorities which we can deliver together.

During the year, we undertook an extensive consultation programme with customers, listening to their views to help us understand what matters to them most and what they expect from us.

We are determined that we will meet their expectations.

Tripling investment to improve river health

We fully understand public concerns about river health and, in particular, storm overflows; and we are committed to doing more, doing it faster and transparently reporting progress.

Storm overflows are the legacy of over 100 years, when sewerage systems were built using the same pipe to carry both sewage and rainwater, with overflows designed to protect property from flooding during very heavy rain. Wessex Water has 1,300 overflows on our 35,088 kilometres of sewers and we have been steadily eliminating or improving these, but not fast enough.

We have already increased investment and are currently spending £3 million per month – at no additional cost to customers – to make a 25% reduction in the operation of storm overflows by 2025, from the 2020 level.

After 2025, we are proposing a threefold increase in investment to £9 million per month, with the aim of fully treating or eliminating any discharge from storm overflows by 2050. It is simply not possible to reach that goal in the shorter timescales many would like.

The solutions we choose must also be sustainable for the long-term, taking into account the impact of climate change. So, wherever possible, we will separate surface water from sewage flows or use nature-based treatment solutions.

We will continue to report transparently on the operation of overflows and our progress towards treatment or elimination, so that we can rightfully be held to account.

The consequences of climate change were also clearly demonstrated during last year, which was one of the driest on record. We implemented our well-rehearsed drought plans during the summer and succeeded in avoiding any restrictions to supply – maintaining our 47-year unbroken record of no restrictions.

But to keep pace with the changing climate, we need to continue our drive to further reduce leakage, and to work with customers to help them use less water, as well as planning for additional water storage for the longer term.

Climate change also means lower flows for longer periods in many of our rivers and watercourses. This, coupled with a growing population and new houses, means that the level of nutrients is too high, resulting in excessive growth of algae and consequent damage to the water environment.

Because of this, Natural England are imposing tough new standards for the level of nutrients and requiring any new development to be nutrient-neutral. The new standards will affect almost half the Wessex Water region and will be the largest driver of our investment programme from 2025.

Supporting customers during challenging times

Water must be affordable for everyone, all of the time. We offer our customers extensive financial and debt support through a range of schemes and low-rate tariffs under our tailored assistance programme (tap).

We increased this in 2022 as customer incomes were increasingly squeezed by inflation and the high cost of living.

We are tripling the numbers on our financial support schemes over the next couple of years, making help much easier and quicker to access, auto-enrolling customers on to discounted tariffs where we can, and injecting additional funding into the debt advice sector to build extra capacity.

We made the following changes in the past year:

• worked to fast track another 60,000 customers on to our Assist social tariff, so they can benefit from discounts of up to 90% on their water bills more quickly and easily.
• worked with the Department of Work and Pensions to automatically apply a 20% discount to the bills of up to 55,000 low-income pensioners. Overall, more than 23,900 low-income pensioners received around £60 off their bill.
• set up data shares with local councils to auto-enroll customers on to help schemes.
• promoted our schemes using a variety of communication channels, and using imagery and wording customers have said will best encourage them to get in touch. We also built new partnerships with organisations to increase take-up.
• simplified the application process for our schemes based on feedback from customers through focus groups.
• injected an additional £160,000 from out-performance into the debt advice sector, funding seven new projects across our region to directly increase capacity.
• ran a large pilot with debt advice organisation Money Wellness to directly refer our customers to them through a web portal. With consent, we are also able to receive customer data return and support them with the right scheme.

In our strategic direction statement, which sets out our aims for 2050, we are targeting zero water poverty which means no one will spend more than 5% of their disposable income on water.

Other people and places targets include:

• 100% water quality compliance
• zero water supply interruptions of longer than three hours
• halving the impact of sewer flooding
• being a top 10 customer service provider across all companies in the UK.

Determined to regain our leading performance

Our performance against our commitments to enhance the environment was mixed. We made improvements in some areas, but failed to advance in others. We are taking urgent steps to improve our record across all our environmental activities.

This is particularly true of our pollution performance which deteriorated significantly. We are extremely disappointed with this performance.

There are some factors that have impacted on our performance. The rollout of our monitoring programme has increased our ability to identify pollutions.

