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Keynote Speech to CWMag Ian Pemberton, Principal · Microsoft PowerPoint - 0 - Ian Pemberton -...
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Trust in water | Hyder mewn dŵr 1
Keynote Speech to CWMag
Ian Pemberton, BSc CEng Cwem MICE MCIWEM
Principal
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• A little about me• What do Ofwat do
• Vision for the sector• Four pillars of our plan
• Step change in AMP7• Challenges, obstacles and opportunities• What can you do
• What’s the Long-term future• RAPID
Introduction
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Formed by the Water Industries Act 1991 –
We regulate the Water Undertakers – the licencees• Protect Customers• Ensure that companies properly carry out their functions both
statuatory and under their licences
We also have powers under the Competition Act 1998.
• We set the amount of money that can be recovered from customers – NOT – how much the company can spend.
• We set the amount of money based on econometric models – an efficient frontier.
We Don’t !!!• Tell the companies ‘how to’• Intervene in customer complaints or environmental issues• Regulate how the companies work with their supply chain
Who are Ofwat
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Vision and strategy
Emerging themes of the vision
Delivering everyday excellence – these are essential services and customers’ growing and changing demands should be met
To add value – that means value for money to customers, but it also means companies delivering value for communities and the environment
Long-term stewardship of the environment, assets and relationships with customers
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Four pillars of PR19
Great customer service starts with an in-depth understanding of customer preferences and priorities and involves them in the development and delivery of services.
In our price review we expect companies to make Performance Commitments that reflect their customers' priorities and we will challenge individual companies to go further where necessary.
Water and wastewater services must be affordable to customers. This means affordable overall, in the long term and for those struggling, or at risk of struggling, to pay.
We expect companies to ensure that customers that are struggling to payhave easy and effective access to assistance.
We expect companies to make a step change in cost efficiency providing lower bills and help with affordability.
Customers expect reliable water and wastewater services supplied by infrastructure that can avoid, cope with and recover from, disruption. Companies need the right information, systems, processes, governance and finances.
One of the measures we expect to see in our price review is for companies to reduce water leakage by at least 15%.
We will assess how innovative companies’ plans are. Companies with the most innovative and ambitious plans delivering real benefits for customers and raising the bar for others will receive an additional
Outcome Delivery Incentive (ODI) return.
This is in recognition of the additional effort and risk they will have taken in preparing their plans.
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Leakage in the price review
What is an Outcome Delivery Incentive (ODI)?
ODIs enable companies to proposed enhanced outperformance payments for frontier shifting performance improvements, they must be accompanied by underperformance penalties for poor performance.
ODIs can be reputational or financial.
ODIs default to being financial
Leakage is a financial Outcome Delivery Incentive
What is a Performance Commitment (PC)?
PCs are the pledges companies make about service levels to make progress towards their outcomes. They are developed through customer engagement. to reflect the priorities of customers and other stakeholders.
PCs are measured by a Performance Commitment Level (PCL) – typically a value of the indicator.
PCs can be Common or Bespoke
Leakage is a Common Performance Commitment
What is a price review?
A price review is when water companies create their plans for the future that will deliver for their customers.
Ofwat sets the framework for these plans so that they innovate, push forward performance and stretch the boundaries for delivery and efficiency.
We scrutinise and challenge the plans to make sure that they are a efficient, affordable and providing resilience and great customer services
We set the five-year price, service and incentive package that the water companies will deliver
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Common Performance Commitments
Source: Ofwat Methodology, December 2017
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ODI payments and penalties
Source: Figure 4.2 - Ofwat Methodology, December 2017
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The challenges ahead
ResilienceSecurity and supply of waterAffordabilityMitigating environmental impactsPopulation growthClimate change
Photo © Environment Agency
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Challenges
Source:
Figure 6-11
Water UK Report
Water Resources long-term planning framework
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Challenges
Source:
Figure 6-20
Water UK Report
Water Resources long-term planning framework
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Supply-demand balance deficit – 2065
Source:
Figure 6-27
Water UK Report
Water Resources long-term planning framework
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Collaboration
Regulators
• Ofwat, EA, Dwi and other regulators (UKRN)• Cross fertilisation of ideas
Regulators
• Ofwat, EA, Dwi and other regulators (UKRN)• Cross fertilisation of ideas
Collaboration
• UKWIR• Water UK• WRSE• WRE… etc
Collaboration
• UKWIR• Water UK• WRSE• WRE… etc
Innovation
• Joint research – UKWIR, Wrc etc
• Club contracts• Supply chain• SMEs and start ups
Innovation
• Joint research – UKWIR, Wrc etc
• Club contracts• Supply chain• SMEs and start ups
Photo © Ian Pemberton
Water
Companies
Customers
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Resilience
Systems thinking• Better customer engagement, better planning, better value
options
The environment• The natural capital approach• Circular economies. Schemes which deliver better,
long-term, resilience and better outcomes for customers
Customers• Resilience matters because it is important to customers• Developing solutions requires a sound understanding of customers’ preferences• Engaging customers in decisions about low probability, long-term, but high-impact events is challenging
Planning• Interdependencies – systems and external factors (power, labour market, transport etc)
Smart resilience• A smart approach means a broader perspective, reducing the chance of threats and improving the
ability to cope and recover when they occur
Monitoring and measuring• Companies develop their own forward looking resilience metrics
Company Boards• Right people, right skills, appropriate assurance in place
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Innovation
Companies need to innovate to deliver more of what matters to customers and the environment, including:
• Working more closely with their customers • Demand management, water efficiency and
leakage reduction• Using best practice from the water sector• Developing and implementing new ways of
working – changing the culture and focus of companies and the ways they work with their supply chain and wider stakeholders
• Learning from other sectors• Use direct procurement• Greater use of markets in particular water
resources and bioresources (challenge the capital bias)
Photo © Ian Pemberton
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Summary
• Join us in putting the customer at the heart of everything we do.
• The challenges ahead will need smart people and smart thinking
• The challenges we face are long term and will need long-term solutions
• We can’t stand still – we need astep-change in performance
• Innovation includes the application of technology and new ways of working
• They are there to be made but the rewards have to be earned