NORTHUMBRIAN
WATER LIMITED
ANNUAL
PERFORMANCE
REPORT
For year ended 31 March 2021
NORTHUMBRIAN WATER LIMITED ANNUAL PERFORMANCE REPORT
FOR YEAR ENDED 31 MARCH 2021
NORTHUMBRIAN WATER LIMITED ANNUAL PERFORMANCE REPORT FOR
YEAR ENDED 31 MARCH 2021
CONTENTS
BOARD STATEMENT
CHIEF EXECUTIVE OFFICER’S WELCOME
WATER FORUM STATEMENT
WHO WE ARE
VISION AND VALUES
OUR PURPOSE
OUR OUTCOMES
OUR STAKEHOLDERS
ASSURANCE SUMMARY
INTRODUCTION
OUR ANNUAL PERFORMANCE AT A GLANCE – SERVICE
OUR PERFORMANCE AT A GLANCE – ENHANCEMENTS
OUR 2020/21 PERFORMANCE IN DETAIL
UNRIVALLED CUSTOMER EXPERIENCE:
• Our customers tell us we provide excellent customer service and resolve issues quickly
• Our customers say they feel informed about the services we provide and the importance of water
• Our customers say we are a company they trust
• Our finances are sound, stable and achieve a fair balance between customers and investors.
AFFORDABLE AND INCLUSIVE SERVICES:
• Our customers say our services are good value for money and we work hard to keep water and wastewater
services affordable for all
RELIABLE AND RESILIENT SERVICES:
• We are resilient and provide clean drinking water and effective sewerage services; now, and for future generations
• We always provide a reliable supply of water
• Our drinking water is clean, clear and tastes good
• Our sewerage service deals with sewage and heavy rainfall effectively
LEADING IN INNOVATION:
• We are an innovative and efficient company
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IMPROVING THE ENVIRONMENT:
• We help to improve the quality of rivers and coastal waters for the benefit of people, the environment and wildlife
• We take care to protect and improve the environment in everything we do, leading by example
BUILDING SUCCESSFUL ECONOMIES IN OUR REGIONS:
• We are proud to support our communities by giving time and resources to their important causes
• We work in partnership with companies and organisations to achieve the goals that are most important to our
customers
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BOARD STATEMENT – OUR PURPOSE, VISION AND PERFORMANCE
This statement sets out how we, the Board of Northumbrian Water Limited, set the
company’s aspirations in respect of the services we provide to our customers and other
stakeholders - both now and into the future; how we are performing against our aspirations,
and how we structure management rewards to incentivise delivery of these aspirations.
An extensive stakeholder engagement exercise has helped us to clarify our Purpose (the detail of this is on page 14). Set
within the context of our Purpose, the Board has a long-term vision for the company, which is to be the national leader in
the provision of sustainable water and wastewater services. This will require us to consistently deliver outstanding service
to our customers across our water and wastewater businesses, as well as maintaining the highest levels of environmental
performance.
We also understand that being the national leader means continuously improving standards further. To achieve this, we
encourage a culture of innovation, as demonstrated by our annual Innovation Festivals. Many other examples of our
innovative approach to improving our customer service and resilience are set out in this report.
HOW WE SET OUR ASPIRATIONS
The aspirations we set for the current price control period 2020-25 were developed through extensive engagement and
consultation with customers and other stakeholders throughout our business planning process. Through this engagement,
the company agreed updates to our Outcomes for customer service, the environment, and the way we manage the
business. For each Outcome, we agreed challenging Performance Commitments (PCs) which we use to monitor and report
on our performance.
In this report, we set out our Outcomes and how we deliver these across our strategic themes, as well as through our
corporate Purpose and Values. We report on our performance against our Outcomes and PCs in this report.
However, to drive the year on year performance improvements necessary to deliver our Vision of being national leader,
we set ourselves tougher, stretching targets within the business. These targets are reported internally through a balanced
scorecard of key performance indicators which cover the full range of strategic themes that support our Vision. We re-set
these targets each year, taking account of how other companies in the industry have performed and what our customers
have told us about their priorities.
We also work closely with the Water Forum, which brings together expertise from a wide range of stakeholders. The Water
Forum’s Chair has attended full Board meetings and our Independent Non-Executive Directors, and Executive Directors,
regularly attend Forum meetings and workshops. This ensures that the Board directly understands the areas where Forum
members are challenging us to improve performance and Outcomes for our customers and stakeholders.
To ensure that the Executive Leadership Team’s focus is aligned with the business Outcomes we want to attain, stretching
internal targets from across our balanced scorecard of performance measures represent 90% of the potential value of the
short-term incentive plan for our Directors, with a further 10% available for the achievement of bespoke personal targets.
The Remuneration Committee Report is available within our Annual Report and Financial Statements. A separate report
available on our NWG website provides full, transparent detail on our directors’ remuneration policy and how remuneration
in the year has been calculated.
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PERFORMANCE IN 2020/21
This report describes our performance in 2020/21 against our Performance Commitments (PCs) in detail.
We’re delighted to be in the top three companies in the new C-MeX measure for customer experience and above average
for the new D-MeX measure of developer experience. Our customers continue to be very satisfied with the services we
provide and consider those services to be good value for money – something we know to be very important to them,
particularly in these uncertain economic times. We are very proud to have been found to be the best performing water
company, in the 2020 Water Matters Report carried out by CCW, when it comes to overall satisfaction of water service and
reliability of services. We are also pleased to have also scored highly in relation to trust and satisfaction in handling queries.
Our performance against our new series of measures for both affordability, and support for customers in circumstances
which could make them vulnerable, also provided a strong starting point to build upon.
We performed well on many customer focused measures of water asset health, such as water supply interruptions,
discoloured water contacts, taste and smell contacts, ERI, AIM, risk of severe restrictions in a drought, unplanned outages,
water mains repairs and visible leak repairs. We were disappointed not to achieve our leakage targets in both our operating
areas this year.
We were also disappointed not to achieve our drinking water quality PC but are confident that improvement activities have
been identified to achieve the new Compliance Risk Index measure in future.
Our sewer flooding performance is improving, despite not meeting some of our ambitious targets for this year. Our progress
in reducing the risk of sewer flooding in a storm and repeat sewer flooding is very encouraging.
We are also proud of our industry leading performance in pollution, maintaining our strong performance in Bathing Water
compliance and delivering the WINEP, while narrowly missing our target for Treatment Works Compliance. We remain
strong in Bioresources.
We welcome the key role that the Water Forum play in providing challenge on behalf of our customers. As part of this
process we report to and discuss our performance with the Water Forums and they provide their independent commentary
on pages 10 to 11.
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LOOKING TO THE FUTURE
Customer engagement and participation is an ongoing process, not a once every five years exercise for each business
plan. We published our approach to customer participation in our report ‘From customer consultation to a culture of
customer participation’ in 2017 and co-creation of our plans with customers is business as usual for us. This is led from
the top, with our Independent Non-Executive Directors participating in many customer and stakeholder events.
Understanding from our customers what matters most to them about the services we provide shapes both our immediate
targets and our long-term plans, which we brought together in our 2020-2025 Business Plan.
We set out our ambitions for customers in our long-term vision ‘Shaping our Future,’ which we published in 2018 but which
looked ahead as far as 2040. This vision focuses on the next five years but is set in the longer-term context of providing
affordable and resilient services for today’s generations and our future customers. We published more detail on how we
will deliver these ambitions in our Business Plan for 2020-2025, which we developed in partnership with our customers.
As a Board, we remain committed to continuing our drive to be the national leader and to deliver outstanding service to
our customers and other stakeholders both for now and into the future.
Signed on behalf of the Board of Northumbrian Water Limited:
Andrew J Hunter, Chairman
Heidi Mottram, Chief Executive Officer
Paul Rew, Senior Independent Non-Executive Director
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CEO’S WELCOME
Our Vision is to be the national leader in the provision of sustainable water and wastewater services. I am delighted that
we have made further progress towards this Vision during 2020/21, under incredibly challenging circumstances, and remain
one of the leaders in our industry.
COVID-19 Resilience
This has been a unique year with much of it spent in lockdown and under COVID-19 restrictions. We provide vital services,
but the importance of these has never been more apparent than during the pandemic. I am extremely proud of the way
our teams have responded to the challenge and kept our essential services running for our customers and the communities
we serve. This has been a fantastic effort and shown the resilience of both our people and our operations.
Our first concern has been for the safety of our employees and customers and we have taken every precaution to ensure
that we carried out our operations securely. We took appropriate steps to ensure that our operational and field workers
could carry on their work in a COVID-safe way with social distancing and protective equipment as required. Around half of
our staff, in customer and support roles, have worked from home throughout the year and it has been a testament to our
Information Services team that they have been able to continue to work effectively and collaboratively.
I am also proud of how we have worked with the government and local authorities to support testing and vaccine roll out.
We were the first water company in the country to launch a rapid testing programme with employees and piloted a scheme
for asymptomatic testing to be carried out across our workforce. Working with Newcastle University, we played a leading
role in analysing wastewater to track the presence of COVID-19 in localities. We supported the set up of the Nightingale
Hospital in Sunderland, which is now being used as a vaccination centre, and even gave our head office over to the NHS
for use as a vaccination centre for Durham.
Our Performance in 2020/21
We set out our ambitious goals for the 2020-2025 period in Our Plan, reflecting the feedback from our customers. This has
been the first year of delivering against those goals and the tough performance commitments we have made. Overall, I am
pleased with our performance: we have exceeded our targets in many areas and remain one of the top companies for
customer service. However, we are always striving to do better and were disappointed to fall short on leakage and water
quality.
Customer
Ofwat introduced a new Customer Measure of Experience (C-MeX) in the year to measure customer service performance.
This is a more representative measure of customers with experience of our performance and it was a good performance
to come in the top three for C-MeX, though our ambition is to provide unrivalled customer service.
We have set an ambitious goal to eradicate water poverty in the regions we serve by 2030, and the importance of this was
brought into even more focus during the pandemic as many of our customers faced financial uncertainty. We took an early
decision to offer payment breaks to many of our customers to give them breathing space and have been able to extend
the scope of our social tariffs to allow us to make support available to more of our customers who need it.
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Water
In our water business we remain industry leading on minimising interruptions to supply and have made great progress on
the taste and appearance of water delivered to our customers’ taps. We have also continued to focus on ways to reduce
leakage from our networks and were on track to achieve our targets until we experienced some extreme cold weather over
the winter which pushed our results above target.
The water we deliver to our customers is of high quality and this is always one of our top priorities. The Drinking Water
Inspectorate (DWI) rightly sets extremely high standards and a small number of issues in the year caused us to miss our
target on their Compliance Risk Index measure. We’re working actively with DWI to identify ways we can improve across
the whole end-to-end water process, from source to tap.
Environment
Our environmental performance has remained strong this year and I was delighted to achieve a 4* Environmental
Performance Assessment from the Environment Agency (EA). We continued to be at the forefront of the industry in
minimising pollution incidents, an area of public interest at present. Sewer flooding remains one of the worst service failures
our customers can experience, and we have made significant progress in tackling this through both investment in our
assets and education of customers through our Bin the Wipe campaign. I was pleased that we have shown further
reductions in both internal and repeat sewer flooding incidents and we are committed to our ambitious goal of eradicating
sewer flooding in the home as a result of our assets and operations.
Another of our ambitious goals is to achieve net zero carbon emissions by 2027 and it was a great achievement to reduce
emissions by more than double our target in the year. We are continuing to invest in renewable generation as well as
seeking to reduce emissions further through transforming our vehicle fleet.
Our People and the Communities we serve
While our focus is to deliver unrivalled service to our customers and benefit the communities we serve, it is always
heartening to gain external recognition. I was delighted that we were named Water Company of the Year at the 2020 Water
Industry Awards, which recognised all-round excellence in customer service, innovation, operational resilience, and
workforce best practice.
In addition, we were named on the World’s Most Ethical Companies list, compiled by the Ethisphere Institute, for the tenth
time, and were the only water company recognised. This reflected our work in our communities, supporting our people and
embedding an ethical approach and a strong sense of purpose in our culture.
These achievements are the result of the hard work that our people put in every day, even under the most difficult of
circumstances we’ve experienced this year. That’s why I was so pleased that the feedback from our employees through
our Great Place To Work (GPTW) survey showed an increase in trust and engagement which brought us into the top 25
of best workplaces in the UK, for ‘super large’ companies.
Financial Performance
In Our Plan for 2020-2025 we committed to significant reductions in customer bills and, following the Ofwat FD, our
customers in the North East received an average reduction in their combined bill of around 20%, while our customers in
Essex & Suffolk received a 12% reduction on their water-only bills. As the Chairman has said in his statement, we asked
Ofwat to refer its FD to the CMA as we didn’t think it adequately reflected what our customers said were their priorities. We
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were pleased to receive additional funding for some activities, including a scheme to improve the resilience of water
supplies in Essex for the long term.
The COVID-19 pandemic has also created some financial pressures, with reduced activity from many business customers
and increased costs to ensure that we continued our operations safely. However, our financial position remains robust and
we were reassured that we retained our independent credit ratings following the outcome of the CMA process.
Looking Forward
We have taken the first steps towards the ambitious goals we set ourselves in Our Plan and will continue to drive these
forward over the coming year. I know we are building on strong foundations in areas such as customer service and
environmental performance and in many aspects of our water business. Equally we know we have to improve our
performance across areas such as leakage and water quality and must continue to address sewer flooding, in order to
meet our stretching Performance Commitments (PCs) and achieve our Vision to be the national leader in our industry. We
will also progress our longer-term goals, investing in the resilience of our assets and pursuing our goals to reduce carbon
emissions and waste.
As the world hopefully moves on from the global pandemic, we are committed to building back better. We are conscious
of the financial consequences that some of our customers will face and will continue to provide support to all with
affordability challenges. I also believe that the way we have managed through the restrictions, and the resilience we have
shown, has created some new opportunities and we will embrace the prospect of a more flexible and adaptable business
and workforce in the future.
We are proud of our achievements to date, but we are never complacent and will continue to make further service
improvements in 2021/22 and beyond. I hope you find our Annual Report and Financial Statements helpful and informative.
H Mottram CBE
CEO
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HOW WE’VE RESPONDED TO THE COVID-19 PANDEMIC
The COVID-19 pandemic and associated lockdowns and restrictions created unprecedented challenges for the whole
world. As a provider of essential services, we needed to adapt rapidly to make sure we continued to deliver clean water
and take wastewater away safely. We pledged to support our people, customers, and communities throughout the difficult
circumstances of the past year.
Our key workers showed great dedication to keep the water flowing for our customers. This was particularly important for
the NHS, so we provided extra support to deliver network connections to new facilities, including the Nightingale Hospital
set up in the North East, and carried out extra checks to ensure resilient supplies to existing NHS sites. We also provided
20,000 litres of emergency water to keep NHS workers hydrated.
It was critical we did this in a way that kept our employees safe. We carried out site assessments, issued new bespoke
guidance, and created a new app to help our employees make effective judgments on how to work in a COVID-secure
way. In January 2021, we became the first water company in England and Wales to launch a COVID-19 rapid testing
programme with employees. Working closely with NHS Test and Trace, Defra, and Water UK, we piloted a scheme for
asymptomatic testing to be carried out on a voluntary basis for around 600 employees. This has now been made available
to the whole workforce. Up to the end of March 2021, 5,596 tests were carried out.
More than 1,500 of our employees moved to home working and were shown how to carry out assessments to make sure
they had set up the appropriate equipment to do so safely and effectively. In addition, we stepped up our support for
colleagues’ wellbeing, which contributed to us being named a Centre of Excellence for Wellbeing 2020/21 by the Great
Place to Work Institute, and awarded Ambassador Status for wellbeing as part of the 2020 Better Health at Work Award
assessment.
Many of our customers faced additional challenges due to COVID. In response to this, we initiated new support including
payment breaks for people facing financial difficulty. To the end of March 2021, 8,015 customers benefited from a payment
break. In addition, 9,779 extra customers have received additional support through our social tariff and WaterSure
schemes.
We created content on our websites to give our customers a one-stop-shop for everything they needed to know about
COVID-19 and detailing how we’d continue to operate safely in the communities we serve. This new hub was signposted
from all our other operational communication channels, as well as in our marketing and corporate communications. We
put robust processes in place to keep information updated and relevant, so that it added value and helped customers to
help themselves.
Our contribution to tackling the pandemic included supporting Newcastle University with research to test wastewater for
traces of COVID-19 to help identify future disease hotspots. We also provided our Boldon House office to be used as the
Arnison Vaccination Centre for Durham. In addition, more than 50 of our colleagues volunteered to help clinical staff run
this centre, along with other vaccination sites in the North East.
We are committed to caring for our communities, and we took several opportunities to do so during the pandemic. We
provided IT equipment and connectivity for students who were home schooling during lockdown. On the back of individual
donations for schools in our operating area, we led the establishment of the wider Laptops for Kids campaign run in
partnership with Northern Powerhouse Partnership and The Evening Chronicle newspaper in our Northern operating area.
We also committed that no colleagues would be furloughed if they were unable to carry out their normal job, and instead
identified opportunities for both secondments elsewhere in the business and volunteering in the community.
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WATER FORUM STATEMENT
Ordinarily, at this point in the year the members of the Water Forum review NWL’s performance from the customer
perspective and comment on: the extent to which the company has risen to the challenges we raised 12 months prior; on
the successes or improvements achieved; and on what the data is telling us about the areas that need additional focus in
the coming year.
It will come as no surprise to readers of this report that we have found that more difficult this time around – as with seemingly
every aspect of life at the moment, the COVID-19 pandemic has had an effect. Consumption patterns have changed,
customers have had different reasons to contact their water company and the need for social distancing changed aspects
of customer service delivery.
In last year’s Annual Performance Report, for example, we noted that we would like to see a continued focus on getting to
the root cause of the issues at Cullercoats Bay, which had not met the minimum bathing water quality standard. As
explained elsewhere in this report, the lack of sampling in 2020/21 means that we must wait until next year to see whether
our expectations of improvement have been met. For all elements of performance, tracking progress and issues over time
is key, and we will of course review them all again in 2022 year to see whether trends are moving in the right direction.
That said, there are clearly areas of positive progress and some areas that require attention.
Customer Service: Throughout the pandemic, NWL has done lots to encourage customers to contact them, and the
satisfaction data (C-Mex) shows that when they do, the company handles their queries and problems well – this is to be
commended. On the other hand, complaints data reveals that customers are having to wait too long for their calls to be
answered, which would seem to indicate a need to review the contact centre’s resource provision.
Drinking Water Quality: The ‘Compliance Risk Index’ (CRI) stands out as an area of poor performance for the company.
Through the many conversations and challenges made in the Water Forum’s drinking water quality sub-group, we are
reassured about the current process, engagement and focus being put on this area in conjunction with the Drinking Water
Inspectorate.
Sewer Flooding: The ‘repeat sewer flooding’ performance measure is one that was included because of challenge from
the Water Forum, so we are particularly pleased to see the step change that the company has achieved for its customers
here.
The company just missed its targets on sewer flooding, and we know that vital, preventative customer behaviour campaigns
such as Bin The Wipe have been affected by the pandemic. Now that this work has been able to re-start, we expect the
teams will get to grips with this issue in the next 12 months. We have challenged NWL to use its positive reputation for
partnership working to take a lead in a national campaign to prevent the sewer misuse that leads to blockages and flooding
for customers.
Water Poverty and Customers in Vulnerable Circumstances: We’re pleased to note that the company is doing well on
all measures in this area; and particularly the levels of awareness about support available and the customer satisfaction
achieved by those who receive such support.
With ongoing uncertainty about the post-furlough economy and the medium- and long-term effects on customers’ ability to
pay their bills, this is an area that the Water Forum will stay very close to throughout the year ahead.
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Environment: It is clear through our numerous conversations and working groups with the company that it takes its
environmental performance seriously, and this can be seen in the 2020/21 performance figures for pollution incidents,
greenhouse gas emissions and water environment improvements.
Leakage: As the company details later in this report, over the past year there have been many factors affecting the various
leakage measures. Our challenge to the NWL team has been to consider the results of its response to the freeze/thaw
event in March 2021 in comparison to its widely commended approach to the severe Beast from the East weather event
in February 2018 – we believe that doing so would yield some useful lessons learned.
The pandemic has tested all organisations in many different ways – for NWL to deliver its customer promises through the
performance commitments and improvement plans outlined in this report, we encourage the team to assure itself that its
management systems are resilient to any future pandemic or major emergency. Certainly, from our interactions with the
Leadership Team, we are confident that the all-important culture of responding to and learning from problems is in place.
We therefore look forward to seeing what the company can deliver for its customers in 2021-22; and between now and
then we will continue to fulfil our role of providing independent challenge, insights and expertise.
Melanie Laws
Water Forum Chair
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WHO WE ARE
Northumbrian Water Limited provides:
• Water and wastewater services to 2.7 million people in North East England, trading as Northumbrian Water, and
• Water services to 1.5 million people in Essex and 0.3 million people in Suffolk, trading as Essex & Suffolk Water.
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OUR PURPOSE
Our Purpose is caring for the essential needs of our communities and environment, now and for generations to come.
We do this by providing reliable and affordable water and wastewater services for our customers.
We make a positive difference by operating efficiently and investing prudently, to maintain a sustainable and resilient
business.
OUR VISION
Our Vision is to be the national leader in the provision of sustainable water and wastewater services.
OUR VALUES
As important as what we do is how we do it. Our Values define how we work to deliver our Outcomes and achieve our
Vision.
CUSTOMER FOCUSED
We aim to exceed the expectations of our external and internal customers.
RESULTS-DRIVEN
We take personal responsibility for achieving excellent business results.
ETHICAL
We are open and honest in meeting our commitments, with a responsible approach to the environment and our
communities.
INNOVATIVE
We continuously strive for innovation and better ways to deliver our business.
ONE TEAM
We work together consistently, promoting co-operation, to achieve our corporate objectives.
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DEVELOPING OUR PURPOSE AND VALUES
We decided last year to develop our purpose further by revising our Purpose statement. Our aim was to re-define it to
powerfully communicate our ethos and generate a deeper understanding and sense of ownership among our people and
stakeholders.
To do this, we engaged with Business in the Community (BITC), the Prince’s responsible business network, who’ve
supported hundreds of businesses in the last five years to create and embed their purpose. BITC worked alongside us to
co-create a process which would investigate how our Purpose statement should be developed.
Our process involved desktop research to look at our own activity and best practice; interviews with senior leaders; a
business-wide employee survey; engagement through our Have Your Say customer forum; workshops with both
employees and customers, and discussions with our Water Forum.
Through this, we identified a set of principles that were valued by our stakeholders, including the importance of
demonstrating our place within our community and environment, and providing reassurance as a provider of an essential
service relied on by our customers. We also tested the language we could use and identified the key concepts that resonate
with our stakeholders.
Our new Purpose statement gives us a powerful, relevant and shared understanding of why our company exists. This sits
alongside our Vision – setting out what we want to achieve – and our Values – setting out how we will behave to deliver
this – as part of a comprehensive business model.
Next, we will embed our Purpose in the business, ensuring it is reflected in decision making through processes including
our service value framework. We will effectively measure and transparently communicate how well we implement our
Purpose. Within our annual corporate reports, we’ll publish a report on Our Purpose, describing our progress. In future,
this will contain a consistent set of measures, enabling stakeholders to understand how we live out our Purpose.
Alongside this, we’ve started refreshing our Values. These are well recognised and understood across the business, but
we want to make sure they take account of the insights gathered while developing our new Purpose statement and fit with
wider societal changes.
As a first step, we’ve changed the previous ‘Creative’ value to ‘Innovative’. This is more in keeping with the language we
use around the business, particularly since the growth of our Innovation Festivals. Innovation has come to represent
something more people can relate to and identify with.
In the months ahead, we’ll refresh and simplify the definition and behavioural framework sitting behind all our Values, using
insight from our people to make these inclusive, current and memorable to colleagues at all levels.
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OUR OUTCOMES FOR 2020-25
UNRIVALLED CUSTOMER EXPERIENCE:
• Our customers tell us we provide excellent customer service and resolve issues quickly.
• Our customers say they feel informed about the services we provide and the importance of water.
• Our customers say we are a company they trust.
• Our finances are sound, stable and achieve a fair balance between customers and investors.
AFFORDABLE AND INCLUSIVE SERVICES:
• Our customers say our services are good value for money and we work hard to keep water and wastewater
services affordable for all.
RELIABLE AND RESILIENT SERVICES:
• We are resilient and provide clean drinking water and effective sewerage services; now, and for future
generations.
• We always provide a reliable supply of water.
• Our drinking water is clean, clear and tastes good.
• Our sewerage service deals with sewage and heavy rainfall effectively.
LEADING IN INNOVATION:
• We are an innovative and efficient company.
IMPROVING THE ENVIRONMENT:
• We help to improve the quality of rivers and coastal waters for the benefit of people, the environment and wildlife.
• We take care to protect and improve the environment in everything we do, leading by example.
BUILDING SUCCESSFUL ECONOMIES IN OUR REGIONS:
• We are proud to support our communities by giving time and resources to their important causes
• We work in partnership with companies and organisations to achieve the goals that are most important to our
customers
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OUR STAKEHOLDERS
We provide an essential service that is relied on by our customers and communities. Understanding their experiences,
needs and expectations is therefore vital to our business success. It’s also critical for us to engage with the many
organisations who share and help to advance their interests.
We engage proactively and constructively with a range of stakeholders to understand their views, and work with them to
provide an unrivalled customer experience and deliver our business Outcomes.
HOW WE ENGAGE
KEY ISSUES COVERED
STAKEHOLDERS / WHY WE ENGAGE
WITH THEM
Customers
Understanding customer priorities and
preferences, as well as their
experiences, is vital to delivering world
class services today and preparing for
the future.
Colleagues
Our colleagues deliver daily the activities
and services that enable us to achieve
our ambitious goals. Our success is
dependent upon their engagement,
collaboration and innovation. Therefore,
it’s essential to understand their needs
and invest in them.
•
Focus groups / deliberative workshop
groups, including via digital platforms
• Co-creation workshops
Email surveys
•
SMS surveys
•
Social media
•
• Community Portal
• Online community groups – Have Your
Say
• Customer Zone at Innovation Festival
• Weekly ‘Heidi Live’ question and answer
•
•
broadcast
Face-to-face TeamTalk events with
senior managers
Internal communication channels –
intranet, weekly newsletter, Yammer
• Company-wide employee surveys
Internal networks and forums
•
• Negotiation and Consultation Group,
including trade unions
Ofwat
As our economic regulator, Ofwat plays
a key role in setting the conditions for us
to fulfil our statutory duties and meet
customers’ expectations.
• Responding to consultations
• CEO level one-to-ones
•
•
•
Peer to peer contact and meetings
Proactive briefings
Annual Performance Report (APR)
Environment Agency
We are committed to delivering excellent
environmental outcomes and work
closely with the Environment Agency to
ensure we consistently achieve high
standards.
Annual and monthly performance reviews
• Responding to consultations
•
• Management reviews
• National strategy and practitioner
•
•
networks
Industry task and finish groups
Joint working group on pollution incidents
and monthly pollution challenge group
meetings
• Regional and local partnerships and
groups, including North East Water
Leaders Group, Regional Flood and
Coastal Committee, Northumbria
Integrated Drainage Partnership (NIDP)
and Catchment Partnerships
• National Advisory Panel on Citizen Juries
• Water Resources East
•
•
•
•
• Drainage and Wastewater Management
Plan
• Water Resource Management Plan
• Complaints and compensation
• Water environment improvements
• Water use behaviours
• Digitalisation
• Overall service versus expectations
• Campaigns feedback
• Our Purpose
• COVID-19 response and future planning
• Company performance
• Defining our company Purpose and
Values
• Health, safety and wellbeing campaigns
• Diversity and inclusion strategy
•
•
Innovation projects and ideas
Survey feedback and resulting focus
areas
Employee satisfaction surveys
Pay and conditions
Primary activity in 2020/21 has been the
CMA review of Ofwat’s Final
Determination of our PR19 Business
Plan
Engagement with Ofwat’s innovation
competition
• COVID-19 response
• Water poverty
•
Environmental performance
• Compliance and performance, including
pollution and bio-resources
Event duration monitoring
•
• WINEP delivery
• Drainage and Wastewater Management
Plan
• Howdon Sewage Treatment Works
expansion
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FOR YEAR ENDED 31 MARCH 2021
Drinking Water Inspectorate
Our commitment to providing clean,
clear, great tasting water requires us to
understand and meet the DWI’s
expectations for best practice.
Water Forum
Our Water Forum play a critical role in
challenging us on how we listen to and
act upon the customer voice, as well as
our performance across a range of focus
areas.
CCW
CCW help us understand how we can
continue to develop world class
customer service and deliver against
increasing customer expectations.
Supply chain partners
Our supply chain is vital in enabling us
to deliver our services. It is also a
significant part of the economic impact
we deliver in our regions, through our
goal of spending 60p in every £1 with
suppliers in our operating areas.
• Responding to consultations
• Quarterly operational liaison meetings
Transformational design
•
Senior leadership strategy meetings
•
• Chief Inspector’s report launch meetings
• Consultation and negotiation via Water
UK groups at board, strategic and policy
levels
• Reviews of regulatory commitments
Industry task and finish groups
•
• On site collaborative investigations and
audits
Formal meetings and sub-groups
•
• Meetings with senior managers,
Executive Leadership Team, and Board
members
• Consultation processes
Proactive project briefings
•
Sharing material for review
•
• Responding to consultations
• Quarterly liaison meetings
•
•
•
Attendance at regional public meetings
Bespoke engagement sessions
Industry working groups and best
practice forums
• Customer Service Network
•
•
•
•
•
•
•
Joint Framework Governance Groups
Safety, Health and Environment Forum
Integrated programme delivery teams
Joint conferences and workshops
Joint recruitment and development of
employees
Leading and participating in industry
bodies
Partner participation in our Innovation
Festivals
Government and policy makers
Politicians, civil servants, and policy
makers have a significant influence on
the conditions within which we operate.
They also have an interest in
understanding how we serve our
customers and communities.
Briefings
Site visits
Face to face meetings
Attendance at key forums
Speeches and events
•
•
•
•
•
• Responding to consultations
Local authorities
Local authorities are important partners
in delivering services within their areas.
They also have a deep understanding of
the communities we operate in.
• Regular meetings with senior officials
•
•
and lead councillors
Technical input and support on planning
matters
Participation in consultations and
steering groups relating to environment
or economic development issues
NGOs and charities
We’re committed to positive outcomes in
our communities and environment.
Working with organisations that share
this passion and have deep knowledge
and expertise enables us to deliver more
effectively.
Sponsorship and donations
Just an Hour volunteering programme
Policy input
•
•
•
• Governance support
• Meetings and forums
•
Partnership schemes and collaboration
• Company compliance assessments
• Dissemination of company incidents and
•
•
•
agreed learning points
Technical audit feedback
Progress with agreed programmes of
work
Internal water quality communication
strategy
• Collaboration opportunities
• National legislation changes
• Research outputs
• Company performance
• Reviewing ambitious goals
• Drinking water quality improvements
• Customer engagement activity and
performance
Supporting customers through COVID-19
•
• Our Purpose
Innovation Festival outcomes
•
• Complaints management and best
practice
• Water Matters tracking research
Tariffs, including social tariffs
•
• New complaints definition and roll out
•
•
•
Tone of Voice and customer engagement
Future service provision
Improving customer- centricity in
complaints management
•
•
•
Innovation and best practice solutions
Sustainable operations including
environmental challenges
Stakeholder engagement and customer
service improvement
• Capex programme delivery
•
Leaving a positive legacy from our
investment projects
Support in identifying opportunities and
effective tendering
•
•
•
Environmental performance and net zero
commitment
Environment Bill, including water
efficiency measures
Storm Overflows and river water quality
•
Eradicating water poverty
•
Innovation activity
•
Key investments
•
• Water resources
• Our Purpose
• COVID-19 response
•
•
• Regional plans and economic
Asset investment schemes
Environmental performance
development
Eradicating water poverty
•
• Water resources
•
Essex Climate Action Commission
Environmental activities and investments
•
• Water for health campaigns
Eradicating water poverty
•
Education initiatives
•
• Regional policy support
• Our Purpose
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FOR YEAR ENDED 31 MARCH 2021
Media and opinion formers
Media and other influential voices in our
regions and industry help us to
communicate important messages about
our services and understand the impact
they have on our audiences.
• News releases
Briefings
•
Events
•
• Critical incidents
• COVID-19 response
Key campaigns, including Bin The Wipe
•
Environmental initiatives
•
• Water saving / usage advice
• Water safety advice
• Customer service support
Investors
Our investors ensure we have access to
the funding we need to deliver services
and invest for the future. They also
provide important feedback and insight
to inform our business practices.
Shareholder directors
Periodic reporting
Investor update on new issuance
•
•
•
• Credit investors portal
• Credit agency meetings and publications
•
Engagement with banks
Financial results
•
•
• Regulatory and operational performance
•
• Regulatory environment
• Capital programme update
• Our Purpose
Funding, hedging and liquidity
15 July 2021
PAGE 18 OF 114
NORTHUMBRIAN WATER LIMITED ANNUAL PERFORMANCE REPORT
FOR YEAR ENDED 31 MARCH 2021
ASSURANCE SUMMARY
Within this Annual Performance Report, we publish a range of information about our services and performance, including
how we’re performing against the commitments we made in our 2020-25 Business Plan. This helps to provide our
customers and stakeholders with assurance that we’re delivering what they’ve told us they need and want from us.
It’s important that we have robust assurance arrangements to make sure this information is accurate, clear and transparent.
This is essential to building and maintaining a high level of trust and confidence with our customers and stakeholders.
In March 2021, following consultation with customers and stakeholders, we published our Assurance Plan for 2021/22.
Consistent with guidance from our economic regulator (Ofwat), this document firstly assessed any strengths, risks and
weaknesses associated with either meeting our obligations and commitments or providing information of appropriate
quality. It then detailed the checks and balances (assurance) we planned to carry out to address these risks and make
sure we remain on track.
A significant proportion of our assurance is targeted at making sure that the information we publish in our Annual
Performance Report is of appropriate quality. We’ve published a Data Assurance Summary alongside this Annual
Performance Report. This details how we decide what level of assurance should be applied to our data (i.e. who should
provide the assurance), and whether this has been completed during the year. It also details key findings and, in conclusion,
confirms that there were no significant issues to report.
15 July 2021
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NORTHUMBRIAN WATER LIMITED ANNUAL PERFORMANCE REPORT
FOR YEAR ENDED 31 MARCH 2021
INTRODUCTION
This report summarises our performance against our Outcomes during the regulatory year ending 31 March 2021. This is
the first year of us delivering our 2020-25 Business Plan.
Our drive to be the best is supported by six strategic themes: Unrivalled customer experience; affordable and inclusive
services; leading in innovation; reliable and resilient services; improving the environment and building successful
economies in our regions. Our Outcomes are aligned to these themes and set out what we aim to achieve. They represent
what our customers have told us they value in the long-term. They are our commitments, or promises, to our customers.
Our 14 Outcomes were developed with our customers and stakeholders. Everything we do is driven by an Outcome for
our customers.
To track performance against our Outcomes we have clear metrics with associated targets – our Performance
Commitments (PCs). For delivering better performance in certain measures, we could earn a financial reward. Conversely,
poor performance in certain measures could incur a financial penalty. These rewards and penalties are called Outcome
Delivery Incentives (ODIs). Some of our performance measures are simply reputational, which means that they do not
incur financial penalties or rewards.
This performance report sets out the work that we are doing to deliver our 2020-25 PCs along with our progress towards
the longer-term goals which we’ve set.
The report provides extended commentary for tables 3A to 3I, which is a summary of our performance against our PCs
that we must provide for our regulator (Ofwat) every year.
We measure our performance and calculate any penalties or rewards using the methodology in our PR19 Final
Determination, along with any subsequent amends set out in the CMA’s recent redetermination.
This reporting process is subject to robust assurance, as set out in the Data Assurance Summary. Further information
about our performance is available on our website www.nwg.co.uk. For information about how we are performing in
comparison to other water and sewerage companies, visit www.discoverwater.co.uk.
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NORTHUMBRIAN WATER LIMITED ANNUAL PERFORMANCE REPORT
FOR YEAR ENDED 31 MARCH 2021
OUR ANNUAL PERFORMANCE AT A GLANCE
We show figures in green where we’ve met our performance against our promise this year, amber where we have not met
our performance but not incurred a penalty, and red where we have not met our performance and have incurred a penalty.
For further details about reasons for performance and our plans for improving, please see the detailed section for each PC
later in this document.
MEASURE OF SUCCESS
COMMON /
BESPOKE
OUR
PROMISE
FOR 2020/21
OUR PERFORMANCE
2019/20 OR
SHADOW
YEAR
2020/21
ACHIEVED
REWARD
/ PENALTY (£)
Ofwat’s Customer Measure of
Experience (C-MeX)
Response time to written
complaints
Ofwat’s Developer Services
Measure of Experience (D-MeX)
Customers’ perception of trust
(independent survey)
NWL independent value for
money survey
Percentage of households in
water poverty
Awareness of additional financial
support
Satisfaction of customers who
receive additional financial
support
Awareness of additional non-
financial support
Satisfaction of customers who
receive additional non-financial
support
Priority services for customers in
vulnerable circumstances –
Reach/ Actual contact/
Attempted contact
British Standards Institute Award
for Inclusive Services
Voids
Gap sites
Risk of severe restrictions in a
drought
Per Capita Consumption (PCC)
Unplanned outages at Water
Treatment Works
C
B
C
B
B
B
B
B
B
B
C
B
B
B
C
C
C
Top 2
5th
3rd (85.76)
£tbc
2 days
6.35
7.10
Reputational
Top 2
3rd (86.64)
7th (86.94)
(tbc by Ofwat)
8.8
8.2
n/a
8.1
8.8
8.3
Reputational
Reputational
12.52%
N/A
10.38%
Reputational
39%
N/A
41%
Reputational
8.7
N/A
9.3
Reputational
39%
N/A
50%
Reputational
8.7
N/A
8.7
Reputational
7.6% / 17.5% /
45%
N/A
2.3% / 40.0% /
57.3%
Reputational
maintain
4.40%
84.40%
0%
0.8%
N/A
N/A
N/A
0%
Maintained
Reputational
3.74%
67.5%
0%
£1.33m
Reputational
Penalty only
150.6 l/p/d 3 yr
avg
-3.8%1 (156.3
l/p/d 3 yr avg)
£1.366m
6.37%
9.82%
5.69%
Penalty only
1 2020/21 3 year average 156.3 l/p/d, annual 165.7 l/p/d
15 July 2021
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NORTHUMBRIAN WATER LIMITED ANNUAL PERFORMANCE REPORT
FOR YEAR ENDED 31 MARCH 2021
MEASURE OF SUCCESS
COMMON /
BESPOKE
OUR
PROMISE
FOR 2020/21
OUR PERFORMANCE
2019/20 OR
SHADOW
YEAR
2020/21
ACHIEVED
REWARD
/ PENALTY (£)
Interruptions to supply between
one and three hours (mm:ss)
Water supply interruptions
greater than three hours
(mm:ss)
Interruptions to supply greater
than 12 hours (properties)
Leakage (ESW)*
Leakage (NW)*
Visible Leak repair time
(average days)
Mains repairs
(per 1,000km main)
Abstraction Incentive
Mechanism (AIM)
Water quality
compliance (CRI)
Event Risk Index (ERI)
Discoloured water contacts (per
10,000 population)
Taste and smell contacts (per
10,000 population)
Internal sewer flooding
(per 10,000 connections)
Repeat sewer flooding
External sewer flooding
Risk of sewer flooding in a storm
Sewer blockages
Sewer collapses
(per 1,000km of sewers)
Treatment works
discharge compliance
Bathing water compliance
Pollution incidents (per
10,000km of sewers)
B
C
B
C
C
B
C
B
C
B
B
B
C
B
B
C
B
C
C
B
C
Water Industry National
Environment Programme
(WINEP)
Delivery of WINEP requirements B
B
2 08:17 3 year average; actual annual 2020/21 09:17
3 64.9 MLD 3 year average, 66 MLD annual
4 136.2 MLD 3 year average, 140.0 MLD annual
5 Underperformance deadband is 99%
N/A
N/A
0%2
From next year
06:30
05:37
04:04
£2.500m
500
n/a
143
£1.182m
1.3%
1.0%
10.0
65.2 MLD (3 yr
avg)
0.5%3 (64.9
MLD 3 yr avg)
134.8 MLD (3
yr avg)
-1.0%4 (136.2
MLD 3 yr avg)
£0.090m
£0.473m
N/A
9.7
£78,000
141.9
107.5
127.0
£1.450m
0
N/A
N/A
No reward/ penalty due
0.00
3.20
7.11
£7.123m
295.070
N/A
197.592
Penalty only
10.51 (4,839)
N/A
8.22 (3,761)
£2.011m
2.08 (952)
n/a
1.75 (800)
£350,000
1.68
46 (in last 5
years)
3.68
N/A
1.89
25
£530,000
£882,000
3,372
4,697
3,862
£3.072m
32.30%
35.17%
16.11%
Reputational
11,594
11,875
12,023
£619,000
10.69
9.8
9.82
Penalty only
100.00%
n/a
99.51%5
Underperformance
deadband
97.06%
97.06%
n/a – see text
No reward/ penalty due
24.51
0
Met
n/a
N/A
N/A
14.61
£2.960m
0
Met
Reputational
Reputational
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NORTHUMBRIAN WATER LIMITED ANNUAL PERFORMANCE REPORT
FOR YEAR ENDED 31 MARCH 2021
MEASURE OF SUCCESS
COMMON /
BESPOKE
OUR
PROMISE
FOR 2020/21
OUR PERFORMANCE
2019/20 OR
SHADOW
YEAR
2020/21
ACHIEVED
REWARD
/ PENALTY (£)
Water environment
improvements
Greenhouse gas emissions
(tCO2e from 2019/20 baseline)
Bioresources
B
B
B
10.0km
N/A
30.2km
£155,055
-4,433
tCO2e
100%
N/A
-15,235
£2.020m
100%
100%
Reputational
We have strived to deliver our PCs in what has been a challenging year due to the impacts of Covid-19 and the constraints
imposed by Ofwat’s Final Determination for 2020-25.
We’re pleased to have achieved or beaten 34 out of our 47 PCs in 2020/21. This excludes the final assessment of C-MEX
and D-MEX, AIM which was not activated in 2020-21 and interruptions one hour to three hours which was being assessed
as part of the baseline performance. The number of PCs has nearly doubled from 26 in 2019/20.
We earned rewards for 11 of these achievements, excluding the final confirmation of C-MEX and D-MEX rewards. 14 were
reputational only, eight were penalty only.
