LEAKAGE CONFERENCE 2016

Transcription

1 17 TH ANNUAL LEAKAGE CONFERENCE 2016 Tuesday, 11 October 9am to 4.30pm Crowne Plaza Birmingham Follow us on Join the conversation #leakage2016 Water UK Partners Media Partner Charity Partner

2 Chair s opening remarks Martin Baggs Former Chief Executive Officer of Thames Water

3 Water UK Partners Media Partner Charity Partner

4 Event and networking breaks sponsor

5 Exhibitors

6 17 TH ANNUAL LEAKAGE CONFERENCE 2016 Tuesday, 11 October 9am to 4.30pm Crowne Plaza Birmingham Follow us on Join the conversation #leakage2016 Water UK Partners Media Partner Charity Partner

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8 Chair s opening remarks Martin Baggs Former Chief Executive Officer of Thames Water

9 Water 2020 and beyond David Black Senior Director Water 2020 Ofwat

10 Water 2020 and Beyond David Black, Senior Director, Water 2020, Ofwat 11 October 2016 Trust in water 10

11 Greater role for markets across value chain We continue to develop a less intrusive approach for five-year reviews (more complexity though en route to simplification as markets work) Direct procurement for customers (new infrastructure) Water resources Focus on new resources as most benefits from wider consideration of options for resources across company boundaries to promote efficiency and resilience Trading is below its optimal level, and taking steps to mitigate identified barriers to this could result in benefits of up to 1 billion for customers We will also enable third party resource providers in England to contract with retailers as provided for in Water Act 2014 Retail 2014 Water Act delivers retailer choice for business customers by 2017 Benefits from improved efficiency and M&A of retail operations as well as improving service and increasing customer focus Environmental improvements and water efficiency services Retail household We are also reviewing case for extending competition to HH retail (reporting to Government in Sept) Bioresources Enable better and more effective optimisation Greater participation from firms operating in wider waste markets OFT/Ofwat study identified significant benefits from development of markets for bioresources processing/transformation to gas and fertiliser Direct procurement for customers for schemes over 100 million: benefits include competition to provide finance as well as services and revealing information about the market price of capital Trust in water 11

12 Companies commitments to reduce leakage by 2020 *Anglian Water s performance commitment is for no reduction in leakage, but its stated aim is to achieve a reduction of 10% funded through in-period ODI rewards. Trust in water 12

13 Rising population but falling water demand in England ( ) Its not just about new water resources demand management and reducing leakage matter too Trust in water 13

14 Companies performance on leakage in Year One Percentage reduction in leakage over AMP 6 AFW 3% 4% BRL 0% 8% TMS 2% 3% WSH 2% 2% SBW 0% 9% SVT 1% 4% SEW 1% 5% WSX 1% 2% YKY 0% 4% NES Northumbria 1% 4% SES 0% 1% SRN 0% 5% PRT 0% 6% DVW 0% 14% ANH 0% 2% NES Essex & Suffolk 0% 6% SSC South Staffordshire 0% 1% SSC Cambridge 0% 2% SWT 0% 0% UU 0% 2% 0% 2% 4% 6% 8% 10% 12% 14% 16% Actual CPL Trust in water 14

15 Retail Market Opening update: The Shadow Market and preparations for 2017 Ben Jeffs Chief Executive Officer MOSL

16 Retail Market Opening Update The shadow market and preparations for April 2017 Ben Jeffs Chief Executive Market Operator Services Limited 11 October 2016

17 2015/16 - from a standing start... Mobilisation & Procurement Design & Build to Apr 15 May 15 Jun 15 Jul 15 Aug 15 Sep 15 Oct 15 Nov 15 Dec 15 Jan 16 Feb 16 Mar 16 Mobilisation & Procurement CMOS procurement OWML transition MOSL establishment Recruitment CGI mobilisation Business planning Design & Build Programme planning CMOS design & build (Phase 1&2) Market engagement Market & company readiness Market entry assurance Data strategy & operations Self assessments 1 st letter of assurance 2016/17 budget Target operating model

18 2016/17 - implementation Testing Shadow Apr 16 May 16 Jun 16 Jul 16 Aug 16 Sep 16 Oct 16 Nov 16 Dec 16 Jan 17 Feb 17 Mar 17 Test Phase 1 deployment Phase 2 build Training Sandpit environment User acceptance testing Market entry assurance Initial data load Shadow market As live environment Switch testing Maintain data (via market processes) Letter of assurance 2 & 3 Secretary of State decision Project to enduring market operator

19 The shadow market Where we are now Aims and objectives - Switch to operational mode m of 2.6m SPIDs loaded in to the central system - 1.2m premises of 1.3m likely - Market entry assurance testing completed - First tranche of 61 market entry certificates issued - Incumbent wholesalers and retailers to prove lifecycle of a premise processes - Opportunity for wholesalers to work with new entrants to test interoperability - Switching and Gap sites - Operational terms - Commissioning - CMOS (Usability) - Market (Codes, data & processes) - New market governance arrangements - Settlement and revenue assurance

20 What does success look like? The market is working if Better price/service Switching Innovation - bill consolidation, multi-utility billing, new tariffs, demand management Valid complaints, disputes, objections Reduction in leakage by billing more premises/meters Consolidation & market entry The market is not working if Complex, opaque tariffs Indecipherable bills Poor response to issues and complaints High volume of miss selling claims by micro businesses Constant regulatory intervention to fix issues Water/environmental compliance issues and better information in relation to costs and service on which to base future price reviews!

