Annual results 2014
Weather and compliance | Investment and bills | Planning for the future | Governance | Our employees | The future
It is 40 years since Wessex Water was formed as a regional water authority on 1 April 1974 and in October it will be 25 years since we were privatised. It is sometimes difficult to remember the scale of the changes that have taken place: from a time when the River Avon, through Bristol, had to be chlorinated in the summer to kill the smell and some rural customers often went days without proper water supplies during very dry weather, to today, when our standards are among the highest in the world.
Much of the improvement has been due to privatisation which provided access to private capital for investment and gave incentives to deliver high levels of customer and environmental service as efficiently as possible. Over the last year, Wessex Water has again been the best performing water and sewerage company, with more than 96% customer satisfaction and the lowest level of complaints.
We consistently deliver around 100% compliance with environmental standards, have the lowest level of pollution incidents and have not imposed a hosepipe ban since 1976. The improvements of the past 25 years have put us in a good position to meet the challenges of climate change, a growing population and increasing customer expectations. Our commitment to embedding sustainability throughout the business was rewarded by the company retaining The Queen’s Award for Enterprise in Sustainable Development.
Weather and compliance
Extremes of weather were very evident over the last year, most notably the exceptionally wet autumn and winter of 2013-2014. December to February were the wettest for almost 100 years. Our staff were fully deployed dealing with problems and to minimise the impact on customers we introduced temporary tankering and pumping at 48 locations across the region.
Even so, we maintained very high compliance with drinking water quality at 99.97% and compliance with abstraction licences at 99.98%.
However, partly because of the extreme weather, the number of pollution incidents increased, so we are working hard to identify additional measures to reverse this position. The weather was also one of the main reasons why operating costs rose by £13.9m to £162.3m. Other factors included the cost of new obligations, higher business rates and inflation. Operating profit rose by £10.8m to £234.8m.
Investment and bills
During the year we invested a total of £226m to improve existing infrastructure and build new assets. This investment included continuing work on the regional supply grid which will significantly improve resilience and quality of water supplies.
Other major work included mains refurbishment in and around Taunton, replacement of Ashford water treatment works, phosphorus removal schemes at three sewage treatment works and work to improve the treatment of sewage sludge and to generate more renewable energy at our Trowbridge plant. In total, we completed 700 separate projects and are on target to deliver all our regulatory outputs by the end of 2015.
While continued investment is essential, we also need to keep bills affordable. The proportion of household income spent on water and sewerage services has increased by only 0.2% since privatisation, but we know that for some customers the bills are difficult to meet. The Board decided not to apply the real terms increase in bills for 2014-2015 that had been agreed with the regulator at the last price review in 2009. We also extended our tailored assistance programme, tap, to help customers in financial difficulties.
Currently, 15,000 households benefit and the latest changes should add another 10,000. We have continued to work closely with the Citizens Advice and debt agencies and our Money Matters grants have helped 10 organisations that offer financial, literacy and money management help. The quality of our overall customer services has again been demonstrated by retaining the Customer Service Excellence award.
Planning for the future
We have published Water – a new direction, our business plan for services, investment and bills for 2015-2020. This built on the need to continue investing in our infrastructure and the requirement to keep bills affordable. We propose spending 20% more than the current five-year period, while bills will fall in real terms this year and every year until 2020 – reducing by more than 5% over the five years.
The plan focuses on reducing the burden for all customers, increasing support for those who have real difficulty in paying while at the same time meeting all regulatory outputs and continuing to raise service standards. We propose to achieve this difficult balance by even greater innovation in delivering improvements and by phasing investment to reflect customers’ ability to pay.
The plan has been subject to detailed review by our customer scrutiny group and has wide support from across the region. The plan is now subject to Ofwat scrutiny following which it will publish its determination.
Wessex Water operates to the highest standards of corporate governance and, as a privately owned company, our board meetings provide for the full engagement of shareholder, independent and executive directors. All decisions affecting the business are taken at these meetings. For example, the board has been fully involved in every aspect of the development of our business plan. Our governance is not static and we have made changes to comply with the UK code, including separating the roles of chairman and chief executive. We have also formed a corporate responsibility committee.
Our employees have again been outstanding in dealing with the challenges of extreme weather, alongside all the day to day demands of the business – they consistently go the extra mile for customers. As economic growth takes off and major infrastructure projects, such as Hinkley Point C nuclear power station, begin construction, we need to ensure we retain and attract both existing skills and the new skills we will need in a competitive marketplace. So we have significantly increased apprenticeships and are working closely with universities, colleges and schools. We also need to grow the diversity of our workforce, including attracting more women and ethnic minorities into the company and progressing the careers of those already in the business.
Twenty five years on from privatisation, our commitments to the highest quality of customer service, to the environment and to innovation make us the leading UK water and sewerage company. We will continue to deliver on those commitments, ensuring lower bills for customers, ongoing investment in our region and a fair return for our investors.