We accrued penalties for not meeting seven of our PCs this year and did not achieve three of our reputational only PCs.
While there have been some setbacks this year regarding progress towards our longer-term ambitious goals, we’re
committed to continuing to strive to achieve them.
Headlines include:
• Our customers continue to be satisfied with the services we provide and consider those services to be good value
for money. Our performance in response time to written complaints, Per Capita Consumption, gap sites, and voids
was particularly impacted by the pandemic, yet we continued to perform very strongly relative to the industry on
the new D-MeX and C-MeX measures of customer satisfaction, and out-perform our voids PC.
• We’re disappointed not to achieve our water quality compliance (CRI) PC. We’re committed to achieving industry-
leading levels of CRI and are delivering our long-term plans to reach this. We are also working closely with the
Drinking Water Inspectorate (DWI) on a transformation plan which includes accelerating and increasing funding
in our base capital programme.
• Our taste and odour and interruptions to supply performance have also improved since 2019/20, with the former
achieving its target for 2020/21. Discoloured water contacts increased slightly, but we still met our PC. These
aspects of performance continue to compare favourably to the rest of the industry.
• We’re disappointed not to achieve our leakage targets in both of our operating areas but expect operational
improvements and investments in pressure management to deliver improvements for 2021/22. We have met our
PC for the number of mains repairs despite an increase. We’ve also performed well on the new Event Risk Index,
Abstraction Incentive Mechanism, risk of severe restrictions in a drought and unplanned outage PCs, as well as
our new bespoke visible leak repair time PC.
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NORTHUMBRIAN WATER LIMITED ANNUAL PERFORMANCE REPORT
FOR YEAR ENDED 31 MARCH 2021
Abstraction Incentive Mechanism, risk of severe restrictions in a drought and unplanned outage PCs, as well as
our new bespoke visible leak repair time PC.
• Our sewer flooding performance has improved. While blockages increased, the quantity remained within our
target range, and we beat our target for repeat flooding. However, we didn’t manage to achieve some of our very
stretching PCs for flooding, including for internal and external flooding. We will continue to focus on our flooding
tactical plan for 2020-25 to deliver further improvements.
• We continue to be delighted with our industry leading performance on customer service, pollution (for which we
earned our highest reward), achieving our new PCs for Sewer collapses and Bioresources. We were disappointed
not to achieve our new PC for Treatment Works Compliance, due to some technical issues.
• We beat our targets of delivering improvements to 10km of water environments this year and reduce sewer
flooding risk to deliver 30.2km against our unique new PC and halve our sewer flooding risk. For greenhouse gas
emissions, we delivered more than triple the required reduction.
• We’ve made a good start on our new PCs around inclusivity and affordability, exceeding some of our PCs for
reducing water poverty, maintaining our inclusivity standard, and satisfaction with our support packages and
awareness of the support we offer by some margin. We still need to improve our reach for Priority Services but
surpassed our PCs for reviewing the register.
In addition to the commitments outlined in the table above, we have PCs to ensure that we deliver additional investments
for customers by 2025 including:
• Smart metering
•
Lead Pipe Replacement
• Delivery of our water and wastewater resilience programmes
• Howdon Sewage Treatment Works Expansion
• Cyber Resilience
• Drainage & Wastewater Management Plans
While progress has been slower than expected during 2020/21 because of the pandemic (especially for Smart Metering
and Lead pipe replacement, which require access to customer properties), we remain confident of delivering our
commitments by 2025.
The following pages describe each aspect of our performance in more detail.
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NORTHUMBRIAN WATER LIMITED ANNUAL PERFORMANCE REPORT
FOR YEAR ENDED 31 MARCH 2021
OUR 2020/21 PERFORMANCE IN DETAIL
Some of the measures are ‘common’ across the water industry and some are ‘bespoke’ to us. This is flagged next to each
measure.
THEME ONE: UNRIVALLED CUSTOMER EXPERIENCE
OUTCOME 1: our customers tell us we provide excellent customer service and resolve issues
quickly
AMBITIOUS GOAL: Deliver world class customer service
• Ofwat’s Customer Measure of Experience (C-MeX) – common
• Response time to written complaints – bespoke
• Ofwat’s Developer Services Measure of Experience (D-MeX) – common
Delivering world class customer service continues to be something we strive for every day – getting things right first time,
fast time, every time. We know our customers really value this and we’re always working hard to achieve this and ‘wow’
our customers.
During the COVID-19 pandemic, this focus on customer service has been more important than ever. Customers have
looked to key workers in the water sector to keep essential services flowing, to keep them safe and protected, and to make
things easier for them during these difficult times.
We created a website, giving our customers a one-stop-shop for everything they needed to know about how we would
continue to operate safely across the communities we serve. This new hub was signposted from all our other operational
communication channels, as well as in our marketing and corporate communications. We put robust processes in place to
keep information updated and relevant, so that it added value and helped customers to help themselves.
Knowing that many customers’ financial circumstances were affected by furlough, redundancy, or illness, we provided
payment breaks to help them. We also wrote to customers to show them other ways they could pay when they normally
did so in person or through PayPoint in local shops.
We used our data, insights, and experience to build new customer journeys that helped customers to engage with us in
new and easy ways. We used those same information sources to write to customers to share what we were doing to help
and how we were there to support them.
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FOR YEAR ENDED 31 MARCH 2021
Customer Measure of Experience (C-MeX)
C-MeX is the new, common measure for 2020-25 that all companies will be assessed against. It’s an evolution of the
Service Incentive Mechanism (SIM) measure and provides a much more holistic review of a company’s customer
satisfaction performance. This is because it looks not only at the operational (transactional) contacts, as SIM did, but also
includes experiential views and perceptions. These are the much broader, reputational and brand awareness elements of
customer experience, when people may not have had an actual transaction with the company in recent times, but can
recall and recognise its brand, and are comfortable with sharing their views on it.
Our ambition is to be in the top two companies for C-MeX across the 2020-25 Business Plan period. In the first year of
the measure, we’ve consistently been in the top quartile companies for both headline measures, and we finished the year
ranked second overall for customer experience and third for customer satisfaction, meaning we were third overall for the
year.
We can earn a reward for high performance if we meet each of the following three criteria:
• We’re one of the top three performers by C-MeX score;
• We’re at or above a cross-sector threshold of customer satisfaction performance based on the all-sector upper
quartile (ASUQ) of the UK Customer Satisfaction Index (UKCSI); and
• We have lower than the industry average number of household complaints (per 10,000 connections).
In 2020-21 we had 26,781 total complaints from household customers (132.562 per 10,000 connections).
We await Ofwat’s confirmation on the level of our C-MEX reward factoring in the three criteria above.
In line with the guidance provided by Ofwat, we’ve offered at least five contact channels throughout the year, and at least
three of them were digital. Examples of our channels include: Voice, automated IVR, email, webform, website, app, social
media and messaging.
Our Net Promoter Score does not contribute to our overall C-MeX score but is recorded separately as part of our customer
satisfaction surveys. We were proud to achieve +48.5, in third position after Welsh Water and Portsmouth Water and
significantly higher than the industry average of +34.
To make sure we’re best placed to drive forward our efforts to ‘wow’ all our customers and provide them with unrivalled
experiences, we’ve focused on how we can make things better and simpler for our customers – driving a right first time,
fast time, every time approach across all our services. This has seen us reengineer some of our organisation and reshape
some roles to make sure our employees are able to use customer insights, learn and take opportunities to ‘wow,’
consistently. We’re confident that our action plans, and the way we work together as one team across the organisation to
deliver unrivalled customer experience, will help us perform well.
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FOR YEAR ENDED 31 MARCH 2021
We’re delighted with our position, but there’s always more we can do. We’re determined to keep making experiences even
better for our customers, using their feedback and insights to continuously improve our services.
Early in the year, we discovered an error in our reporting data error for C-Mex, which we self-reported to Ofwat following
an internal review. We’re confident that this has had no impact on scores and have put extra controls in place.
Response time to written complaints
Our customers tell us that the speed with which we respond to complaints, and the way in which we communicate, are
more important to them than minimising incidents. After carrying out a review of best practice for responding to complaints,
we introduced a new, bespoke PC in our Business Plan for 2020-25. We’re the only water and wastewater company to
have a bespoke PC for response time to written complaints.
This measure uses the Consumer Council for Water (CCW) definition of a written complaint, which covers complaints via
post, email, web or fax that are responded to within the reporting year.
We’re committed to responding to a minimum of 90% of written complaints within one working day. To encompass that
level of service, and to maintain appropriate focus on complex complaints which cannot be responded to within one day,
we set our PC to two working days for 2020-25. This is a reduction from an annual average of five days - the level we were
performing at when we wrote Living Water - Our Plan for 2020-25 and beyond. In the last few years our complaints numbers
unfortunately increased across all reportable areas. We have not met our PC during 2020/21.
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A proportion of the factors contributing to our increase in complaints this year can be directly linked to COVID-19 and the
challenges it’s brought, including:
• People spending more time at home using more water have then received higher water bills and not understood
what’s driven them.
• Delays due to changes to operating practices caused by the pandemic and its implications on being able to
complete work.
• Changes to customers’ circumstances and therefore the affordability of bills.
We’ve also seen phone calls coming to us in different patterns, at different times, in different volumes, which has led to
complaints about call waiting times increasing significantly. Initially, this all took place as we transitioned most of our
customer service advisors to working from home, and the collective and individual technology challenges this brought
about.
There have been customers using new and different channels – such as digital and online services – and struggling to
adapt immediately to these. All these challenges, and those beyond them, have had an impact on complaints numbers
overall. There is therefore more work to do to reduce them and further enhance customers’ satisfaction levels.
We recently completed some structural changes in our Customer Directorate to make sure we can deliver world class
service. Our new structure facilitates even stronger ownership of customers’ issues, fewer hand overs and faster resolution.
We’ll continue to do everything we can to meet our challenging, bespoke written complaints PC, and are confident that
we’ll see reductions in numbers and handling times as we move forward from this difficult period.
Developer Experience (D-MeX)
The Developer Measure of Experience (D-MeX) is the new financial common PC designed to provide developer services
customers in the water sector with excellent levels of service. It’s now a broader and more representative measure, looking
at a range of Water UK metrics (the ‘quantitative’ element), as well as feedback from customers (the ‘qualitative’ element).
We expect to finish in 7th place, with an overall score of 86.94, receiving a small reward. We scored a qualitative score of
80.26 and a quantitative score of 93.62.
This PC is designed to incentivise companies to improve the experience they provide to developer services customers,
including property developers, self-lay providers and those with new appointments and variations (NAVs). The PC should
increase developer customer satisfaction, by improving the overall customer experience for all developer services
customers.
Following the shadow year during 2019/20, where we finished strongly (third place overall in industry for the combined
quantitative and qualitative score), we’ve now moved into the first live year for this measure. This year, there have been
several other challenges to overcome too, including changes to metrics and reporting, and implementing new corporate
systems.
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At the start of the first lockdown, in March 2020, our main priority was to keep our employees and our customers safe. We
reviewed the types of work we undertook that involved our employees having face to face contact with customers and
consciously took the decision to stop activities that were not emergencies. As a result of this review, we decided to pause
site-based developer services activity, including new service connections. This was purely due to safety concerns around
the pandemic and was a decision that was taken to protect our employees and our customers. Some companies continued
to carry out non-essential site-based developer services activity, whilst other companies took decisions like ours.
Our decision to stop non-essential developer services activity resulted in a backlog of new service connections that
subsequently led to increased failure levels. This adversely affected both our quantitative and qualitative performance
during the first half of the year, with us finishing in ninth position overall at the end of Q2.
During Q3, as we cleared the backlog in field activities and as our office teams became increasingly competent with working
from home and the new systems, we saw our performance recover. We ended Q3 in third place overall for that reporting
period. The improved performance during Q3 saw us move to seventh in the industry overall and just into financial reward.
There have been changes to the reporting metrics since the shadow year concluded, including:
• Changes between the draft and final determination calculation methodology;
•
•
The introduction of new metrics part way through the year to include the Sewerage Adoption Code metrics;
The introduction of metrics for NAV customers, and
• As we move into the 2021/22 reporting year, new metrics related to Water Adoption Codes were introduced.
We’re confident that, had it not been for the COVID-19 pandemic and our decision to put the safety of our employees and
our customers first, we could have ended the year in a better position.
As the number of metrics almost doubled to 84 compared to the same period last year, these changes have increased the
complexity of systems and reporting. This required us to divert resources away from improving our customer experience,
which is reflected in the drop in our qualitative performance.
We continue to review our performance, with a focus on both achieving good levels of service and enhancing the customer
experience. During 2021, we’ll introduce additional channels for customers by implementing a new customer portal and
we’ll work with our field teams to improve performance. Given our current position and the improvement plan we have in
place, we anticipate that our performance will continue to improve throughout 2021/22.
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Case study - Customer experience at the heart of everything we do
Ofwat’s new customer experience benchmark, C-MeX, was launched in April 2020 to galvanise water companies into
action when it came to customer experience – with financial incentives or penalties to match.
As a company who believes every customer should receive an unrivalled customer experience, we challenged ourselves
to go beyond industry benchmarking to ensure best-in-class customer experiences.
We worked with KPMG Nunwood, using its Six Pillars of experience excellence - an evidence-based method that
prioritises actionable results. The six pillars are Personalisation, Integrity, Expectations, Resolution, Time and Effort, and
Empathy.
This was no cosmetic, tick-box exercise, but a holistic, root and branch approach to strengthening customer-centricity,
finding new ways of working and creating a lasting roadmap for change.
We worked with KPMG to:
• Create maps of the current service states across three priority scenarios - ‘Pay your bill,’ ‘Manage your water,’
and ‘Priority customers’ – flagging gain and pain points and areas of value and waste.
•
Identify end customer personas, based on qualitative and quantitative insights and extensive customer interviews.
• Outline service requirements for our future states, drawing on best practice, employee engagement and customer
and business insights.
Taking time to engage with customers in end-to-end reviews, to make sure improvements work for them, has been an
important element of the process. Digital innovation has also been a cornerstone of our customer experience
transformation. We used digital twins (virtual copies of our customer processes and systems to simulate, test, and optimise
them without loss to the business) to manipulate customer data in multiple ways to determine customer needs and
expectations, including the requirements of vulnerable customers, and our digital channels used these principles to
radically enhance and transform our customer service offer.
Our next steps are to adopt the KPMG Nunwood Customer Experience Cloud, which has access to machine learning. This
will facilitate a holistic, agile approach to transforming customer insights into better decision making and greater efficiency.
By analysing specific customer touch points, we could understand the journeys customers must take to get the best result.
Opening up our processes and systems to scrutiny has achieved some great results.
The project involved everyone from our CEO and leadership team to contact centre employees, operational teams and
new recruits.
We’ve now embedded the Six Pillars into our performance management training across the entire company. Training
sessions are also part of new starter inductions, focusing on the soft skills and technical know-how required for every
customer journey.
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OUTCOME 2: Our customers say they feel informed about the services we provide and the
importance of water
AMBITIOUS GOAL: Give every single customer the opportunity to have a strong voice and
engage with us, with at least 2m customers participating by 2025
We know that listening to our customers and having a deep understanding of what they expect from us now and in the
future is important. We’ve long been committed to making sure our customers are at the heart of what we do. Always giving
them the opportunity to have a strong voice, one that is heard and can shape the services we provide, allows us to do this
consistently.
We’ve worked hard over the years to shape our offerings to reflect customers’ needs and wants, incorporating this feedback
into our business plans so we’re always representing the voice of our customers. This is especially true when we’re setting
bold, new objectives like the ones included in our Business Plan for 2020-25. We established an engagement steering
group in the development of our PR19 business plan, and this group is now developing the metrics to track and drive
performance towards our goal to give every customer the opportunity to have a strong voice and engage with us.
When we received Ofwat’s Final Determination, the things our customers told us were important to them hadn’t been heard
as loudly as we’d have liked. We decided – for that reason and others – to refer our case to the Competition and Markets
Authority (CMA) for further consideration. This assessment and review process has been ongoing across much of the first
year of us delivering our new business plan, so we’ve continued to focus on the things our customers told us were important
to them while this was under review.
As the country has faced the impacts of the global pandemic, it has never been more important for us to remain true to our
‘Customer Focused’ value. As lockdowns and restrictions have impacted how, when, where and why we engage with our
customers, we’ve made sure the activities we put the most effort into continue to add value and make a positive impact.
Over the last year, while continuing to deliver critical water and wastewater services, we’ve seen a lot of our customers
embrace digital technologies in new and different ways. We’ve taken opportunities to engage more digitally – using
technologies like WhatsApp, Zoom, Teams, Vyn, Facebook and other platforms to talk with customers, and share ideas
and thinking.
We hope that there will always be a place for face-to-face customer engagement. However, quickly moving to make sure
our customers could reach us in new and emerging ways was key to keeping dialogues going, and ideas flowing as freely
as our tap water. We’ll use our experiences and new ways of working, as we move through the restrictions and into the
future.
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Case study – Customer engagement on drainage and wastewater
We’re very proud of our track record of creating innovative, robust customer research on complex issues.
It was important to us that our customers were able to make educated contributions to the development of our Drainage
and Wastewater Management Plan (DWMP).
We started by educating a diverse group of customers that represented of our customer base in our North East region. We
made sure that the group included customers who’d experienced wastewater issues, such as internal flooding, and
customers who used the water environment recreationally.
Working with an independent market research agency we designed an online engagement platform that could collect
individual customers’ views. We then used the results in eight online discussion sessions to obtain consensus on the most
important issues. We made sure that customers without digital access could be involved through telephone interviews.
Sixty current and future customers, along with some local businesses, took part in the individual stage of the research.
They were taught about:
• The water cycle and how wastewater companies are involved.
• Correct and incorrect usage of sewers.
• Drainage and wastewater problems and their causes.
• Potential solutions to flooding and pollution, and their advantages and disadvantages.
Participants were then asked to prioritise different high-level aims for the DWMP, as well as being able to add any additional
aims of their own. They were asked their opinions on how risks could be prioritised in the plan, and how they would like
customers to be involved in developing the remainder of the DWMP.
Customers were able to interact directly with our employees to ask questions and clarify issues. Directors, senior managers
and Board members also joined in the discussions.
Many have signed up to take part in the subsequent stages of our DWMP research. Here are some customer comments
about their involvement in this project:
"I’ve thoroughly enjoyed it. I’ve learned a lot. I feel valued as a customer and included in discussions about things that may
affect me."
“It makes us feel included, that Northumbrian Water really do care and value us as customers. I’ll be interested to see how
this research impacts on what Northumbrian Water does going forward.”
"When you get into the finer detail, I would imagine you'd want someone who knew what they were talking about.”
“It’s good to know they have proper scientists and specialists in the field. But I think as paying customers, it’s really
important our views are included too.”
“I think consultation is exceptionally important because it not only consults you, but it also educates. There are bits through
this consultation process that we weren’t aware of and we can actually change our habits now as well as giving you my
views.”
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"I didn't realise what went on behind the scenes, so getting input from the general public is quite important - to remind us
how important it is, and to remind the water company what’s important to the customer."
OUTCOME 3: our customers say we are a company they trust
• Customers’ perception of trust (independent survey) – bespoke
Customers’ perception of trust (independent survey)
This measure is the mean customer satisfaction score out of ten from our quarterly independent customer tracking surveys
in the calendar year. The survey covers only household customers and consists of 500 completed interviews each quarter.
The surveys are carried out in line with the Market Research Society Code of Conduct.
Trust remains consistent at 8.8 out of 10, which is in line with our PC. In our tracking research customers tell us they trust
us because they’ve never had any problems / reason not to trust us and because they have a reliable water supply. Social
media sentiments show other factors that influence trust include our community work, how we supported those who were
struggling during the pandemic and how we kept operations running, dealing effectively with interruptions to supply and
blockages.
As a provider of essential services, being trusted by our customers really matters. Our ‘Just Add Water’ campaign - our
customer centric, mass market, brand building campaign, built on extensive market and customer insight - focuses on this.
We use segmentation, positioning and targeting to land our communications messages effectively and efficiently. We
amplify messaging consistently across all our channels and we have a joined-up approach to campaign delivery. We made
a commitment to maintain clear, consistent communication during COVID, reassuring our customers that we are always
there for them when they need a helping hand, advice or a solution.
By continuously monitoring and evaluating, we were able to flex dramatically during the pandemic, to make sure our
messaging pivoted in line with customer expectations.
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There are no financial incentives associated with this PC. We want to maintain our high score of 8.8 out of 10 throughout
the 2020-25 period, so that we can be confident that customers trust us. In addition, we score highly for trust in CCW’s
Water Matters annual tracking survey. In 2020, we achieved a CCW trust score of 8.16 out of 10 for NW – significantly
higher than the average for Water and Sewerage Companies (7.86). In ESW, we achieved 8.14 which was up from 7.59
in 2019, a significant change from last year and higher than the industry and Water Only Company average (7.91).
OUTCOME 4: Our finances are sound, stable and achieve a fair balance between customers and
investors.
There are no PCs under this Outcome. However, we stated in our Business Plan that we will deliver the following for
customers under this Outcome:
• We are financially resilient
• We have a financially stable Business Plan
• We plan our finances for the long-term
• We raise debt finance efficiently
• We share any efficiencies we make with customers
• We pay our taxes
• We procure responsibly
We have longer term plans to allow us to operate our business sustainably and we manage our finances in the same way
to make sure they remain sound and stable. It is important that we maintain a fair balance between our customers and
investors to keep our customers’ bills as low as possible while continuing to attract capital to finance the investment
necessary to maintain and enhance our assets. Striking this balance shows our customers they can have trust and
confidence in us.
Financial structure and resilience
Like most companies, we are financed through a combination of money from shareholders, profits, and borrowings. NWL
is a wholly owned subsidiary of Northumbrian Water Group Limited (NWGL), which is majority owned by companies in the
CK Hutchison Holdings Limited (CKHH) group, based in Hong Kong, who are responsible and committed investors in our
business.
Like any investors, our shareholders expect a return on the money they invested but these dividends are not guaranteed.
We make sure the dividends are set at a level which is sustainable, remains consistent with our investment grade credit
ratings and allows us to continuously put money back into the business.
The Board places a strong focus on maintaining long term financial resilience. We maintain a detailed five-year plan that
is updated and reviewed annually. This is underpinned by a commitment to maintaining an investment grade credit rating,
as assessed by independent credit rating agencies Moody’s and Standard & Poor’s.
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The Board has assessed our long-term financial resilience over a nine-year period, to the end of the next price review
cycle. This included stress testing our plan against our most significant risks and uncertainties. The Board’s assessment
is set out in our long-term viability statement on page 119 of this report.
Customer bills
The revenue that we can charge to customers is set every five years through the regulatory price review process. We aim
to keep our bills as low as possible while still allowing us to invest in sustainable and resilient services and allowing a
reasonable return to our investors. For 2020-25 we proposed a 15% reduction in customer bills, the largest in the sector.
We operate and finance our business as efficiently as we can on behalf of our customers, and we share any efficiencies
we make with them. We aim to be at the frontier of cost efficiency which benefits all water and sewerage customers in
England because it drives the efficiency frontier, against which all companies are benchmarked, to new levels.
Customers benefit from sharing the cost efficiencies we make in each price review period. Any outperformance of the totex
regulatory allowance for 2020-25 will be shared with customers, resulting in lower future bills. They also benefit from
efficiencies in financing costs so that customers do not pay any more than is necessary.
Long term borrowings
We invest around £1m each business day in maintaining and enhancing our asset base to improve services for our
customers. The scale of this capital expenditure means that we need to supplement the money we receive each year from
our customers through their bills by borrowing additional money from banks and debt markets. Our investment grade credit
ratings and strong capital structure help us to obtain financing at competitive interest rates, making sure our financing costs
stay as efficient as possible for customers.
We borrow in a controlled and sustainable manner to make sure we can deliver substantial investment in our asset base
without this leading to a significant increase in customer bills. We spread the financing cost of our investment and manage
the borrowings over long periods of time, sometimes more than forty years. This means both current and future customers
help to pay for the investment. As a result, bills are more stable and sustainable for customers, with a fair balance of
contributions between generations.
Our borrowings range from short term working capital financing to long term bonds, typically listed on the UK Stock
Exchange. Our borrowings reflect a mix of fixed rate, providing stable interest costs, and inflation-linked, to match our
inflation linked revenues. By maintaining a well-balanced debt portfolio, we can better manage risks of adverse movements
in inflation and interest rates and minimise volatility on customer bills.
Our total borrowings at 31 March 2021 amounted to £2.936bn, as reported in Table 1E of this report.
Shareholder returns
Our shareholders have provided the necessary capital and financial backing required to run the business and in return
they receive a dividend return on the capital they have invested. The dividends we can pay are driven by our financial and
operational performance, the level of service provided to our customers and employee’s interests. This means that the
returns our shareholders receive are not guaranteed from one year to the next, and we paid no dividends in the year
2020/21. There are many significant risks associated with the business and it is the shareholders rather than our customers
who carry the weight of these risks.
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We make sure the dividends are set at a level which is sustainable, remains consistent with our investment grade credit
ratings and allows us to continuously put money back in the business. Our dividend policy is described on page 174
along with how the directors have applied the policy in the year.
Taxes
Both NWL and our parent company, NWGL, are based in the UK and pay corporation tax to the UK Government. We are
transparent about our tax arrangements and present our Tax Strategy on page 145 of this report, as well our website.
This sets out our responsible approach to tax matters, under the oversight of the Board and its Audit Committees,
and our constructive relationship with HMRC.
Our customer bills include an allowance to cover the corporation tax we expect to pay, like other operating costs. This
allowance reflects the benefit of tax reliefs that are available to us, such as capital allowances on our investment in our
assets, which helps keep customer bills down.
Responsible procurement
Our responsible approach to procurement is described on page 112 of this report.
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THEME TWO: AFFORDABLE AND INCLUSIVE SERVICES
OUTCOME 5: Our customers say our services are good value for money and we work hard to
keep water and wastewater services affordable for all
AMBITIOUS GOAL: Eradicate water poverty in our operating areas by 2030
• NWL independent value for money survey – bespoke
• Percentage of households in water poverty – bespoke
• Awareness of additional financial support – bespoke
• Satisfaction of customers who receive additional financial support – bespoke
• Awareness of additional non-financial support – bespoke
• Satisfaction of customers who receive additional non-financial support – bespoke
• Priority services for customers in vulnerable circumstances – common
• Reach of Priority Services Register – common
• Review of Priority Services Register – common
• British Standards Institute Award for Inclusive Services – bespoke
• Percentage of void household properties – bespoke
• Gap sites – bespoke
NWL independent value for money survey
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This measure of performance continues from our 2015-20 Business Plan and is reported on a calendar year basis. This
year (2020) we saw a 0.2 out of 10 increase in the average satisfaction of customers that the services we provide represent
good value for money. The score of 8.3 out of 10 is the highest score we’ve received in the last six years. This is particularly
pleasing, given the affordability challenges many of our customers faced during the pandemic.
Percentage of households in water poverty
We have an ambitious target to eradicate water poverty in our operational areas by 2030. To meet this goal, we’ve set
annual targets to reduce water poverty each year.
Our initial water poverty target for 2020/21 was to reduce water poverty to 12.52% in our areas. As a result of the income
impacts of the pandemic - particularly the nature of income support initiatives offered by the government - we feel that
calculating a baseline measure how we initially envisaged (by using credit reference data) would not give a realistic
estimation at this time. We fully accept that incomes have been dramatically impacted during the year and that as a result
underlying water poverty will have worsened. However, any new assessment during this time would provide a skewed and
potentially short-term view. The focus we have internally is that getting support to those who need it is more important.
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To give consistency to our measurement and targets for the 2021/22 year, we’ve kept the baseline previously calculated
the same, and measured the numbers of customers for whom we’ve made a positive intervention to assess our impact on
water poverty. Using this method, we believe we’ve reduced water poverty in our areas to 10.38% compared to a target of
12.52% this year.
Our target reduction in 2020/21 was based on three main aspects:
• An underlying price reduction.
•
•
Increasing the numbers of customers benefiting from our financial support schemes.
Identifying customers who would benefit from a metered bill.
The price reduction in the first year of PR19 was greater than we initially expected, and our estimation of the impact a price
reduction would have on water poverty in our Business Plan was very cautious. The price reduction is bigger than in our
plan, reflecting Ofwat’s FD. We estimate that this price reduction (with external income changes) will have lifted 185,752
customers out of water poverty. We’re aware that the recent correction of Ofwat’s Final Determination by the Competition
and Markets Authority will result in increased prices in future years. However, we will increase support in other areas to
compensate for this.
An additional 22,000 customers have been able to access our financial support schemes because we were successful in
gaining customer support to extend the funding of our SupportPlus social tariff, funded by cross-subsidy. We were one of
only a few water companies who carried out additional customer research in this area. Because of this we were able to
apply our maximum cross subsidy to 2021/22 tariffs, which is £3.00 for the Essex & Suffolk region and £3.75 for the
Northumbrian region.
During 2020/21, the number of customers benefitting from financial support through our SupportPlus tariff increased by
30.2% to 30,210. Our company-funded tariff also increased by 21.6% this year, which means we now have 8,919
customers benefitting from bill reductions of up to 50%. We’ve also seen a steady increase in our WaterSure numbers,
which increased by 15.2% this year to 9,327.
In March 2021, we were an early adopter of sharing data with the Department for Work and Pensions (DWP), to help us
identify customers who would benefit from a metered bill by flagging new eligible customers receiving Pension Credit and
customers eligible for WaterSure. We are one of only three water companies currently sharing data with DWP. The project
has been delayed by the DWP, but the data matching will be a key driver for us identifying those in need in 2021/22.
We’ve been heavily involved in the work with Water UK and CEPA (global economic and financial policy consulting
business) looking at the measurement and initial assessment of water poverty in the industry. We are pleased that the way
water poverty has been defined in this work has aligned closely with our own measure.
As part of our work to assess water poverty and target those needing help, we’re working closely with credit reference
agencies. Alongside our plans to have a more adaptive measure of water poverty in the future, we hope this will enable us
to better target customers and provide a simpler eligibility assessment by automating large parts of the process.
Benefit sharing arrangement
In Our Plan for the 2020-2025 period, we committed to using the interest income earned on unutilised tax funding from the
previous price review to support our zero water poverty goal and other targeted customer support arrangements. The
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value of interest earned has been small this year due to extremely low rates of interest receivable. However, we have
used this to explore two opportunities to support customers.
Foodbank partnership trial
During the start of the pandemic around half of the people who used a food bank had never needed one before. With the
growing need and demand, our foodbanks are a link to our customers most in need of our help as they are struggling not
just with their bills, but the basic need of food. We have been trialling a new approach offering a free month’s water to
encourage these customers who are traditionally hard to reach engage with us and allow us to assess them for the best
tariff.
The approach is being trialled with 250 customers offered free water for a month following a doorstep visit by a food bank
representative to include sign up for free month during which time they will take details to assess most suitable tariff for
the customer.
Flexible payments
Many customers are increasing their digital engagement with us both when communicating and making payments, but
customers have fed back areas where they would benefit from more flexibility.
We have been working with Netcall, who offer a new type of online platform using a Low Code solution. Netcall joined our
Virtual Innovation Festival in 2020 where they facilitated a session to explore the current pain points for customers in
arrears. Using this insight they went on to create a proof of concept Low Code app in 3 days which looked to create a
smoother and more efficient journey for both us and our customers.
Since the festival we have continued to develop this idea using this funding to deliver a 3-month pilot focussing on;
• Providing the ability to allow customers to flex their own payment arrangements within parameters, giving them
control of their accounts whilst freeing up our contact centre advisors who would otherwise handle these calls
•
The ability for a customer to upload a document straight onto our website (for example to provide evidence
regarding their income for a support tariff)
• Allow customers to complete income and expenditure details online and submit them to us.
We have trained some of our internal employees to understand how to use the platform to build the solution which has is
ready to go live. The first instance focussed on providing customers with the opportunity to flex their payment plans. Initially
this will be for customers who have registered for an online account and who currently have a payment plan with us,
allowing them the flexibility and control to change their arrangement.
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Case study – Supporting our customers in 2020 and the pandemic
Many people across the country experienced unexpected changes in their circumstances due to the coronavirus pandemic.
From the start of the first lockdown, and throughout the year, we provided our customers with guidance on how we can
help make sure their water bills are more affordable.
Some customers were facing worrying and uncertain times, and we knew that Government changes to the furlough scheme
may bring further change and additional worry.
Through our Water Without the Worry campaign, we offered a wide range of free support, especially for those who were
unexpectedly affected by the pandemic and people who were already having financial difficulties.
Here are some ways we have supported, and continue to support, our customers:
• Checking they’re on the cheapest tariff for their current circumstances. We can offer discounts of up to 50%.
These tariffs are perfect if a customer’s total household income is less than £16,105, a member of the household
receives Pension Credit, or their household income doesn’t cover essential bills.
• Supporting switching to a water meter when this can save customers money. Our instant, online calculator
shows whether a water meter would reduce charges. We install meters for free and allow customers to track their
water usage with an online account.
•
•
If anyone has been made redundant or had a sudden change to their income and can’t afford to make payments,
we can offer payment breaks. Since the first lockdown, we’ve already helped more than 7,000 customers this
way.
If a customer’s income has reduced and they can’t afford their normal payment arrangements, we can offer a
variety of flexible payment arrangements that are suitable for the individual.
• Working with independent debt charity StepChange, which provides free, expert debt advice and solutions for
anyone looking to reduce arrears and re-schedule payments to ease debt problems.
Lisa Connell, Customer Service Manager, said: "We have a fantastic team ready to help our customers and give them the
support they need. We’ve helped many customers reduce their charges and provided many affordable payment plans.
"The worry of unpaid bills and getting into debt can put a strain on people's health. It's important for people to know that
they don't have to face their problems alone and that we’re here to help - not just during the coronavirus pandemic, but at
any time. All they need to do is get in touch to talk about what we can do to support them.”
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Awareness of additional financial support
This new, bespoke PC measures customers’ awareness of the additional financial support we offer. This includes both
discounted bills and writing off customer arrears for eligible customers. We measure awareness in quarterly surveys with
customers and we’ve achieved 41% awareness - ahead of our committed PC of 39%.
The pandemic has had a significant impact on our customers - especially on household incomes and their ability to pay
bills. Our email communication campaigns included messages about the tariffs and financial support we could offer. Many
customers have used our payment breaks service. We provided an easy to use online form for customers to request a
payment break of up to three months and received more than 8,200 requests via this form. We also promoted our additional
tariffs which could reduce bills as part of processing each request.
We used radio to raise awareness of additional support available in January and February.
Satisfaction of customers who receive additional financial support
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This new, bespoke, reputational only PC is designed to make sure we provide high quality financial support to household
customers that are signed up to one of our SupportPLUS tariffs or WaterSure. We work hard to make sure customers
receiving financial support are satisfied with the services they receive (via a satisfaction score out of 10), indicating that we
are delivering a quality approach to supporting these customers. We are pleased to beat our target of 8.7 with a high score
of 9.3.
The score is determined as an annual mean from telephone surveys, during which a total of 1,000 customers who are
receiving financial support for either water arrears or ongoing charges are asked to rate their overall satisfaction with the
services we provide. The research is completed in line with the Market Research Society code of conduct. This year, we
completed a one-off survey to cover the whole year. This was due to the impact of the pandemic - with the ever changing
situations, we wanted to have an overall view when we were hoping to see more stability and understand how customers
had felt about our services particularly through this time. From next year, we will move to quarterly surveys.
Case study: how we are supporting customers financially
Customer A – Stockton-on-Tees
Customer A had been in contact with us regularly in previous years because she’d been struggling to make payments as
her daughter had been ill; and requested to restructure her instalments.
In January 2020, when she contacted us again, we discussed the tariffs we had available with her. She wasn’t eligible for
our tariff aimed at those on low incomes. She was struggling financially, so we suggested she contact StepChange for
holistic debt advice. We provided her with their phone number and a link to their online budgeting tool via text message
and put her account on hold while she sought debt advice.
She had only made three payments in the previous year and owed us £960.
After contacting StepChange for a full assessment, she provided us with a copy of her income and expenditure. This
showed that she had multiple debts with other organisations and owed more £10,000 in total.
We provided her with a 50% discount on her ongoing charges and put her arrears payments on hold. This reduced her
payments to just £14 a month, and she is eligible for all her arrears of £960 to be written off, over two years. The first
payment will be applied in March 2021. Customer A has been making regular payments to us since she was accepted onto
our scheme and will be debt free if she continues these reduced payments in March 2022.
Customer B – Darlington
We were contacted by Customer B’s support worker because he was struggling to pay our bill and the support worker was
aware of our support schemes. The customer had arrears with us over two accounts - one for a previous address and one
for his current address. He owed us a total of £2,447, including charges back to 2008. The support worker provided the
necessary supporting income and expenditure assessment, which showed our customer had five other non-priority debts.
We agreed to him paying £22 a month to cover reduced payments and put all his payments towards his arrears on hold.
Customer B has been making fortnightly payments ever since, was due to be debt free after the final arrears payment to
us in April 2021.
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Customer C – Romford
Customer C contacted us because she was previously paying via Water Direct. These payments had stopped, so our
customer wanted to set up a new arrangement with us.
When discussing the payments, we became aware that she was claiming Income Support, had three children under 18 in
her home, and a medical condition which meant she needed to use more water. We identified she was eligible for the
WaterSure tariff. Customer C had an outstanding balance of more than £2,300.
We agreed a reduced payment arrangement based on the WaterSure scheme while she provided proof of eligibility. The
WaterSure scheme capped her monthly bill at £34 per month.
Customer C’s water consumption was still higher than expected for her family size, and we found out that this was due to
a tap in her garden which was accessible to other neighbours. To assist our customer to reduce wastage through
neighbours using her tap, we bought a lockable cover for her outside tap so that only her family could use it as needed.
We also registered our customer for Priority Services, as she would need bottled water if there was an extended interruption
to supply due to her health condition.
Customer feedback
Two examples of recent feedback we’ve received from customers who we’ve supported financially are included below.
"I think because they have done a good option to help other people, they listen to problems of other people, and you feel
like you've got help from them as well. They think about you - about people. The fact that they think about doing something
good - it's really emotional and very, very important in life."
"When we first set it up, the lady I spoke to was very helpful - showed empathy. It was simple to complete, very helpful.
We were struggling and she was incredibly helpful."
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Awareness of additional non-financial support
This new, bespoke PC measures customers’ awareness of the non-financial services we offer as part of our Priority
Services Register. We’ve achieved 50% awareness, which is ahead of our PC of 39%.
As some of our customers were asked to shield and stay at home, this meant they needed our additional services because
their family members couldn’t visit them to provide support. This year we’ve introduced e-learning for our contact teams
about identifying signs of vulnerability and how to introduce our Priority Services in a conversational way, which can remove
barriers to service.
To raise awareness of the different Priority Services we offer, we’ve proactively completed contact campaigns with
customers using more than 2million targeted email communications as well as social media campaigns. The emails
achieved a 65% open rate and generated 81,000 clicks through to the relevant pages of our websites.
Throughout this year, use of our websites has increased, as more customers are looking to self-serve. We designed a
landing page to highlight our Priority Services and signpost customers to additional information. Our unmeasured annual
bills which were delivered during February and March 2021 promoted Priority Services prominently on the back of the
envelope.
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Satisfaction of customers who receive additional non-financial support
This is a new, bespoke PC. Alongside collecting users’ satisfaction scores out of 10, we’re also asking them for feedback
about any additional services or barriers to service they may be experiencing. We were pleased to achieve our PC, which
is reputational only.
An independent market research provider has interviewed 1,000 customers and we scored 8.7 out of 10 this year, which
is in line with our PC. We completed a one-off survey to cover the whole year rather than smaller quarterly surveys. This
was due to the impact of the pandemic - with the ever changing situations, we wanted to have an overall view when we
were hoping to see more stability and understand how customers had felt about our services particularly through this time.
From next year, we’ll move to quarterly surveys.
As part of the BSI Inclusive Services standard assessment, we’ve reviewed our services and customer engagement tools.
We’ve also increased the training provided to our front-line teams, including a new training session for field-based teams
to identify customers in need of additional tailored services and noticing triggers. Alongside this, we’ve launched an
additional British Sign Language translation service.
Feedback from customers about the additional support was as follows:
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Customer feedback on non-financial support
No problems
Helpful/supportive
Reassuring/what we need
Happy with them/they’ve been good to me
Good customer service
Provide bottled water so we’re never without
20%
13%
12%
11%
8%
7%
No supply problems
Polite/friendly staff
Prompt issue resolution
Alert customers to works/problems
Get a cost reduction
Not given enough information
5%
5%
5%
4%
4%
4%
Don't know enough/no real dealings as…
37%
Priority services for customers in vulnerable circumstances
This is a new, common, reputational only measure for 2020-25. Its purpose is to ensure a minimum standard across all
companies for the number of households registered on the Priority Service Register (PSR) and for PSR data checking.
This PC will help to increase the number of customers in vulnerable circumstances that receive the most appropriate
service to their needs. It will also make sure PSRs are kept up to date.
The PC has the following criteria:
•
The PSR reach: percentage of households that the company supplies with water and/or wastewater services that
are registered on the company’s PSR.
• Attempted contact: percentage of distinct households on the PSR that the company has attempted to contact over
a two-year period.
• Actual contact: percentage of distinct households on the PSR that the company has contacted over a two-year
period. To achieve compliance with this PC, all the reach, attempted contact and actual contact targets must be
achieved.
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Reach of Priority Services Register
Our original projections for customers signed up to our Priority Services Register (PSR) included an expectation that we
would be data sharing with the energy sector in our areas. Due to delays to this programme, we haven’t seen the increases
anticipated and did not meet our target. However, we have still seen a significant increase in the number of customers who
are benefitting from the service. More than 2.3% (45,427) of our households are now registered against our target of 7.6%.
During 2020, the PSR awareness training we delivered to call handlers increased registrations for these free services from
an average of 65 per week (June 2019) to more than 500 per week (February 2021). We developed an eLearning training
module, in collaboration with Northern Gas Networks, for customer-facing, field-based employees. This was to help them
identify and look out for signs that someone may need support and was also successful in raising awareness. The module
uses scenario-based learning with follow up questions to test understanding and provides flexibility and easy delivery. This
was important because most users work a variety of shift patterns, including evenings and weekends.
We changed our legal basis for collecting data about Priority Services customers from ‘explicit consent’ to ‘substantial
public interest’ to make it easier and clearer for customers - especially those acting on behalf of someone who would find
it difficult to reach out to us. More information about how we use and store this information is available here.