21 It is what comes next that counts A quality approach to data maximises Customer Lifetime Value: Low cost to acquire Low cost to serve Higher retention Customers don t expect you to be perfect. They do expect you to fix things when they go wrong Your most unhappy customers are your greatest source of learning The best customer service is if the customer doesn't need to call you, doesn't need to talk to you. It just works and its all about the data: Data pilot 2015 Lessons from Scotland Lessons from energy and remember, the customer remains a customer of the wholesale business no matter who their retailer

22 Panel discussion: Retail Market Opening - opportunities for water resources and leakage management Panel chair: Sarah Mukherjee Director of Regulation Water UK Panel Guest AndrewBuckley Chief Executive Major Energy Users Council Panel Guest Ben Jeffs Chief Executive MOSL Panel Guest Tony Smith Chief Executive CC Water

23 Water resources 2065: Long-term planning framework report Jean Spencer Director of Regulation Anglian Water

24 Water Resources 2065: The long term water resources project Jean Spencer, Chair of Steering Group and Regulation Director, Anglian Water 11 October 2016

25 Project questions & outputs Develop a high level strategy to plan for long term public water supply in England and Wales What could drought resilience look like over the next 50 years? An assessment of the potential scale of the challenges: resilience; growth; environmental protection; climate change Scale of deficits in 2040 and 2065 Potential options that could address the challenges Cost/benefit analysis - the resilience/cost trade-off Indication of most suitable investment solutions Policy opportunities and risks Independently peer reviewed 25

26 The problem now: droughts are real Droughts and water shortages are an issue today Historic droughts affected different parts of the country 76 and 96 caused severe stress to supply systems Systems should now be resilient to those droughts, but recent, very significant, near misses: 2011/12 drought: two dry winters caused conditions in April worse than any historic drought for Thames and the south east Hosepipe ban introduced (just before Olympics) Situation only remedied by exceptionally wet summer period beyond normal experience Plus other near misses e.g. 2005/06 in SE, 2010 in NW Bewl Reservoir levels, Trentabank Reservoir, peak District, June 2010

27 Key findings: risks and investment needed There is a significant and growing risk of severe drought impacts arising from climate change, population growth and environmental drivers. The impacts of severe drought are high The investment needed to increase resilience is relatively modest compared with the cost of drought. 27

28 Key findings: options portfolios A twin track approach that includes supply enhancement, with associated transfers, as well as demand management, is the most appropriate strategic mix for the future. Key demand management measures: ambitious levels of reduction in demand and leakage required how to build and fund efficient new homes? Key supply side: measures: inter-regional transfers new infrastructure will be needed: storage, desalination, effluent reuse. There is a case for a national level adaptive plan that supports on-going WRMPs and balances risks against opportunities to defer costs. identify the key trigger points some risks are immediate and need a prompt response: the risk of drought is present now and the Government aims to achieve sustainable levels of abstraction by the 2020s the most cost-effective approaches to increasing resilience involve action in the current round of Water Resource Management Plans to avoid having to rely on more expensive options later on. 28

29 Key findings: collaboration and minimum standards Industry, government and regulators need to work together with customers on how best to respond to the risk of severe drought There is a strong case for the UK and Welsh Governments to consider adopting consistent national minimum levels of resilience. 29

30 Project Overview and methodology 30

31 Scale and Purpose of the Assessment This project concentrated on what needs to be done outside of WRMPs: Policy needs Value of resilience Inter-regional considerations Primarily done at the sub-regional Level Intra-regional issues and costs examined in a qualitative way Regional bodies exist to provide more granularity (WRSE, WRE) 31

32 Future Needs The future is very uncertain: Climate change Demand Reductions in abstraction to protect the aquatic environment At the same time there is a decision to be made about the level of resilience that is adopted: Worst historic type droughts Severe type droughts Extreme type droughts This means the range of potential future supply/demand balances is large 32

33 Scenario Based Approach Considered the potential position at 2040 and 2065 Created 36 representative future scenarios that covered: Different levels of drought risk (resilience) Different climate futures Different levels of growth Different levels of reductions in abstraction licences to support environmental sustainability 33