Moreover, the dry summer and subsequent low river levels meant discharges were not as diluted as in normal conditions and the environmental impact was greater. We are resolute in our intention to regain our industry-leading position on pollution, including through greater use of intelligent monitoring.

More widely, 2022 demonstrated the extent to which weather affects our business and the water environment. The shadow of the severe drought of the summer can be seen in many aspects of our performance.

Leakage increased as the ground around pipes dried. Conversely, awareness of the drought stimulated customers to engage with our water saving messages, lowering average per capita consumption across the year to pre-Covid levels.

We beat our performance commitment target for the volume of water saved through water efficiency activities.

We head into 2023-24 with our water resources recovered. We worked hard in 2022 making robust preparations for the future.

It was a milestone year for water resources planning, with the publication of both our own draft Water Resources Management Plan and the first ever water resource plan for the West Country region.

Our operational carbon emissions continued to fall and our work to boost biodiversity on our landholdings continued apace.

The tumultuous weather of 2022 and its obvious short-term impacts make it clear that our climate is changing with significant consequences. A long-term view is much needed as we work to enhance the environment.

In our strategic direction statement, which sets out our aims for 2050, we are targeting:

• never harming the health of the water environment through our abstraction
• restoring the quality of our rivers and coastal waters
• being a net zero carbon business (by 2040)
• doubling our contribution to the region’s biodiversity.

Building a diverse workforce

Our ambition is to build an inclusive workforce that reflects the communities we serve and we are committed to improving all areas of diversity and inclusion.

Our programme for the year continued with a broad spectrum of activities across gender, ethnicity, disability, sexual orientation and social mobility. We have an active working group overseeing all our efforts in this area.

To better understand how we are doing, we took part in the 2022 Energy and Utility Skills Diversity and Inclusion Measurement Framework. This provided excellent insight into how we compare with the utility industry in the UK, including the water sector, both nationally and regionally.

While we are making good progress on ensuring our workforce reflects the community we serve, our ethnicity results are below the UK industry average.

In response, we formed the Race At Work Group – an internal network of colleagues from across our business, to plan how we can provide more opportunities for those from ethnic minorities.

Similarly, we formed a Disability Advisory Group, again consisting of colleagues across our business, with an interest in promoting opportunities for those with a disability, including hidden disabilities. The group will provide feedback and advice on improving opportunities.

In September 2022, during our promotion of National Inclusion Week, we announced executive sponsors for all key characteristic areas. This was to demonstrate senior level commitment to improving diversity and inclusion, and to provide practical executive level support for our working group members to help them enact their plans.

The internal networks we created in 2021 continued to gather momentum:

• the ARC Alliance, formed to promote acceptance, respect and celebration of our LGBTQ+ colleagues, provided valuable advice and recommendations.
• our Working Families Group provided ongoing help to colleagues juggling work and family life. Tangible policy progress was made here, too. After undertaking external benchmarking on our family leave policies, we improved our leave and benefits entitlements to help us attract and retain talent and build a reputation as an employer of choice, especially in male dominated business areas.
• our Menopause Network has also proved highly successful, running a series of events for both men and women and providing useful information across our internal media.

Partnerships with external organisations continued to thrive. For instance, we provided work placements to help women re-enter employment in collaboration with the Women’s Work Lab, and our work with Seetec Plus and Bristol Future Talent Partnership expanded.

Maintaining financial resilience

Despite last year’s many uncertainties and challenges our financial performance has been marked by its resilience.

Our revenues were lower as we successfully encouraged people to consume less and they were spurred on to do so by awareness of the summer drought and high energy prices which encouraged more frugal use of hot water.

Simultaneously, our operating costs were affected by inflationary and global market pressures, including energy and chemicals costs. We also saw a near-term impact on earnings driven by inflationary pressures, especially on indexed debt.

Nonetheless our credit ratings remained stable; we delivered a large investment programme; and our active treasury management led to financing outperformance relative to our regulatory settlement.

When our 2022 pension scheme valuation was finalised, we agreed the deficit recovery contributions would end early as we had eliminated the deficit.

Executive bonuses totalling £0.5m were paid during the year, down from £0.7m last year. We have not paid any of the 30% bonus potential relating to environmental performance.