We are working with UK Power Networks and Northern Power Grid on automating direct sharing of PSR data for new
customers, in advance of our wider data-sharing programme.
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Review of Priority Services Register
Actual contact
Attempted contact
This was the first year of this common PC. We contacted customers who have been registered on our PSR for more than
two years, to see whether they would still benefit from the services and whether any additional services were required. The
results for our first year have been very positive, and we’ve exceeded our targets for both attempted contacts and actual
contacts.
We created a new alert to prompt employees to check PSR requirements on every call. It indicates when a customer is
already registered on PSR with us, when they have been registered for more than 18 months and need details to be
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validated, and when they should be offered Priority Services. As part of our proactive contact with customers when we are
completing planned work, we will also review their PSR information.
We developed a new report to demonstrate the measures we take to review contacts, and to identify customers who’ve
been registered for more than 18 months and require validation, this year. This enabled us to deliver a suite of outbound
contacts to engage with customers, including outbound texts, email and a letter to customers who were due to have their
information validated who hadn’t contacted us directly.
We also worked with large housing associations to update social housing properties for tenants living in accommodation
reserved for anyone needing support, which has increased the contact rate for this year. For future years, we anticipate
the contact rate will be lower when we are not able to validate in bulk.
British Standards Institute Award for Inclusive Services
This is a new, bespoke PC for 2020-25 and is reputational only. Our target is to maintain this award consistently. This PC
is designed to make sure we provide a fair, flexible service which can be used by all customers equally, regardless of their
health, age or personal circumstances.
We’re proud to have achieved BS 19477: Inclusive Service Verification this year. The standard assesses whether inclusive
services are fully accessible to all customers and that companies have the right business processes in place.
The rigorous audit for the certificate, which was carried out remotely, reviews our approach to vulnerability and makes sure
our services are inclusive for all - whatever a customer’s circumstances. During the assessments BSI reviewed our
documented policies and procedures, then held 27 sessions with our teams to see how the policies and procedures are
brought to life for our customers. These included contact centre call listening, a complaints review, our communications
planning, how we manage events, debt recovery and affordability.
We’ve successfully been accredited, with only one minor non-conformity and three opportunities for improvement. This
was a very good result for a first full assessment; it is common for both minor and major non-conformities to be raised.
We’ve put an action plan in place to cover the non-conformity and opportunities, which will be completed this year. The
actions cover additional training, increased external review of bill re-design, website accessibility enhancements and
developing call calibration; a quality monitoring meeting to rate and discuss customer service calls.
We’re always reviewing the services we offer, and this expert assessment introduced external scrutiny of our processes,
which will help us focus on areas to improve.
We’ll now move to an annual assessment, to retain the standard and continue to demonstrate how we are developing and
enhancing the service we offer.
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Percentage of void household properties
This is a new bespoke measure for 2020-25, with financial incentives for both under and outperformance. Reducing the
number of void properties, which are occupied but not billed, leads to fairer charges between customers and lower bills for
customers already being billed. This year we’ve beaten our PC and earned a financial reward for doing so.
Billing all customers in a timely and accurate way has always been our focus. The introduction of this new measure to
incentivise water companies to minimise the number of void properties led us to look closer at our process for identifying
‘Occupiers’ who have failed to register. We worked closely with TransUnion to consider how we can proactively use credit
reference data to identify properties that are occupied yet not billed. While we’ve always used this data within our void
process, we have now set up new contacts and automated processes to make better and more timely use of this data.
These changes speed up the identification and billing process and reduce unbilled properties. This year we introduced
robotic processing into certain stages of our void process, including the way we manage and automate returned post and
some automatic billing of properties when there is a strong data match.
We continue to innovate in this area, and have been trialling external services, such as using a company called Shepper
to help us to identify properties that look occupied or empty so that we can better focus our visits, or match with lower
certainty credit matching data.
Doorstep visits were put on hold because of social distancing requirements which impacted our void property processes
early in the year. Adjusting our billing and debt recovery processes during the initial lockdown period also impacted our
voids process because we moved our teams from office working to home working, which temporarily reduced our capacity.
The void property measure is an average measure across the year, so as COVID-19 impacted the early part of the year,
this has adversely affected our full year result. However, since September 2020 we’ve maintained a void property rate
ahead of our target performance, and as a result our full year performance will be 3.74%.
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Gap sites
The aim of our new, bespoke gap site PC is to reduce the risk of sites or properties receiving water and/or wastewater
services that are unknown to us and are not being billed. Reducing the number of these gap sites, which are also potentially
occupied, leads to fairer charges between customers and lower bills for customers already paying. This PC is reputational
only so no penalty or reward is payable.
The number of gap sites cannot be measured directly as they are unknown to us. The only way to assess gap site risk is
by comparing our property data with third party information to look for gaps. We set a PC to match the majority of our Non-
Household (NHH) premises database (contained within our corporate Customer Contact and Billing system) with the
Government’s Valuation Office Agency (VOA) business premises ratings list.
Not all the active premises in our database are eligible to be on the VOA ratings list and those that are, don’t always have
a VOA reference number. Local Authorities introducing new or revised numbering structures can cause unmatched
premises, as can simple transcription errors or mistakes when data was entered into our system.
We’ve currently matched 73% of our combined HH and NHH premises in our Essex & Suffolk operating area and 81% in
our Northumbrian operating area. This project is still in the implementation phase and numbers won’t be formalised until
next year. However, our planned PC of 84.4% matches has not been met this year. This is primarily because the resources
we would usually have had available to complete manual validation work to cross reference and match data wasn’t
available as these employees were needed elsewhere as a priority to support customers during the pandemic. We have a
match level of 83.5% but we only have an adequate confidence level in 67.5% of the matched premises. We remain
confident of meeting our five-year target and hope to accelerate our matched rates as we complete our aligned unique
property reference number (UPRN) matching processes over the next year.
To gain further confidence in the matched premises, we’ve used a partial or full postcode to cross reference our premises
with the VOA ratings list. This resulted in 104,538 matches (64.2%) using partial postcode and 92,554 (56.9%) using the
full postcode, which provides assurance on the accuracy of our match rate of 67.5%.
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Our PC is based on the number of premises on the VOA ratings list matched to our NHH premises database. This is now
67.5%, and potentially 83.5%. This year, we report 67.5%, and will validate the other potentially matched premises,
alongside matching additional unmatched premises in the next year. This is a conservative approach because the true
figure could be closer to the 83.5%. This could be reported but with a lower level of certainty. We have therefore opted to
report the lower figure, in which we have a higher degree of confidence.
Work has already begun to enhance our database by matching premises to the Address Base Premium product from
Ordnance Survey and including the UPRN for premises in our database. We have made significant progress with this,
which is helping us to match premises to the VOA database.
The two exercises to match premises to UPRNs and VOA reference numbers are complimentary to each other and we’ll
continue to focus on these until 2025.
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THEME THREE: RELIABLE AND RESILIENT SERVICES
OUTCOME 6: We are resilient and provide clean drinking water and effective sewerage services;
now, and for future generations.
• Risk of severe restrictions in a drought – common
• Delivery of our smart water metering enhancement programme – bespoke
• Delivery of our water resilience enhanced programme – bespoke
• Delivery of our lead enhancement programme – bespoke
• Delivery of our wastewater resilience enhanced programme – bespoke
• Delivery of our Howdon Sewage Treatment Works enhancement – bespoke
• Delivery of our cyber resilience enhancement programme – bespoke
• Delivery of our Drainage and Wastewater Management Plan – bespoke
We always consider the longer term in operating our business. We use horizon scanning to look for future challenges. This
enables us to adapt our plans today to provide a resilient and sustainable business for future generations. You can see
more about our approach in our Future Horizons and Long-Term Strategy documents.
In an increasingly uncertain world, we need to routinely review and update our strategies and plans to take contemporary
understanding of critical uncertainties into account. We’re updating our horizon scanning and developing a number of
plausible futures that will allow us to develop long term, adaptive strategies to deal with critical uncertainties. We aim to
identify shocks and stresses that could have a significant impact on delivering our services. Through this, we can develop
strategies that optimise our approach to designing and managing a resilient business.
Risk of severe restrictions in a drought
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This new, common, reputation-only PC measures our resilience to severe restrictions in a 1-in-200-year drought and
incentivises improvement of this level of resilience. We report a result of 0% for this metric, based upon our WRMP19
forecasts, which meets our PC.
The overall metric is the percentage of our populations at risk of experiencing severe restrictions in a 1-in-200-year drought,
on average, over 25 years. The metric tracks water company implementation of WRMP19 supply and demand schemes
to reduce the percentage of customers at risk, if required.
Our PR19 Water Resources Management Plan (WRMP19) demonstrated that we have 100% security of supply in all our
Water Resource Zones, across the full 40-year planning horizon. We also demonstrated resilience to a drought with a
return period of 1 in 200 years in all our Water Resource Zones, with 0% of our customers at risk from severe supply
restrictions.
In 2020/21, we experienced annual average demands above our WRMP19 dry year demand forecast in all our supply
areas, which was exacerbated by the COVID-19 pandemic. In our Hartismere WRZ in Suffolk, annual average demand
was 29% higher than forecasted. Testing the drought resilience metric calculation using the actual 2020/21 demand
would’ve resulted in a 25-year average risk of 1.5% of our customers experiencing severe restrictions in a 1 in 200-year
drought. We are in the process of carrying out our WRMP24 options appraisal, to address forecasted AMP8 supply deficit
in our Hartismere WRZ caused by abstraction sustainability reductions and new non-household demand.
Delivery of our smart water metering enhancement programme
We’re committed to rolling out smart water meters for our customers throughout 2020-25 and beyond, with the overall goal
that all our meters will be fully smart by 2035.
This programme is supported by a new, bespoke, penalty-only PC to incentivise delivery and return funding to customers
if we fail to deliver the programme in full by March 2025, alongside a reputational target in each year of the period which
we can track progress against.
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We have not achieved our PC for 2020/21.
Our meter installations were impacted by procurement delays, the suspension of metering activity such as fitting and
replacing meters in response to government guidance, and a reduction in the number of customers applying for a meter.
There are three possible explanations for the reduction in customer demand for meters: social distancing restrictions meant
some customers were reluctant to allow our employees inside their homes, a concern about increased water consumption
with more people staying at home, and the reduction in unmeasured bills in our Final Determination from Ofwat, because
saving money on water bills is one of the main drivers for our customers to apply for a meter.
However, we remain confident that we will deliver 100% of the programme by March 2025.
The PC specifically measures the percentage delivered of the company’s smart metering programme. This is limited to
installing new smart meters and replacing existing basic meters with smart meters. Only household meters can be counted
for this PC, and only once for each household in the five-year period.
We continue to offer our customers free water meter installations, on request. However, we started introducing smart
meters in 2021.
Our first smart meter installations took place in May 2021 in Dagenham, Essex, where commissioning an Arqiva base
station enabled us to install approximately 10,000 smart meters connected to the Arqiva Flexnet communications network.
During 2020/21, a total of 8,179 meters were installed across our three operating regions (NW, Essex and Suffolk). These
installations were either visual read meters or meters with AMR capability (but unable to connect to a smart point later), so
do not satisfy our ODI standard. However, once we’ve completed the transition to our new meter supplier, all future
installations will be smart-ready.
Delivery of our water resilience enhancement programme
Our ambitious 2020-25 water resilience enhancement programme comprises 11 investment schemes which will deliver
new assets that will improve overall water supply resilience for our customers, reducing the risk of a prolonged loss of
supply. These schemes are spread across our three geographic supply areas of Northumbrian, Essex and Suffolk, so that
all customers will benefit.
This programme is supported by a new, bespoke, penalty-only PC to incentivise delivery and return funding to customers
if we fail to deliver any of the schemes.
This PC applies at the end of the 2024/25 period and returns funding to customers based on each percentage point of the
programme not delivered.
The 11 schemes are set out in more detail in Table 1 below, along with the criteria which determine whether a scheme has
been successfully delivered or not – described in terms of the benefit that each scheme seeks to deliver for customers
(successful delivery of each scheme is achieved when at least 90% of the associated customer benefit is achieved), and
an initial indication of whether we’re on track with delivery.
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TABLE 1: WATER RESILIENCE ENHANCEMENT PROGRESS
DEFINITION OF SUCCESS
% OF
PROGRAMME*
TARGET ASSET IN USE
DATE
DELIVERING AMP7
COMMITMENT
REGION
NW
NW
SCHEME
REFERENCE
New trunk main
from Springwell to
Pikes Hole - 7km
of 1,000mm main,
plus EOV control
New service
reservoir at
Springwell SR
NW
New WPS at
Shildon SR
340,4506 customers have
improved security of supply from
12 hours to three days in the
event of a failure or restriction at
our treatment works or strategic
main.
New link trunk
main from Carr Hill
to Springwell SR
New strategic
transfer main from
Whorley SR to
Shildon SR
322,003 customers benefit from
a reduced risk of water quality /
loss of supply events and can be
supplied from two supply
sources.
17.2%
31/3/2025
On track
15.0%
31/3/2025
On track
3.7%
31/3/2025, but
dependent on Scheme 5
and on completion of
phase one of Lartington
WTW to Whorley SR
strategic main renewal
project, linked to DWI
undertaking NNE ESK
004 Reg 28
On track
3.5%
31/3/2025
On track
22.2%
31/3/2025
On track
Cross connections
into C60/60a for
Darlington
98,000 customers also benefit
from a secondary point of supply
in the event of a strategic main
failure.
0.2%
31/3/2028, as
dependant on Phase 2
Whorley SR to
Longnewton SR main
renewal scheme,
required by March 2028
as part of our DWI
undertaking. This makes
the completion of
scheme six by March
2025 extremely
challenging. We are
currently reviewing the
situation.
Currently under
review
New main to
duplicate Chirton
SR outlet main
New raw water
transfer main from
Abberton to
Hanningfield
New main to
duplicate
Herongate SR
outlet main
43,116 customers benefit from a
secondary source of supply in
the event of a strategic main
failure.
531,860 customers benefit from
a second raw water supply and
a reduced risk of a water quality
/ loss of supply in the event of
water quality changes or
resource restrictions. 110,000
customers will also benefit from
a secondary source of supply in
the event of a strategic main
failure.
0.5%
31/3/2025
On track
22.3%
31/3/2025
On track
0.3%
31/3/2025
On track
NW
NW
NW
NW
ESW
ESW
ESW
New 20Ml service
reservoir and WPS
at Barsham WTW
89,373 properties in Great
Yarmouth, Lowestoft and North
Suffolk have an alternative
source of supply in the event of
one of the three major treatment
works supplying this area fails.
9.7%
31/3/2025, Late release
as, rejected at IAP but
then included at FD, so
March 2025 deadline is
challenging.
A key enabler for us to
provide a resilient water
supply to the proposed
development of EDF
Sizewell C&D in Suffolk.
We’ll therefore look to
Under review due
to delayed start
6Nature of adjustment form NES.OC.A59-65, A69-71 in April 2019 defined success as 90% of the customers noted.
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overcome this challenge
to deliver the asset in
use on time. We’re
considering options to
deliver both by March
2025 by buying
additional land.
However, there are risks
in that we need planning
permission and then
construction would take
at least two years.
Company
wide
Improve site
resilience against
loss of power and
surface flooding at
14 too critical to
fail sites
942,000 customers benefit from
an increase in current base
resilience, measured using a
resilience metric against natural
and man-made hazards at 14
critical sites.
5.4%
31/3/2025
On track
Percentage of programme and forecast ODIs completed using NWL PR19 Appendix 3.2 Enhancement Business Cases, Ofwat PR19 Final Determination,
Ofwat FW E W Resilience FD Water Deep Dive and the CMA Final Findings March 2021.
**Schemes are complete when at least 90% of the number of customers shown are delivered the benefit, which was included in the Nature
of Adjustment Form NES.OC.A59-65 A69-A71 April 2019 supplied to Ofwat.
There have been various challenges to our ability to plan and deliver this programme. In Ofwat’s Final Determination, we
were subject to significant cost challenges on our resilience programme and funding. Many of the schemes we aim to
deliver by March 2025 also depend on other investments we have planned, including some within our base capital plan.
This year, we focused on planning and preparation and we don’t envisage major construction to commence until mid-2021.
This is adopting the leading practice of focussing on the front end – as championed by the National Infrastructure
Commission and Infrastructure and Projects Authority. As we progress into detailed design and construction phases during
2021, we anticipate that the ‘asset in use’ dates will evolve, and we’ll provide updates as part of future annual performance
reporting. We remain committed to having all assets in use by 31 March 2025.
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Delivery of our lead enhancement programme
This programme is supported by a new, bespoke, penalty-only PC to incentivise delivery and return funding to customers
if we fail to deliver the programme in full by March 2025, alongside a reputational target in each year of the period against
which we can track progress.
We have not achieved our PC for 2021. However, we remain confident that we will deliver 100% of the programme by
March 2025.
As a priority, we want to protect those most vulnerable to the effects of lead in drinking water by focusing on lead pipe
replacement in buildings frequented by children (our Vulnerable Groups scheme, which covers educational and community
establishments).
In addition to protecting our most vulnerable communities, our lead pipe replacement programme prioritises areas at the
highest risk to lead exposure (our Hot Spots scheme). These schemes are spread across our three geographic supply
areas so all our customers will benefit.
Over the last year, we have focused on developing the delivery strategy, including setting up the commercial framework,
and on implementing the model for delivering and reporting on our lead enhancement commitments. Good progress has
been made with understanding and benchmarking the costs to ensure efficient delivery.
Our lead replacement programme was impacted throughout 2020/21 by COVID-19. There were two main aspects of this.
Firstly, the impact that the government restrictions had on our supply chain and their people being furloughed as a result,
and secondly, our awareness that customers would be reluctant to engage in a programme that involved work inside their
homes.
We have significant cost challenges on our lead enhancement programme, and these are expected to continue throughout
2020-25. The schedule of rates produced by our contractors has been higher than expected and it has been a process of
working through the scope of work, understanding the risks, looking at pipe replacement techniques, and reviewing the
procurement and contractual approach to drive the efficiencies required.
Last year was focused on planning and preparation. We’ve now started customer communications, and lead replacements
started in June 2021. We remain confident that we will meet our lead enhancement targets by 31 March 2025.
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Delivery of our wastewater resilience enhancement programme
This new, bespoke, penalty-only PC is designed to deliver our wastewater resilience programme. We achieved zero
outputs in 2021/22, in line with our PC.
The wastewater resilience enhancement programme is focused on delivering investment to increase the resilience of our
wastewater network by reducing the flooding risk at 141 sewage treatment works (STW) and sewage pumping stations
(SPS). Reduced flooding risk will mitigate the level of disruption to customers when receiving wastewater services.
In line with our 2020-25 Business Plan, the work in 2020/21 has been focused on developing cost-benefit analysis and a
strategy has been selected and approved by key stakeholders and the project sponsor.
Our focus in 2021/22 will be to conduct surveys at each individual site to determine the flood mechanism and appropriate
measures to mitigate the flood risk and improve recovery.
Delivery of our Howdon sewage treatment works (STW) enhancement
Howdon STW serves a population equivalent (PE) of just under one million and is the largest wastewater treatment facility
on the east coast and has been assessed as too critical to fail.
The facility is nearing capacity because of population growth and climate change impacts and presents a risk of regulatory
compliance failure and environmental damage. Howdon STW plays a crucial role in enabling economic and population
growth in the North East, and limits to its treatment capacity could impact the long-term economic and commercial
development of Tyneside and therefore of the wider region.
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The project has two main aims: To increase the permitted dry weather flow, due to an anticipated increase in the population
in the catchment (estimated to be 150,000 population equivalent) in the next 25-30 years, and to increase the overall
resilience of the site, because some aspects of the site are single points of failure.
This programme is supported by a new, bespoke, penalty-only PC to incentivise delivery and return funding to customers
if we fail to deliver the project by March 2025.
We are currently on target to deliver this project, specifically:
• Our 3D Tyne river modelling has been accepted by the Environment Agency (EA) which has indicated that an
ammonia standard will be required to remove any additional ammonia discharged, because it can have an impact
on migratory fish if the concentration is too high. This will have an impact on the treatment technology that we
install.
• With our lead Technical Consultants, Wood Group, we will develop a conceptual design, including a review of all
existing treatment technologies, which is due for completion in June 2021. Work is scheduled to start on site in
Q2 in 2023, in line with our original plan.
• We have reviewed the projected population growth which has been revised to 150,000PE. An asset survey will
improve our knowledge of our existing infrastructure and the risks associated with its continued use. In addition,
a 3D scan of the site is also proving beneficial.
Delivery of our cyber resilience enhancement programme
This new, bespoke, penalty-only PC is to ensure delivery of our cyber resilience enhancement programme which will deliver
multiple benefits by enhancing our cyber security function and support compliance with the Network and Information
Systems (NIS) Directive. Our PC is to deliver the first 40.4% of the programme during 2021/22 and we’re currently on
target to achieve this.
We continue to monitor the increasing cyber threat landscape to make sure our investment is focused on the areas that
have the greatest impact on protecting our business. Keeping up with advancements in technological and human cyber
capability, particularly from well-funded foreign state threat actors is both challenging and expensive so we make sure our
investments are allocated to the most appropriate areas. Several procurements have been made in 2020/21 and these
solutions are currently being deployed into our live environment.
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Delivery of our Drainage and Wastewater Management Plan (DWMP)
For the first time in 2023, companies are required to publish Drainage & Wastewater Management Plans (DWMPs) to
identify how they will extend, improve and maintain a robust and resilient drainage and wastewater system in light of the
pressures of climate change, population growth and growing customer expectations.
Publication of our DWMP is supported by a new, bespoke, reputational-only PC, performance against which we will be
assessed in 2023.
We are currently on track to deliver this.
During 2020/21, we have:
• Continued to attend national DWMP groups to make sure we are up to date with regulator and industry
expectations.
• Completed Baseline Risk and Vulnerability Assessments (BRAVA) against 20 indicators for all 483 drainage areas
(DAs) in our NW region and submitted our results to the national group. We identified 332 DAs which need more
detailed assessments of their vulnerability to flooding.
• Set up a quarterly Strategic Planning Group meeting with relevant external stakeholders and agreed its terms of
reference.
• Engaged with customers to inform them about the issues relevant to our DWMP and obtained high-level feedback
about their preferred balance of interventions and how we prioritise areas.
• Began co-creating our customer portal for publishing the DWMP with customers, and refined information on our
customer websites.
• Developed our Optioneering Development and Appraisal (ODA) methodology and started the ODA process.
The programme we’re working towards for publishing our DWMP is:
ODA completed
Prioritisation exercise completed
Draft DWMP published for consultation (on our cocreated
customer portal)
Final draft DWMP, incorporating consultation responses
December 2021
December 2021
June 2022
March 2023
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OUTCOME 7: We always provide a reliable supply of water
AMBITIOUS GOAL: Have the lowest levels of leakage in the country in our water-stressed Essex
& Suffolk Water (ESW) operating area
AMBITIOUS GOAL: Have a per capita consumption (PCC) for water use of 118 litres per person
per day by 2040
• Per Capita Consumption (PCC) – common
• Unplanned outages – common
•
•
•
•
•
Interruptions to supply between one and three hours – bespoke
Interruptions to supply greater than three hours – common
Interruptions to supply greater than 12 hours – bespoke
Leakage (ESW) – common
Leakage (NW) – common
• Visible leak repair time – bespoke
• Mains repairs (was bursts) – common
• Abstraction Incentive Mechanism (AIM) – bespoke
Per Capita Consumption (PCC)
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For this first year of this new PC, we focused on delivering a target reduction of 0.8% from a three-year average of 150.6
litres per person per day. We have not achieved our target for 2020/21.
While our delivery plans for most of the year were not achievable due to the impact of the COVID-19 pandemic, this is a
great example of how quickly our people have had to adjust and we reviewed, adapted or completely changed our plans
which led to a new strategy for the rest of the 2020-25 period.
Keeping our people and our customers safe has been a priority throughout 2020/21. Face to face visits were considered
high risk, so we started engaging with customers about our water efficiency offering via video call. Using a smart phone or
tablet, a qualified plumber was able to:
• Survey water use around the customer’s home.
•
Identify suitable water-saving products for showers, taps, toilets, and gardens.
• Check for tap and toilet leaks.
• Provide hints and tips to challenge and change the household’s water use behaviour.
Products were then sent to the customer to fit themselves, with help available via a second video call with a plumber if
necessary. Thanks to these virtual visits, customer satisfaction has averaged 4.9 out of five, alongside a Net Promoter
Score of +86. We continue to evaluate how virtual audits fit into the delivery plans for next year and onwards.
We’ve been monitoring the impact of COVID on PCC and looking to understand its immediate and longer-term impact on
water use. This included completing the following three key pieces of research.
We’ve contributed and collaborated with Artesia and the industry on the report: Collaborative Study - The impact of COVID-
19 on water consumption, which looked at total demand, household consumption and non-household consumption. This
is the impact over and above that we would expect to have seen, given the weather in 2020 under non-COVID conditions.
Unsurprisingly there was an increase in household consumption (9%) and a decrease in non-household consumption
(25%).
We also commissioned work with the MetOffice to understand the impact of weather and COVID-19 on demand in our
regions. This shows that:
• During the period of lockdown, in all three regions, total demand and PCC increased above the normal demand for
the expected weather. From this it can be concluded that COVID-19 alone impacted total demand and PCC over
and above the effects of the warm weather experienced particularly in the first few months of the lockdown.
• PCC for our operating areas overall increased by 5% between April and August 2020. 63% of this was due to an
increase in base demand from normal, and 37% was due to an increase in weather dependant demand from
normal.
In addition, we’ve sent two surveys to our customers to understand changes in work location, water use now and in the
future. Customers told us that working from home has increased and they are using more or much more water, which is
mainly due to the increase of hand washing and flushing the toilet indoors and increase of hosepipe use and filling watering
cans outdoors.
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We’ll continue to understand the changes next year so that we have a clear picture of what’s changing and how it will
impact PCC in future.
Case study – The Ripple Effect – Educating youngsters on the value of water
In early 2021, our educational offering to schools was reassessed due to COVID-19 and we changed from the play and
workshops delivered in schools, to online learning. We launched this brand-new initiative for educators and parents to
supporting home-schooling and educate thousands of primary school pupils about the importance of water.
Working closely with leading education agency Hopscotch Consulting, we developed The Ripple Effect, which is designed
to change the way children think and feel about water.
It’s a free online programme helping young people become more aware of how precious water is. Through interactive
games, videos and activities, it also teaches them how to use water efficiently.
The Ripple Effect was set up to be simple and effective for parents and teachers to use during the pandemic and the period
of remote learning due to lockdown.
This is one of the many steps we’re taking to future-proof our resources and raise awareness of our ambitious
environmental goals.
Tim Wagstaff, Lead Water Efficiency Manager, said: "The Ripple Effect invites school communities to think hard about the
way they use water. Children now care more about how they treat the environment - it's the ‘Greta (Thunberg) Effect.’
"By making small changes to the way we use water, we can protect our precious water supplies. It’s really important that
we properly educate the next generation so that we can create positive change for the future.
"We use water for everything - cooking, cleaning, drinking, eating - and it's important that we value it and don’t take it for
granted. On average, people use around 150 litres of water a day and water use has almost doubled in 60 years. As
population and housing numbers are also increasing, this creates even more demand for water.
"We also hope this programme will be of assistance to all of the incredible parents and teachers who are having to adapt
to these strange ways of working under the current climate."
Tiff Barwick, Deputy Managing Director at Hopscotch, added: "We're thrilled to be working with Northumbrian Water and
Essex & Suffolk Water to create The Ripple Effect.
"Water, after all, is a precious natural resource which warrants effective, focused and impactful learning opportunities from
a young age. We feel proud to be supporting the organisation's mission to change people's behaviour surrounding water
use."
As part of the exciting new initiative, students train to become ‘Water Trackers' - expert protectors of water and guardians
of the water cycle.
There are two digital spaces for educators to explore with their students:
• Water Tracker Training Camp: A rich suite of activities that allow children to collect virtual badges as they complete
challenges and gather important facts about water efficiency and the water cycle
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• Water Tracker House: Packed full of games, skills tests and challenges related to water-waste scenarios.
Both journeys contain flexible, interactive resources for the classroom and remote learning.
The programme is aimed at seven to 11-year-olds and gives educators the opportunity to sign their class up for free. It is
also open to community groups. For more information, www.nwg.co.uk/ripple.
Unplanned outage
This is a new, common, penalty-only measure for 2020-25, which is used to assess the health of our assets for our water
abstraction and water treatment activities. It is designed to make sure water companies appropriately maintain and improve
the asset health of their non-infrastructure or above-ground water assets for the benefit of current and future generations
and demonstrate their commitment to asset stewardship responsibilities.
We have improved performance to 5.69% and brought it under our target of 6.37%.
This measure is reported as the temporary loss of peak week production capacity (PWPC) in the reporting year weighted
by the duration of the loss (in days). Unplanned outage for each water production site is calculated separately and then
summed over the reporting year to give a total actual unplanned outage for the water resource zone.
Ofwat set us the very ambitious target of having only 2.34% of unplanned outages by the end of 2025. Our shadow reporting
for 2019/20 was at 9.82% across the company (this was not targeted), and our target for 2020/21 was 6.37%. The penalty
for underperformance is £1.72million per % over target.
We have a commitment to Ofwat to prove that we can provide a Peak Week Production Capacity (PWPC) from each of
our Water Treatment Works. This is described as the maximum volume put into supply, as a five-year rolling average
measured in megalitres per day. The PWPC assessment must be supported by physical testing to demonstrate capability
(minimum of once every five years).
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We inform Ofwat of any unplanned or planned situations when we’re unable to meet PWPC because of any asset failures
or the inability to treat water to required standards.
We continue to improve our processes and make amendments to simplify the data entry process for operations. Internal
engagement through regular meetings and outage reviews means our people have a clear awareness of the need to
accurately record outages.
With proactive maintenance regimes, continued operator asset care and delivery of future investment to our water
treatment assets, we arere confident that we will perform well on this new measure.
Interruptions to supply between one and three hours
This is a new, bespoke measure for 2021-25. We committed to publishing three years of data from 2018/19 through to
2020/21 to establish a baseline level of performance, from which we could then measure our performance as a percentage
change.
This year, we’ve achieved 09:17 (mm:ss) and the average of the last three years’ performance will make the baseline level
08:17 (mm:ss).
An interruption to the water supply can either occur on a planned basis, when we carry out network maintenance, or
unexpectedly when a burst, third party damage, or other failures happen in the network. We recognise that interruptions to
the water supply can cause our customers real inconvenience, especially when they’re unexpected, and we cannot warn
customers in advance. For this measure, all interruptions between one hour and two hours 59 minutes are added up to
give the total time that customer supplies were lost across our supply area. We then divide this total time by the total
number of connected properties we serve. This gives an average time in minutes and seconds that we’ve interrupted each
customer for between one and three hours.
As we’ve continued to drive improvements in the >3hours common measure, we’ve inevitably increased the impact on the
1-3 hours measure. Our performance for this year has been poorer than the first two years of the baseline, so this will
make it extremely challenging for the remainder of the 2020-25 period to improve the performance for this measure. We
are looking at further initiatives to drive improvements to performance and will continue to share learning and carry out
training to increase awareness among our people.
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Water supply interruptions (greater than three hours)
This is a continuation of the common measure from 2015-20, but amendments to our methodology have been implemented
this year, so it is not comparable with previous years.
This year, we’ve achieved 04:04 (mm:ss) against our PC of 06:30mm:ss. This is an improvement of 01:33 (mm:ss) from
our shadow reporting in 2019/20 of 05:37, which will result in a reward of £2.500million.
This common PC is designed to incentivise companies to minimise the number and duration of supply interruptions.
Reducing the number and duration of interruption events improves the reliability of supply and reduces negative social and
public health impacts on customers.
For this measure, all interruptions of three hours or longer are added up to give the total time that customer supplies were
lost across our supply area. We then divide this total time by the total number of connected properties we serve. This gives
an average time in minutes and seconds that we have interrupted each customer for three hours or longer.
We’ve improved our level of performance this year, having learned from previous year’s events and changed our strategy
and processes accordingly. This now includes quicker response times by our technicians when receiving a customer nil
supply contact, event escalation, event management and innovative thinking about restoring supplies through alternative
methods (before the repair is completed). Our focused approach means that all teams involved know to keep supply
interruptions as short as possible. To support this, we introduced digital pressure gauges to our field teams, so they can
record an accurate pressure reading in the field.
We continue to carry out post-interruption reviews for events of more than three hours that affect more than 100 properties.
These meetings are aimed at understanding and recording what we could do better and share any learning, to reduce the
likelihood of a similar event happening again.
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Interruptions to supply greater than 12 hours
This is a new, bespoke measure for 2020-25, where we record the number of properties affected by a water supply
interruption for 12 hours or longer.
This year, we’ve achieved 143 properties, against a PC of 500 properties, which will result in a reward of £1.182m.
Like the >3hour measure, we’ve driven good performance through our focused approach. When interruptions were lengthy
or complicated, we emphasised providing alternative supplies such as overland supplies or redirecting water from
elsewhere. Good event management and manager escalation have also played their part in this year’s success. We used
tankers more to supplement the network, to safeguard supplies when the repair was due to be pro-longed. We now also
carry out post interruption reviews for events over 12 hours, to understand what we could do better and share any learning,
to reduce the likelihood of similar events happening again.
However, we’ve been fortunate to have not experienced a widespread unplanned interruption in an area of the network
with no alternative supply (rezone) options. This target is very stretching for us to meet over the next four years, as one
large event could result in us failing to meet our PC.
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Leakage Northumbrian Water (NW)
This is a common measure with several industry-wide methodology changes for 2020-25 which aim to help companies
calculate leakage more consistently.
Leakage from the water network is measured in Megalitres (millions of litres) lost per day. Leakage levels fluctuate
throughout the year as the weather changes, and we report the average daily level at the end of the year. Our PC is the
percentage reduction of three-year average leakage against our 2019/20 baseline. For 2020/21, this was 1.0%.
In our NW operating area, leakage averaged 140 megalitres per day (Ml/day) in 2020-2021. This is an underperformance
of 8.1Ml/day against our internal target to achieve the three-year average of 133.5Ml/day against the 19/20 baseline. We
are now 2.7Ml/day above the rolling three-year average PCL target – a penalty of £0.473m.
Several industry-wide methodology changes come into force throughout 2020-25, with the aim of bringing all companies
closer together in how leakage is calculated. The implementation of these changes and the initial understanding of their
effects on performance data was severely hampered by COVID-19. Customer-reported leaks were much lower during
lockdown, and at certain points in the year it was difficult to differentiate between leakage and genuine usage. The
pandemic also disrupted the retail market and the data provision from the Central Market Operating System (CMOS). For
example, one retailer made every single non-household property vacant from March 2020 onwards, which impacted the
leakage calculation.
We had been on track to deliver against our leakage commitments until we were hit by extreme weather. The winter period
saw leakage steadily rise to a peak in late-February, with a significant freeze-thaw event taking place which caused lots of
mains bursts. Despite our best efforts, we were unable to bring the winter peak back down as quickly as we’d hoped
through our find and fix activities during the typically benign seasons (spring/autumn) to compensate.
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We’ve begun our pressure management programme, which includes installing new pressure-reducing valves in capable
areas. Alongside improvements to how repairs are being prioritised, this should bring a noticeable leakage benefit over the
next year. Looking forward, we’re investing more in district meter maintenance. With an increased focus, leakage has fallen
by approximately 30Ml/day since the late-February peak, and we continue to work hard to start 2022 in the best possible
position.
Leakage Essex & Suffolk Water (ESW)
Our PC is the percentage reduction of three-year average leakage against our 2019/20 baseline of 65.2Ml/day. For
2020/21, this was 1.3%.
In 2020/21, leakage was 66 Megalitres per day (Ml/day) for Essex & Suffolk Water (ESW). This is an underperformance of
1.6 Ml/day against our target to achieve the three-year average PC of 64.4 Ml/day. We’re now 0.5Ml/day above our rolling
three-year average PC target – a penalty of £90,000.
Customer-reported leaks were much lower during lockdown. Find and fix performance has also not been to the required
standard this year and leakage levels have not been driven down in typically benign seasons (spring/autumn). The warmer
months had volatile weather, which indicates that we may not have a complete view of genuine demand within our night
use models. In addition, leakage steadily rose during winter to a peak in late February when a significant freeze-thaw event
took place, causing lots of mains bursts.
Our pressure management programme and prioritising repairs should bring a noticeable reduction in leakage next year.
With our increased focus, leakage has fallen by approximately 25Ml/day since the late-February peak, and we continue to
work hard to start AR22 in the best possible position.
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Despite the challenges we have faced over the past reporting year, our focus remains on finding new and innovative ways
working at each stage of the leakage process. We will invest in proactive leak detection and recruit additional resources.
We will also make greater use of correlating noise loggers and data science technology.
Case study – Pressure Management
Our goal is to have the lowest level of leakage in the industry in our Essex & Suffolk Water area, both during and at the
end of AMP7 - measured by the number of litres per property per day.
For ESW, our leakage reduction target of 17.5% exceeds Ofwat’s requirement for all companies to reduce leakage by a
minimum of 15%.
Our plans, for both our supply areas, centre on two main interventions to reduce leakage: Pressure management and
finding and fixing more leaks.
If there’s more than enough pressure in a water supply network, we can install pressure-reducing valves and controls
(PRV’s) which reduces leakage and also allows us to minimise the variation in pressure throughout the water network.
While pressure management is the best value way of tackling leakage, it’s only feasible in areas with excess pressure.
We’ve determined where pressure management may be feasible. So far, we have installed 49 PRV’s across our regions
with a further 90 planned and we’re currently carrying out more detailed surveys to develop schemes.
Visible leak repair time
This is a new, bespoke PC for 2020-25 to incentivise us to reduce the time it takes to repair customer-reported visible
leaks. This will reduce the amount of water wasted through leaks and demonstrate that we are responding to leaks that
customers report.
We’ve achieved 9.7 against a PC of 10.0 calendar days, earning a small reward. We’ve worked continuously to strike a
balance between repairing reported visible leaks and repairing non-visible mains leaks. Looking forward, we aim to become
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more sophisticated in this endeavour, by continuing to develop prioritisation tools and dashboards. These will help our
planning and operational teams drive efficiency in the end-to-end process. We’re also adjusting our systems to make it
easier for our technicians to record visible leak information in the field.
All incoming reports of visible leaks through any channel (telephone call, social media, etc) are captured.
Mains repairs (was bursts)
This is a continuation of the mains bursts common PC from 2015-20 and is measured per 1,000km of the entire water main
network conveying treated water around the distribution point (excluding communication and supply pipes). Proactive
(found because of active leakage control/detection by the company) and reactive (customer reported) repairs are reported
separately.
We’ll receive a reward of £1.45m this year.
We measure the number of mains bursts by counting the repairs we make to water mains each year. This year we repaired
3,335 mains bursts, which is well below our PC of 3,725. For the first nine months of 2020, our performance was
comparable to 2019/20. However, in 2021 we experienced relatively severe conditions in January, February, and March,
when we saw extensive failures at weak points in the network. Our burst rate during these months was approximately 50%
higher than the corresponding period in 2020. This is the main contributing factor for our overall deterioration in
performance from 2,817 in 2019/20 to 3,335 this year. It should be noted that 2019/20 was an exceptional year with burst
levels never previously seen, and therefore achieving 3,335 bursts in 2020/21 is still an extremely positive result.
We invest in replacing the most vulnerable sections of our vast network of water pipes each year. We’ve also taken a
holistic approach to managing our networks calmly to reduce bursts, leakage, and interruptions to customers’ supplies.
This has seen us install 50 pressure-reducing valves - some of which have additional control equipment which allows us
to continually optimise the pressure within the areas they serve. We’ll continue with mains renewal, our research into
pressure changes, and refreshing employee training on calm network operations.
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Abstraction Incentive Mechanism (AIM)
AIM is a new, common, financially incentivised measure for 2020-25 and was not triggered this year. It was previously a
reputational-only measure and we can now earn either a penalty for underperformance or reward for outperformance for
this measure. The scheme parameters (water level trigger point and baseline abstraction year) have also been revised for
2020-25. Our one AIM scheme site at Ormesby Broad, Norfolk, is designed to protect its valuable designated habitats and
ecology.
This year’s summer (May to September inclusive) rainfall was around the long-term average during 2020. Therefore, our
AIM was not triggered this year, as we managed broad water levels to remain well above the AIM trigger point. The only
previous year in which our AIM was triggered was 2018, when summer rainfall was around 50% of our long-term average.
Our performance for this year, i.e. AIM not being triggered, is as expected, given the average rainfall over the summer
period. Our PC is zero until 2025.
OUTCOME 8: Our drinking water is clean, clear and tastes good
AMBITIOUS GOAL: Promote confidence in our drinking water so that nine out of ten of our
customers choose tap water over bottled water.
• Water quality compliance (CRI) – common
• Event Risk Index (ERI) – bespoke
• Discoloured water contacts – bespoke
• Satisfaction with taste and odour of tap water – bespoke
Water quality Compliance Risk Assessment (CRI)
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CRI is a new, common, penalty-only, calendar year PC using a risk-based monitoring methodology, which is used to assess
water quality compliance against our statutory obligations. Every compliance failure receives a CRI score based on the
cause and significance of the failure, the location within the water supply system, and the quality of our investigation. The
annual CRI for a company is the sum of the individual CRI scores for every compliance failure reported during the year.
In 2020, CRI was 7.11 against a PC level of 0, with penalties applying for performance higher than 2.0.
With social distancing restrictions we were unable to sample randomly from our usual customer houses and were limited
to COVID-safe commercial properties. The complexities of internal plumbing and pipework at commercial properties,
combined with their diverse water usages, can lead to sample failures which aren’t always representative of the high-
quality water we strive to supply.
However, the biggest impact on CRI for 2020 was from bacteriological fails at three water treatment works, which
collectively accounted for 4.95 units – more than 60% of our eventual figure. We’re putting together an enhanced
programme of treated water storage tank inspections to mitigate some of the risks identified at these sites, alongside a
root and branch review of treatment processes.
We’re committed to achieving industry-leading levels of CRI and are delivering our long-term plans to reach this, as well
as working closely with the Drinking Water Inspectorate (DWI). We’ve accelerated and increased funding in our base
capital programme as part of our transformation plan with the DWI.
We are prioritising our efforts around water treatment where CRI risk is highest, and areas of focus include filter media
refurbishment, carbon regeneration, and water quality minor works activities such as on-line monitoring capability to
increase resilience and control of the treatment processes.
In the last 12 months, we have also completed the full replacement of treatment sites in Berwick, Northumberland and
Suffolk which will provide more reliable supplies and have an ability to meet current and future drinking water standards.