34 Evaluation of Drought Resilience Innovative modelling used to analyse spatially coherent drought risk Looked at risks of drought at three different levels, focused on Drought Deficit Regions Drought Severity Level Worst Historic Severe Extreme Description Significant events with a severity equal to the worst events seen in the 20 th Century record Rare events beyond those seen in the 20 th Century might only be expected to occur once every couple of centuries Very rare events of a type only observed a few times in even the longest reconstructed records (using tree ring analysis or similar). Probability that a drought at or worse than that level of severity would be experienced in a 25 year planning period 22% 12% 5% Drought Orders and Permits become important when resilience is being considered Reasonable estimates of benefits taken based on Drought Plans, but significant uncertainties are evident 34

35 Climate Change Fairly simple, conservative analysis used for this study (Future Flows) Based on just two representative realisations: a median and a dry climate future, with resilience testing of two pattern types for the dry future More severe climate change scenarios were not considered the probabilities become very small when combined with growth risks. 35

36 Protection of the Aquatic Environment Also a large uncertainty, but likely to be resolved in the near term Had to account for this through the future scenarios analysis 36

37 Options Appraisal and Strategy Development Used 5 interlinking approaches to appraise strategy options Demand management scenarios were set as the baseline, and the supply and transfer needs were assessed on top of that Allowed us to cost all reasonable supply/demand strategies Also allowed testing of non-monetary issues (reliability, delivery constraints) 37

38 Growth and Demand Management Future demand due to population growth is one of the larger uncertainties Four potential demand management strategies were developed and imposed on top of this underlying growth: Business As Usual: Upper (poor customer response to initiatives) Base (stretched targets based on current activity types) Extended (e.g. incl smart metering & tariffs, some retrofitting) Enhanced (e.g. incl enhanced new build regs, retrofitting, large scale mains replacement for leakage etc) Forecast pcc 38

39 Consequence and Cost/Benefit Analysis (CBA) Each strategy comes with a residual risk from the futures and droughts that it is not resilient to Significant droughts are High Impact, Low Likelihood Events NERA monetised analysis of the consequences of drought: Impacts of temporary (hosepipe) & non-essential use bans Impacts of emergency restrictions Analysed the residual costs of failure against costs of strategies to provide CBA ( / HH / yr per avoided expected day of interruption/ year) S2 S3 TUBs S4 EDOs Low Central High PWS Non-PWS Industry S2 S3 S4 S2 S3 S4 Agriculture, forestry and fishing Wholesale and retail trade; repair of motor vehicles Administrative and support services Arts, entertainment and recreation Rain-fed agriculture Irrigated crops Cereals N/A N/A N/A 0% 15% 30% Potatoes rain-fed N/A N/A N/A 0% 15% 30% Other rain-fed crops N/A N/A N/A 0% 15% 30% Potatoes irrigated N/A N/A N/A 53% 59% 59% Strawberries 0% 100% 100% 0% 100% 100% Other irrigated crops N/A N/A N/A 24% 37% 37% Livestock Livestock 0% 0% 25% 0% 10% 25% Retail sale of flowers, plants, seeds, fertilizers, etc. 0% 30% 30% 15% 30% 30% Other wholesale and retail 0% 0% 25% 0% 0% 25% Landscape service activities 25% 100% 100% 0% 0% 25% Other administrative and support services 0% 0% 25% 0% 0% 25% Sports activities 50% 50% 50% 50% 50% 50% Other arts and entertainment 0% 0% 25% 0% 0% 25% Food products, beverages and tobacco 1% 10% 75% 1% 10% 75% Textiles, wearing apparel and leather products 1% 10% 75% 1% 10% 75% 39

40 The Case for Resilience (cost/benefit analysis) Strong CBA case for increasing the current level of resilience in water supplies Currently most companies plan resilience to the worst even in the 20 th century, perturbed for climate change (reliance on emergency drought measures after that). Very strong case for increasing this to at least a severe (once every couple of centuries) type event Developed consequence models for all deficit sub-regions, based on analysis of durations of Level 3 and 4 restrictions from stochastic analysis Drought Deficit sub- Region Affinity Water London Anglian Bristol SEEL Thames- London Level of Resilience Planned for Severe Extreme NPV cost required to achieve change in resilience ( m) Lower NPV of Consequence Benefits Central Estimate including non- PWS Benefit See note below Benefit:Cost Ratio; Lower bound Benefit:cost Ratio; Central estimate incl. non-pws benefits Severe , Extreme , Severe Extreme Severe 237 2,479 3, Extreme 256 1,423 2, Severe 453 6,364 7, Extreme 425 3,125 3, * Affinity: low drought vulnerability but very high consequence if a L4 event occurred 40

41 Leakage: the challenge WRMP 2016 starting point A big challenge: Needs innovation Need to shift ELL reduce costs 41

42 Report 42

43 17 TH ANNUAL LEAKAGE CONFERENCE 2016 Tuesday, 11 October 9am to 4.30pm Crowne Plaza Birmingham Follow us on Join the conversation #leakage2016 Water UK Partners Media Partner Charity Partner