This will be supplemented in the next year with the completion of the new Horsley works feeding large proportions of
Tyneside, plus the replacement of four new sites in Northumberland and the installation of UV treatment at two works
supplying the Durham and Wearside areas.
The journey of water from treatment through to customer tap is important, and so in our networks we have introduced an
enhanced service reservoir maintenance programme which means we will inspect and (where applicable) repair a higher
number of tanks per annum in order to maintain the integrity of these assets and minimise any water quality risks. We are
achieving this through a combination of physical assessment and technologies such as Remote Operating Vehicles
(ROVs).
We are also introducing smart network innovation into the water quality plan to allow real time operational decisions to be
made on the quality of water being supplied through our networks and so improve the customer experience. This is a
leading approach within the industry.
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Event Risk Index (ERI)
This is a new, bespoke, penalty-only, calendar year measure and we have outperformed our PC.
This PC incentivises us to promote a proactive approach to risk mitigation of water quality events, including understanding
the impact of events on customers. An improvement in this risk-based index indicates that we’re reducing the occurrence
and/or impact of water quality events on our customers.
Events are assessed by the DWI and the assessment considers the seriousness of an event, our response, the population
impacted, and the duration.
During 2020, we outperformed our target as 33 events were notified to the DWI for assessment, resulting in 197.592 units
against a target of 295.070 units. This represents a considerable improvement on 2019, which resulted in 3,821 units. This
step change was primarily achieved by increasing our focus on Cryptosporidium management at high risk treatment works,
developing better procedures to improve site operation and raw water abstractions.
We’re committed to improving on ERI performance and investing in our assets.
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Discoloured water contacts
This calendar year measure reflects the number of times we’ve been contacted by customers due to the appearance of
their tap water not being clear, per 10,000 population. Our PC this year was 10.51, which we’ve achieved.
This appearance measure has superseded reporting of just discolouration – brown-orange-black contacts. The measure
covers seven contact types including discolouration (brown orange black and green, blue, pink), aerated water, particles,
and general conditions. We’ve performed better than our PC for the sixth year in a row.
Our plan continues to focus on appearance - discoloured water – brown orange or black, which is our major contributor of
contacts to this measure.
Very occasionally, and for a short time, customers’ tap water may appear discoloured. This is caused by the disturbance
of harmless material in our water supply network, possibly caused by a burst or a leak.
In previous years we’ve reported on how we’ve made improvements at our water treatment works, and in our networks, to
tackle this important issue. We are now progressing with further programmes of work agreed with the DWI to improve the
number of trunk mains in which flow can be automatically raised with less risk of disturbing mains material and causing
discolouration in downstream supply areas. Continuing to flush smaller sized pipes closer to customers is happening on a
prioritised basis as well as investigations into how to improve the other contact types such as water coloured white due to
aeration. We’ll also look for innovations that can cleanse parts of the network which cannot be managed with our current
techniques.
Focus is also on the competency of our employees who continue to help reduce the number of complaints we receive.
The reward for this measure for 2020 is £2.011 million.
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Taste and smell contacts
This measure reflects the number of times we’ve been contacted by customers to report perceptive issues with the taste
or smell of their tap water. It aims to incentivise water companies to improve the taste and smell of tap water and our PC
is 2.08 for 2020/21.
We received 800 taste and smell contacts in 2020. This level of performance is better than the upper quartile (top 25%)
threshold, and better than our stringent PC of 952 contacts. An outperformance reward of approximately £290,000 is
payable for this measure.
The drinking water we supply is very high quality, but occasionally some of our customers perceive different tastes or
odours. This could be due to:
•
The use of chlorine to maintain good hygiene in our water supply network.
• A change in where a customer’s water comes from, or how it is treated.
•
Issues with a customer’s own plumbing inside their home.
• A change in a customer’s perception.
Around 30% of customer taste and smell contacts are recorded as chlorine based. We have been carefully controlling the
level of chlorine in the water, balancing the needs of water safety and water acceptability.
Customer engagement has also identified that change causes concern for customers and can therefore trigger contact.
Water supplies for most areas routinely come from the same source. However, to carry out asset maintenance, or in
response to reactive issues like a burst pipe, water to an area can be re-zoned through a different route or come from a
different source treatment works. It may also be necessary for us to change the source of supply in drier weather to protect
resources and preserve stocks.
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Case study: “I like mine” campaign
“I like mine” is a new campaign launched in 2020. It promotes the benefits of drinking tap water and is positively received
by our customers. The campaign is designed to help customers understand where the water they drink comes from. We
want to encourage customers to drink more tap water and we’ve mapped out exactly where customers water comes from,
depending on whereabouts in our regions they live.
Alan Brown, Head of Water Quality, said: “People often wonder why their water tastes different to their friends’ or family’s
– sometimes even if they live fairly close by.
“This is because each area receives water from different sources across the region, including some well-known beauty
spots. Sources can vary from rivers to reservoirs and groundwater.
“We work hard to make sure that our customers get clean, clear and great tasting water straight into their homes, but we
also thought it would be useful and interesting to share the journey along the way.”
Examples of where customers’ water comes from include:
Newcastle - People living in areas north of Newcastle,
Chelmsford, Essex - Water comes to our treatment
such as Gosforth and Fenham, receive some of their
works direct from the River Stour, Kings Lynn and our
water from the serene reservoir of Kielder, where rainfall
reservoir at Abberton - an internationally recognised top
is collected under world-famous dark skies.
water body, near Colchester.
Abberton Reservoir receives water, collected in the
autumn and winter, from several Essex rivers and water
transferred 140km from Kings Lynn in Norfolk.
Lowestoft, Suffolk – People living in the Lowestoft and
Redcar and Saltburn - Water starts its journey in the
Belton areas receive their water from our Lound
stunning area of upper Teesdale - home to the
treatment works that is directly supplied by the Lound
impressive High Force.
Lakes, which include Fritton Lake. They are located on
the border between Norfolk and Suffolk, between Great
Rainfall collected in open-air reservoirs and water from
Yarmouth and Lowestoft. The lakes are a linear series of
the River Tees is moved to two water treatment works
manmade basins, draining west to the River Waveney at
by a series of pipes and pumps before travelling into
St Olaves. The lakes were historically formed from peat
customers houses.
diggings and then later utilised for their water storage.
Helping our customers understand where their water comes from is essential to achieving our ambition to promote
confidence in our drinking water so that nine out of ten of our customers choose tap water over bottled water.
We’ve been asking whether customers choose to drink bottled water or tap water in our quarterly domestic tracking surveys
since 2019. Our 2020 results were consistent with 2019, with 75% of customers saying they would choose tap water over
bottled water, which is good given the pandemic. But we still have some way to go before we achieve our aspiration of
90%.
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The pandemic has meant that the Refill and Bring Your Own Bottle campaigns have not been as active as we anticipated
they would be. This had a direct impact on our progress towards achieving our ambitious goal. We’ll continue to promote
these campaigns as the COVID-19 government restrictions are eased and the “I like mine” campaign will continue
throughout the 2020-25 period.
OUTCOME 9: Our sewerage service deals with sewage and heavy rain effectively
AMBITIOUS GOAL: Eradicate sewer flooding in the home as a result of our assets and
operations.
•
Internal sewer flooding – common
• Repeat sewer flooding – bespoke
• External sewer flooding – bespoke
• Risk of sewer flooding in a storm – common
• Sewer blockages – bespoke
• Sewer collapses – common
The performance measures for 2020-25 use new reporting methodologies agreed across the water and sewerage industry
for internal and external flooding, as well as for sewer collapses. For sewer flooding, the main differences in the reporting
measures are:
• Reporting of properties (2015-20) changed to the reporting of incidents (2020-2025). For example, five properties
that suffered two flooding events during a year would now count as ten flooding incidents in 2020-21, where
previously only five properties would have counted against the measure.
• Severe weather is now included.
For sewer collapses, the new definition records a sewer collapse as any failure to a sewer pipe that results in either contact
with the company (i.e. a customer contact), or any unplanned escape of wastewater resulting in the need to replace or
repair the pipe. Intentionally, the measure does not refer to nor record the magnitude of the sewer collapse.
These new measures will drive continuing improvements in performance across the industry. Early in our preparations for
2020-25 we recognised that a step change was required in our own performance to meet the PCs - particularly for year 1.
As part of our 2020-25 Business Plan, we reported previously that we’d developed a sewer flooding tactical plan to identify
and deliver effective near-term interventions to help reduce the risk of flooding.
The tactical plan includes interventions around the following core themes:
• Customer communication: Focused interventions to help reduce the risk of sewer blockages as a result of
sewer misuse.
•
Focused teams: Increasing our technical and operational resources to make sure we have the right people
available to respond to incidents, investigate root causes and fix problems identified on the network.
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• Operational plan: Activities identified following a review of our day-to-day activities to improve the way we work
to reduce the number of incidents occurring within our control. These include improving training materials and
reducing the risk of sewer flooding incidents occurring from jetting.
• Better use of data: Using the information we collect every day to help improve efficiency in our operational
activities.
• Enhanced flooding (other causes) CCTV programme: Increasing CCTV find and fix activities from 70km to
370km.
Since the original tactical plan was developed, additional activities have been agreed and added to the plan this year. The
aim of this is to maintain and further improve the performance levels we’re currently forecasting, particularly around
improving external sewer flooding. These additional activities include:
• Moment of change/Bin the Wipe full programme: Following the success of the initial pilot studies, we’ve scaled
this initiative up to focus on 50,000 high risk postcode areas in the North East. This includes eight full time
employees working in the field, a team leader, and a data analyst.
• Additional resources: We’ve taken on five additional employees from our supply chain partners for a period of
six months. They’re helping to reduce the backlog of sewer flooding incidents and reviewing CCTV footage to
make sure root cause assessments are right first time. We’re also using four shared employees from the pollution
team to help with a peak in sewer investigations we’re experiencing during recent extended periods of wet
weather.
• External operational plan: The external plan focuses on operational improvements to help reduce external
sewer flooding, through improved processes, training, and investigations. Activities include having technical
support assistants attend out of hours flooding events, improving service level agreement response times, and
in-house training.
These initiatives have resulted in significant improvement in our sewer flooding performance and will be supported by
additional activities we’re proposing for year two of our plan.
We’re committed to continuing to reduce the number of sewer flooding incidents our customers experience each year.
We’ve made a significant reduction in the number of internal sewer flooding incidents we’ve reported compared to the
previous year.
Our flooding tactical plan, for this year and across 2020-25, includes making further step changes in our performance
towards achieving this ambitious goal.
These activities, along with the measures we are taking to manage the misuse of sewers, for example our Bin the Wipe
campaign, as well as our continued approach to working in partnership with others to manage the risk of flooding, will help
us provide a sewerage service which deals with sewage and heavy rainfall effectively.
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Internal sewer flooding
This is a common measure with financial incentives associated with under and out performance
We recognise that internal sewer flooding is one of the worst performance failures our customers may face. Our target was
a significant reduction on our reported performance in 2019/20. We’ve achieved a significant step change in our internal
sewer flooding performance to 244, reducing our number of incidents by 48% in comparison to 2019/20 (to 1.89 per 10,000
population). Despite making big progress throughout 2020/21 and overall demonstrating good performance in reducing
internal sewer flooding for our customers, we’ve still underperformed against our stretching PC of 217 (1.68 per 10,000
population). This could be due to the unusually wet winter experienced this year.
In accordance with our incentive structure for this measure, we will pay an underperformance penalty of £530,000.
Repeat sewer flooding
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This new, bespoke measure records the number of internal sewer flooding incidents in properties which have flooded
internally more than once in the last five years.
As a result of the interventions we’ve put in place in our sewer flooding tactical plan, we’ve significantly reduced repeat
sewer flooding to 25 incidents, beating our PC of 46.
This measure includes flooding from the public and transferred network and includes severe weather events. Any flooding
due to the cleansing of sewers from jetting is included, unless the water is fully contained within a toilet bowl and flooding
due to third party action is included in all cases.
We recognise that internal sewer flooding is one of the worst performance failures our customers may face, and that repeat
internal sewer flooding is even worse.
This is therefore an area we’re incredibly proud of. Additional resources, proactive hotspot investigations and our Bin the
Wipe campaign all contributed towards this reduction.
In accordance with our incentive structure for this measure, we’ve earned an outperformance payment of £1.157m.
External sewer flooding
This is a continuation of our measure from 2015-20 and is now a bespoke measure with financial incentives.
We’ve achieved a good reduction in our external sewer flooding performance, reducing our number of incidents by more
than 17% in comparison to 2019/20 to 3,862. However, our performance against our external sewer flooding PC was
impacted by an extremely wet winter, when compared with average rainfall across our region for previous years.
In response to these factors, we recognised that we wouldn’t achieve our PC for external sewer flooding and put additional
measures in place to further reduce this risk, as well as to put us in the best position for the future. We’re confident that
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the measures we’ve taken, as well as the additional interventions we’re planning in year two of our sewer flooding tactical
plan, will continue to reduce external sewer flooding, in accordance with our PCs.
In accordance with our incentive structure for this measure, we’ve incurred an underperformance penalty of £3.072m.
Risk of sewer flooding in a storm
This PC is designed to incentivise companies to better understand flood risk in their region and utilise this knowledge to
develop long term strategies and so reduce the risk of sewer flooding over the long term. This measure records the
percentage of the region’s population at risk from internal hydraulic flooding from a 1 in 50-year storm, based on modelled
predictions.
As a result of the work we’ve completed as part of our DWMP programme, we’ve significantly outperformed our 2020/21
PC, as well as achieving and outperforming our 2024/2025 PC. This measure is reputational only and therefore we cannot
earn an outperformance reward.
Our baseline population at risk of sewer flooding in a one in 50-year rainfall event within the NW operating region was
35.17%. This number was derived from running 124 hydraulic models covering 77% of the population in our northern
operating region. This risk was made up of a modelled ‘known’ risk of 12.55%, and an un-modelled risk of 22.62%.
For 2020/21, we’ve updated and re-run 242 hydraulic models, which now cover 98.5% of the population in our NW
operating region, as part of our Drainage and Wastewater Management Plan (DWMP) programme. As a result of this
update, the population at risk of sewer flooding in a one in 50-year rainfall event within the NW operating region is now
16.11%. This risk is made up of a modelled ‘known’ risk of 14.82%, and an un-modelled risk of 1.29%.
Through our extensive coverage of sewer level monitoring, we now have more than 98% of our storm overflows monitored
- with plans in place to achieve 100% in 2021.
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We’ve published spill and duration data, known as Event Duration Monitoring (EDM), on our website and this has also
been made available on gov.uk. Our strategy for storm overflows is to continue our significant investment to improve SOs
and reduce spills, while also working with the Defra-led Storm Overflow Task Force towards future plans, increased
transparency and policy changes.
The information collected from our EDM monitors helps to inform our risk-based catchment screening which forms part of
the early stages of our DWMP to prioritise catchments for further investigation. The data also helps us understand the
performance of the network. It helps, in conjunction with other information and stakeholder knowledge, to calibrate hydraulic
models to consider wider risks and benefits (for example sewer flooding).
Sewer blockages
Blockages are a significant contributing factor to sewer flooding. To assist in performing against our internal, external and
repeat flooding PCs, we have added sewer blockages as a bespoke measure for 2020-2025.
The number of sewer blockages has increased since 2019/20 and we haven’t hit our PC. We had a particularly wet winter
in 2020/21 and we’re still analysing our blockage data to understand the increase. However, we’re confident that
interventions like extending our Bin the Wipe campaign to more than 50,000 properties, as well as additional dedicated
employees for investigating repeat blockages, will enable us to reduce the risk of sewer blockages in future, in accordance
with our PCs.
In September, as part of our Innovation Festival we held a week-long design sprint on the topic of “How can we reduce
sewer blockages by 50%,” in partnership with the University of Sunderland. As part of the outputs from the sprint, we’ve
set aside funding to further develop two ideas, which we hope can further contribute to reducing the risk of sewer blockages
in the future.
In accordance with our incentive structure for this measure, we’ve incurred an underperformance penalty of £619,000.
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Case study – Bin the Wipe
Bin the Wipe is a brand-new approach to reducing sewer blockages by focusing on the problem’s number one
cause...WIPES!
The key aim to generate a step change in the amount of sewer flooding incidents by targeting customer behaviour.
Bin the Wipe was launched in 2020 to replace our 3Ps (only paper, pee and poo should go down the loo) approach, which
is commonplace across the industry. It turns the message and focus towards wipes. If we can reduce or even remove
wipes from our network, we can massively drive down blockages. In 2019, 64% of the 15,600 blockages we cleared from
our network contained wipes, which do not break up and can snag or settle in pipes and cause build-ups.
The Bin the Wipe message is a simple one for customers to understand and needs only an easy change to their behaviour
to make a big difference, if enough customers play their part.
The campaign uses innovative tools to track wrongly flushed items back to the homes they came from and helps customers
to understand that flushing wipes can cause sewer flooding in homes and damage to the environment, such as rivers and
beaches.
Our Bin the Wipe team focuses on hot spot areas and works in an area for three months, clearing blockages and identifying
where wipes have been flushed. As the search narrows to streets - and even to individual properties - we continue to
encourage people to stop flushing wipes through direct conversations and, where necessary, letters.
Those who continue to flush wipes are warned of our ability to charge them for the cost of clearing blockages - and even,
in extreme circumstances, prosecute them for offences under the Water Industry Act 1991.
Bin the Wipe has so far focused on areas of Teesside, where flushing wipes was a known problem. This has reduced the
number wipes found in the sewer network by more than 60%, without the need for us to charge or prosecute any customers.
Simon Cyhanko, Head of Wastewater Networks, said: “Wipes that have been flushed down the loo are the biggest cause
of blockages in our sewers, which threatens people’s homes, businesses and the environment with flooding.
“When a sewer gets blocked, all the waste people flush away is stopped in its tracks and can only go either back to where
it came from or out into the environment. That’s the worst thing that can happen to a customer in relation to our network,
so we want to stop such unnecessary problems at their root cause.
“Even wipes that come in packages claiming they’re ‘flushable’ can cause problems. Because they don’t break down like
loo roll, they can start or contribute to blockages.
“We can use our team’s specially created tools to trace flushed wipes directly back to homes, and we can take action
against people who keep flushing them. However, we’ve found that customers are generally willing to make that simple
change in their behaviour once they understand the consequences, in the areas we’ve taken Bin the Wipe to already.
“It’s a simple change to make that costs nothing. All we ask is that people stop using their toilets as bins and Bin the Wipe.”
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Sewer collapses (per 10,000km sewer)
The methodology for reporting sewer collapses was aligned across the industry and we have adopted this as a common,
penalty only measure for 2020-25.
We’re continuing to train our teams in accordance with the new reporting measure for sewer collapses, which along with
existing sewer maintenance activities has resulted in us outperforming our PC for 2020/21 by 26 collapses.
In accordance with our incentive structure, this measure is penalty-only, and therefore we cannot earn a reward for our
outperformance.
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THEME FOUR: LEADING IN INNOVATION
OUTCOME 10: We are an innovative and efficient company
AMBITIOUS GOAL: To be leading in innovation within the water sector and beyond
Measuring innovation takes many forms across the business and these are detailed in Table 2.
Table 2
METRIC
Reach
Culture
Employee
participation
Collaboration
External collaboration
Added value
Design sprints/hacks
Ideas generated
Ideas in the
innovation pipeline
Success rate (%)
Potential value (£)
Innovation funding
secured (£)
DESCRIPTION/
HOW WILL MEASURE
2018/19
2019/20
TARGET
Social media reach
4.1M
8.6M
>5M
2020/21
ACHIEVED
5m+ on Twitter and 10m+ on
Facebook
Number of innovation
ambassadors
Number of employees taking
part in Innovation Festivals
Innovation Festival attendees
Number of
businesses/organisations
attending Innovation Festivals
Training delivered as part of
festivals (hours)
Number of innovation
activities
Ideas unfiltered
Total number of ideas
Projects adopted as Business
as Usual
Potential value of the pipeline
(£)
14
47
All of NWG
71
328
2373
510
23
16
334
42
-
484
3311
734
46
23
615
56
>20%
>2500
>140
>12
>20
>300
>50
38%
40%
645
(21% of NWG)
2,730* Digital event
941
400
40
2000
70
41%
£5m
£15m
£20m
Estimate* £27m
External funding secured
-
-
>£500,000
£475,000 for Innovation;
£350,000 for Research &
Development
We have ambitious plans about our innovative culture and measure growth in the number of innovation ambassadors and
the number of our employees that take part in the Innovation Festival each year. Our innovation ambassadors enable and
spread an innovative culture across our business and drive the implementation of innovative new ideas so that innovation
becomes business as usual.
This group has grown from 14 in 2018 to 71 people in 2021 and continues to grow. It includes those in all functions and
levels within the company and seven external businesses and organisations that excel in innovation. Our annual plan for
the growth and development of the ambassadors includes external speakers (e.g. Professor Roy Sandbach OBE and
Tendayi Viki, who are globally renowned in the field of innovation) and training to build knowledge and capability. In
addition, we’ve set up the NWG Innovation University and offer bite-sized training that will come together as a cohesive
programme covering the core elements of innovation. This will be a recognised internal qualification, and there are 14
people taking part in our first cohort.
Innovation is part of all we do across the year, but our Innovation Festivals are an important element, given their outward
facing nature. These events are now firmly established industry-wide and attract participants from across the globe. They’re
widely anticipated within our regions and across our supply chain. We were leading the charge on virtual events and
successfully ran our biggest and first virtual festival to date in September 2020.
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As well as building the digital collaboration skills of our employees and supply chain, we ran 388 hours of training for
innovation festival participants, enabling our collaborative partner organisations too. 2,730 people joined us from 900
organisations in 37 different countries. The digital nature of the event meant it was very inclusive and attracted a broader
diversity of audience that we would not be able to tap into in our business as usual activities. The equivalent professional
services value of this contribution is estimated to be between five and six million pounds.
The purpose of this year’s event was to create new ideas to improve our business, but also accelerate the progress of
existing ideas that require collaboration across organisational boundaries, e.g. the common underground map. The festival
places us firmly at the epicentre of an innovation ecosystem. There are lots of spin-offs from the event - many of which we
get involved in, some of which happen without us. This year saw our innovation festivals placed in the global arena, with
events in Australia, India and North America, and with cross sector global sponsors such as Salesforce, Procter & Gamble
and Schneider Electric.
Some statistics about our four festivals:
•
150 ideas generated that we’ve taken back into the business – while we’ve subsequently dismissed some of
these, approximately a third have delivered (or are near to delivering) value.
•
9,300 participants. Approximately 25% of these are our employees helping to spread the method and confidence
about being innovative.
• More than £1.5million put back into the local economy demonstrating our convening power in the region to bring
others into our regions.
•
In 2020 we reached more people than ever across social media channels (Linked In, Twitter and Facebook),
building up a strong innovation community with thought leadership and impactful content that reached more than
5million on Twitter and 10million on Facebook.
In September 2019, we held a joint event (Innovate East) with Anglian Water over three days in Ipswich. This was a first
of its kind for the industry. We’ve used 2020 to build upon the six big ideas which sprang from the Innovate East event,
which include Wheatley’s water trading platform, a cross-sector digital twin group and a water quality sensor business
model.
In 2021, we’ve grown Innovate East to include Yorkshire Water and its focus will be the public interest commitment to
achieve carbon neutral operations by 2030 that the three water companies jointly lead. A series of virtual events are
planned for 2021, exploring the three themes of nature-based solutions, technology solutions and hydrogen. The events
will culminate in a joint exhibition at the UN Climate Change Conference (COP 26) in November 2021.
We’ve been using our idea management platform (Amplify) to solve our big business challenges. The platform enables us
to harness the creativity and expertise of our employees, supply chain, eco-system and beyond. So far, we’ve run eight
challenges and have identified some game-changing solutions. For example, the seed idea for our successful Bin the Wipe
campaign, which has significantly reduced the number of wipes being flushed, and therefore reduced sewer blockages.
Ofwat’s innovation funding competitions are further encouraging collaboration across the water sector and will enable us
to run innovation projects which would normally be out of scope. This change in culture across the water sector will also
drive positive change. We’re building an exciting pipeline of potential projects with a wide range of different businesses
and organisations, within and beyond our current supply chain. For the first Water in Innovation Competition that ran in
February, we submitted eight bids for a wide range of innovation projects, and we’re collaborating on three other projects
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with other water companies. We were successful in securing two of the 11 funding opportunities. One is for the UK Water
Sector Centre of Excellence, an innovation accelerator hub that will encourage more innovation across the sector and
open opportunities to a broader supply chain. (We co-wrote and submitted this bid on behalf of the entire UK water sector).
In addition, we secured £225,000 funding for a sector-first project which turns ammonia into green hydrogen fuel,
collaborating with Organics, Wood Group, and Warwick and Cranfield universities to create a pilot plant at Howdon. This
funding has enabled us to run this innovation project which would otherwise be out of scope.
We’re focusing on speeding up the achievement of value from innovation, by supporting the seed of an idea through to its
becoming business as usual. We have a very active innovation pipeline with more than 80 ideas being considered across
the business. To drive adoption in the operating business, we’ll be better supporting the strongest ideas to realise value
from innovation.
We continue to use design thinking methods in the business and for our events. Throughout 2020 we ran more than 30
design sprints. As part of the Water Innovation Strategy 2050 (a joint initiative across the UK water sector), we’ll collaborate
with other water and wastewater companies to set up a new Centre of Excellence for Innovation.
Collaborating on shared challenges will enable a step change on some of the especially tough challenges the sector faces.
It will include working in partnership with current supply chains, as well as bringing opportunities to businesses that haven’t
yet worked with the water sector. The strategy aims to create conversations with experts in innovation, diversity and
inclusion, as well as entrepreneurs and small business owners.
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Case study – Open Data ‘Stream’
We’ve seen the benefits of giving data scientists the opportunity to derive new insights from our data (data hacks) for the
last few years. We’ve used this approach on projects aimed at addressing leakage, tackling flooding, and reducing spills
from storm overflows.
Through our Innovation Festival and partnership event with Anglian Water, Innovate East, we’ve led various initiatives to
share data with other organisations. The clearest example of this success in collaboration is the National Underground
Asset Register (NUAR), where this open data approach led to a ground-breaking project now backed by the Government.
We’re determined to unlock more value from the data which the industry owns and harness other potential opportunities,
by working together with other water and utility companies and innovation partners.
From this, we’ve developed ‘Stream’ – a collaborative Open Data initiative to take this forward across the sector.
An initial strategy exercise on behalf of the sector was commissioned and we engaged management consulting firm Sia
Partners, who’d already successfully adopted the same principles and approach to creating an open data strategy for the
Royal Navy. They helped us learn best practice from other sectors.
Together we:
• Created a cross-industry approach to find where value lies and for who.
•
Identified critical and high value opportunities for the water industry and stakeholders.
• Built an end to end model and opportunity roadmap that capitalises on open data by addressing gaps.
This formed the basis of an open data strategy that enables the water industry to collaboratively generate sustainable
value. Over four weeks, 40 people from 12 companies collaborated on various workstreams. They tested three Proof of
Concepts aligned to strategic goals within the sector:
•
inquEIRy: A functional prototype enabling users to query data sets subject to Environment Information Requests
(EIRs). Water quality sample data was used (a typical EIR request) at postcode level from six companies with
over 156,000 water quality samples. inquEIRy is capable of housing more than ten years of all UK water
companies’ sample data, and presents a highly investable quick win that can pave the way for more ambitious
Open Data projects in the sector.
• Algaerithm: A design sprint for an algorithm that proactively flags the risk of harmful algal blooms in UK fresh
water sources. Driven by rising temperatures, these blooms are a significant burden on the UK water industry,
and climate change will only exacerbate their increase.
• AssetAlert: A feasibility study for a data system that identifies water asset problems before they occur and
improves predictive maintenance processes. Asset data from four companies was analysed, converging on pump
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data due to high failure rates and associated maintenance costs. The staggering cost burdens associated with
unplanned asset failures could potentially be reduced through wide-scale asset data pooling.
By working together to create a shared strategy and approach to open data we’re identifying answers to the challenges of
what information is shared, how it is shared, and crucially how it is kept safe.
Case study: Detecting COVID-19 in wastewater
We’re working with scientists at Newcastle University who are part of a national programme to develop a standardised UK-
wide system for detecting COVID-19 in wastewater. By analysing sewage to monitor the prevalence of COVID-19, the
project aims to provide an early warning of future outbreaks and reduce reliance on costly testing of large populations.
SARS-CoV-2, the COVID-19 virus, does not readily spread through sewage and wastewater systems. However, non-
infectious genetic residues of the virus, in common with other microbes, can remain in wastewater systems in locations
where infected people go to the toilet, even if they are asymptomatic, so sewage surveillance is widely seen as a promising
way of identifying future disease hotspots.
The new £1m research programme, which lasts until October 2021, will see experts develop sampling, testing and scientific
modelling methods that will be adopted by government agencies and scientists across the UK. The work will inform the
national surveillance programme recently announced by Defra.
Richard Warneford, Wastewater Director, said: “We’re proud to be working with our partners at Newcastle University on
this globally significant project. Our wastewater teams are working with their engineers and scientists to safely gather and
analyse data and we’re hoping that together we can help make a difference in the battle against COVID-19.”
Dr Andrew Singer of UKCEH, principal investigator of the new National COVID-19 Wastewater Epidemiology Surveillance
Programme (N-WESP), says: “Several studies have shown that the RNA of SARS-CoV-2 - the genetic material of the virus
- can be detected in wastewater ahead of local hospital admissions, which means wastewater could effectively become
the ‘canary in the coalmine’ for COVID-19 and other emerging infectious diseases.
“By sampling wastewater at different parts of the sewerage network we can gradually narrow an outbreak down to smaller
geographical areas, enabling public health officials to quickly target interventions in those areas at greatest risk of
spreading the infection.”
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THEME FIVE: IMPROVING THE ENVIRONMENT
OUTCOME 11: We help to improve the quality of rivers and coastal waters for the benefit of
people, the environment and wildlife
AMBITIOUS GOAL: Have the best rivers and beaches in the country
AMBITIOUS GOAL: Have zero pollutions as a result of our assets and operations
•
Treatment works compliance – common
• Bathing water compliance – bespoke
• Pollution incidents – common
• Water Industry National Environment Programme (WINEP) – bespoke
• Delivery of WINEP requirements – bespoke
Treatment works compliance
For 2020-25, we’ve adopted Ofwat’s new common measure for treatment works discharge compliance. This measure
differs slightly from that reported by the Environment Agency (EA) in its annual Environmental Performance Assessment
(EPA) of water companies in England. It is reported as the total number of failing sites (rather than the number of failing
discharges) where one or more numeric permitted discharges have been confirmed as failing in a calendar year. This is
expressed as a percentage of the total number of discharges on the EA register. For both NW and ESW in 2020-25, this
measure now includes both STW and WTW discharges and is only subject to penalties for under-performance.(EA
reporting does not include ESW sites).
While our performance has improved since last year, we’ve still not met our PC but are within our deadband so will not pay
a penalty.
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We’ve achieved a 4-star company status in the Environmental Performance Assessment from the EA for 2020, with leading
environmental performance, such as in pollution management and discharge compliance. We’ve also committed to
challenging bathing water targets to maintain Good or Excellent bathing water quality at 33 of our 34 designated beaches.
During 2020, our permitted concentrations were breached at one STW (out of a total of 160) for an upper tier failure on
suspended solids, and one WTW (out of a total of 38 in NW and ESW) failed on pH7. These are both disappointing and
are undergoing our strict operational scrutiny and cause investigations. There is an ongoing performance investigation at
the STW to identify further mitigation measures to avoid future solids failures.
We have a very strong record for meeting numeric discharge compliance limits (reporting at normal frequency until you
have reported 12 consecutive months of numeric compliance) at our STWs - an area where we’ve held an excellent industry
position. We’ve also made considerable performance improvements in our water treatment works discharge compliance.
We make sure that our treatment works meet the required discharge standards by taking regular samples that are analysed
for the levels of substances, including phosphorous and ammonia, and specific substances that may accumulate to cause
a problem in the water environment. These numeric permits apply to 160 of our largest STWs and 38 WTWs).
Future permits will tighten as legislation changes. This will introduce new challenges and standards over the next five years
and beyond, as well as tightening existing permit standards. We will therefore need to adopt new treatment technologies
and increase our emphasis on very efficient operational control. The pressures of increasing population, new housing,
industrial development, and climate change will also challenge our performance.
We’re doing our best to deliver against challenging new standards over 2020-25, whilst also adapting to very challenging
circumstances, as well as a very stretching settlement from Ofwat. We must also plan to meet future new and tighter
standards and satisfy our obligations in working towards meeting ‘Good’ Water Framework Directive (WFD) status in our
rivers.
Bathing water compliance
7 EPA 2020
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This new, stretching bespoke measure for 2020-25 is to contribute towards all the region’s bathing waters being ‘Good or
Excellent’. Our previous PC for 2015-20 was to contribute to all the region’s bathing water being ‘sufficient or better.’
COVID-19 impacted the EA’s regulatory bathing water sampling during 2020. As a result, bathing waters in England were
not classified for the 2020 bathing season and therefore no official statistic was produced. This means that the bathing
waters in our region will display the 2019 classification, with 33 out of 34 bathing waters either Good (8) or Excellent (25)
- 97.06%.
Our bathing waters (sea water at the region’s beaches) continue to be among the cleanest in the country. As sea water
quality can be affected by several influences, such as run-off from agriculture, sea birds and urban pollution, we work in
partnership to make improvements and maintain standards.
Cullercoats bathing water in North Tyneside had deteriorated from being classified as Good in 2016, to Sufficient in 2017,
then Poor in 2018 and 2019. Due to the break in classifications for 2020, the five-year consecutive count before de-
designation for Poor bathing waters, such as Cullercoats, will be reset in 2021. This means that the earliest Cullercoats
could be de-designated due to five consecutive Poor classifications will now be 2026.
We continue to work in partnership with the EA and the local authority to understand the reasons for the localised decline
in bathing water quality at Cullercoats and to understand all bathing water quality compliance issues and identify priority
beaches for closer attention. Working in partnership allows us to share information, plans and best practice. For example,
making sure that signage (which we funded) under the EA’s pollution risk forecasting system is in place, and understanding
ambitions for more Blue Flag award beaches.
Pollution incidents (Category 1-3 Wastewater)
We aim to avoid all pollution and have a PC for all category 1, 2 and 3 incidents for 2020-21. This is a common measure
for pollution using the EA EPA methodology.
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We’ve outperformed our 2020 PC for category 1-3 wastewater pollution incidents and have therefore earned a reward of
£2.960million.
We are delighted to remain a Frontier Company for pollution incident performance and are determined to maintain this
position.
We continuously learn and improve on our pollution performance through our company-wide zero-tolerance approach to
it. By constantly examining all aspects of pollution through our pollution best practice group we can target our efforts to
effectively reduce the number of incidents. In September 2020, we published our Pollution Incident Reduction Plan
which outlines initiatives that will further improve performance. Examples of the work we are doing include:
• Deploying further monitoring, early warning capability and increased business intelligence across our wastewater
system, with increased coverage of sites on eSCADA telemetry with appropriate alarm generation.
• Developing innovative new sensors and monitors, such as a rising main burst sensor.
•
Targeted customer behaviour-change campaigns with the launch of our ‘Bin the Wipe’ programme, reducing fats,
oils and greases getting into sewers with food outlets, and trade effluent response to reduce pollution risk.
•
Targeted capital maintenance programmes to maintain asset health, such as refurbishing pumping stations and
treatment works, lining sewers, reducing the risks of dual manholes and storm overflow ancillary programmes.
We’re pleased that the number of our more serious category 1 and 2 pollution incidents remains low at one in 2018, two
in 2019 and one again in 2020. We aim to have zero serious incidents.
While incidents from wastewater continue to be lower than our PC, we’ve seen an increase in those attributable to our
water treatment and supply networks, as we’ve focused on raising standards in this area. There were 27 such incidents in
2020 mainly attributable to the supply network, which included three serious category 2 incidents. We continue to develop
our processes, procedures, and response to these types of incidents, which typically involve a burst water main and
chlorinated water impacting a nearby watercourse.
The EA expects us to pro-actively ‘self-report’ at least 80% of all pollution incidents to them, rather than rely on others to
point out any problems. We consistently achieve high levels of self-reporting, meeting the 80% requirement with 81% in
2020, 80% in 2019 and 84% in 2018. For 2020 onwards, the EA also expects 90% or more self-reported pollution incidents
for sewage pumping stations (SPSs) and sewage treatment works (STWs). We achieved 100% self-reported pollutions in
2020 against this new metric.
As mentioned in the flooding section, we began extensively monitoring our Storm Overflows more than 15 years ago for
operational control, detection and response purposes. We’ve published Storm Overflow spill and duration data, known as
Event Duration Monitoring (EDM), on our website and this has also been made available on gov.uk. Our strategy for storm
overflows (SOs) is to continue our significant investment to improve SOs and reduce spills, while also working with the
Defra-led Storm Overflow Task Force towards future plans, increased transparency and policy changes. Pollutions
associated with network SOs have fallen significantly through our leading monitoring and pollution management approach.
Average numbers (for Category 1-3 incidents) have reduced from 28 in 2013-2016 to just 4.5 for years 2018-2020.
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Case study – Leading approach to pollution
We work hard to make sure all our assets work as they should, but sometimes things can go wrong. Our aim is to continue
to reduce all pollutions associated with our assets. This includes from our wastewater and water assets in our Northumbrian
Water operating area, and for water only assets in Essex & Suffolk.
We’re maintaining industry leading levels of wastewater pollutions through our transformative pollution management
programme and Pollution Incident Reduction Plan (PIRP), which outline what we’ll do to reduce the risk of these incidents
and what we’ll do if an incident occurs.
For water related pollutions, we continue to work hard to reduce pollutions, including serious incidents, through new
interventions, improved processes, and procedures.
We’re committed to being as ethical, open, and honest as we can with our customers, and we’ve published our plan for
reducing pollutions from 2020-25 to help us meet our ambitious goal to have zero pollutions as a result of our assets and
operations. We’ve developed a culture focused on all aspects of pollution risk, and this approach has resulted in a real
transformation in our pollution performance.
Since 2017, we’ve been at the frontier with industry-leading performance on pollution. In 2018 and 2020, we received a
four-star rating in the Environment Agency’s Environmental Performance Assessment. In 2019 our pollution performance
remained leading, but we were disappointed in our two-star rating, which was due to a compliance issue.
We’re focused on continuously improving our performance across our water and wastewater networks and assets,
including 25,000km of water mains, 55 water treatment works, 30,000km of sewers, 1,250 storm overflows, 1,000 sewage
pumping stations and 430 sewage treatment works.
Richard Warneford, Wastewater Director, said, “It’s vital we protect the environment that provides us with the material we
use to supply clean, clear and great tasting drinking water. We must return it back to the environment in the best possible
condition.
“We have many assets - both in water and wastewater - and it’s essential that we maintain and operate them in a way that
minimises any negative impact on the environment.
“Our customers have told us that looking after the environment is very important to them and something they expect from
us. Through our PIRP, we show our commitment and provide details on how we’re minimising risks and how we’ll put
things right if something does go wrong.”
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Water Industry National Environment Programme (WINEP)
This is a new, bespoke PC for 2020-25 which is reputational only this year. It’s measured by the cumulative number of
WINEP schemes completed each year across our operating areas. The WINEP is a key part of the overall programme of
measures to meet the requirements of the Environment Agency (EA)’s Water Industry Strategic Environmental
Requirements (WISER) document. This includes objectives to meet Water Framework Directive (WFD) ‘Good’ status in
our rivers by 2027 and prevent deterioration in status, together with other international regulatory drivers, including the
Urban Wastewater Treatment (UWWT) and Habitats Directives. The EA sets an expectation in its WISER guidance that
companies will deliver 100% of the environmental improvement schemes listed in WINEP.
We work very closely with our local EAs to make sure we have a common understanding of the specific requirements of
our obligations, and to make sure the mitigation measures we implement will satisfy the WINEP’s environmental objectives.
The EA also measure performance in their Environmental Performance Assessment (EPA). In its publication for the EPA
2020 the EA note that we are on track to deliver 100% of our WINEP schemes.
We’re required to track our performance against both the EPA and our PCs, and we’re required to confirm our annual
performance with the EA.
Our targets for the first four years are reputational only, but if we should fail to complete all 656 sites by 31 March 2025,
we would pay a financial penalty in 2024/25.
The EA acknowledged anticipated delays in early 2020-25 due to the restrictions on water company and laboratory work
and accordingly extended our delivery dates for 203 of our schemes (202 for NW and one for ESW), by either six or 12
months.
Aside from the COVID-19 related changes, the deadline for the single remaining deliverable for ESW in 2020-21 was also
extended (via the accepted change protocol procedure and with the agreement of the EA) to Year Two. The revised
forecast profile for WINEP is indicated in the infographic above.
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Delivery of Water Industry National Environment Programme requirements
For 2020-25, we’ve adopted a bespoke PC as a measure of success for delivery of the WINEP in addition to our numerical
WINEP measure. The measure is reputational only.
This is a new ODI measure, but is like the EPA measure, against which we’ve consistently delivered 100% of schemes
since 2011.
The definition of this measure is the company has either met or not met all its requirements for WINEP in the reporting
year. Ofwat specifies that performance for 2020-21 will be reported based on the latest WINEP programme on 31 March
2021 and the schemes which will have been delivered by this date.
Failing to complete the designated WINEP schemes for any given year would result in a ‘not met’ result. As we have no
forecasted deliverables (post accepted changes) for 2020/21, there will be none recorded as ‘not met.’
OUTCOME 12: We take care to protect and improve the environment in everything we do,
leading by example
AMBITIOUS GOAL: Be leading in the sustainable use of natural resources, through achieving
zero avoidable waste by 2025 and being carbon neutral by 2027
Last November Water UK launched the industry’s Routemap 2030 – our sector’s push to Net Zero. It’s the world’s first
sector wide commitment of its kind and we’re proud to be leading the way.
Some of the things we’ve already achieved include:
• We’ve reduced operational emissions by 46% since 2009.
• Our Advanced Anaerobic Digestion activities mean we were the first and are the only water company to use 100%
of our sewage sludge to create energy (or power from poo), and we’ve enhanced our activities in energy creation
further with the implementation our second Gas to Grid plant at Bran Sands.
• We lead the industry with our offshore wind Power Purchase Agreement (PPA), which was the first of its type in
the UK. This 10-year deal has us sourcing approximately 30% of our electricity demand from the Race bank
offshore wind farm.
• All 1,858 of our sites are powered using renewable electricity. This means we can achieve 85,000 tonnes of CO2
savings each year - over 400 times the weight of the Angel of the North.
• We have around 10 electric vehicles in our fleet used by colleagues in water and wastewater operations. Every
100 miles in a small diesel van releases 24kg of CO2, while an electric van releases only 0.6kg.
We’ll create zero avoidable waste by 2025. This will mean eliminating, re-using or recycling 90% of our waste from
operations, and working with partners to contribute to the circular economy in their regions.
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We’ll also continue our investment in natural solutions like reedbeds which have provided environmental benefits in
biodiversity and reduction in CO2 emissions.
We have around 15MW of solar planned for delivery in the next 18 months, with further plans being evaluated for the rest
of the AMP. We also plan to deploy onshore wind at sites where suitable and sensitive to the environment and our
communities.
Looking ahead, the use of Digital Twins, pilots of large-scale battery storage and the production of hydrogen in hydropower
sites that cannot be connected to the grid demonstrates our continued industry leadership in this area.
Our commitments are ambitious, but we know they’ll create positive outcomes for our people, customers and our beautiful
environment. By doing all of this, we expect to save the emission of up to 10 million tonnes of greenhouse gas. Our
emissions as a result of our operations in 2019/20 (see the section on our greenhouse gas emissions PC) were 61,650
tonnes of CO2 equivalent.
AMBITIOUS GOAL: Demonstrate leadership in catchment management to enhance natural
capital and deliver net gain for biodiversity
• Water environment improvements – bespoke
• Greenhouse gas emissions – bespoke
• Bioresources – bespoke
Water environment improvements
This is a new, bespoke measure for 2020-25. Our PC is 10km each year against which we’ve achieved 30.2km through
delivery of four projects across our NW and ESW operating areas for the first year of this programme in 2020/21. The full
reward due on 20.2km is £155,055.
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Our full costs were £232,136 and we committed to reinvest 50% after costs. We aren’t claiming our costs for our feasibility
study resource or Branch Out fund, so we will only claim £48,856 costs, which means we can reinvest £53,100 in new
projects in year two.
Linking improvements to public access is an innovative approach to investing in the environment, and this is a completely
new environmental measure for our regions. All water environments within our regions are in scope, including lakes and
reservoirs, streams and rivers, canals, wetlands, coasts and beaches. Improvements must cover at least two out of three
aspects of access: Facilities and recreation, wildlife and biodiversity, and water quality, and must include elements above
our regulatory obligations.
In 2020/21 we carried out a feasibility project to understand external expectations for this new measure and develop our
approach. Our work has been led by a small team of three environmental experts, and has included extensive customer
research, with 800 customer surveys carried out and nine focus groups held, engagement with more than 100 partners
from 63 organisations through nine catchment partnership workshops and individual conversations, and development of
candidate projects from a long list of opportunities identified within our regions.
This year we established an external governance group to provide assurance to regulators and high-level steering of our
approach. The Water Environment Governance Group (WEGG) is an independent group with informal links to our Water
Forum Environment sub-group via shared members and a joint Chair. We’ve worked closely with the WEGG to put
processes in place for formal review and approval of projects and sign-off after project delivery.
Case study: Working in Partnership
We’ve improved accessible water environments at four locations in our regions as follows:
• Kielder Water (Northumberland): 12km of Lakeside Way improved with Kielder Water & Forest Park Development
Trust, Forestry England and Red Squirrels Northern England, including footpath improvements, enhanced
signage, protection for red squirrels and ospreys, and a new, fully accessible osprey watch facility.
• Carlton Marshes (Lowestoft, Suffolk): 16km of water environment improved with Suffolk Wildlife Trust, creating a
new publicly accessible 405hectare wetland including boardwalks, a visitor centre, wild playscape, viewing hides
and linked year-round nature activities and an educational programme.
• Frenze Beck (Diss, Norfolk): 1.5km of water environment at a County Wildlife Site improved with the River
Waveney Trust and South Norfolk District Council. New footpaths and boardwalks with disabled access were
created, as well as visitor seating, new wetland habitats and facilities to support bird nesting.
• Filby and Ormesby Little Broad (Norfolk Broads): 0.7km of water environment improved with Norfolk Wildlife Trust,
at one of only a few publicly accessible sites in the area. The project upgraded boardwalks to enable wheelchair
access to viewing points, repaired paths, resurfaced car parks, and restored a dyke adjacent to the path to protect
fish habitats.
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Greenhouse gas emissions
This new, bespoke PC incentivises us to reduce greenhouse gas emissions arising from our operational activities. Our
target for 2020/21 is a reduction of 4,433 tonnes of CO2e (carbon dioxide equivalent) from our 2019-20 baseline.
We’ve achieved more than triple our target reduction this year, which equates to a reward of £2.020m (see note below).
Eleven years ago, we committed to a carbon management plan to reduce our greenhouse gas (GHG) emissions by 35%
by 2020 against a 2008 baseline. We were delighted to achieve this goal ahead of schedule in 2018/19, through a twin
focus on energy efficiency and renewable energy.
This was delivered largely through investing in Advanced Anaerobic Digestion at our major sewage treatment works at
Howdon in North Tyneside and Bran Sands on Teesside, making us the first, and still the only, water company to use 100
per cent of our sewage sludge to create energy.
We also signed a ground-breaking offshore wind Power Purchase Agreement, which was the first of its type in the UK.
Under this 10-year deal, we source around 30 per cent of our electricity demand from the Race Bank offshore wind farm,
which contributes to our wider agreement to be fully powered by renewable energy at all sites across our business.
In our PR19 Business Plan we set an ambitious goal to go much further and achieve net zero carbon by 2027. We’re
pleased that we are ahead of schedule.
Further plans to continue our progress to net zero include installing renewable generation at a number of sites; low emission
vehicles – adding further electric vans and trialling biodiesel tankers; developing our procurement process to give emissions
appropriate weighting in contract awards, and adding GHG emissions to our service value framework, ensuring the lowest
economic emissions options are chosen for new capital schemes.
We’ve successfully gained external third-party assurance that all data relating to operational greenhouse gas emissions is
compliant with the version of the international carbon reporting standard (ISO 14064, Part 1). The measure, following an
audit by an appropriately qualified independent third party, includes all direct emissions, indirect emissions from the
generation of purchased energy, and other indirect emissions under the direct control of the company.
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More broadly, we’re leading the UK water industry’s public interest commitment in this area and led a group to launch the
industry-wide route map to net carbon zero by 2030, the first time a whole industry has achieved consensus on a stretching
target and plan.
In line with the terms of Ofwat’s final determination we’ve calculated our emissions using version 13 of UK Water Industry
Research Ltd (UKWIR) Carbon Accounting Workbook published on 8 May 2019, with the amendments required by the
ISO 14064, Part 1 auditor to make sure the workbook is compliant with the ISO standard.
However, we believe there are further weaknesses in version 13, which results in this approach overstating the reduction
we have delivered. These weaknesses have been corrected in version 15 of the workbook, which gives us a more accurate
figure of a reduction of 12,848 tonnes, which in turn would reduce the reward earned to £1,573,605. We are currently
seeking agreement from Ofwat for us to report using version 15.
Case study: Water and electricity CAN mix
We’re committed to being carbon neutral by 2027 and enhancing our sustainable energy mix by adding electric vehicles
to our operational fleet is essential to us meeting this target. We therefore aim for all our new vehicle purchases for our
thousand-strong fleet to be zero emissions from 2024.
Introducing the second-generation Nissan ENv200 in 2019 to be used by one of our meter readers started our journey
towards that goal. In 2020, a further 12 joined the fleet. They’re being used by operational teams in our meter reading,
water, and wastewater teams, with more planned over the next few years.
Through our partnership with leasing firm VLS, Nissan showcased the first-generation model at our second Innovation
Festival in 2018, and the updated model’s extra mileage capability makes it a viable option for meter reading.
Fleet Manager Kate Wilson said: “Electric vehicles and their viability are increasing evolving, to the point where it’s now
becoming feasible to consider them for our fleet, helping to protect the environment in the communities we serve.
“We have strong emissions ambitions, which include being carbon neutral by 2027 – more than 20 years ahead of the
target set by Government. Through our relationship with VLS, we’ve been able to bring these Nissan vehicles into our
fleet.”
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Bioresources
This is a new, bespoke measure for 2020-25 which is reputational only.
Our measure for bioresources is the percentage of sewage sludge (bioresources) treated at one of our Advanced
Anaerobic Digestion (AAD) sites and beneficially recycled to land. Our aim is to treat 100% of our bioresources together
with any imported organic material through AAD, and for 100% of the resultant biosolids to be safely recycled to agricultural
land. This meets our PC to maintain 100% under this measure for 2020-25.
For the period 2020/21, our performance for this measure was 100%, therefore maintaining our committed performance
with this bespoke measure since attaining 100% for the first time 2014/15.
Our strategy for wastewater bioresources is industry leading, and an example of dynamic efficiency from innovation (Ofwat,
May 2016). It comprises:
•
Two centralised AAD sludge treatment centres for all our bioresources and for trading in the bioresources market.
• Upgrading from biogas to biomethane, and injection into the natural gas grid at both sites. We are the only
company to have 100% of our energy-rich biogas used through this valuable route.
• A transport strategy based on a network of local dewatering sites at six strategic sludge handling centres and
onward transport of sludge cake by truck into AAD.
•
•
Thickened raw sludge transported by road tankers 24/7 into SHCs or direct into AAD.
Fertiliser biosolids products recycled safely and beneficially to agriculture under the Biosolids Assurance Scheme
(BAS).
The EA’s Satisfactory Sludge Use and Disposal metric, that forms part of their annual Environmental Performance
Assessment (EPA), has been suspended for 2018, 2019 and 2020, with shadow reporting only. It will remain suspended
for the 2021 calendar reporting year. We confirm that all regulations and good practice codes have been complied with
under the existing EPA metric.
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We’re working closely with the EA and industry groups in the development of the EA’s National Sludge Strategy.
We demonstrate leadership in catchment management to enhance natural capital and deliver net gain for
biodiversity
Catchment management covers the whole water cycle and this ambitious goal links across our water, wastewater, and
conservation activities. We carry out catchment work both across our own network and assets, and in partnership with
others, working to influence and to make shared decisions to improve the environment and showing leadership in integrated
catchment management. In contrast to a piecemeal approach of separating land management from water management,
approaching our environmental planning from a catchment perspective enables a more sustainable approach to managing
resources and having a positive ecological impact.
We deliver on this outcome in various ways:
Catchment Based Approach (CaBA) and Catchment Partnerships – We engage widely across the business on
catchment activity and plans, working with ten partnerships across our NW and ESW areas. Following on from our
successful launch of the Water UK CaBA network in 2019, which allows all water and wastewater companies to collaborate
on catchment approaches and partnership working, we have initiated and now chair the Water UK CaBA Steering Group
which has representatives from all WaSCs and key water only companies. This forms a space for discussion of key issues,
best practice sharing, and learning and networking between key players across the industry. We have recently held two
workshops discussing water companies’ approaches to catchment partnerships and our strategies for these, and a further
workshop including other key CaBA stakeholders to consider how we can best work together with CaBA as an industry.
Water Environment – Our new bespoke Water Environment Improvements ODI allows us to support, drive and deliver
above and beyond activities which focus on wildlife and biodiversity, water quality, and access facilities and recreation,
contributing to enhanced natural and social capital and improved catchment management.
Water Resources – We work with farmers, land managers, other stakeholders and partners to protect drinking water in
our regions and is leading on two holistic catchment projects in the South Tyne and Blackwater (Essex) to deliver WINEP
NERC Outcomes and protect our water resources.
We are also delivering our Capital Grant Scheme called Field to Tap across both our NW and ESW operating regions.
This will allow land managers to apply for capital grants for items that will reduce diffuse pollution from their land and help
improve water quality in the rivers and reservoirs from which we abstract.
We are also a core member of Water Resources East (WRE) and are part of a sub-group called Systematic Conservation
Planning. This group is taking a catchment approach to identify priority areas across the WRE region where measures
can be implemented to achieve natural capital objectives.
Our water resources catchment activity also includes work on sustainable abstractions and reservoir release/flow schemes
towards Water Framework Directive (WFD) Good ecological status.
Wastewater – We are leading on catchment approaches to deliver regulatory obligations included in the WINEP, focusing
on two catchments in the Wear and Tees. We are exploring catchment nutrient balancing, integrated constructed wetlands
and other catchment solutions towards delivering catchment Outcomes in partnership. Since September 2020 we have
strengthened our strategic catchment expertise and capability through external secondments from key partners into the
company (the EA and Durham Wildlife Trust). These roles have strengthened our catchment approach and partner
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relationships, and we plan to build on this to support our catchment approach to phosphorus removal in 2020-25, catchment
planning for 2025-30, and our approach to water environment improvements.
Conservation – We carry out conservation activities, deliver WINEP commitments to increase priority habitat and manage
invasive non-native species, and manage our Branch Out scheme to invest in projects to protect and enhance and
biodiversity within our operating area. We lead on national groups focusing on biodiversity including the Nature Recovery
Network Partnership Management Group.
Innovation – In 2020 we have carried out innovative activities that demonstrate leadership in catchment management,
including development of new tools for monitoring (Dragonfly, Passive Samplers for Phosphorus), the Cool Cool Water
Sprint at Innovation Festival 2020 with the Water Hub focusing on ‘How can we best work together to achieve a shared
vision for investment in the North East’s water environment?, and the InvestQuest Wetlands Demonstration Platform
project to consider how we can implement trial wetlands for wastewater treatment and contribution to national groups. We
also contributed to the planning and delivery of the Ouseburn Citizen Jury on Rethinking Water, one of only three in the
country.
Collaborative working at regional and landscape scale – We are represented on the board of all three Local Nature
Partnerships in the North East and are a member of the North East Natural Environment Leaders Network. We are also
engaged in two Landscape Partnership projects of key strategic importance to us as a company. The first, SeaScapes,
delivers heritage improvements across the Tyne-Tees coast and coastal streams catchments, has commenced its delivery
phase and we now have a Beach Care seconded into NWG for four years from Durham County Council. This role will allow
us to focus on key engagement and beach care activities and water environment improvements. We’ve also been involved
with Discover Brightwater providing steer and support as a board member since 2019. The partnership is now supporting
us in the scoping and development of our catchment project for the River Skerne, and we anticipate shared benefits and
efficiencies through working in partnership with the programme over the remainder of the 2020-25 reporting period.
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Case study – Creating a buzz with new diverse green spaces
There's literally a buzz in the air, following the creation and enhancement of wildflower areas to help support pollinating
insects that are in decline.
The natural environment is essential to the work and services we provide for our customers. So, any opportunity to enhance
the environment and increase biodiversity is very important to us.
We’ve changed how often we cut the grass at some of our operational sites, which will support biodiversity and protect
valuable wildlife habitats that are under threat. Some have already shown promising signs of encouraging nature to thrive,
with 62 species of plants recorded at one site alone.
We’ve also created new meadow areas at our head office and implemented changed how we cut the grass at and around
our reservoirs, service reservoirs, water and wastewater treatment works.
There are a range of plants blooming across our sites - from beautiful wildflowers to orchids. A variety of bees and other
invertebrates like butterflies and day-flying moths are regularly spotted, along with various reptiles like snakes and lizards.
Miranda Cooper, Conservation and Land Manager, said: "We're delighted with the progress of changes to how we manage
grassland, and are looking for further opportunities to expand this across more of our sites.
"These small changes are helping to make a big difference by providing important sources of nectar and pollen for insects,
which are vital for pollinating many of the crops we eat. It's fantastic that we can contribute towards ensuring connected
landscapes for our wildlife and helping reverse declines in biodiversity.
"It's amazing what can be achieved just by simply reducing the amount of times the grass is cut. It not only helps to create
a pleasant workplace for our people, but also creates an invaluable habitat for wildlife and builds stronger resilience to
climate change."
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THEME SIX: BUILDING SUCCESSFUL ECONOMIES IN OUR REGIONS
OUTCOME 13: We are proud to support our communities by giving time and resources to their
important causes
AMBITIOUS GOAL: Be the most socially responsible water company
We’re still developing how we can credibly measure this goal through our work on our Purpose (as detailed below), but we
believe we’re building from a strong starting point. This includes our long-standing practice of investing more than 1% of
our profit in our communities and being the only water company on the Ethisphere Institute’s World’s Most Ethical
Companies list for the eleventh year.
We’ve also achieved many accreditations recognising our good practice in employment, environment, supply chain and
other areas. These include:
•
•
ISO accreditations for Environmental Management, Asset Management and Emissions Reporting.
BiTC Responsible Business Tracker.
• Great Place to Work Centre of Excellence for Wellbeing.
•
•
Better Health at Work Award Wellbeing Ambassador status.
Living Wage employer.
Our continuing work in this area includes our Just an Hour scheme, through which employees can volunteer in their
communities for 15 hours or more a year; providing community benefits through our asset investment schemes; taking a
leadership role in our local communities, through business organisations, education activities and civic roles, and award-
winning campaigns in areas such as water efficiency and our volunteer Water Rangers who monitor watercourses in our
regions.
We responded to the pandemic by focusing more than £1m of additional support towards our employees, customers, and
communities. We demonstrated this commitment publicly by signing the C-19 Business Pledge, developed by the This Is
Purpose organisation.
In 2021, we’re implementing two projects to deepen our impact within the communities we serve.
The first is updating our corporate Purpose. We’ve engaged our employees and customers to help us better define
the Purpose for our business, which is outlined in this report on page 14. As part of our corporate annual reports, we’re
publishing our first ‘Our Purpose’ report, demonstrating how we live up to this. In a further stage to this project, we’ll
identify how we can more clearly measure the extent to which we live up to our Purpose and embed this within our
governance processes to strengthen accountability for doing so.
Secondly, we’re launching a new Community Investment Strategy. This is designed to focus our attention on the social
and environmental issues which matter most to our customers, that are closely connected to our Purpose and our ambitious
goals, and where we believe that we have a responsibility to take a lead role. These include tackling water poverty, water
for health, and enhancing the water environment.
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Our support for these initiatives will include cash donations, in kind and volunteer resources, and will increasingly involve
us taking an activist approach, leading a drive for positive change on these issues in our communities by influencing and
involving others.
Case study - Computers for schools
When the UK went into lockdown schools across the country closed and quickly had to adapt their teaching methods and
move to digital remote learning.
Many young people in the regions we serve were in danger of being left behind because they lacked access to the internet
or the right equipment to take part in online learning.
As part of our community investment work, we supported children learning from home throughout the pandemic by donating
hundreds of laptops and computers to children in our operating areas. We also donated 100 4G dongles to the Northern
Powerhouse Laptops for Kids campaign to help support pupils with home schooling.
The laptops and equipment enabled pupils to continue with online learning, complete assignments and projects and keep
in virtual contact with their teachers and fellow classmates.
It followed us expanding our free online educational resources, launched last month to support teachers and families with
home schooling. For more detail about these resources, see our case study about PCC on page 63.
One school that benefited is Castle View Enterprise Academy, who we also sponsor. They teach 11 to 16-year olds from
the Castletown, Town End Farm, Bexhill and Hylton Castle areas of Sunderland.
Janet Bridges OBE, Principal of Castle View Enterprise Academy, said: "We're grateful to Northumbrian Water for their
kind generosity and thank them for their ongoing support.
"The laptops will certainly come into good use for some of our pupils, who’ve had limited or no access to a device to help
support with online learning. It’s been a challenge at times, but the amazing team of people I work with have really stepped
up to ensure all students and families receive the best possible support from us.
"Now we can expand the high standard of education we pride ourselves on delivering to even more pupils, through online
classes and teacher interaction."
Nigel Watson, Group Information Services Director at Northumbrian Water, said: "Supporting our local communities is at
the heart of what we do and we're delighted to work in partnership with Castle View Enterprise Academy, to help support
pupils that don't have access to a device or tablet with home schooling.
“These laptops will support students with online learning and help support their vital learning and development. They also
ensure interaction with their teachers during these really challenging times for everyone.”
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Case study: Helping with THE vaccination rollout
More than 50 employees are volunteering to help the NHS with the COVID-19 vaccination rollout in the North East by
helping clinical staff run the Arnison Vaccination Centre in Durham and the Mowden Arena site in Darlington.
They’re working alongside NHS staff, people who have been trained to become vaccinators, administrative staff and other
volunteers to make sure the service operates smoothly and safely and as many people are able to receive the vaccine as
possible.
As well as providing people to support with the vaccination effort, we also provided our Boldon House office building to be
used for the Arnison Vaccination Centre for Durham.
Chief Executive Officer Heidi Mottram, said: "We are delighted to play our part in the rollout of the vaccine, as supporting
local communities and making a difference is exactly what we're about.
"Whether that's through freeing up our people from their day jobs to enable them to volunteer and support the rollout of
this lifesaving programme, or by us working in partnership with the NHS to deliver the transformation of our office into the
new vaccination centre.
"It's fantastic that we've been able to help out and I'm immensely proud of our employees for stepping up to volunteer and
I’m grateful to everyone helping to fight coronavirus."
Dr Stewart Findlay, Primary Care Clinical Director for the NHS COVID Vaccination Programme for the North East and
North Cumbria, said: "We're grateful for the support from Northumbrian Water as a company both for their premises and
provision of volunteers who are helping to provide a good experience for patients.”
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OUTCOME 14: We work in partnership with companies and organisations to achieve the goals
that are most important to our customers
AMBITIOUS GOAL: Spend at least 60p in every £1 with suppliers in our regions
As a responsible business with a strong track record, it’s important to us that we demonstrate leadership and make a wider
contribution to life within our regions.
Our ambitious goal is to spend at least 60p in every £1 with suppliers in our regions.
As can be seen from graph below, the work we started in 2017/18 has had a positive impact on local spend, and the 2020
data indicates that we spend 58% with local suppliers. This puts us in a strong position to achieve our goal of 60% by 2025.
Our Responsible Procurement Strategy includes several additional initiatives:
•
Targeted local supplier engagement at ‘Meet the Buyer’ events.
• Mobile supplier engagement using our customer engagement vehicle ‘Flo’.
• Producing ‘Procurement in the Community’ - an educational pack to inform local SMEs about our procurement
process and procurement by utilities more widely.
•
Launching an internal procurement handbook giving advice on low value procurement, including considering local
sourcing.
This approach has achieved industry recognition. We were awarded ‘Best Contribution to Corporate Social Responsibility’
and ‘Overall Winner’ at the Chartered Institute of Procurement and Supply 2018.
To establish a baseline in anticipation of the 2020-25 reporting period, we started defining local procurement and mapping
suppliers to local and non-local categories. We currently define ‘local spend’ as spending with suppliers with a postcode
that falls within its operating areas. This is based on the ‘pay site’ defined on the supplier’s invoices.
In calculating local procurement expenditure, we include both capex and opex, but exclude certain spend categories, e.g.
power, banking payments and inter-company payments. Excluding these items removes approximately 20% of total
expenditure.
For smaller companies, the invoice location is generally near where the company is based and where their employees
work and live. However, for larger companies (operating over larger geographical areas), using invoice postcodes is less
effective. Examples include temporary staffing contractors and capital framework partners who have a head office out of
our regions but source our requirements from our local areas. To address this, a manual adjustment is made to better
reflect where their employees work and live.
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To make sure we continue to improve on building successful economies in our regions, we have identified the following
actions:
•
Improve incentivisation and promotion of our approach to local spend to our capital framework partners. Design
and implement measures that encourage our directly contracted (Tier 1) suppliers to ‘think local’ as part of their
delivery model through their suppliers (our Tier 2 suppliers).
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• Make sure our local supply chains are engaged in procurement strategy development. For example, considering
whether larger contracts or requirements can be split into lots (where commercially viable), to provide
opportunities for local SMEs who may struggle to deliver the full work package. This may also drive innovation.
• Examine the potential to include ‘local’ criteria within our procurement evaluation process so that local suppliers
could be scored more highly for this. Consider the impact on Utilities Contract Regulations. At present the
regulations do not allow this but recent changes for spend under a certain threshold has allowed for contracts to
be reserved for local companies.
• Update our Supplier Charter to include a commitment on local spend which clearly sets out our expectations for
our supply chains.
• Continue to engage with Durham County Family to deliver social value benefits in our regions through our supply
chains.
We will also continue to engage with our local supply chains and our wider communities. While our ‘Meet the buyer’ events
may no longer be face to face, we will look at how we can use technology to continue to make ourselves visible.
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Case study – COVID work with suppliers
Throughout the COVID-19 pandemic, we’ve worked with a wide range of suppliers from across our regions to support job
retention and bolster businesses' financial health.
Since the first national lockdown was announced in March 2020, many businesses have suffered from uncertainty about
their future workloads, while others have seen incomes disappear.
However, our range of joint initiatives, grown from forward thinking ahead of initial Government measures and support for
smaller suppliers, is helping to counter that uncertainty and reduce the need to furlough many employees in our regions.
Prior to lockdown, we have been working with suppliers for our investment work - such as water network upgrades and
maintenance. As a result, these businesses established working groups to collaborate on issues including ensuring health
and safety, maintaining productivity and supplies, and general wellbeing.
In addition, we’ve worked with many suppliers - largely small and medium sized businesses (SMEs) - to pay them faster
to improve cash flow and assure them about future workload volumes. This allowed these businesses to make informed
decisions about how much of their active workforce they should retain.
Investment work, mostly delivered by framework partners, has continued to be carried out safely during the pandemic
because of its essential nature. However, by working together, the companies have introduced innovative new working
methods, such as installing Perspex dividers where single occupancy of vehicles has not been possible.
Tamsin Lishman, Asset Management Director, said: "2020 brought a lot of uncertainty, not only for businesses, but for
those they employ, their families and communities. It's important to us that, where we can, we help reduce the stress that
comes with this.
"More than half of our spend goes to businesses within our operating areas, and we have an ambition to increase that to
60%. Our decisions have a big effect on our communities, affecting a lot of people across our regions. That's why it's
important that we tackle the current COVID situation in partnership with our suppliers, helping them to maintain employment
levels and plan workloads.
"The businesses that deliver our investment projects alone employ more than 1,000 people. Any decision on what work
we continue has a big impact on these regions, so we feel it's vital that we continue our essential work. Most of our work
is essential to keep delivering our services to customers, which is a strong position from which we can continue to support
all our partners and suppliers. Working together creatively, we’ve been able to adapt and drive forward work in a way that
not only keeps people in work and cash flowing, but also protects the safety of our own employees and those within our
supply chain."
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REGULATORY ACCOUNTING STATEMENTS
&
ADDITIONAL REGULATORY INFORMATION
DIRECTORS’ RESPONSIBILITIES AND DECLARATIONS
for the year ended 31 March 2021
DIRECTORS’ RESPONSIBILITIES STATEMENT
The Directors are responsible under Condition F of the Instrument of Appointment granted by the Secretary of
State for the Environment to the Company as a water and sewerage undertaker under the Water Industry Act 1991
for:
•
ensuring that proper accounting records are maintained by the Appointee to enable compliance with the
requirements of Condition F;
•
preparing a set of regulatory accounting statements each financial year in accordance with the Regulatory
Accounting Guidelines; and
•
preparing such other financial and related information as is required by the Regulatory Accounting Guidelines.
RISK AND COMPLIANCE STATEMENT
The Board confirms that:
•
it considers the Company has full understanding of, and is meeting, all its relevant statutory, licence and
regulatory obligations and has taken steps to understand and meet customer expectations;
•
it has satisfied itself that the Company has sufficient processes and internal systems of control to fully meet its
obligations; and
•
the Company has appropriate systems and processes in place to allow it to identify, manage, mitigate and
review its risks.
DISCLOSURE OF INFORMATION TO AUDITORS
So far as each current Director is aware, there is no relevant audit information of which the Company’s auditor is
unaware and each Director has taken all the steps that he or she ought to have taken as a Director in order to
make himself or herself aware of any relevant audit information and to establish that the Company’s auditor is
aware of that information.
CONDITION P (Ring-fencing Certificate)
The Directors certify that, in their opinion:
•
the Appointee will have available to it sufficient financial resources and facilities to enable it to carry out, for at
least the next 12 months, the Regulated Activities (including the investment programme necessary to fulfil the
Appointee’s obligations under the Appointment);
•
the Appointee will, for at least the next 12 months, have available to it management resources and systems of
planning and internal control which are sufficient to enable it to carry out those functions as required by
paragraph I13 of the Instrument of Appointment;
•
the Appointee has available to it sufficient rights and resources, other than financial resources, to enable a
special administrator to manage the affairs, business and property of the Appointee, should a special
administration order be made; and
•
all contracts entered into with any Associated Company include all necessary provisions and requirements
concerning the standard of service to be supplied to the Appointee, to ensure that it is able to meet all its
obligations as a water and sewerage undertaker.
In providing this certificate, the Directors have taken into account:
•
•
•
•
the financial strength of the Company at the balance sheet date and financial performance, which is in line
with expectations and reviewed at each Board meeting, most recently in July 2021;
the key financial ratios over the next 12 month planning horizon, as reflected in investment grade credit ratings;
the fact that the Company has in place £450m of five year committed bank facilities as back up liquidity,
maturing in December 2054, which was undrawn at 31 March 2021;
the work of the Board and its Committees, including the Remuneration and Nomination Committees, in
considering succession planning and senior management performance, reviewing the results of the annual
employee engagement survey reports, and the appointment of five new Independent Non-Executive Directors,
making them the largest single group on the Board;
•
the work of the Board and its Committees to monitor the risk and control systems throughout the year, including
conducting a robust assessment of principal risks and an annual review of the effectiveness of the Company’s
risk management and internal control systems, oversight of the work carried out by external auditor, internal
audit and other assurance providers, and monitoring compliance with procedures to prevent bribery and
receiving reports on any whistleblowing allegations;
•
•
the work of the Board monitoring the Company’s purpose, strategy, values and culture, long term planning and
development of major technology transformation programmes;
the approval by the Board of all significant contracts and full disclosure of all transactions with associated
companies, of which no new arrangements were entered into during the year, and the settlement of a legacy
intercompany loan arrangement, after 31 March 2021; and
•
the monitoring and review throughout the year of the principal risks and uncertainties facing the business by
the Risk & Compliance Sub-committee.
Deloitte LLP have carried out assurance on the ring-fencing certificate in accordance with the Company’s
Instrument of Appointment.
CONDITION P26 (Credit Rating)
The Directors also confirm that throughout 2020/21 the Appointee has ensured that it, and an Associated Company
as issuer of debt on its behalf, has maintained at all times an issuer credit rating which is an investment grade
rating.
VIABILITY STATEMENT
When considering longer-term viability, the Directors note that, in their opinion, the PR19 FD, as revised by the
CMA in March 2021, has resulted in a lower cost of capital, significant totex challenge, stretching PC targets and
an asymmetric penalties and incentives mechanism which represents a significant challenge to financeability in
AMP7. There is also lower financial headroom available for management of downside shocks and there is likely to
be pressure on projected credit ratings, as reflected in the current negative outlook from Standard & Poor’s (S&P).
Financial forecasts over longer-term timeframes are inherently subject to more risk that the assumptions adopted
will not be realised. As set out in the ‘ring-fencing certificate’ above, the Directors have confirmed that the business
has sufficient resources to carry our its regulated activities. In considering the longer-term viability, the Directors
note the challenges inherent in the PR19 FD referred to above and that some of the downside stress test scenarios
would place significant pressure on projected credit ratings in the next four years, particularly higher operating and
capital costs. The longer-term view beyond four years assumes that the 2024 price review will provide a sufficient
rate of return to enable the Company to finance its functions for the period 2025-30.
Additional uncertainty remains over the economic impact of the COVID-19 pandemic, specifically in respect of
changes in water demand patterns, pressure on household revenue collection as government support
arrangements are phased out and longer-term macro-economic impacts.
The Directors have assessed the future prospects of the Company and consider that the Company should be able
to manage its business risks, continue to operate and meet its liabilities as they fall due over the nine years to
March 2030 given the long-term nature of the business.
In arriving at their conclusion, the Directors have taken into account:
•
•
the Licence which is in place on a rolling 25 year basis;
revenue from wholesale and household retail price controls to March 2025 provided by the PR19 FD, as
revised by the CMA in March 2021;
•
the financial strength of the Company at the balance sheet date and the fact that the Company has a £450m
undrawn committed bank facility as back up liquidity, maturing in December 2025 with the intention of
extending until 2030 in due course;
•
the key financial ratios over the planning horizon of the Company’s financial forecast to March 2026 and
extended forecast to March 2030, as reflected in investment grade credit ratings;
•
the Board’s flexible dividend policy; and
•
the principal risks and uncertainties facing the Company and the mitigating controls, as described on pages
57 to 60 of the Annual Report & Financial Statements, which are monitored by the Audit Committee, Risk &
Compliance Sub-committee and Board.
The Directors have chosen a period of nine years to March 2030 to assess the viability of the Company to align
with the business planning process for the regulatory price review period to March 2025, and the next price review
period to March 2030. Whilst the Directors do not believe that it is possible to test financial resilience beyond March
2025 to the same level of robust detail, given uncertainty of revenue and returns past this point, they have
performed an assessment of viability beyond five years against an extended plan applying reasonable assumptions
for the next price review which includes a sufficient rate of return to enable the Company to finance its functions.
The financial forecast has been stress tested under a number of plausible and severe adverse scenarios. The
scenarios were selected by the Board after considering the principal risks and uncertainties facing the Company
and the key economic and financial variables which could impact on the forecast. The combined impact of multiple
scenarios has also been tested.
The stress tests were assessed in the context of NWL’s overarching financial objective of maintaining prudent
investment grade credit ratings from S&P and Moody’s, and the Board’s target of retaining regulatory gearing of
around 70%.
The scenarios tested were:
•
lower CPIH inflation, leading to reduced allowed revenue and RCV and therefore lower profitability and higher
gearing;
•
increased future borrowing rates for new and refinanced debt, increasing interest charges and reducing
interest cover metrics;
•
further increases in tax corporation rates, in addition to the planned increase to 25% in 2023, increasing tax
payments and gearing;
•
increased defined benefit pension scheme deficit and revised schedule of contributions, resulting in increased
contribution payments and higher gearing under rating agency methodologies;
•
impact of a credit rating downgrade, causing increased borrowing costs and potentially triggering refinancing
of existing debt;
•
•
higher operating and capital investment cost, causing increased net debt and gearing and reduced profitability;
impact of a major incident crystallising one of the Company’s principal risks, causing a significant cash outflow
and increased net debt and gearing;
•
a sustained deterioration in household revenue collection as a result of the economic impacts of COVID-19,
reducing cash receipts leading to i increased net debt and gearing; and
•
reduced Outcome Delivery incentive (ODI) rewards or increased ODI penalties as a result of performance not
achieving targeted levels of performance, reducing future revenues.
A number of combined scenarios were also tested. These were determined by considering which scenarios were
most likely to occur in combination. The combined scenarios tested were:
•
adverse economic conditions, comprising reduced indexation, increased borrowing costs and increased tax
rate;
•
•
external impacts, comprising increased pension payments and credit rating downgrade; and
shortfall in operational performance, comprising higher totex, major operational incident and reduced ODI
rewards or increased penalties.
To the extent that any of these scenarios, in isolation or combination, would place retention of the Company’s
investment grade credit rating or liquidity position at risk, the Board would seek to take mitigating actions. This
includes actions to support pension deficit repair payments utilising an asset-backed funding arrangement, efficient
financing of new debt and application of the Board’s flexible dividend policy. While outperformance of the FD cost
allowance would also help mitigate such an outcome, the Directors do not consider this to be a key mitigating factor
given the level of challenge and stretch implied by the FD.
The Board engaged Deloitte LLP to provide third party assurance, in the form of agreed upon procedures.
BOARD STATEMENT ON ACCURACY AND COMPLETENESS OF DATA AND
INFORMATION
In the opinion of the Board, based on the governance and assurance arrangements in place, the data and
information contained in this Annual Performance Report and provided to Ofwat during the year is complete and
has a high degree of accuracy. Our Data Assurance Summary provides a detailed review of the assurance work
carried out in the year and the findings of our assurance providers, upon which this opinion is based.
Governance Arrangements & Assurance Framework
The Board is committed to providing regulatory data and information that is accurate, clear and transparent in order
to maintain the trust of our customers and stakeholders. The Board takes ownership of the arrangements for
governance and assurance of regulatory submissions and reporting. This is monitored and controlled through the
Board’s Audit Committee and Risk & Compliance Sub-committee, which report regularly to the Board.
The Board has put in place a comprehensive assurance framework, shown in the diagram below. This has Board
oversight at its core, supported by a risk management framework and multiple layers of internal and external
assurance.
The Risk & Compliance Sub-committee, on behalf of the Board, carried out its annual review of the effectiveness
of the Company’s risk management and internal control systems. This review confirmed that the Company has
strong systems of internal control and robust processes in place to enable it to identify, evaluate and manage the
risks it faces and to ensure that its obligations are met. These systems and processes are embedded in the
organisation and are reviewed regularly by the Board, its Committees and Sub-committee. The annual review
confirmed that the risk management and internal control systems have operated effectively through the year and
that there have been no significant failings or weaknesses.
Activities in the Year
We published our annual Assurance Plan in March 2021, following consultation with customers and stakeholders,
which set out how we intend to meet our obligations and the commitments we made to customers and stakeholders
in our Business Plan 2020-25 and how we provide information of appropriate quality.
In developing this Assurance Plan and recognising that this is the first year of a new five-year regulatory period,
we thoroughly reviewed our risks, strengths and weaknesses against the stretching commitments in our business
plan, identifying which areas required increased focus to ensure quality of reporting.
The Board, through the work of its Audit Committee, has overseen a plan to improve regulatory data through the
year. This plan was designed to address areas of risk identified in reports from our assurance providers for the
2019/20 APR, as well as areas where the source of data has changed during the year and where there are new
reporting requirements. This included:
•
•
•
data managed in complex spreadsheets creating a higher risk of error;
information being drawn from multiple sources; and
data being sourced from our new Maximo asset data system, which was fully implemented during the
year.
As part of the approval process for this APR, the Audit Committee received assurance reports from the Internal
Audit manager, the external technical assurer, PricewaterhouseCoopers LLP, and the financial auditor, Deloitte
LLP. We have also published a Data Assurance Summary as part of our suite of annual reporting. This describes
the assurance activities carried out throughout the year and for data provided in the APR, and reports any key
findings of our assurance providers. This confirms there were no significant issues to report.
Conclusion
The Board is satisfied that the governance and assurance arrangements it has put in place are comprehensive and
robust and have operated effectively throughout the year. On this basis, the Board is confident that the data
reported has a high degree of accuracy. However, no assurance process can give an absolute guarantee of total
accuracy, especially given the extremely large volume of data in the APR and the fact that some of the reported
information is dependent on expert judgement and assumptions, for example accounting separation data.
By order of the Board
Andrew J Hunter
Chairman
Heidi Mottram
CEO
Paul Rew
Senior Independent
Non-Executive Director
Alan Bryce
Dominic Chan
H L Kam
Independent Non-Executive Director
Non-Executive Director
Non-Executive Director
Duncan Macrae
Jacquie McGlade
Bridget Rosewell
Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Richard Sexton
Peter Vicary-Smith
Independent Non-Executive Director
Independent Non-Executive Director
15 July 2021
REGULATORY ACCOUNTING POLICIES AND DISCLOSURES
for the year ended 31 March 2021
(a) Regulatory Accounts - Basis of Accounting
The Regulatory Accounting Statement, have been prepared in accordance with the Regulatory
Accounting Guidelines (RAGs) issued by Ofwat. They have been prepared on a consistent basis to
the Company’s Financial Statements, with the following exceptions:
•
•
•
•
income relating to energy generation and meter reading, which is recorded as revenue in the statutory
accounts, has been recorded as negative operating expenditure;
rental income and amortisation of deferred capital income, which are recorded as revenue in the
statutory accounts, have been recorded as other income below operating profit;
profit on disposal of fixed assets, which is recorded as operating costs in the statutory accounts, has
been recorded as other operating income; and
borrowing costs that are directly attributable to the acquisition or construction of an asset, which are
capitalised in the statutory accounts, are charged to the income statement.
The information reported in the Regulatory Accounting Statements relates to NWL’s Appointed business only,
except where stated. The Appointed business comprises Regulated Activities, defined in Condition A of the
Licence to be ‘functions of’ and the ‘duties imposed on’ a water and sewerage undertaker by the Water
Industry Act 1991. Such duties are consequently those necessary for the Company to fulfil its duty as a water
and sewerage undertaker.
The accounts have been prepared on a going concern basis which assumes that the Company will have
adequate funding to meet its liabilities as they fall due in the foreseeable future.
(b) Revenue recognition
The revenue recognition policy is the same in the regulatory and statutory accounts, other than the exceptions
related to income from energy generation, meter reading, rental income and deferred capital income, as
explained above.
RAG 1.09 requires companies to recognise all revenue billed to properties which receive a service, other than
if confirmed as void, and to assume that it is probable that this will be collected, disapplying IFRS 15 in this
respect. NWL complies with this requirement.
Revenue from water and sewerage charges billed to customers is recognised pro-rata over the period to
which it related. For consumption by measured customers which has not yet been billed, revenue is estimated
and accrued using a defined methodology based upon historical usage and the relevant tariff per customer.
Invoices raised or payments received where the service has not been provided are not recognised in revenue
in the year but are treated as receipts in advance.
Additional charges added to a customer’s account as a result of debt recovery activity, such as court costs or
solicitors’ fees, are recognised as negative operating costs when payment is received in both the statutory
and regulatory accounts. They are not recognised in revenue.
Charges for water and sewerage services remain due in full whilst a property contains furnishings and fittings
or when a property is unfurnished and water is being used for any purpose including refurbishment. If the
Company has turned off the supply of water at the mains to a property at a customer’s request, then water
supply charges are not payable.
If the supply of water is turned off and the property is unfurnished the property is considered unoccupied and
charges are not payable. If, however, the supply of water is turned off and the property remains furnished it
is considered ready for occupation and in this case sewerage charges in respect of the drainage of surface
water and contribution to highway drainage continue to be payable.
If a property is recorded as empty in the billing system an empty property process is followed. The purpose
of this process is to verify whether the property is occupied or not and, if occupied, to identify the chargeable
person and raise a bill. No bills are raised in the name of ‘the occupier’.
The empty property process comprises a number of steps including an initial letter asking the occupier to
either contact the Company or return a completed registration form, a check of the property record against
Land Registry information and visits to the property by Company representatives. If these steps confirm that
a property appears to be empty, then the supply may be turned off.
New properties are charged from the date a meter is installed, if consumption is being recorded on the meter.
If the property is unoccupied but water is being registered, the developer will be charged. Once the developer
is no longer responsible for a property, if no new occupier has been identified the property will be treated as
unoccupied and the empty property process followed, as outlined above.
A retrospective review has confirmed that the measured household income accrual at 31 March 2020 of
£71.2m was marginally higher than the amounts subsequently billed to customers of £68.8m.
(c) Bad debt policy
The policy for bad and doubtful debts is applied consistently between the statutory and regulatory accounts.
(i) Bad debt write offs
Debt is only written off after all available economic options for collecting the debt have been exhausted and
the debt has been deemed to be uncollectable. This may be because the debt is considered to be impossible,
impractical, inefficient or uneconomic to collect.
Situations where this may arise and where debt may be written off are as follows:
• where the customer has absconded without paying and strategies to trace their whereabouts and collect
outstanding monies have been fully exhausted;
• where the customer has died without leaving an estate or has left an insufficient estate on which to levy
execution;
• where the customer does not have any assets or has insufficient assets on which to levy execution;
• where the value of the debt makes it uneconomic to pursue;
• where county court proceedings and attempts to recover the debt by debt collection agencies have
proved unsuccessful; and
• where the customer has been declared bankrupt, is in liquidation or is subject to insolvency proceedings
or a debt relief order and no dividend has been or is likely to be received.
For debt to be written off there must be a legitimate charge against the debtor. If it is considered that part or
all of the debt is incorrect or unsubstantiated, then such elements are dealt with through the issue of a credit
note.
(ii) Bad debt provisioning
The Company’s detailed bad and doubtful debts provision policy has remained unchanged during the year
and has been consistently applied in the current and prior periods. The bad debt provision is charged to
operating costs to reflect the Company’s assessment of the risk of non recoverability of debtors. It is calculated
by applying expected recovery rates to debts outstanding at the end of the accounting period. These recovery
rates take into account the age of the debt, payment history and type of debt.
Higher provisioning percentages are applied to categories of debt which are considered to be of greater risk,
including those with a poor payment history as well as to those of greater age. Bad debt provisioning rates
are reviewed annually to reflect the latest collection performance data from the Company’s billing system.
Actual amounts recovered may differ from the estimated levels of recovery which could impact on operating
results.
A comparison of the provision against historical collection rates is carried out at the end of each year. This
indicated a slight deterioration in the longer term recovery of debt, which has been impacted by restrictions
on certain court enforcement activities in the year as a result of Covid-19. An assessment of the potential
impact of Covid-19 on the economic circumstances of our household customers was made at 31 March 2020
and a provision of £6.5m created. Cash collection has remained in line with expectations during the year as
the Government has continued to provide support to those affected by Covid restrictions. However, once
these arrangements cease then there is a risk that collection performance will deteriorate, therefore the £6.5m
provision has been retained.
Accordingly, the provision has increased from £104.4m at 31 March 2020 to £111m at 31 March 2021. This
reflects aging of outstanding debt less debt written off.
(d) Capitalisation policy
The policy for the capitalisation of costs as items of property, plant and equipment and intangible assets is
applied consistently between the statutory and regulatory accounts, in accordance with IAS 16 Property, Plant
and Equipment and IAS 38 Intangible Assets.
The application of this policy is summarised below. Further detail is provided in the accounting separation
methodology statement published on our websites.
The cost of construction or purchase of new or replacement infrastructure and non-infrastructure assets is
capitalised. Cost includes any costs directly attributable to bringing the asset into condition for use in the
business, including directly attributable overhead costs but excluding general overhead costs. The costs of
infrastructure and non-infrastructure assets are depreciated over their useful economic lives.
On the infrastructure network, capital replacement of assets includes any renewal of a full pipe length of main
or sewer and replacement of ancillaries such as stop taps, valves, meter chambers and manhole covers.
Subsequent maintenance expenditure is treated as an operating cost unless it provides an enhancement of
economic benefits in excess of the expected standard of performance such as an extension in the estimated
useful life or an increase in capacity, in which case it is capitalised. Examples of maintenance costs charged
as operating costs include pipe and tank cleaning, inspections, surveys and zonal studies.
(e) Accounting separation policy
Cost allocations have been prepared in accordance with RAG 2.08 and RAG 4.09 for the definitions for the
regulatory accounting tables. All costs are recorded in the accounting records by cost centre. Cost centres
are defined either as a direct department, comprising operational and customer functions, or a support
department. Direct departments are mostly directly allocated to service activities based on the nature of the
function, although some costs require apportionment on an appropriate basis. Support departments are
apportioned across the price controls either based upon a specific analysis of the costs or by apportionment
by an appropriate cost driver. Once allocated to the appropriate price control the costs are then allocated to
service activities pro-rata to full time equivalent staff numbers of the direct departments.
Fixed assets directly involved in the activities within each business unit are recorded against that business
unit using direct allocation per the location or asset type. Where an asset is utilised in more than one business
unit, the asset is allocated to the business unit of principal use and costs are recharged to other different
business units on the same basis used to allocate operating expenditure.
Further detail is provided in the accounting separation methodology statement published on our website.
(f) Statement of Directors’ remuneration and standards of performance
Directors’ remuneration is fully disclosed in the NWL Annual Report and Financial Statements for the year
ended 31 March 2021, in the Remuneration Committee Report on pages 87 to 99. This is published on our
website. To avoid duplication, this information has not been replicated within the APR.
The Remuneration Committee Report has been produced in accordance with section 35A of the Water
Industry Act 1991. It also has regard to the requirements of the Large and Medium-sized Companies and
Groups (Accounts and Reports) (Amendment) Regulations 2013 in respect of Directors’ remuneration
reporting for quoted companies, albeit in the context of a company which is not a listed public limited company.
1.A Income Statement
for the year ended 31 March 2021
Revenue
Operating costs
Other operating income
Statutory
£’m
758.4
(563.4)
-
(33.6)
14.4
1.3
Operating profit
195.0
(17.9)
Other income
Interest income
-
2.1
20.1
0.3
Interest expense
(100.3)
(11.1)
Other interest expense
Profit before tax and fair
value movements
Fair value gains/(losses) on
financial instruments
Profit before tax
UK Corporation tax
Deferred tax
Profit for the year
(1.7)
95.1
(11.1)
84.0
(12.0)
(1.9)
70.1
-
(8.6)
-
(8.6)
-
1.7
(6.9)
Adjustments
Differences
between
statutory and
RAG definitions
Non-appointed
Total
adjustments
Total appointed
activities
£’m
£’m
£’m
£’m
(62.7)
695.7
37.7
1.1
(525.7)
1.1
(23.9)
171.1
(29.1)
23.3
(0.2)
(6.0)
(5.2)
(2.0)
0.3
0.1
14.9
(1.7)
(10.8)
0.1
(12.8)
(21.4)
-
-
(12.8)
(21.4)
0.5
0.7
0.5
2.4
(11.6)
(18.5)
14.9
0.4
(111.1)
(1.6)
73.7
(11.1)
62.6
(11.5)
0.5
51.6
1.A Income Statement (continued)
for the year ended 31 March 2021
Adjustments
Differences
between
statutory and
RAG definitions
Statutory
Non-appointed
Total
adjustments
Total appointed
activities
£’m
£’m
£’m
£’m
£’m
-
-
-
(0.5)
-
(0.5)
(0.5)
-
(0.5)
11.6
(0.1)
11.5
Tax analysis
Current year
Adjustments in respect of
prior years
UK Corporation tax
Analysis of non-
appointed revenue
Imported sludge
Tankered waste
Other non-appointed
revenue
Revenue
12.1
(0.1)
12.0
-
1.7
27.4
29.1
Differences between statutory and RAG definitions are explained in note (a) of the Regulatory Accounting Policies
and Disclosures.
The change to profit for the year reflects the different treatment of borrowing costs, which are capitalised in the Statutory
Financial Statements but charged to the Income Statement in the Regulatory Accounting Statements, and the associated
depreciation and deferred tax. Other changes are presentational in nature:
•
•
income relating to energy generation and meter reading has been reclassified from revenue in the statutory accounts to
negative operating costs;
rental income, amortisation of deferred income and other contributions to capital investment have been reclassified from
revenue in the statutory accounts to other income; and
• profit on disposal of fixed assets has been reclassified from operating costs in the statutory accounts to other
operating income.
Interest Analysis
Interest expense comprises:
Bank overdrafts and loans
Loans from financing subsidiary
Amortisation of issuance costs
Accretion on index-linked debt
Obligations under leases
Interest expense
(5.6)
(85.8)
(2.0)
(15.2)
(2.5)
(111.1)
NWL has a financing subsidiary, Northumbrian Water Finance Limited, which raises listed debt on its behalf. The debt is then loaned
to NWL at the same terms.
Other interest expenses represents interest cost on pension plan obligations.
1.B Statement of
Comprehensive Income
financial performance for the 12 months ended 31 March 2021
Adjustments
Differences
between
statutory and
RAG definitions
Statutory
Non-appointed
Total
adjustments
Total appointed
activities
£’m
70.1
(43.9)
2.2
28.4
£’m
£’m
£’m
£’m
(6.9)
(11.6)
(18.5)
-
-
0.3
-
0.3
-
(6.9)
(11.3)
(18.2)
51.6
(43.6)
2.2
10.2
Profit for the year
Actuarial gains/(losses) on
post employment plans
Other comprehensive
income
Total Comprehensive
income for the year
1.C Statement of
Financial Position
financial performance for the 12 months ended 31 March 2021
(Registered number 02366703)
Adjustments
Differences
between
statutory and
RAG definitions
Statutory
Non-appointed
Total
adjustments
Total appointed
activities
£’m
£’m
£’m
£’m
£’m
Non-current assets
Fixed assets
4,690.1
(55.0)
(105.6)
(160.6)
4,529.5
Intangible assets
Investments - loans to
group companies
Investments - other
90.5
160.9
-
(5.0)
(0.1)
(5.1)
85.4
-
-
(160.9)
(160.9)
-
-
-
-
Total non-current assets
4,941.5
(60.0)
(266.6)
(326.6)
4,614.9
Current assets
Inventories
Trade & other receivables
Cash & cash equivalents
Total current assets
Current liabilities
4.6
221.7
28.6
254.9
-
1.9
-
1.9
Trade & other payables
(134.7)
(27.1)
Capex creditor
Borrowings
Current tax liabilities
Provisions
(28.7)
(66.1)
-
(1.1)
-
25.2
-
-
Total current liabilities
(230.6)
(1.9)
Net current assets /
(liabilities)
24.3
-
(0.4)
(14.4)
(9.7)
(24.5)
28.8
0.9
-
-
-
29.7
5.2
(0.4)
(12.5)
(9.7)
4.2
209.2
18.9
(22.6)
232.3
1.7
0.9
25.2
-
-
27.8
5.2
(133.0)
(27.8)
(40.9)
-
(1.1)
(202.8)
29.5
1.C Statement of
Financial Position (continued)
financial performance for the 12 months ended 31 March 2021
(Registered number 02366703)
Adjustments
Differences
between
statutory and
RAG definitions
Statutory
Non-appointed
Total
adjustments
Total appointed
activities
£’m
£’m
£’m
£’m
£’m
-
(2,895.6)
(52.5)
(127.6)
(4.9)
(391.1)
(131.0)
(459.1)
(4,061.8)
-
-
-
-
-
-
-
11.4
11.4
-
-
-
2.2
1.5
93.0
-
3.9
-
-
-
2.2
1.5
93.0
-
15.3
-
(2,895.6)
(52.5)
(125.4)
(3.4)
(298.1)
(131.0)
(443.8)
100.6
112.0
(3,949.8)
Non-current liabilities
Trade & other payables
Borrowings
Financial instruments
Retirement benefit
obligations
Provisions
Deferred income - G&C's
Deferred income - adopted
assets
Deferred tax
Total non-current
liabilities
Net assets
904.0
(48.6)
(160.8)
(209.4)
694.6
Equity
Called up share capital
Retained earnings & other
reserves
122.7
781.3
-
(30.6)
(30.6)
(48.6)
(130.2)
(178.8)
Total Equity
904.0
(48.6)
(160.8)
(209.4)
Approved by the Board of Directors on 15 July 2021 and signed on their behalf by:
92.1
602.5
694.6
H Mottram
The change in net assets and total equity reflects the different treatment of borrowing costs, which are capitalised in the Statutory Financial
Statements but charged to the income statement in the Regulatory Accounting Statements, and the associated depreciation and deferred tax. Other
changes reflect the disaggregation of cash balances and trading balances between the appointed and non-appointed businesses.
1.D Statement of
Cash Flows
financial performance for the 12 months ended 31 March 2021
Adjustments
Differences
between
statutory and
RAG definitions
Statutory
Non-appointed
Total
adjustments
Total appointed
activities
£’m
195.0
-
147.8
-
13.0
(12.4)
(9.1)
-
334.3
(93.5)
(11.7)
229.1
Operating profit
Other income
Depreciation
Amortisation - G&C's
Changes in working capital
Pension contributions
Movement in provisions
Profit on sale of fixed assets
Cash generated from
operations
Net interest paid
Tax paid
Net cash generated from
operating activities
Investing activities
Capital expenditure
(231.5)
Grants & Contributions
Disposal of fixed assets
Other
Net cash used in
investing activities
Net cash generated
before financing activities
12.9
1.5
27.0
(190.1)
39.0
£’m
£’m
£’m
£’m
(17.9)
20.1
(2.2)
-
-
-
1.3
(1.3)
-
-
-
-
-
-
-
-
-
-
(6.0)
(5.2)
(2.3)
-
(5.4)
(0.2)
5.6
0.2
(23.9)
14.9
(4.5)
-
(5.4)
(0.2)
6.9
(1.1)
171.1
14.9
143.3
-
7.6
(12.6)
(2.2)
(1.1)
(13.3)
(13.3)
321.0
(1.7)
0.5
(1.7)
0.5
(95.2)
(11.2)
(14.5)
(14.5)
214.6
3.1
-
(0.2)
-
2.9
3.1
-
(0.2)
-
2.9
(228.4)
12.9
1.3
27.0
(187.2)
(11.6)
(11.6)
27.4
1.D Statement of
Cash Flows (continued)
financial performance for the 12 months ended 31 March 2021
Adjustments
Differences
between
statutory and
RAG definitions
Statutory
Non-appointed
Total
adjustments
Total appointed
activities
£’m
£’m
£’m
£’m
£’m
Cashflows from financing
activities
Equity dividends paid
Net loans received
(45.5)
Cash inflow from equity
financing
Net cash generated from
financing activities
Increase / (decrease) in
net cash
-
-
(45.5)
(6.5)
-
-
-
-
-
-
5.2
-
5.2
-
5.2
-
5.2
-
(40.3)
-
(40.3)
(6.4)
(6.4)
(12.9)
1.E Net Debt
Analysis
as at 31 March 2021
Borrowings (excluding
preference shares)
Preference share capital
Total borrowings
Cash
Short term deposits
Net Debt
Gearing
Adjusted Gearing
Interest
Full year equivalent nominal
interest cost
Full year equivalent cash
interest payment
Indicative interest rates
Indicative weighted average
nominal interest rate
Indicative weighted average
cash interest rate
Time to maturity
Weighted average years to
maturity
Interest rate risk profile
Index linked
Fixed rate
Floating rate
£’m
£’m
RPI
£’m
CPI/CPIH
£’m
Total
£’m
1,767.6
26.3
1,041.9
100.7
2,936.5
-
2,936.5
(18.9)
-
2,917.6
69.5%
69.5%
111.2
94.5
79.4
79.4
0.5
0.5
30.0
14.4
1.3
0.2
4.44%
1.88%
2.87%
1.26%
3.75%
4.44%
1.88%
1.38%
0.24%
3.19%
8.9
7.0
16.8
18.0
-
12.0
1.F Financial Flows
for the 12 months ended 31 March 2021 and for the price review to date
12 months ended 31 March 2021
Average 2020-25
%
£’m
%
£’m
Actual
returns and
notional
regulatory
equity
Actual
returns
and actual
regulatory
equity
Actual
returns
and actual
regulatory
equity
Notional
returns and
notional
regulatory
equity
Actual
returns and
notional
regulatory
equity
Actual
returns
and actual
regulatory
equity
Actual
returns and
notional
regulatory
equity
Actual
returns
and actual
regulatory
equity
Actual
returns
and actual
regulatory
equity
Notional
returns and
notional
regulatory
equity
Actual
returns and
notional
regulatory
equity
Actual
returns
and actual
regulatory
equity
Return on regulatory
equity
Return on regulatory equity
4.34
3.28
4.34
69.1
52.2
52.2
4.34
3.28
4.34
69.1
52.2
52.2
Regulatory equity (£m)
1,591.7
1,591.7
1,202.4
Financing
Gearing
Gearing benefits sharing
Variance in corporation tax
Group relief
Cost of debt
Hedging instruments
-
-
-
-
-
-
1.06
1.39
-
-
0.44
0.58
-
-
(0.77)
(1.19)
(0.57)
(0.88)
-
-
-
-
-
-
-
-
-
1,591.7
1,591.7
1,202.4
16.8
16.8
-
6.9
-
-
6.9
-
(12.3)
(14.3)
(9.1)
(10.6)
-
-
-
-
-
-
1.06
1.39
-
-
0.44
0.58
-
-
(0.77)
(1.19)
(0.57)
(0.88)
-
-
-
-
-
-
-
-
-
16.8
-
6.9
-
6.8
-
6.9
-
(12.3)
(14.3)
(9.1)
(10.6)
1.F Financial Flows (continued)
for the 12 months ended 31 March 2021 and for the price review to date
12 months ended 31 March 2021
Average 2020-25
%
£’m
%
£’m
Actual
returns and
notional
regulatory
equity
Actual
returns
and actual
regulatory
equity
Actual
returns
and actual
regulatory
equity
Notional
returns and
notional
regulatory
equity
Actual
returns and
notional
regulatory
equity
Actual
returns
and actual
regulatory
equity
Actual
returns and
notional
regulatory
equity
Actual
returns
and actual
regulatory
equity
Actual
returns
and actual
regulatory
equity
Notional
returns and
notional
regulatory
equity
Actual
returns and
notional
regulatory
equity
Actual
returns
and actual
regulatory
equity
4.34
3.44
4.24
69.1
54.5
51.0
4.34
3.44
4.24
69.1
54.5
51.0
Return on regulatory
equity including
Financing adjustments
Operational Performance
Totex out / (under)
performance
ODI out / (under)
performance
C-Mex out / (under)
performance
D-Mex out / (under)
performance
Retail out / (under)
performance
0.44
0.59
0.12
0.15
-
-
-
-
(1.22)
(1.61)
-
-
-
-
-
-
-
7.1
1.9
-
-
7.1
1.9
-
-
(19.4)
(19.4)
0.4
0.4
(10.0)
(10.0)
-
-
-
-
-
-
-
0.44
0.59
0.12
0.15
-
-
-
-
(1.22)
(1.61)
0.03
0.04
(0.63)
(0.83)
-
-
-
-
-
-
-
7.1
1.9
-
-
7.1
1.9
-
-
(19.4)
(19.4)
0.4
0.4
(10.0)
(10.0)
Other exceptional items
0.03
0.04
Operational performance
total
(0.63)
(0.83)
1.F Financial Flows (continued)
for the 12 months ended 31 March 2021 and for the price review to date
12 months ended 31 March 2021
Average 2020-25
%
£’m
%
£’m
Actual
returns and
notional
regulatory
equity
Actual
returns
and actual
regulatory
equity
Actual
returns
and actual
regulatory
equity
Notional
returns and
notional
regulatory
equity
Actual
returns and
notional
regulatory
equity
Actual
returns
and actual
regulatory
equity
Actual
returns and
notional
regulatory
equity
Actual
returns
and actual
regulatory
equity
Actual
returns
and actual
regulatory
equity
Notional
returns and
notional
regulatory
equity
Actual
returns and
notional
regulatory
equity
Actual
returns
and actual
regulatory
equity
RoRE
4.34
2.81
3.41
69.1
44.5
41.0
4.34
2.81
3.41
69.1
44.5
41.0
Actual performance
adjustment 2015-20
(0.05)
-
-
(0.6)
-
-
(0.05)
-
-
(0.6)
-
-
Total earnings
4.29
2.81
3.41
68.5
44.5
41.0
4.29
2.81
3.41
68.5
44.5
41.0
RCV growth from inflation
1.01
1.01
1.01
16.1
16.1
12.2
1.01
1.01
1.01
16.1
16.1
12.2
Voluntary sharing
arrangements
-
-
-
-
-
-
-
-
-
-
-
-
Total shareholder return
5.30
3.82
4.42
84.6
60.6
53.2
5.30
3.82
4.42
84.6
60.6
53.2
Dividends
Gross Dividend
Interest Received on
Intercompany loans
4.00
-
-
-
-
-
63.7
-
-
-
-
-
4.00
-
-
-
-
-
63.7
-
-
-
-
-
Retained Value
1.30
3.82
4.42
20.9
60.6
53.2
1.30
3.82
4.42
20.9
60.6
53.2
The purpose of this table is to provide transparency of financial flows to investors, comparing actual flows, and the main elements of
performance which contribute to these flows, against the financial flows assumed by Ofwat under the notional structure at the last
price review.
As this is the first year of the 2020-2025 price control period, this commentary only reflects 2020/21 performance. Note, all of the
financial values are expressed in the same 2017/18 price base as the PR19 price review.
Return on regulatory equity (RORE)
At PR19, the base notional RORE was set at 4.34% for the year. The regulatory equity base represents the proportion of RCV funded
as equity rather than debt. Ofwat’s notional structure for PR19 assumed net debt at 60% of RCV, equating to base regulatory equity
of 40%, or £1,592m at March 2021. NWL’s average gearing in 2020/21, after taking account of PR19 midnight adjustments to RCV,
was 69.8%, resulting in actual regulatory equity of 30.2% of RCV, or £1,202m.
Financing
This section of the report relates to performance from financing, excluding tax.
Gearing is calculated as net debt divided by RCV. NWL’s average gearing was 69.8%, remaining above Ofwat’s notional structure
assumption of 60% but below our target level of around 70%. This has generated a financing benefit of £16.8m. The CMA
redetermination removed the gearing sharing mechanism for NWL, though it would not have come into effect during the year if it had
been applied.
Corporation tax reports the difference current tax funded in the FD and the actual tax rate applied to profit before fair value, adjusted
for capital allowances. This has shown an outperformance of £7m in 2020/21. A reconciliation of our current tax to FD allowance is
provided on page 142. All tax losses acquired from related parties in the year were paid for in full.
Cost of debt performance is reported in real terms, rather than nominal. As reported in table 4H, 60% of the Company’s debt is at
fixed rate and not impacted by indexation. In 2020/21, the real cost of debt was higher than allowed in the FD due to relatively low
CPIH inflation, generating a £14.3m underperformance on cost of debt.
Hedging instruments shows the impact of interest rate swaps on the cost of debt reported in the year, and equated to a cost of benefit
of £10.6m in the year.
The net effect of financing and tax in the year was an undererformance of FD allowance by £1.2m, or 0.1% of actual regulatory
equity.
Operational Performance
This section of the report explains the impact of operational performance on wholesale totex, ODIs and retail costs, each of which is
explained elsewhere in this report.
Wholesale totex performance reflects the performance presented in table 4C, and excludes variations due to timing of expenditure.
The outperformance of £7.1m reflects our leading position on bioresources costs, including generation of renewable energy.
ODI performance against our PCs is reported in tables 3A amd 3B, with a net reward of £1.9m in the year. The rewards reflect
outperformance on a number of measures including water supply interruptions, discoloured water contacts, pollution incidents and
greenhouse gas emissions, partially offset by a penalties on drinking water compliance and external sewer flooding. Our performance
against each of these is explained earlier in this report. Performance rewards on C-MeX and D-Mex have not been finalised for
2020/21 so are reported at zero, though we expect our strong 3rd place on C-MeX to generate a reward.
Retail costs were significantly higher than PR19 allowance, as explained in the narrative to table 2C. This gave rise to an
underperformance of £19.4m, 1.6% of regulatory equity.
Exceptional items reflects the company’s share of benefits from the disposal of surplus land and properties.
The net effect of operational performance in the year was an underperformance of FD allowance by £10m, baseor -0.83%.
Total Shareholder Return
The total shareholder return comprises base RORE, financing performance, operational performance and growth in the RCV as
allowed in the FD. Our performance generated a total shareholder return of £53.2m in 2020/21, a 4.43% return on regulatory
equity. This was fully retained within the business, as no dividend was paid during the year.
Our dividend policy is set out on page 174 and we explain how this dividend policy is applied on page 174.
Return on Regulatory Equity
This commentary explains the differences between the base return at PR19 and actual return.
The FD RORE for 2020/21 was 4.34%. Actual returns on actual regulatory equity for 202/21 was 3.41%, an underperformance of
0.93%. The reasons of this variance have been explained in the commentary above, but are summarized below.
Financing underperformance was 0.1%. This was largely due to underperformance on cost of debt (-1.19%) as a result of number
being calculated in real terms, adjusting for CPIH, whereas 60% of our debt is fixed rate and does not vary with inflation. As a result
when inflation is comparatively low, the real cost of debt appears higher. This was exacerbated by adverse mark to market
impovements on hedging instruments (-0.88%) reflecting market rates. These underperformances were partially offset by the benefit
of gearing above the notional level in the FD (1.39%) and lower corporation tax (0.58%).
Operational underperformance was 0.83%. Thi was mainly due to higher retail costs causing a retail underperformance of -1.61%,
explained in the commentary to table 2C, partially offset by totex outperformance on bioresources (0.59%), ODI performance (0.15%)
and proceeds from land sales (0.04%).
APPOINTED BUSINESS TAXATION
The rate of UK corporation tax for the current year was 19%. Current and deferred tax have both been provided at this rate. Changes
to the rate of tax announced by the government on 3 March 2021 do not affect these financial statements but are referred to below.
The current tax charge for the Appointed business is derived by reducing the Company's statutory charge (£12.0m) by the amount
relating to the activities of the Non-appointed business (£0.5m). The Appointed business charge of £11.5m includes £1.1m payable
to fellow group companies in respect of their current year tax losses that will be surrendered to the Appointed business. The
surrenders have not required the disclaimer of any capital allowances by the Appointed Business and payment for the losses to
group companies is made at the full rate of corporation tax.
The prior years' corporation tax credit of £0.1m reflects revisions to capital allowances claims (£1.6m charge) offset by the release
of a related provision (£1.8m credit) and other small adjustments (£0.1m charge).
The current year corporation tax charge for the Appointed business has reduced by £29.4m compared to 2019/20, of which £28.3m
relates to the decrease in profit before tax and fair value movements. The remaining £1.1m is mainly explained by relatively small
changes in capital allowances, non-allowable depreciation, allowable pension contributions and income which relates to capital
projects that is taxed via the capital allowances system.
The deferred tax charge for the Appointed business is derived by adjusting the Company's statutory charge (£1.9m) by amounts
relating to accounting differences (i.e. capitalised interest: charge of £1.6m) and the activities of the Non-appointed business (charge
of £0.8m). The Appointed business credit of £0.5m includes a credit of £1.6m for prior years related to the prior year matters referred
to above. Deferred tax in the year and at the balance sheet date is all provided at 19%, being the rate at which temporary differences
are expected to reverse.
An explanation of why the current tax charge for the Appointed business is lower than the result of applying the standard rate of
corporation tax to profit before tax is provided in the table opposite:
CURRENT TAX RECONCILIATION for the 12 months ended 31 March 2021
Profit before tax and fair value movements
Profit before tax and fair value movements multiplied by standard rate of corporation
tax of 19%
EFFECTS OF:
Expenses incurred that are not deductible for tax purposes
Non-taxable income and other tax reliefs
Depreciation in respect of non-qualifying items
Tax reliefs claimed for capital expenditure in excess of accounts depreciation
Grants and contributions received in excess of accounts amortisation
Pension contributions paid in excess of accounts service and finance costs
Other temporary differences
Adjustments in respect of prior periods
Total appointed
activities
£'m
73.7
14.0
0.2
(0.2)
0.9
(7.0)
4.4
(2.1)
1.4
(0.1)
UK:UK transfer pricing adjustments
Balancing payment payable
Appointed business current tax charge
(0.8)
0.8
11.5
Factors affecting future tax charges and other significant matters
Future tax charges will be affected by the following matters:
In its Budget Statement on 3 March 2021, the UK government announced an increase in the corporation tax rate from 19% to 25%
with effect from 1 April 2023. The increase is included in Finance Act 2021 which received Royal Assent on 10 June 2021. These
financial statements are unaffected by the change as the legislation was neither enacted nor 'substantively enacted' by the balance
sheet date.
In accordance with IAS 12, it will be necessary to restate the Company's deferred tax liabilities with effect from 1 April 2021 to take
account of the higher tax rate that will apply to the reversal of temporary differences after 31 March 2023. The Company estimates
this will result in its total deferred tax liabilities at 31 March 2021 of £459.1m rising to £606.0m, recognising that some temporary
differences will reverse at 19% in the next two years before the rate increase comes into force. The balances relating to the Appointed
business are £443.8m and £586.3m respectively (after eliminating amounts relating to capitalised interest and the Non-appointed
business). The restatement will be reflected in the financial statements for the year ended 31 March 2022.
The Company expects to continue to incur high levels of capital expenditure during the remainder of the 2020-25 regulatory review
period which should result in claims for tax reliefs in excess of depreciation.
A temporary increase in the rate of capital allowances was announced by the UK government on 3 March 2021 which is now included
in Finance Act 2021. Qualifying expenditure incurred in the two years ended 31 March 2023 will attract allowances of 130%
(compared to the normal 18%) in the case of assets with an economic life of less than 25 years, and 50% (compared to the normal
6%) in the case of assets with an economic life of 25 years or more. The Company is considering the application of the rules governing
these higher allowances, in particular the requirement that they only apply to expenditure contracted for on or after 3 March 2021.
CURRENT TAX RECONCILIATION TO FD
An allowance for corporation tax was made in the Final Determination (FD) at PR19. Actual performance differs to the FD for a
number of reasons. As far as current tax is concerned, the charge for the year is reconciled to the FD allowance as follows:
Current tax charge (at 19%) allowed in price limits
Remove Non-Household included above following exit from market
Adjustment for actual indexation
Net increase in profit before tax and depreciation
Increase in allowable pension contributions
Increase in tax reliefs for capital expenditure
Increase in amortisation of grants and contributions
Increase in provisions
Increase in contributions to capital investment
Other
Adjustment in respect of prior years
Appointed business current tax charge
Total appointed
activities
£'m
15.0
(1.2)
13.8
(1.0)
12.8
2.5
(1.9)
(1.0)
(1.1)
1.3
(1.5)
0.5
(0.1)
11.5
APPOINTED BUSINESS TAX STRATEGY
Scope
The Company is required, by section 3.30 of RAG 3.12, to publish details of its Tax Strategy relating to the Appointed business
within the Annual Performance Report. For the avoidance of doubt, the Company has a single Tax Strategy which applies to its
Appointed and Non-appointed businesses, as well as to its subsidiaries.
The Tax Strategy set out below is for the Company’s financial year ended 31 March 2021 in order to satisfy the requirements of
Schedule 19, Finance Act 2016.
Aim
The Company is committed to fully complying with all its statutory tax obligations, including the payment and recovery of taxes at
the right time and the provision of all relevant information to HM Revenue and Customs (HMRC) to support the amounts of tax
concerned.
The Company’s Board owns and approves the Tax Strategy which comprises the following four components:
a) Tax governance arrangements
The Board reviews and approves all significant investment and business operating decisions directly or delegates the appropriate
authority. The Company’s Audit Committee considers significant tax related matters as part of its monitoring of internal controls and
financial reporting arrangements.
Day-to-day management of the Company’s tax affairs is delegated to the Tax Manager and to other appropriately qualified staff
who have responsibility for specific taxes. All staff with responsibility for tax report to members of the Company’s senior
management team which, in turn, reports to the Board.
The Company's tax affairs are conducted in a business-like manner in accordance with the Company's commitment to
corporate responsibility.
b) Tax risk management framework
The Company’s Risk Committee oversees the risk assessment process applied by the business which includes an assessment of
tax risks. Significant risks identified by the business are escalated for the Committee to consider.
As far as possible, through the activities of its Board, Committees and personnel responsible for tax matters, the Company seeks
to reduce or eliminate the level of tax risk arising from its operations by ensuring appropriate processes and controls are in place.
The Company only takes tax positions which are justifiable and based on law, with advice taken from reputable professional firms
where necessary. In accordance with internal governance procedures, any transaction that is likely to have material tax
consequences must be referred to the Board.
To help manage tax risk, the Company’s taxation affairs are only handled by appropriately qualified and experienced staff and, where
necessary, training is given to non-tax staff who are involved in processes which have tax implications.
The Company does not tolerate or condone any form of tax evasion, whether committed or facilitated by its own staff or any
associated persons (e.g. agents and other persons who perform services for or on behalf of the Company) and manages this risk
by the use of appropriate processes.
c) Approach to tax planning
The Company considers tax as part of its business decision making process. When entering into commercial transactions, the
Company seeks to obtain the benefit of tax incentives, reliefs and exemptions available under UK tax legislation, consistent with
the purpose and the letter of the law.
The tax affairs of the Company are arranged and managed in response to, and in support of, its business or commercial activities.
Related party transactions are managed and documented to ensure they are in compliance with local tax law and practice.
d) Relationship with HMRC
The Company seeks to have a transparent and constructive relationship with HMRC on all taxation matters and keeps HMRC aware
of significant transactions and business developments. All contact with HMRC is conducted in a professional and courteous manner.
The Company seeks to obtain certainty from HMRC at the earliest opportunity on the tax treatment of complex or uncertain issues.
Discussions with HMRC are held at least annually to review past and present tax risks and agree on the steps required to take
matters forward. Resolution of any disputed matters will be sought through open discussion and negotiation with HMRC, but the
Company is prepared to litigate in cases where it believes the technical basis of a decision is incorrect.
The Company takes an active role in the development of the UK’s legislative framework through participation at company or industry
level in Government consultations on significant new tax laws.
Publication date: 15 July 2021.
2.A Segmental Income Statement
for the 12 months ended 31 March 2021
Retail
Household
Retail non-
household
Water
resources
Water
Network+
Wastewater
Network+
Bioresources
Operating expenditure - including PU recharge impact
(60.5)
(0.3)
(72.4)
(161.3)
(90.7)
(1.4)
(386.6)
Revenue - price control
Revenue - non price control
Operating expenditure - excluding PU recharge impact
PU opex recharge
£’m
55.8
-
(56.1)
(4.4)
£’m
-
0.2
(0.3)
-
Depreciation - tangible fixed assets
Amortisation - intangible fixed assets
PU recharge impact
Depreciation &amortisation - including PU recharge
impact
Other operating income
(2.0)
(1.3)
-
(3.3)
-
-
-
-
-
-
£’m
£’m
£’m
£’m
Total
£’m
77.2
314.2
219.0
23.4
689.6
-
5.9
-
-
6.1
(5.4)
(66.0)
(50.7)
(8.0)
(132.1)
-
(0.5)
(5.9)
-
(9.8)
11.0
(0.2)
(5.2)
(64.8)
(56.1)
-
1.0
95.0
-
(11.3)
(0.9)
(8.9)
0.1
4.4
(139.0)
1.1
Operating profit
(8.0)
(0.1)
(1.1)
72.2
13.2
171.2
Surface water drainage rebates
0.1
2.B Totex Analysis:
Wholesale
as at 31 March 2021
Water resources
Water Network+
Wastewater
Network+
Bioresources
£’m
£’m
£’m
£’m
Total
£’m
20.5
22.1
Base operating
expenditure
Power
Income treated as negative
expenditure
Abstraction charges/
discharge consents
Bulk Supply/Bulk discharge
Renewals expensed in year
(Infrastructure)
Renewals expensed in year
(Non-Infrastructure)
Other operating expenditure
Local authority and Cumulo
rates
Total base operating
expenditure
Other operating
expenditure
Enhancement operating
expenditure
Developer services
operating expenditure
Total operating
expenditure excluding
third party services
Third party services
Total operating
expenditure
7.5
(0.3)
43.5
1.1
0.4
-
6.4
4.2
-
0.3
-
0.5
2.2
107.9
26.7
62.8
158.1
0.7
-
63.5
8.9
72.4
-
-
158.1
3.2
161.3
(1.5)
(12.0)
-
-
-
0.1
13.4
1.4
1.4
-
-
1.4
-
1.4
48.6
(12.3)
47.5
1.1
1.2
2.6
183.6
39.3
311.6
1.9
-
313.5
12.3
325.8
-
3.7
-
0.3
0.3
55.9
7.0
89.3
1.2
-
90.5
0.2
90.7
2.B Totex Analysis:
Wholesale (continued)
as at 31 March 2021
Water resources
Water Network+
Wastewater
Network+
Bioresources
Total
£’m
-
£’m
-
£’m
-
£’m
-
Grants and contributions
- operating expenditure
Capital expenditure
Base capital expenditure
Enhancement capital
expenditure
Developer services capital
expenditure
Total gross capital
expenditure (excluding third
party)
£’m
-
13.9
3.3
-
97.4
13.3
14.7
17.2
125.4
Third party services
-
-
Total gross capital
expenditure
Grants and contributions
- capital expenditure
17.2
125.4
-
16.1
Net totex
89.6
270.6
173.4
Cash expenditure
Pension deficit recovery
payments
Other cash items
Totex including cash
items
0.3
-
6.5
-
3.2
-
89.9
277.1
176.6
56.7
22.1
7.0
85.8
-
85.8
3.1
2.7
170.7
-
-
2.7
-
2.7
-
4.1
0.2
-
4.3
38.7
21.7
231.1
-
231.1
19.2
537.7
10.2
-
547.9
2.C Cost Analysis:
Retail
for the 12 months ended 31 March 2021
Operating expenditure
Customer services
Debt management
Doubtful debts
Meter reading
Services to developers
Other operating expenditure
Local authority and Cumulo rates
Total operating expenditure excluding third party services
Depreciation
Depreciation on tangible fixed assets existing at 31 March 2015
Depreciation on tangible fixed assets acquired after 1 April 2015
Amortisation on intangible fixed assets existing at 31 March 2015
Amortisation on intangible fixed assets acquired after 1 April 2015
Recharges
Recharge from wholesale for legacy assets principally used by
wholesale (assets existing at 31 March 2015)
Income from wholesale for legacy assets principally used by retail
(assets existing at 31 March 2015)
Recharge from wholesale assets acquired after 1 April 2015 principally
used by wholesale
Income from wholesale assets acquired after 1 April 2015 principally
used by retail
Net recharges costs
Household -
total
Non-household
- total
£’m
£’m
Total
£’m
14.3
4.5
23.4
2.1
-
11.6
0.2
56.1
1.5
0.5
1.3
-
1.6
(0.1)
3.0
(0.1)
4.4
-
-
-
-
0.3
-
-
0.3
-
-
-
-
-
-
-
-
-
14.3
4.5
23.4
2.1
0.3
11.6
0.2
56.4
1.5
0.5
1.3
-
1.6
(0.1)
3.0
(0.1)
4.4
2.C Cost Analysis:
Retail (continued)
for the 12 months ended 31 March 2021
Total retail costs excluding third party and pension deficit repair
costs
Third party services operating expenditure
Pension deficit repair costs
Total retail costs including third party and pension deficit repair
costs
Debt written off
Capital expenditure
Household -
total
Non-household
- total
£’m
63.8
-
2.3
66.1
9.7
3.4
£’m
0.3
-
-
0.3
-
-
Total
£’m
64.1
-
2.3
66.4
9.7
3.4
Other operating expenditure includes the net retail expenditure for the following household retail activities which are part funded by
wholesale:
Demand-side water efficiency - gross expenditure
Demand-side water efficiency - expenditure funded by wholesale
Demand-side water efficiency - net retail expenditure
Customer-side leak repairs - gross expenditure
Customer-side leak repairs - expenditure funded by wholesale
Customer-side leak repairs - net retail expenditure
0.5
0.5
-
0.7
0.7
-
Retail revenue and cost reconciliation to FD
Household retail revenue, reported in table 2I, was £55.8m, which was £0.5m higher than allowed in the FD. Household retail costs
excluding pension deficit repair costs, in table 2C above, were £63.8m, which was £17.1m higher than allowed in the FD, giving rise
to a negative margin of 14%.
The operating costs are at a level consistent with the prior year and do not contain any exceptional items of expenditure. The retail
cost base is higher than the allowance made in the FD, reflecting inflationary pressures on staff and other costs which were not
allowed in the FD.
The operating costs reported in the NHH column relate to activities retained by the wholesale business after NWL’s exit from the
NHH retail market, for services to developers. NWL has no allowance for NHH costs.
2.D Historic Cost Analysis of Tangible Fixed Assets
for the 12 months ended 31 March 2021
Cost
At 1 April 2020
Disposals
Additions
Adjustments
Assets adopted at nil cost
At 31 March 2021
Depreciation
At 1 April 2020
Disposals
Adjustments
Charge for year
Retail
Household
Retail non-
household
Water
resources
Water
Network+
Wastewater
Network+
Bioresources
£’m
£’m
£’m
£’m
£’m
£’m
Total
£’m
28.7
(0.2)
1.4
-
-
29.9
(21.2)
0.1
-
(2.0)
-
-
-
-
-
-
-
-
-
-
102.8
3,405.6
2,854.2
198.5
6,589.8
(0.1)
17.2
(1.1)
116.6
192.4
(192.4)
(4.0)
85.8
-
-
0.3
15.6
(0.5)
2.7
-
-
(5.9)
223.7
-
15.9
312.3
3,329.0
2951.6
200.7
6,823.5
(26.6)
(1,206.7)
(786.4)
(126.8)
(2,167.7)
0.1
(37.6)
4.2
37.6
0.9
-
0.5
-
5.8
-
(5.4)
(66.0)
(50.7)
(8.0)
(132.1)
2.D Historic Cost Analysis of Tangible Fixed Assets (continued)
for the 12 months ended 31 March 2021
At 31 March 2021
Net book amount at 31 March 2021
Net book amount at 1 April 2020
Depreciation charge for year
Principal services
Third party services
Total
Retail
Household
Retail non-
household
Water
resources
Water
Network+
Wastewater
Network+
Bioresources
£’m
£’m
£’m
£’m
£’m
£’m
Total
£’m
(23.1)
6.8
7.5
(2.0)
-
(2.0)
-
-
-
-
-
-
(69.5)
(1,230.9)
(836.2)
(134.3)
(2,294.0)
242.8
2,098.1
2,115.4
66.4
4,529.5
76.2
2,198.9
2,067.8
71.7
4,422.1
(5.1)
(0.3)
(5.4)
(66.0)
(50.7)
(8.0)
(131.8)
-
-
-
(0.3)
(66.0)
(50.7)
(8.0)
(132.1)
The net book value includes £218.2m in respect of assets in the course of construction.
2.E Analysis Of ‘Grants And Contributions’:
Water Resources, Water Network+ and
Wastewater Network+
for the 12 months ended 31 March 2021
Fully recognised
in income
statement
Capitalised
and amortised
(in income
statement)
Fully netted off
capex
£’m
£’m
£’m
Total
£’m
Grants and contributions - water resources
Diversions - s185
Other contributions (price control)
Price control grants and contributions
Diversions - NRSWA
Diversions - other non-price control
Other contributions (non-price control)
Total
Value of adopted assets
Grants and contributions - water network+
Connection charges
Infrastructure charge receipts
Requisitioned mains
Diversions - s185
Other contributions (price control)
Price control grants and contributions before
deduction of income offset
Income offset
Price control grants and contributions after
deduction of income offset
Diversions - NRSWA
Diversions - other non-price control
-
-
-
-
-
-
-
-
-
-
-
1.0
-
1.0
-
1.0
1.9
-
-
-
-
-
-
-
-
-
9.3
1.8
6.3
-
-
17.4
4.7
12.7
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
9.3
1.8
6.3
1.0
-
18.4
4.7
13.7
1.9
-
2.E Analysis Of ‘Grants And Contributions’:
Water Resources, Water Network+ And
Wastewater Network+ (continued)
for the 12 months ended 31 March 2021
Fully recognised
in income
statement
Capitalised
and amortised
(in income
statement)
£’m
0.5
3.4
-
-
-
0.1
0.8
0.9
-
0.9
-
-
0.8
1.7
-
£’m
-
12.7
0.3
0.1
1.3
-
-
1.4
-
1.4
-
-
-
1.4
15.6
Fully netted off
capex
£’m
-
-
-
-
-
-
-
-
-
-
-
-
-
Other contributions (non-price control)
Total
Value of adopted assets
Grants and contributions - wastewater
network+
Receipts for on-site work
Infrastructure charge receipts
Diversions - s185
Other contributions (price control)
Price control grants and contributions before
deduction of income offset
Income offset
Price control grants and contributions after
deduction of income offset
Diversions - NRSWA
Diversions - other non-price control
Other Contributions (non-price control)
Total
Value of adopted assets
Total
£’m
0.5
16.1
0.3
0.1
1.3
0.1
0.8
2.3
-
2.3
-
-
0.8
3.1
15.6
2.E Analysis Of ‘Grants And Contributions’:
Water Resources, Water Network+ And
Wastewater Network+ (continued)
for the 12 months ended 31 March 2021
Fully recognised
in income
statement
Capitalised
and amortised
(in income
statement)
Fully netted off
capex
£’m
£’m
£’m
Total
£’m
Movements in capitalised grants and
contributions
Brought forward
Received in year (above)
Adopted assets
Transferred from receipts in advance
Amortisation (in income statement)
0.6
-
-
-
-
242.2
12.7
0.3
(2.0)
(3.6)
163.2
406.0
1.4
15.6
0.8
(2.1)
14.1
15.9
(1.2)
(5.7)
Carried forward
0.6
249.6
178.9
429.1
Grants and contributions falling within the wholesale price control, and therefore also reported on table 2B, comprise
connection charges, infrastructure charge receipts and requisitioned mains and sewers.
2.F Residential Retail
for the 12 months ended 31 March 2021
Residential revenue
Wholesale charges
Retail revenue
Total residential revenue
Retail revenue
Revenue Recovered ("RR" )
Revenue sacrifice
Actual revenue (net)
Adjustment
Allowed revenue ("R" )
Net adjustment
Customer information
Actual customers ("AC" )
Reforecast customers
Other residential information
Revenue
Number of
customers
Average
residential
revenues
£’m
000s
£
498.8
55.8
554.6
55.8
-
55.8
55.2
(0.6)
1,935.7
1,954.1
Average residential retail revenue per customer
28.8
2G & 2H
NON-HOUSEHOLD WATER AND WASTEWATER REVENUES BY TARIFF TYPE
NWL exited the NHH retail market at 1 April 2017 and transferred its NHH retail business to an acquiring licenced
retailer, NWGB, another subsidiary of NWGL.
In accordance with RAG 4.09, as NWL has exited all NHH market activities, we are no longer required to publish tables
2G and 2H.
NWL still provides wholesale water and wastewater services to NHH properties in our areas of supply. The NHH
wholesale revenue for the year ended 31 March 2021 was £135.0m, as reported in table 2I.
2.I Revenue Analysis
for the 12 months ended 31 March 2021
Wholesale charge - water
Unmeasured
Measured
Third party revenue
Total wholesale water
revenue
Household
Non-
household
£’m
£’m
169.5
144.8
1.1
315.4
1.1
68.3
6.6
76.0
Total
£’m
170.6
213.1
7.7
Water
resources
Water
Network+
£’m
£’m
Total
£’m
31.6
45.6
-
138.9
170.5
167.5
213.1
7.8
7.8
391.4
77.2
314.2
391.4
Household
Non-
household
£’m
£’m
Total
£’m
Wastewater
network+
Bioresources
Total
£’m
£’m
£’m
Wholesale charge -
wastewater
Unmeasured - foul charges
119.4
Unmeasured - surface water
charges
Unmeasured - highway
drainage charges
-
-
Measured - foul charges
63.8
Measured - surface water
charges
Measured - highway
drainage charges
Third party revenue
Total wholesale
wastewater revenue
Wholesale charge -
Additional Control
Unmeasured
Measured
Total wholesale additional
control revenue
0.5
1.5
0.7
27.8
19.7
8.8
-
119.9
107.1
12.8
119.9
1.5
0.7
91.6
19.7
8.8
0.2
1.3
0.6
84.7
17.6
7.5
0.2
0.2
0.1
6.9
2.1
1.3
-
1.5
0.7
91.6
19.7
8.8
0.2
-
-
0.2
183.4
59.0
242.4
219.0
23.4
242.4
-
-
-
-
-
-
-
-
-
2.I Revenue Analysis (continued)
for the 12 months ended 31 March 2021
Household
Non-
household
£’m
£’m
Total
£’m
Water
resources
Water
Network+
£’m
£’m
Total
£’m
Wholesale Total
498.8
135.0
633.8
Retail revenue
Unmeasured
Measured
Other third party revenue
Retail Total
Third party revenue - non-
price control
Bulk supplies - water
Bulk supplies - wastewater
Other third party revenue
Principal services - non-
price control
Other appointed revenue
Total appointed revenue
26.0
29.8
-
55.8
-
-
-
-
26.0
29.8
-
55.8
3.3
-
2.6
0.2
695.7
2I REVENUE ANALYSIS for the 12 months ended 31 March 2021 (continued)
Wholesale revenue control reconciliation to FD
Charges for 2020/21 were set in accordance with the price controls set by Ofwat in its PR19 Final Determination.
During the COVID-19 pandemic we have seen an increase in household consumption due to the impact of various lockdown
periods and customers working from home. There have also been fewer than anticipated switches from unmeasured to measured
billing as a result of this change in working patterns A number of initiatives have been carried out during the year which have led to
a reduction in the number of household voids to a void rate of 3.74% at the year end.
For our non-household charging base, early in the COVID-19 pandemic there was a period when many properties were made
vacant in the market charging system. This was a temporary arrangement that has now been unwound. However, this did
affect non-household revenue. Non-household voids have remained relatively stable, excluding the temporary closure period.
Overall, non-household consumption has seen a significant reduction over the course of the pandemic.
Wholesale water revenue in 2020/21 was £1.5m (0.4%) lower than the revenue cap income allowance. This is split between the
resources and network+ price controls which were £5.1m (6.2%) lower and £3.6m (1.1%) higher than revenue cap
respectively. Within the network+ price control, grants and contributions income was £6.9m (34%) lower than the allowed revenue
for the period, this is partly due to the impact of COVID-19 pandemic which halted construction for a number of weeks at the start
of the period. Developer activity has subsequently restarted.
Wholesale wastewater revenue in 2020/21 was £8.0m (3.2%) lower than the revenue cap income allowance. This is split between
the network+ and bioresources price controls which were £9.5m (4.1%) lower and £1.5m (6.7%) higher respectively. Within the
network+ price control, grants and contributions income is £1.5m (40.5%) lower than the allowed revenue for the period, this is
partly due to the impact of COVID-19 pandemic which halted construction for a number of weeks at the start of the period.
Developer activity has subsequently restarted.
The revenue imbalances in the table above (for water resources and the network+ controls) will be incorporated into the
Revenue Forecasting Incentive model and will be corrected within charges for 2022/23 against the relevant price controls.
2.J Infrastructure Network
Reinforcement Costs
for the 12 months ended 31 March 2021
Wholesale water network+ (treated water distribution)
Distribution and trunk mains
Pumping and storage facilities
Other
Total
Wholesale wastewater network+ (sewage collection)
Foul and combined systems
Surface water only systems
Pumping and storage facilities
Other
Total
Network
reinforcement
capex
On site / site
specific capex
(memo only)
£’m
£’m
0.3
-
-
0.3
1.5
3.5
0.7
-
5.7
-
-
-
-
-
-
-
-
-
2.K Infrastructure Charges
Reconciliation
for the 12 months ended 31 March 2021
Impact of infrastructure charge discounts
Infrastructure charges
Discounts applied to infrastructure charges
Gross infrastructure charges
Comparison of revenue and costs
Variance brought forward
Revenue
Costs
Variance carried forward
Water
Wastewater
£’m
£’m
Total
£’m
1.8
-
1.8
3.7
1.8
(0.3)
5.2
1.3
0.5
1.8
3.2
1.3
(5.7)
(1.2)
3.1
0.5
3.6
6.9
3.1
(6.0)
4.0
Reconciliation of infrastructure charges and network reinforcement costs
Infrastructure charges are set at a level to fund investment in reinforcement of our networks, to meet the demand arising from new
development of household properties. We are required to ensure that revenue from infrastructure charges broadly matches
network reinforcement expenditure over a five year rolling period.
We review infrastructure charges annually, taking account of extra capacity expected to be required as a result of new
developments in the following five years. Our forecast reflects applications received for the provision of new infrastructure, pre-
development enquiries and a longer term view of local authority plans and strategic studies.
Water
In 2020/21, there was a relatively low level of spending on network reinforcement projects compared to infrastructure charges
received. After three years of the rolling five year review period, the cumulative expenditure on water network reinforcement is
£5.2m less than the infrastructure charge income received. We have reduced our water infrastructure charges in 2020/21 and
2021/22 to reflect the lower level of network reinforcement investment than previously forecast. The projected expenditure over the
next two years is greater than the expected infrastructure charge income which will reduce the cumulative difference.
Wastewater
In 2020/21 there were two large network reinforcement projects which totalled spend of £5.7m. As a result, the cumulative
expenditure on wastewater network reinforcement after three years of the rolling five year review period is £1.3m more than the
infrastructure charge income received. This demonstrates the uneven phasing of network reinforcement investment. Expenditure
for the next two years is projected to be lower than the expected infrastructure charge income.
2.L Land Sales
for the 12 months ended 31 March 2021
Proceeds from disposals of protected land
Water resources
Water Network+
Wastewater
Network+
£’m
0.1
£’m
0.8
£’m
-
Total
£’m
0.9
2.M Revenue Reconciliation:
Wholesale
for the 12 months ended 31 March 2021
Water resources
Water Network+
Wastewater
Network+
Bioresources
£’m
£’m
£’m
£’m
77.2
314.2
-
13.7
219.0
2.3
23.4
Total
£’m
633.8
16.0
77.2
327.9
221.3
23.4
649.8
82.3
303.6
227.0
21.9
634.8
-
-
-
20.7
3.8
-
-
-
-
-
-
-
24.5
-
-
Revenue recognised
Wholesale revenue
governed by price control
Grants & contributions
(price control)
Total revenue governed
by wholesale price
control
Calculation of the revenue
cap
Allowed wholesale revenue
before adjustments (or
modified by CMA)
Allowed grants &
contributions before
adjustments (or modified by
CMA)
Revenue adjustment
Other adjustments
Revenue cap
82.3
324.3
230.8
21.9
659.3
Calculation of the revenue
imbalance
Revenue cap
Revenue Recovered
Revenue imbalance
82.3
77.2
(5.1)
324.3
327.9
3.6
230.8
221.3
(9.5)
21.9
23.4
1.5
659.3
649.8
(9.3)
2.N Residential Retail
Social Tariffs
for the 12 months ended 31 March 2021
Number of residential customers on social tariffs
Residential water only social tariffs
Residential wastewater only social tariffs
Residential dual service social tariffs
Number of residential customers not on social tariffs
Residential water only no social tariffs
Residential wastewater only no social tariffs
Residential dual service no social tariffs
Social tariff discount
Revenue
Number of
customers
£’m
000s
5.2
0.6
25.1
758.8
66.4
1,079.6
Average discount per water only social tariffs customer
Average discount per wastewater only social tariffs customer
Average discount per dual service social tariffs customer
Social tariff cross-subsidy - residential customers
Total customer funded cross-subsidies for water only social tariffs
customers
Total customer funded cross-subsidies for wastewater only social tariffs
customers
Total customer funded cross-subsidies for dual service social tariffs
customers
Average customer funded cross-subsidy per water only social tariffs
customer
Average customer funded cross-subsidy per wastewater only social
tariffs customer
Average customer funded cross-subsidy per dual service social tariffs
customer
1.2
0.1
2.2
Average
residential
revenues
£
-
-
-
-
-
-
222.1
120.0
88.0
1.5
1.1
2.0
2.N Residential Retail
Social Tariffs (continued)
for the 12 months ended 31 March 2021
Revenue
Number of
customers
Average
residential
revenues
£’m
000s
£
-
-
-
Social tariff cross-subsidy - company
Total revenue forgone by company to fund cross-subsidies for water
only social tariffs customers
Total revenue forgone by company to fund cross-subsidies for
wastewater only social tariffs customers
Total revenue forgone by company to fund cross-subsidies for dual
service social tariffs customers
Average revenue forgone by company to fund cross-subsidy per water
only social tariffs customer
Average revenue forgone by company to fund cross-subsidy per
wastewater only social tariffs customer
Average revenue forgone by company to fund cross-subsidy per dual
service social tariffs customer
Social tariff support - willingness to pay
Level of support for social tariff customers reflected in business plan
Maximum contribution to social tariffs supported by customer
engagement
-
-
-
2.1
2.9
2.O Historic Cost Analysis of Intangible Fixed Assets
for the 12 months ended 31 March 2021
Water
resources
Water
Network+
Wastewater
Network+
Bioresources
Retail
Household
Retail non-
household
£’m
£’m
£’m
£’m
£’m
£’m
Cost
At 1 April 2020
Disposals
Additions
Adjustments
Assets adopted at nil cost
At 31 March 2021
Amortisation
At 1 April 2020
Disposals
Adjustments
Charge for year
-
-
-
-
-
-
-
-
-
-
111.9
0.9
-
8.8
-
-
-
-
-
-
120.7
0.9
(52.6)
(0.5)
-
-
-
-
(9.8)
(0.2)
-
-
-
-
-
-
-
-
-
-
33.7
-
2.0
-
-
35.7
(7.5)
-
-
(1.3)
-
-
-
-
-
-
-
-
-
-
Total
£’m
146.5
-
10.8
-
-
157.3
(60.6)
-
-
(11.3)
2.O Historic Cost Analysis of Intangible Fixed Assets (continued)
for the 12 months ended 31 March 2021
At 31 March 2021
Net book amount at 31 March 2021
Net book amount at 1 April 2020
Amortisation for year
Principal services
Third party services
Total
Water
resources
Water
Network+
Wastewater
Network+
Bioresources
Retail
Household
Retail non-
household
£’m
£’m
-
-
-
-
-
-
(62.4)
58.3
59.3
(9.8)
-
(9.8)
£’m
(0.7)
0.2
0.4
(0.2)
-
(0.2)
£’m
-
-
-
-
-
-
£’m
(8.8)
26.9
26.2
(1.3)
-
(1.3)
£’m
-
-
-
-
-
-
Total
£’m
(71.9)
85.4
85.9
(11.3)
-
(11.3)
The net book value includes £5.5m in respect of assets in the course of construction.
DISCLOSURE OF TRANSACTIONS WITH ASSOCIATES
Services supplied by the appointee to associated companies:
Associate
Service
AquaGib Limited
Anglian Water Business (National) Limited
(AWB)
Eastern Power Networks
Northern Gas Networks Limited (NGN)
Vehicle Lease and Service Limited (VLS)
UK Power Networks
Sale of materials
Water and sewerage supplies
Rental income
Mains repairs and trade effluent
charges
Rental of garage and service
charges
Rental income
Services supplied to the appointee by associated companies:
Associate
Service
CKI
NGN
NWGL
Three Rivers Insurance Company Limited
(TRICL)
VLS
UK Power Networks
Software licensing agreements
Gas main diversions
Holding company charges
Public liability insurance (deductible
infill policy)
Vehicle maintenance and capital
finance charge
Cost of damages
Turnover
£’m
14.8
391.0
670.0
439.3
Terms of
Supply
Negotiated
Competitive
letting
No market
No market
Value
£’m
0.107
111.707
0.003
0.031
18.1
Negotiated
0.099
1,760.0
No market
0.002
Turnover
£’m
6,719
439.3
7.0
0.4
Terms of
Supply
Negotiated
No market
No market
No market
18.1
1,760.0
Competitive
letting
No market
Turnover
£’m
391.0
Terms of
Supply
No market
Value
£’m
1.953
0.002
1.629
0.404
9.646
0.075
Value
£’m
0.402
nil
No market
0.248
7.0
No market
0.318
Corporation tax group relief received by the appointee from associated companies:
Associate
AWB
Wave Ltd
NWGL
Service
Transfer of corporation tax group
losses
Transfer of corporation tax group
losses
Transfer of corporation tax group
losses
Turnover data for all companies relates to the year to 31 March 2021, with the exception of data for VLS and CKI which relates to the
year to 31 December 2020.
Payment for tax losses transferred between group companies is calculated as the losses transferred multiplied by the corporation tax
rate for the year.
Service provided by the non appointed business:
Service
Basis of recharge made by the appointed business
Treatment of imported sludge
The average unit cost per tonne dry solid is calculated using operating costs
only and excluding payroll. This gives a unit rate which is more than the
incremental cost but less than the income received therefore sharing the
benefit of the activity.
Treatment of tankered waste
Other
The recharge comprises recovery of operating costs of operator time and
sampling and analysis and a charge for the use of appointed business
assets, calculated using the Biological and Sludge elements of the trade
effluent charge set out in the Company’s Wholesale Charges Scheme.
Other assets are specifically identified to the appropriate business.
Information in relation to allocations and apportionments
Value
£’m
0.004
0.733
-
The appointed and non-appointed businesses operate separate accounting records including sales and purchase ledgers. Revenue,
operating costs, assets and liabilities are taken directly from these records.
Revenue is separately recorded between wholesale water and wastewater and household and non-household retail services and no
apportionment has been necessary. Operating costs have been allocated between wholesale water and wastewater and household
and non-household retail services in accordance with the guidance set out in RAG 4.08.
Overhead costs incurred in the appointed business which relate to the non-appointed business have been allocated using an activity
based approach to comply with RAG 5.07.
Interest has been allocated between the appointed and non-appointed businesses on the basis of actual cash balances held by these
businesses during the year at market rates. Capital costs and the related depreciation charges are specifically identifiable to the
appropriate business and service.
Amounts borrowed by the appointee from associated companies
The Company has loans amounting to £2,367.6m due to NWF, a subsidiary company. Details of these loans and the associated
guarantees are provided in note 15 of the NWL Annual Report and Financial Statements.
The Company acquires vehicles from VLS, an associated company, on a finance lease basis. During the year, new finance leases
of £4.5m were entered into and capital repayments of £3.9m were made. The year end finance lease creditor was £12.2m. All
leases have an individual interest rate which is fixed for the term of the lease. In 2020/21 all leases had an interest rate of 5.5%.
Guarantees or other forms of security
There were no guarantees or other forms of security provided by the appointee to any associate during the year, other than those
relating to amounts borrowed from NWF, outlined above.
Dividends paid
During the year, the appointed business paid no dividend.
Dividend policy
The Board has a policy which takes into account the principle of incentive based price cap regulation, including operating and
investment performance. When declaring dividends, the Directors consider the Company’s five-year plan and give due consideration
to business performance, the prospects of the Company and the principal risks facing the business.
Specifically, the Board determines the level of dividend declared by reference to:
•
•
the Company’s ability to finance its functions;
the Company’s cumulative financial performance and past outperformance; and
• maintaining the Company’s investment grade credit ratings.
The Directors have also had regard to:
•
•
how the Company has satisfied its statutory and regulatory obligations, performed against the performance commitments in the
final determination and the level of service provided to its customers; and
employees’ interests and, specifically, compliance with the pension deficit repair plan agreed with the Pension Trustee in respect
of the NWPS, as submitted to the Pensions Regulator.
Amendment to Dividend Policy
The dividend policy has been updated to reflect the consideration given to the Company’s statutory and regulatory obligations and
performance commitments in the final determination.
Application of Policy
No dividends were proposed, approved or paid in respect of the year ended 31 March 2020 and no dividends were approved or paid
during the year ended 31 March 2021. In deciding this, the Board took into account the impact of the PR19 FD on the financial
position of the Company over a five year time horizon, the uncertainty surrounding the CMA redetermination process and the need
to retain financial resilience in order to be able to deliver the Company’s Business Plan commitments for stakeholders.
After the balance sheet date, the Board approved the payment of a final dividend of £123.3m in respect of the year ended 31 March
2021. In reaching this decision, the Board took account of the Company’s financial position at 31 March 2021, cumulative financial
performance over the two years since the previous dividend payment and the impact of the CMA redetermination on the five year
plan which remained compatible with investment grade credit ratings. The Board also took into account the principal risks facing the
business, performance against statutory obligations and regulatory commitments, levels of customer service and C-MeX
performance, positive ongoing employee engagement and payments made under the agreed schedule of contributions for the
NWPS.
After the balance sheet date, the Board also approved the payment of a special dividend of £159m from the Non-appointed business.
The purpose of the special dividend was to enable NWGL to use the dividend proceeds to settle a legacy £159m intercompany loan
arrangement with the Company (see note 11), following discussions with Ofwat. The outcome of the special dividend and loan
settlement transactions was cash neutral to the Company.
Omission of right
There were no omissions by the appointee to exercise any rights which would cause the net assets to decrease.
Waivers
There were no waivers by the appointee of any consideration, remuneration or other payment owed to it by any associated
company.
The information in this note has been produced to comply with the requirements of RAG 5.07 Transfer Pricing in the Water Industry
and the disclosures required by paragraph 6 of Condition F of the Company’s operating licence.
The Directors confirm that, to the best of their knowledge, all transactions with associated companies have been disclosed.
INDEPENDENT AUDITOR’S REPORT TO THE WATER SERVICES REGULATION AUTHORITY (‘WSRA’) AND
DIRECTORS OF NORTHUMBRIAN WATER LIMITED
Opinion
We have audited the sections of NWL’s Annual Performance Report for the year ended 31 March 2021 (“the Regulatory
Accounting Statements”) which comprise:
• the regulatory financial reporting tables comprising the income statement (table 1A), the statement of comprehensive
income (table 1B), the statement of financial position (table 1C), the statement of cash flows (table 1D), the net debt analysis
(table 1E), lines 1F.1 to 1F.3, 1F.5 to 1F.6, 1F.8, 1F.12 to 1F.14, 1F.18 and 1F.23 to 1F.24 of the statement of financial
flows (table 1F) and the related notes; and
• the regulatory price review and other segmental reporting tables comprising the segmental income statement (table 2A),
the totex analysis for wholesale water and wastewater (table 2B), the operating cost analysis for retail (table 2C), the
historical cost analysis of fixed assets for wholesale and retail (table 2D), the analysis of grants and contributions and land
sales for wholesale (table 2E), the household water revenues by customer type (table 2F), the non-household water
revenues by customer type (table 2G), the non-household wastewater revenues by customer type (table 2H), the revenue
analysis & wholesale control reconciliation (table 2I), the infrastructure network reinforcement costs (table 2J), the
infrastructure charges reconciliation (table 2K), the analysis of land sales (table 2L), the revenue reconciliation for wholesale
(table 2M), residential retail social tariffs (table 2N) and historical cost analysis of intangible assets (table 2O) and the related
notes.
We have not audited lines 1F.4, 1F.7, 1F.9 to 1F.11, 1F.15 to 1F.17, 1F.19 to 1F.22 and 1F.25 of the statement of financial flows
(table 1F), the Outcome performance table (tables 3A to 3I) and the additional regulatory information in tables 4A to 4R, 5A to 5B,
6A to 6D, 7A to 7E, 8A to 8D and 9A.
In our opinion, NWL’s Regulatory Accounting Statements within the Annual Performance Report have been prepared, in all
material aspects, in accordance with Condition F, the Regulatory Accounting Guidelines issued by the WSRA (RAG 1.09, RAG
2.08, RAG 3.12, RAG 4.09 and RAG 5.07) and the accounting policies (including the Company’s published accounting
methodology statement.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”), including ISA (UK) 800, and
applicable law, except as stated in the section on Auditors’ responsibilities for the audit of the Regulatory Accounting
Statements below, and having regard to the guidance contained in ICAEW Technical Release Tech 02/16 AAF ‘Reporting to
Regulators on Regulatory Accounts’ issued by the Institute of Chartered Accountants in England & Wales.
Our responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the Regulatory Accounting
Statements within the Annual Performance Report section of our report. We are independent of the Company in accordance with
the ethical requirements that are relevant to our audit, including the Financial Reporting Council’s (FRC’s) Ethical Standard as
applied to public interest entities, and we have fulfilled our ethical responsibilities in accordance with these requirements. We
believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Emphasis of matter – special purpose basis of preparation
We draw attention to the fact that the Regulatory Accounting Statements have been prepared in accordance with a special purpose
framework, Condition F, the Regulatory Accounting Guidelines, the accounting policies (including the Company’s published
accounting methodology statement, as defined in RAG 3.12, appendix 2) set out in the statement of accounting policies and under
the historical cost convention. The nature, form and content of the Regulatory Accounting Statements are determined by the
WSRA. It is not appropriate for us to assess whether the nature of the information being reported upon is suitable or
appropriate for the WSRA’s purposes. Accordingly we make no such assessment. In addition, we are not required to assess
whether the methods of cost allocation set out in the accounting methodology statement are appropriate to the circumstances of
the Company or whether they meet the requirements of the WSRA.
The Regulatory Accounting Statements are separate from the statutory financial statements of the Company and have not been
prepared under the basis of International Accounting Standards in conformity with the requirements of the Companies Act 2006
(“UK IASs”). Financial information other than that prepared on the basis of UK IASs does not necessarily represent a true and fair
view of the financial performance or financial position of a company as shown in statutory financial statements prepared in
accordance with the Companies Act 2006.
The Regulatory Accounting Statements on pages 116 to 123 have been drawn up in accordance with Regulatory Accounting
Guidelines with a number of departures from IFRSs. A summary of the effect of these departures from Generally Accepted
Accounting Practice in the Company’s statutory financial statements is included in the tables within section 1.
Our opinion is not modified in respect of this matter.
Conclusions relating to going concern
In auditing the Regulatory Accounting Statements, we have concluded that the directors’ use of the going concern basis of accounting
in the preparation of the Regulatory Accounting Statements is appropriate.
Our evaluation of the directors’ assessment of the Company’s ability to continue to adopt the going concern basis of accounting
included:
•
•
assessing financing facilities including availability and access at the balance sheet date, the nature of facilities, repayment
and expiration terms and associated covenants;
evaluating management’s going concern assessment and the linkage to the business model and medium-term risks
including effects of changes in water availability and usage and potential changes in regulation;
•
•
•
•
challenging assumptions used in the forecasts, including the effects of AMP 7 from the Ofwat final determination and the
subsequent CMA final decision;
evaluating the amount of headroom in the forecasts focusing on cash and covenants associated with financing activities;
performing sensitivity analysis to assess how the headroom within the forecasts is affected by variations within the
assumptions; and
assessing the model used to prepare the forecasts, testing of clerical accuracy of those forecasts and assessing historical
accuracy of forecasts prepared by management.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the Company’s ability to continue as a going concern for a period of at least
twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of
this report.
Other information
The other information comprises all of the information in the Annual Performance Report other than the Regulatory Accounting
Statements and our auditors’ report thereon. The directors are responsible for the other information. Our opinion on the Regulatory
Accounting Statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the Regulatory Accounting Statements, our responsibility is to read the other information and, in doing
so, consider whether the other information is materially inconsistent with the Regulatory Accounting Statements or our knowledge
obtained in the audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material
misstatement, we are required to perform procedures to conclude whether there is a material misstatement of the Regulatory
Accounting Statements or a material misstatement of the other information. If, based on the work we have performed, we conclude
that there is a material misstatement of the other information, we are required to report that fact.
We have nothing to report based on these responsibilities.
Responsibilities of the Directors for the Annual Performance Report
As explained more fully in the Statement of Directors’ Responsibilities set out on page 117, the directors are responsible for
the preparation of the Annual Performance Report in accordance with Condition F, the Regulatory Accounting Guidelines issued by
the WSRA and the Company’s accounting policies (including the Company’s published accounting methodology statement, as
defined in RAG 3.12, appendix 2).
The directors are also responsible for such internal control as they determine is necessary to enable the preparation of the Annual
Performance Report that is free from material misstatement, whether due to fraud or error.
In preparing the Annual Performance Report, the directors are responsible for assessing the Company’s ability to continue as a going
concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the
directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the Audit of the Regulatory Accounting Statements within the Annual Performance Report
Our objectives are to obtain reasonable assurance about whether the Regulatory Accounting Statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance
is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the Regulatory
Accounting Statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our
procedures are capable of detecting irregularities, including fraud, is detailed below.
We considered the nature of the Company’s industry and its control environment, and reviewed the Company’s documentation of
their policies and procedures relating to fraud and compliance with laws and regulations. We also enquired of management about
their own identification and assessment of the risks of irregularities.
We obtained an understanding of the legal and regulatory framework that the Company operates in, and identified the key laws and
regulations that:
• had a direct effect on the determination of material amounts and disclosures in the Regulatory Accounting Statements.
These included Regulatory Accounting Guidelines as issued by the WRSA, UK Companies Act, pensions legislation, tax
legislation; and
• do not have a direct effect on the Regulatory Accounting Statements but compliance with which may be fundamental to
the Company’s ability to operate or to avoid a material penalty. These included the Company’s operating licence, regulatory
solvency requirements and environmental regulations.
In common with all audits under ISAs (UK), we are also required to perform specific procedures to respond to the risk of management
override. In addressing the risk of fraud through management override of controls, we tested the appropriateness of journal entries
and other adjustments; assessed whether the judgements made in making accounting estimates are indicative of a potential bias;
and evaluated the business rationale of any significant transactions that are unusual or outside the normal course of business.
In addition to the above, our procedures to respond to the risks identified included the following:
•
reviewing financial statement disclosures by testing to supporting documentation to assess compliance with provisions of
relevant laws and regulations described as having a direct effect on the financial statements;
•
performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material
misstatement due to fraud;
•
enquiring of management, the audit committee and in-house legal counsel concerning actual and potential litigation and
claims, and instances of non-compliance with laws and regulations; and
•
reading minutes of meetings of those charged with governance, the audit committee, reviewing internal audit reports and
reviewing correspondence with HMRC and WSRA.
A further description of our responsibilities for the audit of the Regulatory Accounting Statements is located on the Financial Reporting
Council’s website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of this report
This report is made, on terms that have been agreed, solely to the Company and the WSRA in order to meet the requirements of
Condition F of the Instrument of Appointment granted by the Secretary of State for the Environment to the Company as a water and
sewage undertaker under the Water Industry Act 1991 (“Condition F”). Our audit work has been undertaken so that we might state
to the Company and the WSRA those matters that we have agreed to state to them in our report, in order (a) to assist the Company
to meet its obligation under Condition F to procure such a report and (b) to facilitate the carrying out by the WSRA of its regulatory
functions, and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other
than the company and the WSRA, for our audit work, for this report or for the opinions we have formed.
Our opinion on the Regulatory Accounting Statements is separate from our opinion on the statutory financial statements of the
Company for the year ended 31 March 2021 on which we reported on 15 July 2021, which are prepared for a different purpose. Our
audit report in relation to the statutory financial statements of the Company (our “Statutory audit”) was made solely to the Company’s
members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our Statutory audit work was undertaken
so that we might state to the company’s members those matters we are required to state to them in a statutory audit report and for
no other purpose. In these circumstances, to the fullest extent permitted by law, we do not accept or assume responsibility for any
other purpose or to any other person to whom our Statutory audit report is shown or into whose hands it may come save where
expressly agreed by our prior consent in writing.
Dave Johnson (Senior statutory auditor)
for and on behalf of Deloitte LLP
Statutory Auditor
Leeds, United Kingdom
15 July 2021
PERFORMANCE SUMMARY
3.A Water performance
commitments - financial
Unit
Performance level
PCL met?
Outperformance /
underperformance
payment
Forecast of
total 2020-25
outperformance or
underperformance
payment
Previous
Current
£m
£m
Common PCs - Water (financial)
Water quality compliance (CRI)
no.
-
7.11
Water supply interruptions
hh:mm:ss
00:05:37
00:04:04
Leakage NW region
Leakage ESW region
Per capita consumption
Mains repairs
Unplanned outage
Bespoke PCs - Water and Retail (financial)
Visible leak repair time
Voids
Interruptions to supply greater
than 12 hours
Discoloured water contacts
Taste and smell contacts
Event Risk Index
Interruptions to supply between
one and three hours
Abstraction incentive mechanism
(AIM)
Water environment improvements
%
%
%
no.
%
nr
%
nr
nr
nr
nr
%
nr
nr
-
-
-
-1.0
0.5
-3.8
107.5
127.0
9.82
5.69
9.73
3.74
143
8.22
1.75
197.592
0
n/a
-
-
-
-
-
-
-
-
-
No
Yes
No
No
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
-
-
30.2
Yes
-7.123
-12.142
2.500
-0.473
-0.090
-1.366
1.450
0.000
0.078
1.333
1.182
2.011
0.290
0.000
0.000
0.000
0.155
5.808
-4.830
-1.471
-10.217
3.009
-1.944
-6.085
4.291
2.181
4.458
1.528
-0.078
-6.817
0.000
0.281
3.A Water performance
commitments - financial (continued)
Unit
Performance level
PCL met?
Previous
Current
Greenhouse Gas Emissions
tCO2e
Delivery of water resilience
enhance programme
Delivery of lead enhancement
programme
Delivery of smart water
enhancement programme
Delivery of cyber resilience
enhancement programme
Financial water performance
achieved
Overall performance
commitments achieved
(excluding C-MEX and D-MEX)
%
%
%
%
%
%
-
-
-
-
-
15235
0
0
0
0
Yes
Yes
No
No
Yes
68
72
Outperformance /
underperformance
payment
Forecast of
total 2020-25
outperformance or
underperformance
payment
£m
2.020
0.000
0.000
0.000
0.000
£m
9.783
-0.074
0.000
0.000
0.000
3.B Wastewater performance
commitments - financial
Unit
Performance level
PCL met?
Outperformance /
underperformance
payment
Forecast of
total 2020-25
outperformance or
underperformance
payment
Previous
Current
£m
£m
Common PCs - Wastewater (financial)
No. of internal
sewer flooding
incidents per
10,000 sewer
connection
Pollution incidents
per 10,000km of
sewer length
No. of sewer
collapses per
1,000km of
all sewers
Internal sewer flooding
Pollution incidents
Sewer collapses
Treatment works
compliance
Bespoke PCs - Wastewater (financial)
Sewer blockages
External sewer flooding
Repeat sewer flooding
Bathing water compliance
Delivery wastewater
resilience enhancement
programme
Water Industry National
Environment Programme
Delivery of Howdon STW
enhancement
Financial wastewater
performance achieved
%
nr
nr
nr
%
text
nr
months
%
3.68
1.89
No
-0.530
-0.429
-
14.61
Yes
2.960
13.533
9.80
9.82
Yes
0.000
-0.686
-
99.51
No
0.000
-2.388
11875
12023
4697
3862
-
-
-
-
-
25
n/a
0
0
0
No
No
Yes
-
Yes
Yes
Yes
60
-0.619
2.361
-3.072
-2.784
1.157
0.000
4.849
0.000
0.000
0.000
0.000
0.000
0.000
0.000
3.C Customer measure
of experience (C-MeX)
Annual customer satisfaction score for the customer service survey
Annual customer satisfaction score for the customer experience survey
Annual C-MeX score
Annual net promoter score
Total household complaints
Total connected household properties
Total household complaints per 10,000 connections
Unit
No.
No.
No.
No.
No.
No.
No.
Value
84.39
87.13
85.76
48.50
26782
2,020,339
132.562
Confirmation of communication channels offered
True / False
True
3.D Developer services measure
of experience (D-MeX)
Qualitative component annual results
Quantitative component annual results
D-MeX score
Developer services revenue (water)
Developer services revenue (wastewater)
Unit
No.
No.
No.
£m
£m
Value
80.26
93.62
86.94
18.461
2.857
3.D Developer services measure
of experience (D-MeX) (continued)
Calculating the D-MeX quantitative component
Water UK performance metric
Unit
W1.1
W3.1
W4.1
W6.1
W7.1
W8.1
W17.1
W17.2
W18.1
W20.1
W21.1
W23.1
W24.1
W26.1
W27.1
W30.1
S1.1
S3.1
S4.1
S7.1
SN2.2
SN4.1
WN1.1
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
First reporting
period
(1 April to 30
September)
Second reporting
period
(1 October to
31 March)
100.00%
100.00%
Quantitative score
(annual)
99.04%
82.90%
95.76%
98.80%
87.58%
98.09%
100.00%
100.00%
93.53%
100.00%
98.53%
95.45%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
62.50%
0.00%
92.86%
100.00%
81.25%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
3.D Developer services measure
of experience (D-MeX) (continued)
Calculating the D-MeX quantitative component
Water UK performance metric
Unit
First reporting
period
(1 April to 30
September)
Second reporting
period
(1 October to
31 March)
Quantitative score
(annual)
WN2.2
WN4.1
WN4.2
WN4.3
SAM - 3/1
SAM - 4/1
D-MeX quantitative score (for the
relevant reporting period)
D-MeX quantitative score (annual)
%
%
%
%
%
%
%
No.
100.00%
100.00%
100.00%
100.00%
89.61%
97.63%
0.94
3.E Non financial
performance commitments
Common
Risk of severe restrictions in a drought
Priority services for customers in vulnerable circumstances
- PSR reach
Priority services for customers in vulnerable circumstances
- Attempted contacts
Priority services for customers in vulnerable circumstances
- Actual contacts
Risk of sewer flooding in a storm
Bespoke PCs
Satisfaction of customers who receive additional
non-financial support
Awareness of additional non-financial support
Response time to written complaints
Customers’ perception of trust
Percentage of households in water poverty
Gap sites
Bioresources
Satisfaction of customers who receive additional financial
support
Awareness of additional financial support
British Standards Institution Award for Inclusive Services
NWL Independent value for money survey
WINEP delivery
Delivery of DWMPs
Non-financial performance commitments achieved
Unit
Performance level
PCL met?
Previous
Current
0.0
-
-
-
0.0
2.3
57.3
40.0
35.17
16.11
-
-
-
-
-
-
-
-
-
-
-
-
-
8.7
50
7.1
8.8
10.38
67.5
100
9.3
41
maintained
8.3
met
0
%
%
%
%
%
nr
%
nr
nr
%
%
%
nr
%
text
nr
text
%
%
Yes
No
Yes
Yes
Yes
Yes
Yes
No
Yes
Yes
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
83
3.H Summary information on outcome
delivery incentive payments
Initial calculation of in period revenue adjustment by price control
Initial calculation of performance
payments (excluding C-MeX and D-MeX)
£m (2017-18 prices)
Water resources
Water network plus
Wastewater network plus
Bioresources (sludge)
Residential retail
Business retail
Dummy control
Initial calculation of end of period revenue adjustment by price control
Water resources
Water network plus
Wastewater network plus
Bioresources (sludge)
Residential retail
Business retail
Dummy control
0.24
-0.56
0.64
0.06
1.48
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
3.H Summary information on outcome
delivery incentive payments (continued)
Initial calculation of end of period RCV adjustment by price control
Initial calculation of performance
payments (excluding C-MeX and D-MeX)
£m (2017-18 prices)
Water resources
Water network plus
Wastewater network plus
Bioresources (sludge)
Residential retail
Business retail
Dummy control
0.00
0.00
0.00
0.00
0.00
0.00
0.00
ADDITIONAL REGULATORY INFORMATION
Additional Regulatory Information
This section contains additional regulatory information required by RAG 3.12.
However, some tables have not been included from this report either because their size or because of the technical nature of their
content. These tables, which are listed below, can be found on our website, alongside this report.
4B
Analysis of debt
4L
Enhancement expenditure – water resources and water network+
4M
Enhancement expenditure – wastewater network+ and bioresources
4Q
Developer services – Non-financial information
4R
Properties, customers and population – non-financial information
5A
5B
6A
6B
Water resources – asset and volumes data
Water resources - operating cost analysis
Raw water transport, raw water storage, and water treatment data
Treated water distribution – assets and operations
6C
Water network+ – mains, communication pipes and other data
6D
Demand management – metering and leakage activities
7A
7B
Wastewater network+ – functional expenditure
Wastewater network+ – large sewage treatment works
7C
Wastewater network+ – sewer and volume data
7D
Wastewater network+ – sewage treatment works data
7E
8A
8B
Wastewater network+ – energy consumption and other data
Bioresources – sludge data
Bioresources – operating expenditure analysis
8C
Bioresources – energy and liquors analysis
8D
Bioresources – sludge treatment and disposal data
4.A Water Bulk
Supply Information
for the 12 months ended 31 March 2021
Bulk supply exports
(NESBWE14) Thames Water
(NESBWE11) Anglian Water (Stour - Tiptree)
(NESBWE12) Leep Utilities - Barking
(NESBWE9) United Utilities Water
(NESBWE17) Anglian Water (2 Sisters Buxted Chickens)
(NESBWE15) Albion Water (Five Oaks)
(NESBWE13) Anglian Water - Woods Meadow Oulton
(NESBWE5) Anglian Water (Layer)
(NESBWE6) Anglian Water (Maldon)
(NESBWE1) Affinity Water (Three Valleys)
(NESBWE2) Anglian Water (Fairstead)
(NESBWE20) IWNL (Limebrook Way)
(NESBWE3) Anglian Water (Fuller Street)
(NESBWE18) IWNL - Throckley
(NESBWE4) Anglian Water (Hogwells)
(NESBWE19) IWNL (Malyon's Lane)
Volume
Operating costs
Revenue
Ml
£m
£m
-
998.9
272.9
220.3
90.6
45.0
39.7
36.3
64.2
21.8
16.5
10.4
8.9
8.5
6.3
2.5
-
0.8
0.2
0.2
0.1
-
-
-
0.1
-
-
-
-
-
-
-
1.8
1.1
0.3
0.2
0.1
0.1
0.1
0.1
0.1
-
-
-
-
-
-
-
Total bulk supply exports
1,842.8
1.4
3.9
4.A Water Bulk
Supply Information (continued)
for the 12 months ended 31 March 2021
Bulk supply imports
(NESBWI2) Anglian Water (Cressing)
(NESBWE14) Thames Water
(NESVW13) - UUW
Total bulk supply imports
Volume
Operating costs
Revenue
Ml
£m
£m
336.1
31,000.0
0.7
31,336.8
0.4
1.7
-
2.1
-
-
-
4.C Impact of Price Control
Performance to Date on RCV
for the 12 months ended 31 March 2021
Totex (net of business rates, abstraction licence fees and grants and
contributions)
Final determination allowed totex (net of business rates, abstraction licence fees and
grants and contributions)
Actual totex (net of business rates, abstraction licence fees and grants and
contributions)
Transition expenditure
Disallowable costs
12 months ended 31 March 2021
Price control period to date
W
a
t
e
r
r
e
s
o
u
r
c
e
s
W
a
t
e
r
n
e
t
w
o
r
k
+
W
a
s
t
e
w
a
t
e
r
n
e
t
w
o
r
k
+
i
B
o
r
e
s
o
u
r
c
e
s
W
a
t
e
r
r
e
s
o
u
r
c
e
s
W
a
t
e
r
n
e
t
w
o
r
k
+
W
a
s
t
e
w
a
t
e
r
n
e
t
w
o
r
k
+
i
B
o
r
e
s
o
u
r
c
e
s
£’m
£’m
£’m
£’m
£’m
£’m
£’m
£’m
24.6
249.5
153.2
16.2
24.6
249.5
153.2
16.2
32.9
234.5
166.0
-
0.2
-
5.1
-
3.1
2.8
-
0.2
2.6
32.9
234.5
166.0
-
0.2
-
5.1
-
3.1
32.7
229.4
162.9
2.8
-
0.2
2.6
Total actual totex (net of business rates, abstraction licence fees and grants
and contributions)
32.7
229.4
162.9
Variance
Variance due to timing of expenditure
Variance due to efficiency
8.1
8.1
-
(20.1)
(20.1)
9.7
9.7
(13.6)
-
-
-
(13.6)
8.1
8.1
-
(20.1)
(20.1)
9.7
9.7
(13.6)
-
-
-
(13.6)
4.C Impact of Price Control
Performance to Date on RCV (continued)
for the 12 months ended 31 March 2021
12 months ended 31 March 2021
Price control period to date
W
a
t
e
r
r
e
s
o
u
r
c
e
s
W
a
t
e
r
n
e
t
w
o
r
k
+
W
a
s
t
e
w
a
t
e
r
n
e
t
w
o
r
k
+
i
B
o
r
e
s
o
u
r
c
e
s
W
a
t
e
r
r
e
s
o
u
r
c
e
s
W
a
t
e
r
n
e
t
w
o
r
k
+
W
a
s
t
e
w
a
t
e
r
n
e
t
w
o
r
k
+
i
B
o
r
e
s
o
u
r
c
e
s
£’m
£’m
£’m
£’m
£’m
£’m
£’m
Customer cost sharing rate
45%
55%
45%
0%
45%
55%
45%
Customer share of totex over/underspend
Company share of totex over/underspend
Totex - business rates and abstraction licence fees
Final determination allowed totex - business rates and abstraction licence fees
Actual totex - business rates and abstraction licence fees
Variance - business rates and abstraction licence fees
-
-
45.5
47.7
2.2
-
-
26.6
27.0
0.4
-
-
7.0
7.0
-
Customer cost sharing rate - business rates and abstraction licence fees
83%
90%
90%
Customer share of totex over/underspend - business rates and abstraction licence
fees
1.8
0.4
-
-
(13.6)
1.4
1.4
-
0%
-
-
-
45.5
47.7
2.2
-
-
26.6
27.0
0.4
-
-
7.0
7.0
-
83%
90%
90%
1.8
0.4
-
£’m
0%
-
(13.6)
1.4
1.4
-
0%
-
4.C Impact of Price Control
Performance to Date on RCV (continued)
for the 12 months ended 31 March 2021
12 months ended 31 March 2021
Price control period to date
W
a
t
e
r
r
e
s
o
u
r
c
e
s
W
a
t
e
r
n
e
t
w
o
r
k
+
W
a
s
t
e
w
a
t
e
r
n
e
t
w
o
r
k
+
i
B
o
r
e
s
o
u
r
c
e
s
W
a
t
e
r
r
e
s
o
u
r
c
e
s
W
a
t
e
r
n
e
t
w
o
r
k
+
W
a
s
t
e
w
a
t
e
r
n
e
t
w
o
r
k
+
i
B
o
r
e
s
o
u
r
c
e
s
£’m
£’m
£’m
£’m
£’m
£’m
£’m
£’m
Company share of totex over/underspend - business rates and abstraction licence
fees
0.4
-
-
0.4
-
-
Totex not subject to cost sharing
Final determination allowed totex - not subject to cost sharing
Actual totex - not subject to cost sharing
Variance - 100% company allocation
Total company share of totex over/under spend
RCV
5.4
8.9
3.5
3.9
4.1
7.5
3.4
3.4
0.6
(0.5)
(1.1)
5.4
8.9
3.5
3.9
4.1
7.5
3.4
3.4
0.6
(0.5)
(1.1)
(1.1)
(13.6)
(1.1)
(13.6)
-
-
-
-
-
-
-
-
Total company share of totex over/under spend
3.9
3.4
(1.1)
(13.6)
3.9
3.4
(1.1)
(13.6)
PAYG rate
89%
56%
49%
41%
89%
56%
49%
41%
4.C Impact of Price Control
Performance to Date on RCV (continued)
for the 12 months ended 31 March 2021
12 months ended 31 March 2021
Price control period to date
W
a
t
e
r
r
e
s
o
u
r
c
e
s
W
a
t
e
r
n
e
t
w
o
r
k
+
W
a
s
t
e
w
a
t
e
r
n
e
t
w
o
r
k
+
i
B
o
r
e
s
o
u
r
c
e
s
W
a
t
e
r
r
e
s
o
u
r
c
e
s
W
a
t
e
r
n
e
t
w
o
r
k
+
W
a
s
t
e
w
a
t
e
r
n
e
t
w
o
r
k
+
i
B
o
r
e
s
o
u
r
c
e
s
£’m
0.4
£’m
1.5
£’m
£’m
(0.6)
(8.0)
£’m
0.4
-
£’m
1.5
-
£’m
£’m
(0.6)
(8.0)
-
-
306.0
1,826.3
1,920.1
144.0
306.4
1,827.8
1,919.5
136.0
RCV element of totex over/underspend
Adjustment for ODI outperformance payment or underperformance payment
RCV determined at FD at 31 March
Projected 'shadow' RCV
Wholesale Reconciliation to FD
Water Resources
Totex excluding business rates and abstraction is £8.2m more than the FD allowance in 20-21 due to the timing of capital
expenditure. The capital expenditure in the year includes £6.4m at Grassholme reservoir for spillway improvements and
embankment stabilisation/improvements as recommended by the most recent s10 inspection report.
Business rates and abstraction licences and totex not subject to cost sharing are both higher than the FD allowance due to
increases in the E.A. abstraction charges in the Northumbria region.
Water Network +
Totex excluding business rates and abstraction is £20.1m less than the FD allowance in 20-21. This is mainly due to the timing of
capital expenditure. The FD allowances are higher in the early years while our planned expenditure is a more even profile across
the AMP in order to optimise delivery.
Totex not subject to cost sharing is £3.4m more than the FD allowance. Although there are no income offsets on new development
quotes from April 2020 onwards there were still legacy schemes being delivered in 20-21.
Wastewater Network +
Totex excluding business rates and abstraction is £9.6m more than the FD allowance in 20-21. This is mainly due to the timing of
capital expenditure. The FD allowances are higher in the later years while our planned expenditure is a more even profile across
the AMP in order to optimise delivery.
Bioresources
Totex excluding business rates and abstraction is £13.7m less than the FD allowance in 20-21. Our sludge strategy which
revolves around two strategically placed AAD plants supplemented by satellite dewatering sites had already proved to be very
successful. The completion of the Bran Sands gas to grid project late in 2019-20 has helped us deliver a further significant
reduction in net operating costs.
Disallowable costs
Costs classified as disallowable are:
• CMA expenditure
• Pollution incidents (EA enforcement undertakings)
• Section 74 fines and fixed penalty notices
• Compensation claims
Recharges in respect of ‘principal use’ of assets
There are recharges between business units which mainly relate to I.S. assets and a smaller amount of offices/buildings
expenditure. The capital is allocated to Water Network+ and recharged to the other business units including retail. The values are
reported on table 2A lines 4 and 9.
4.D Totex Analysis:
Water Resources and Water Network+
for the 12 months ended 31 March 2021
Network+
Water
resources
Raw water
transport
Raw water
storage Water treatment
Treated water
distribution
£’m
£’m
£’m
£’m
£’m
Total
£’m
62.8
4.9
1.6
48.9
102.7
220.9
0.7
-
63.5
8.9
72.4
-
-
-
4.9
1.2
6.1
-
-
-
1.6
-
1.6
-
-
-
48.9
0.4
49.3
-
-
-
0.7
-
102.7
221.6
1.6
12.1
104.3
233.7
-
-
Operating expenditure
Base operating expenditure
Enhancement operating expenditure
Developer services operating expenditure
Total operating expenditure excluding third party services
Third party services
Total operating expenditure
Grants and contributions - operating expenditure
Capital expenditure
4.D Totex Analysis:
Water Resources and Water Network+ (continued)
for the 12 months ended 31 March 2021
Network+
Water
resources
Raw water
transport
Raw water
storage Water treatment
Treated water
distribution
Base capital expenditure
Enhancement capital expenditure
Developer services capital expenditure
Total gross capital expenditure (excluding third party)
Third party services
Total gross capital expenditure
Grants and contributions - capital expenditure
Net totex
£’m
13.9
3.3
-
17.2
-
17.2
-
89.6
£’m
0.1
-
-
0.1
-
0.1
-
6.2
£’m
-
-
-
-
-
-
-
£’m
43.1
8.3
-
51.4
-
£’m
54.2
5.0
14.7
73.9
-
Total
£’m
111.3
16.6
14.7
142.6
-
51.4
73.9
142.6
-
(16.1)
(16.1)
1.6
100.7
162.1
360.2
4.D Totex Analysis:
Water Resources and Water Network+ (continued)
for the 12 months ended 31 March 2021
Network+
Water
resources
Raw water
transport
Raw water
storage Water treatment
Treated water
distribution
£’m
£’m
£’m
£’m
£’m
0.3
-
-
-
-
-
1.7
-
4.8
-
Total
£’m
6.8
-
Cash expenditure
Pension deficit recovery payments
Other cash items
Totex including cash items
89.9
6.2
1.6
102.4
166.9
367.0
Atypical expenditure
CMA costs
Total atypical expenditure
0.2
0.2
-
-
-
-
0.8
0.8
2.3
2.3
3.3
3.3
4.E Totex Analysis:
Wastewater Network+ and Bioresources
for the 12 months ended 31 March 2021
Network+ Sewage Collection
Network+ Sewage Treatment
Bioresources
Total
S
u
r
f
a
c
e
w
a
t
e
r
i
d
r
a
n
a
g
e
F
o
u
l
i
H
g
h
w
a
y
d
r
a
n
a
g
e
i
S
e
w
a
g
e
t
r
e
a
t
m
e
n
t
l
i
q
u
o
r
t
r
e
a
t
m
e
n
t
i
a
n
d
d
s
p
o
s
a
l
I
m
p
o
r
t
e
d
s
u
d
g
e
l
l
S
u
d
g
e
t
r
a
n
s
p
o
r
t
l
S
u
d
g
e
t
r
e
a
t
m
e
n
t
l
S
u
d
g
e
d
s
p
o
s
a
i
l
i
B
o
r
e
s
o
u
r
c
e
s
£’m
£’m
£’m
£’m
£’m
£’m
£’m
£’m
£’m
Operating expenditure
Base operating expenditure
Enhancement operating expenditure
Developer services operating expenditure
Total operating expenditure excluding third party
services
Third party services
9.6
0.4
-
16.1
0.4
-
10.0
16.5
0.1
0.1
Total operating expenditure
10.1
16.6
Grants and contributions - operating expenditure
-
-
Capital expenditure
8.7
0.2
-
8.9
-
8.9
-
51.2
3.8
3.8
(3.7)
1.3
90.8
0.2
-
51.4
-
51.4
-
-
-
3.8
-
3.8
-
-
-
-
-
-
-
1.2
-
3.8
(3.7)
1.3
92.0
-
-
-
0.2
3.8
(3.7)
1.3
92.2
-
-
-
-
4.E Totex Analysis:
Wastewater Network+ and Bioresources (continued)
for the 12 months ended 31 March 2021
Network+ Sewage Collection
Network+ Sewage Treatment
Bioresources
Total
S
u
r
f
a
c
e
w
a
t
e
r
i
d
r
a
n
a
g
e
F
o
u
l
i
H
g
h
w
a
y
d
r
a
n
a
g
e
i
S
e
w
a
g
e
t
r
e
a
t
m
e
n
t
l
i
q
u
o
r
t
r
e
a
t
m
e
n
t
i
a
n
d
d
s
p
o
s
a
l
I
m
p
o
r
t
e
d
s
u
d
g
e
l
l
S
u
d
g
e
t
r
a
n
s
p
o
r
t
£’m
£’m
£’m
£’m
£’m
£’m
Base capital expenditure
Enhancement capital expenditure
Developer services capital expenditure
7.6
3.2
1.9
12.7
5.4
3.3
6.8
2.9
1.8
Total gross capital expenditure (excluding third party)
12.7
21.4
11.5
Third party services
-
-
-
Total gross capital expenditure
12.7
21.4
11.5
Grants and contributions - capital expenditure
(0.9)
(1.4)
(0.8)
29.6
10.6
-
40.2
-
40.2
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
l
S
u
d
g
e
t
r
e
a
t
m
e
n
t
£’m
2.7
-
-
2.7
-
2.7
-
l
S
u
d
g
e
d
s
p
o
s
a
i
l
i
B
o
r
e
s
o
u
r
c
e
s
£’m
£’m
-
-
-
-
-
-
-
59.4
22.1
7.0
88.5
-
88.5
(3.1)
Net totex
21.9
36.6
19.6
91.6
3.8
3.8
(1.0)
1.3
177.6
4.E Totex Analysis:
Wastewater Network+ and Bioresources (continued)
for the 12 months ended 31 March 2021
Network+ Sewage Collection
Network+ Sewage Treatment
Bioresources
Total
S
u
r
f
a
c
e
w
a
t
e
r
i
d
r
a
n
a
g
e
F
o
u
l
i
H
g
h
w
a
y
d
r
a
n
a
g
e
i
S
e
w
a
g
e
t
r
e
a
t
m
e
n
t
l
i
q
u
o
r
t
r
e
a
t
m
e
n
t
i
a
n
d
d
s
p
o
s
a
l
I
m
p
o
r
t
e
d
s
u
d
g
e
l
l
S
u
d
g
e
t
r
a
n
s
p
o
r
t
l
S
u
d
g
e
t
r
e
a
t
m
e
n
t
l
S
u
d
g
e
d
s
p
o
s
a
i
l
i
B
o
r
e
s
o
u
r
c
e
s
Cash expenditure
Pension deficit recovery payments
Other cash items
£’m
£’m
£’m
£’m
£’m
£’m
£’m
£’m
£’m
1.3
-
0.2
-
-
-
1.7
-
-
-
-
-
0.2
-
-
-
3.4
-
Totex including cash items
23.2
36.8
19.6
93.3
3.8
3.8
(0.8)
1.3
181.0
Atypical expenditure
CMA costs
Total atypical expenditure
0.7
0.7
0.1
0.1
-
-
0.8
0.8
-
-
-
-
0.2
0.2
-
-
1.8
1.8
4.F Major Project Expenditure for
Wholesale Water by Purpose
for the 12 months ended 31 March 2021
Expenditure in report year
Cumulative expenditure on schemes completed in the report year
Water network+
Water network+
W
a
t
e
r
r
e
s
o
u
r
c
e
s
R
a
w
w
a
t
e
r
t
r
a
n
s
p
o
r
t
R
a
w
w
a
t
e
r
s
t
o
r
a
g
e
W
a
t
e
r
t
r
e
a
t
m
e
n
t
T
r
e
a
t
e
d
w
a
t
e
r
i
d
s
t
r
i
b
u
t
i
o
n
T
o
t
a
l
W
a
t
e
r
r
e
s
o
u
r
c
e
s
R
a
w
w
a
t
e
r
t
r
a
n
s
p
o
r
t
R
a
w
w
a
t
e
r
s
t
o
r
a
g
e
W
a
t
e
r
t
r
e
a
t
m
e
n
t
T
r
e
a
t
e
d
w
a
t
e
r
i
d
s
t
r
i
b
u
t
i
o
n
T
o
t
a
l
£’m
£’m
£’m
£’m
£’m
£’m
£’m
£’m
£’m
£’m
£’m
£’m
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1.5
1.0
0.8
1.5
-
-
-
-
-
1.1
1.5
1.0
0.8
1.5
1.1
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2.5
-
-
-
-
-
-
-
-
2.5
-
1.1
1.1
Major project capital
expenditure by purpose
Eels Regulations (measures
at intakes) - Eel Regs South
Eels Regulations (measures
at intakes) - Eel Regs and
NEP North
Eels Regulations (measures
at intakes) - Riding Mill Eel
Screens
Addressing raw water
deterioration- Mosswood
UV
Meeting lead standards -
React Net Renewal S 2021
4.F Major Project Expenditure for
Wholesale Water by Purpose (continued)
for the 12 months ended 31 March 2021
Expenditure in report year
Cumulative expenditure on schemes completed in the report year
Water network+
Water network+
W
a
t
e
r
r
e
s
o
u
r
c
e
s
R
a
w
w
a
t
e
r
t
r
a
n
s
p
o
r
t
R
a
w
w
a
t
e
r
s
t
o
r
a
g
e
W
a
t
e
r
t
r
e
a
t
m
e
n
t
T
r
e
a
t
e
d
w
a
t
e
r
i
d
s
t
r
i
b
u
t
i
o
n
T
o
t
a
l
W
a
t
e
r
r
e
s
o
u
r
c
e
s
R
a
w
w
a
t
e
r
t
r
a
n
s
p
o
r
t
R
a
w
w
a
t
e
r
s
t
o
r
a
g
e
W
a
t
e
r
t
r
e
a
t
m
e
n
t
T
r
e
a
t
e
d
w
a
t
e
r
i
d
s
t
r
i
b
u
t
i
o
n
T
o
t
a
l
£’m
£’m
£’m
£’m
£’m
£’m
£’m
£’m
£’m
£’m
£’m
£’m
Meeting lead standards -
React Net Renewal N 2021
Ecological improvements at
abstractions - Suffolk NEP
Flow Monitors
Ecological improvements at
abstractions - Essex NEP
Flow Monitors
Security - SEMD - Water
UK SSAOA compliance
north & south
Security - Non-SEMD -
Cyber Security
Total major project capital
expenditure
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1.1
1.1
0.2
0.1
6.1
-
-
-
0.2
0.1
6.1
-
0.6
0.6
11.2
2.8
14.0
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1.1
1.1
-
-
-
-
-
-
0.3
0.3
2.5
2.5
5.0
4.F Major Project Expenditure for
Wholesale Water by Purpose (continued)
for the 12 months ended 31 March 2021
Expenditure in report year
Cumulative expenditure on schemes completed in the report year
Water network+
Water network+
W
a
t
e
r
r
e
s
o
u
r
c
e
s
R
a
w
w
a
t
e
r
t
r
a
n
s
p
o
r
t
R
a
w
w
a
t
e
r
s
t
o
r
a
g
e
W
a
t
e
r
t
r
e
a
t
m
e
n
t
T
r
e
a
t
e
d
w
a
t
e
r
i
d
s
t
r
i
b
u
t
i
o
n
T
o
t
a
l
W
a
t
e
r
r
e
s
o
u
r
c
e
s
R
a
w
w
a
t
e
r
t
r
a
n
s
p
o
r
t
R
a
w
w
a
t
e
r
s
t
o
r
a
g
e
W
a
t
e
r
t
r
e
a
t
m
e
n
t
T
r
e
a
t
e
d
w
a
t
e
r
i
d
s
t
r
i
b
u
t
i
o
n
T
o
t
a
l
£’m
£’m
£’m
£’m
£’m
£’m
£’m
£’m
£’m
£’m
£’m
£’m
Major project operating
expenditure by purpose
Invasive Non Native Species
- Raw Water WINEP AMP7
Drinking Water Protected
Areas (schemes) - Raw
Water WINEP AMP7
Investigations
Total major project
operating expenditure
0.2
0.4
0.1
0.7
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
0.2
0.4
0.1
0.7
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4.G Major Project Expenditure for
Wholesale Wastewater by Purpose
for the 12 months ended 31 March 2021
Wastewater network+
Bioresources
Total
Wastewater network+
Bioresources
Total
Expenditure in report year
Cumulative expenditure on schemes completed in the report year
Sewage collection
Sewage collection
S
u
r
f
a
c
e
w
a
t
e
r
i
d
r
a
n
a
g
e
F
o
u
l
i
H
g
h
w
a
y
d
r
a
n
a
g
e
i
S
e
w
a
g
e
t
r
e
a
t
m
e
n
t
l
S
u
d
g
e
l
i
q
u
o
r
t
r
e
a
t
m
e
n
t
l
S
u
d
g
e
t
r
a
n
s
p
o
r
t
l
S
u
d
g
e
t
r
e
a
t
m
e
n
t
l
S
u
d
g
e
d
s
p
o
s
a
i
l
S
u
r
f
a
c
e
w
a
t
e
r
i
d
r
a
n
a
g
e
F
o
u
l
i
H
g
h
w
a
y
d
r
a
n
a
g
e
i
S
e
w
a
g
e
t
r
e
a
t
m
e
n
t
l
S
u
d
g
e
l
i
q
u
o
r
t
r
e
a
t
m
e
n
t
l
S
u
d
g
e
t
r
a
n
s
p
o
r
t
l
S
u
d
g
e
t
r
e
a
t
m
e
n
t
i
a
n
d
d
s
p
o
s
a
l
l
S
u
d
g
e
d
s
p
o
s
a
i
l
i
a
n
d
d
s
p
o
s
a
l
£’m
£’m
£’m
£’m
£’m
£’m
£’m
£’m
£’m
£’m
£’m
£’m
£’m
£’m
£’m
£’m
£’m
£’m
Major project capital
expenditure by purpose
Schemes to increase storm
tank capacity - Hepscott
STW Storm Tank
Schemes to increase storm
tank capacity - Lowick STW
Reg Storm tank
Growth at sewage
treatment works (excluding
sludge treatment) -
Wolsingham Growth
Phosphorus removal - River
Gaunless NEP Scheme
-
-
-
-
-
-
-
-
-
-
-
-
0.6
0.7
5.0
0.4
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
0.6
0.7
5.0
0.4
-
-
-
-
-
-
-
-
-
-
-
-
0.6
0.9
-
8.6
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
0.6
0.9
-
8.6
4.G Major Project Expenditure for
Wholesale Wastewater by Purpose (continued)
for the 12 months ended 31 March 2021
Wastewater network+
Bioresources
Total
Wastewater network+
Bioresources
Total
Expenditure in report year
Cumulative expenditure on schemes completed in the report year
Sewage collection
Sewage collection
S
u
r
f
a
c
e
w
a
t
e
r
i
d
r
a
n
a
g
e
F
o
u
l
i
H
g
h
w
a
y
d
r
a
n
a
g
e
i
S
e
w
a
g
e
t
r
e
a
t
m
e
n
t
l
S
u
d
g
e
l
i
q
u
o
r
t
r
e
a
t
m
e
n
t
l
S
u
d
g
e
t
r
a
n
s
p
o
r
t
l
S
u
d
g
e
t
r
e
a
t
m
e
n
t
l
S
u
d
g
e
d
s
p
o
s
a
i
l
S
u
r
f
a
c
e
w
a
t
e
r
i
d
r
a
n
a
g
e
F
o
u
l
i
H
g
h
w
a
y
d
r
a
n
a
g
e
i
S
e
w
a
g
e
t
r
e
a
t
m
e
n
t
l
S
u
d
g
e
l
i
q
u
o
r
t
r
e
a
t
m
e
n
t
l
S
u
d
g
e
t
r
a
n
s
p
o
r
t
l
S
u
d
g
e
t
r
e
a
t
m
e
n
t
i
a
n
d
d
s
p
o
s
a
l
l
S
u
d
g
e
d
s
p
o
s
a
i
l
i
a
n
d
d
s
p
o
s
a
l
£’m
£’m
£’m
£’m
£’m
£’m
£’m
£’m
£’m
£’m
£’m
£’m
£’m
£’m
£’m
£’m
£’m
£’m
Phosphorus removal -
Stokesley STW and Great
Ayton STW
Growth at sewage
treatment works (excluding
sludge treatment) - Waren
Mill STW
Growth at sewage
treatment works (excluding
sludge treatment)
-Embleton STW Growth
Reduce flooding risk for
properties - Prince of Wales
Close
Reduce flooding risk for
properties - Monks Wood
Flooding
-
-
-
-
-
-
-
-
-
0.2
0.3
0.1
-
0.1
-
0.2
0.4
0.5
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
0.2
0.4
0.5
-
-
-
-
-
-
-
-
-
0.6
0.3
0.6
0.3
0.1
0.6
1.0
0.5
3.9
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3.9
-
-
1.2
2.1
4.G Major Project Expenditure for
Wholesale Wastewater by Purpose (continued)
for the 12 months ended 31 March 2021
Wastewater network+
Bioresources
Total
Wastewater network+
Bioresources
Total
Expenditure in report year
Cumulative expenditure on schemes completed in the report year
Sewage collection
Sewage collection
S
u
r
f
a
c
e
w
a
t
e
r
i
d
r
a
n
a
g
e
F
o
u
l
i
H
g
h
w
a
y
d
r
a
n
a
g
e
i
S
e
w
a
g
e
t
r
e
a
t
m
e
n
t
l
S
u
d
g
e
l
i
q
u
o
r
t
r
e
a
t
m
e
n
t
l
S
u
d
g
e
t
r
a
n
s
p
o
r
t
l
S
u
d
g
e
t
r
e
a
t
m
e
n
t
l
S
u
d
g
e
d
s
p
o
s
a
i
l
S
u
r
f
a
c
e
w
a
t
e
r
i
d
r
a
n
a
g
e
F
o
u
l
i
H
g
h
w
a
y
d
r
a
n
a
g
e
i
S
e
w
a
g
e
t
r
e
a
t
m
e
n
t
l
S
u
d
g
e
l
i
q
u
o
r
t
r
e
a
t
m
e
n
t
l
S
u
d
g
e
t
r
a
n
s
p
o
r
t
l
S
u
d
g
e
t
r
e
a
t
m
e
n
t
i
a
n
d
d
s
p
o
s
a
l
l
S
u
d
g
e
d
s
p
o
s
a
i
l
i
a
n
d
d
s
p
o
s
a
l
£’m
£’m
£’m
£’m
£’m
£’m
£’m
£’m
£’m
£’m
£’m
£’m
£’m
£’m
£’m
£’m
£’m
£’m
Reduce flooding risk for
properties - FOC Enh Prog
2020/21
Total major project capital
expenditure
Major project operating
expenditure by purpose
Reduce flooding risk for
properties - Integrated
drainage studies various
Investigations - WINEP
Cullercoats BWStudy
Investigations - WINEP
Seaton Carew BW Study
Investigations - WINEP SSS
BW Studies
Total major project
operating expenditure
2.2
3.6
2.0
-
2.4
4.0
2.1
7.8
0.2
0.4
0.2
-
-
-
-
-
-
-
-
-
0.2
0.4
0.2
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7.8
2.2
3.6
2.0
-
16.3
3.1
5.2
2.8
14.0
0.8
0.2
0.4
0.2
-
-
-
-
-
-
-
-
-
-
-
-
0.8
0.2
0.4
0.2
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7.8
25.1
0.8
-
-
-
0.8
4.H Financial Metrics
for the 12 months ended 31 March 2021
Financial indicators
Net debt
Regulatory equity
Regulatory gearing
Post tax return on regulatory equity
RORE (return on regulatory equity)
Dividend yield
Retail profit margin - Household
Retail profit margin - Non household
Credit rating - Fitch
Credit rating - Moody's
Credit rating - Standard and Poor's
Return on RCV
Dividend cover
Funds from operations (FFO)
Interest cover (cash)
Adjusted interest cover (cash)
FFO/Net debt
Effective tax rate
RCF
RCF/Net debt
Units
Current year
AMP to date
£m
£m
%
%
%
%
%
%
Text
Text
Text
%
dec
£m
dec
dec
dec
%
£m
dec
2,917.6
1,278.8
69.5%
4.9%
2.8%
0.0%
(14.3%)
0.0%
N/A
Baa1
BBB+
4.2%
-
207.0
3.2
1.0
0.1
18.5%
207.0
0.1
-
-
-
-
2.8%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4.H Financial Metrics (continued)
for the 12 months ended 31 March 2021
Units
Current year
AMP to date
Revenue and earnings
Revenue (actual)
EBITDA (actual)
Borrowings
Proportion of borrowings which are fixed rate
Proportion of borrowings which are floating rate
Proportion of borrowings which are index linked
Proportion of borrowings due within 1 year or less
Proportion of borrowings due in more than 1 year but no more than 2
years
Proportion of borrowings due in more than 2 years but but no more
than 5 years
Proportion of borrowings due in more than 5 years but no more than 20
years
Proportion of borrowings due in more than 20 years
£m
£m
%
%
%
%
%
%
%
%
689.6
1,076.2
60.2%
0.9%
38.9%
1.4%
12.9%
8.5%
54.7%
22.5%
An explanation of RORE performance compared to the allowance in the FD is provided in the commentary to table 1F
4.I Financial Derivatives
for the 12 months ended 31 March 2021
Nominal value by maturity (net) at 31 March
Total value at 31 March
1 to 2 years
2 to 5 years
Over 5 years
Nominal value
(net)
Mark to
Market
Total
accretion at 31
March
Interest rate
(weighted average for 12 months
to 31 March 2021)
Payable
Receivable
£’m
£’m
£’m
£’m
£’m
£’m
%
%
Interest rate swap (sterling)
Floating to fixed rate
10.0
150.0
-
160.0
(10.6)
-
2.51%
0.49%
Fixed to index-linked
-
150.0
100.0
250.0
(42.1)
Total
10.0
300.0
100.0
410.0
(52.7)
Forward currency contracts
Forward currency contracts USD
Total
1.0
1.0
4.1
4.1
-
-
5.1
5.1
0.2
0.2
31.1
31.1
-
-
Total financial derivatives
11.0
304.1
100.0
415.1
(52.5)
31.1
0.78%
2.17%
For the floating to fixed rate swaps, the interest rate receivable has been calculated using a 3 month sterling LIBOR of 0.088%, being the market rate for the last day of 2020/21.
For the fixed to index-linked swaps, the interest rate payable has been calculated using a reference RPI of 1.47%, being the published RPI for March 2021. Both swaps reported in
this line are set at RPI minus a fixed percentage.
4.J Base Expenditure Analysis:
Water Resources and Water Network+
for the 12 months ended 31 March 2021
Water Network+
Water
resources
Raw water
transport
Raw water
storage Water treatment
Treated water
distribution
£’m
£’m
£’m
£’m
£’m
7.5
(0.3)
1.1
0.4
-
6.4
4.2
1.5
-
-
-
-
0.4
3.0
-
-
-
-
-
1.6
-
3.0
16.0
-
-
-
1.0
40.6
4.0
-
-
0.5
1.2
65.0
19.7
Total
£’m
28.0
(0.3)
1.1
0.9
2.2
114.0
30.9
Operating expenditure
Power
Income treated as negative expenditure
Bulk supply
Renewals expensed in year (infrastructure)
Renewals expensed in year (non-infrastructure)
Other operating expenditure
Local authority and Cumulo rates
4.J Base Expenditure Analysis:
Water Resources and Water Network+ (continued)
for the 12 months ended 31 March 2021
Water Network+
Water
resources
Raw water
transport
Raw water
storage Water treatment
Treated water
distribution
£’m
£’m
£’m
£’m
£’m
Service Charges
Canal & River Trust abstraction charges/ discharge consents
Environment Agency / NRW abstraction charges/ discharge consents
Other abstraction charges/ discharge consents
Other operating expenditure
Costs associated with Traffic Management Act
Costs associated with lane rental schemes
Statutory water softening
0.5
43.0
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
0.3
-
-
-
-
Total
£’m
0.5
43.3
-
-
-
-
0.3
0.3
-
-
-
-
Total base operating expenditure
62.8
4.9
1.6
48.9
102.7
220.9
4.J Base Expenditure Analysis:
Water Resources and Water Network+ (continued)
for the 12 months ended 31 March 2021
Water Network+
Water
resources
Raw water
transport
Raw water
storage Water treatment
Treated water
distribution
£’m
£’m
£’m
£’m
£’m
Capital expenditure
Maintaining the long term capability of the assets - infra
Maintaining the long term capability of the assets - non-infra
Total base capital expenditure
Traffic Management Act
1.0
12.9
13.9
-
0.1
0.1
Projects incurring costs associated with Traffic Management Act
-
-
-
-
-
-
Total
£’m
27.4
83.9
111.3
-
43.1
43.1
26.4
27.8
54.2
-
8,098.0
8,098.0
4.K Base Expenditure Analysis:
Wastewater Network+ and Bioresources
for the 12 months ended 31 March 2021
Wastewater network+
Bioresources
S
u
r
f
a
c
e
w
a
t
e
r
i
d
r
a
n
a
g
e
F
o
u
l
i
H
g
h
w
a
y
d
r
a
n
a
g
e
i
S
e
w
a
g
e
t
r
e
a
t
m
e
n
t
l
S
u
d
g
e
l
i
q
u
o
r
t
r
e
a
t
m
e
n
t
l
S
u
d
g
e
t
r
a
n
s
p
o
r
t
l
S
u
d
g
e
t
r
e
a
t
m
e
n
t
i
a
n
d
d
s
p
o
s
a
l
l
S
u
d
g
e
d
s
p
o
s
a
i
l
Total
£’m
£’m
£’m
£’m
£’m
£’m
£’m
£’m
Operating expenditure
Power
Income treated as negative expenditure
Bulk discharge
Renewals expensed in year (infrastructure)
Renewals expensed in year (non-infrastructure)
Other operating expenditure
Local authority and Cumulo rates
7.2
-
-
0.1
-
0.2
0.3
12.6
2.3
1.0
(2.5)
-
-
-
0.2
0.1
-
-
-
0.1
-
-
-
-
0.2
15.8
8.6
29.7
-
-
6.7
-
-
-
-
1.5
-
-
-
-
-
2.8
-
(12.0)
-
-
0.1
9.3
1.4
-
-
-
-
-
20.6
(12.0)
-
0.4
0.4
1.3
69.2
-
8.4
4.K Base Expenditure Analysis:
Wastewater Network+ and Bioresources (continued)
for the 12 months ended 31 March 2021
Wastewater network+
Bioresources
S
u
r
f
a
c
e
w
a
t
e
r
i
d
r
a
n
a
g
e
F
o
u
l
i
H
g
h
w
a
y
d
r
a
n
a
g
e
i
S
e
w
a
g
e
t
r
e
a
t
m
e
n
t
l
S
u
d
g
e
l
i
q
u
o
r
t
r
e
a
t
m
e
n
t
l
S
u
d
g
e
t
r
a
n
s
p
o
r
t
l
S
u
d
g
e
t
r
e
a
t
m
e
n
t
i
a
n
d
d
s
p
o
s
a
l
l
S
u
d
g
e
d
s
p
o
s
a
i
l
Total
Service Charges
Canal & River Trust discharge consents
Environment Agency / NRW discharge consents
Other discharge charges / permits
Other expenditure
Costs associated with Traffic Management Act
Costs associated with lane rental schemes
Costs associated with Industrial Emissions Directive
£’m
£’m
£’m
£’m
£’m
£’m
£’m
£’m
-
1.7
-
0.1
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2.0
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3.7
-
0.1
-
-
Total base operating expenditure
9.6
16.1
8.7
51.2
3.8
3.8
(3.7)
1.3
90.8
4.K Base Expenditure Analysis:
Wastewater Network+ and Bioresources (continued)
for the 12 months ended 31 March 2021
Wastewater network+
Bioresources
S
u
r
f
a
c
e
w
a
t
e
r
i
d
r
a
n
a
g
e
F
o
u
l
i
H
g
h
w
a
y
d
r
a
n
a
g
e
i
S
e
w
a
g
e
t
r
e
a
t
m
e
n
t
l
S
u
d
g
e
l
i
q
u
o
r
t
r
e
a
t
m
e
n
t
l
S
u
d
g
e
t
r
a
n
s
p
o
r
t
l
S
u
d
g
e
t
r
e
a
t
m
e
n
t
i
a
n
d
d
s
p
o
s
a
l
l
S
u
d
g
e
d
s
p
o
s
a
i
l
Capital expenditure
Maintaining the long term capability of the assets - infra
Maintaining the long term capability of the assets - non-infra
Total base capital expenditure
Traffic Management Act
5.7
1.9
7.6
9.5
3.2
12.7
5.1
1.7
6.8
0.1
29.5
29.6
Projects incurring costs associated with Traffic Management Act
5,957.0
-
-
-
-
-
-
-
-
-
-
-
-
2.7
2.7
-
Total
20.4
39.0
59.4
5,957.0
-
-
-
-
4.N Developer Services Expenditure:
Water Resources and Water Network+
for the 12 months ended 31 March 2021
New connections
Requisition mains
Infrastructure network reinforcement
s185 diversions
Total developer services expenditure - capex
Total developer services expenditure - opex
Total developer services expenditure
Capex
Capex
Capex
Capex
Capex
Opex
Totex
W
a
t
e
r
r
e
s
o
u
r
c
e
s
R
a
w
w
a
t
e
r
t
r
a
n
s
p
o
r
t
R
a
w
w
a
t
e
r
s
t
o
r
a
g
e
Expenditure in report year
Water network+
W
a
t
e
r
t
r
e
a
t
m
e
n
t
T
r
e
a
t
e
d
w
a
t
e
r
i
d
s
t
r
i
b
u
t
i
o
n
T
o
t
a
l
£’m
£’m
£’m
£’m
£’m
£’m
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7.0
6.4
0.3
1.0
7.0
6.4
0.3
1.0
14.7
14.7
-
-
14.7
14.7
4.O Developer Services Expenditure:
Wastewater Network+ and Bioresources
for the 12 months ended 31 March 2021
Wastewater network+
Bioresources
Expenditure in report year £m
S
u
r
f
a
c
e
w
a
t
e
r
i
d
r
a
n
a
g
e
F
o
u
l
i
H
g
h
w
a
y
d
r
a
n
a
g
e
i
S
e
w
a
g
e
t
r
e
a
t
m
e
n
t
l
S
u
d
g
e
l
i
q
u
o
r
t
r
e
a
t
m
e
n
t
l
S
u
d
g
e
t
r
a
n
s
p
o
r
t
l
S
u
d
g
e
t
r
e
a
t
m
e
n
t
i
a
n
d
d
s
p
o
s
a
l
l
S
u
d
g
e
d
s
p
o
s
a
i
l
T
o
t
a
l
New connections and requisition sewers
Infrastructure network reinforcement
s185 diversions
Other price controlled activities
Total developer services expenditure
Total developer services expenditure
Total developer services expenditure
Capex
Capex
Capex
Capex
Capex
Opex
Totex
£’m
£’m
£’m
£’m
£’m
£’m
£’m
£’m
£’m
-
0.1
0.1
1.6
2.7
1.4
-
0.1
-
0.3
0.4
0.3
1.9
3.3
1.8
-
-
-
1.9
3.3
1.8
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
0.2
5.7
0.1
1.0
7.0
-
7.0
4.P Expenditure on Non-Price
Control Diversions
for the 12 months ended 31 March 2021
Diversions - NRSWA
Diversions - other non-price control
Total expenditure on non-price control
Water
resources
Water
network+
Wastewater
network+
Bioresources
Total
£’m
-
-
-
£’m
2.0
-
2.0
£’m
0.1
-
0.1
£’m
-
-
-
£’m
2.1
-
2.1
9.A Innovation Competition
for the 12 months ended 31 March 2021
Forecast
expenditure
on innovation
projects funded
through the
innovation
competition
Actual
expenditure
on innovation
projects funded
through the
innovation
competition in
year
Bids accepted
and awarded
funding for
innovation
competition
Difference
between actual
and forecast
expenditure
Cumulative
spend on
innovation
projects
Allowed future
expenditure
on innovation
projects funded
through the
innovation
competition
Expenditure
on innovation
projects funded
by shareholders
nr
-
-
£’m
£’m
£’m
£’m
£’m
£’m
-
-
-
-
-
-
-
-
-
-
-
-
Innovation project 1
Total
9.A Innovation Competition (continued)
for the 12 months ended 31 March 2021
Allowed
Allowed innovation competition fund price control revenue
Revenue collected for the purposes of the innovation competition
Price control revenue collected from customers
Non-price control revenue (e.g. royalties)
Revenue collected from customers and transferred into the innovation competition fund
Administration
Administration charge for innovation partner
Current year
£’m
2.5
2.5
-
2.5
-
Innovation Competition
As part of PR19 Ofwat established its Innovation Fund, the purpose of which is to grow the water sector’s capacity to innovate enabling it to better meet the evolving needs of
customers, society and the environment. Our Final Determination revenue for 2020/21 included an allowance of £2.5m to contribute towards the Innovation Fund. This was recovered
from customers in 2020/21 charges.
Funding for the first ‘Innovation in Water Challenge’ was not awarded until April 2021. As a result, the £2.5m collected in 2020/21 had not been paid out by 31 March 2021 and was
included in the cash balance reported in table 1C. We have accrued £2.5m in operating costs, as the cash collected from customers will be paid towards projects as they are awarded
through future innovation competitions.
Additional tables can be found on our website: www.nwg.co.uk