TA.11.WN03 Water Treatment Business Case. September 2018 Version 1.0

Transcription

1 TA.11.WN03 Water Treatment Business Case September 2018 Version 1.0

2 Contents TA.11.WN03 Water Treatment Executive Summary Scope of Technical Annex AMP6 Strategy Investment Strategy Customer Benefits and Resilience Drivers for Change Customer and Stakeholder Views Future Trends and Pressures AMP7 Strategy Investment Strategy Plan options Innovation Customer Benefits and Resilience Value for Customers Costing Strategy Key Risks and Opportunities Risks Opportunities Appendix 1: Schemes in AMP TA.11 WN03 Water Treatment Business Case

3 1. Executive Summary Name of business case Context Customer and stakeholder views Our aim Scope of this business case WN03 Water Treatment The Water Treatment technical annex covers water treatment works maintenance. It strengthens our focus on water quality. As detailed in Chapter 7 - Delivering Beyond Resilience in the Round, we are improving our performance and have committed to become brilliant at the basics. Southern Water currently has DWI notices to support the upgrade of surface water treatment works and also to carry out a Hazard Review (Hazrev) for all sites. Our customers have told us that we must supply high quality water. The DWI have expressed some concerns over our treatment works. Consequently, in AMP6 a number of notices have been issued, in particular regarding treatment upgrades at 3 of our surface water works. These notices specify interventions that are required in both AMP6 and AMP7. The DWI have also mandated a hazard review (Hazrev) for all our treatment sites. We will ensure that the requirements of our customers and regulators are met in AMP7 and dramatically improve our Compliance Risk Index (CRI) score. We are aiming for upper quartile performance in CRI by the end of AMP7. All capital maintenance and base opex investment relating to water treatment at our 91 water supply works. Botex Enhancement Total Totex ( m) 213.4m 0m 213.4m Opex ( m) 70.6m 0m 70.6m Capex ( m) 142.8m 0m 142.8m Residual, post-amp7 capex ( m) 20 year Whole life totex ( m) 20 year cost benefit ( m) Materiality (% 5 year Totex for relevant price control) Relevant business plan table lines Botex Overview of AMP7 proposals 0m 0m 0m 230m - 230m % WS1 line 13 WS1 line 13 We are investing 213m over AMP7 to both maintain and improve the resilience of our water treatment works in AMP7. Investment in this area can be broken down into 3 broad areas: Maintenance ( 119m) Responding to DWI surface water scheme notices, carrying out the DWI mandated hazard review (hazrev) and responding to hazrev outputs covers the majority of spend in this area. This investment is either already covered by 4 TA.11 WN03 Water Treatment Business Case

4 Why are the proposals the best programme- level option for customers What we would like to highlight mandatory notices or will be covered by notices in the future if not resolved following hazrev. Improving resilience ( 24m) We are improving our response to and recovery from incidents by increasing the provision of run to waste facilities and developing mobile temporary treatment plant. Operating assets ( 70m) we will continue to operate our asset base but will improve efficiency through increased monitoring and automation. We have developed this programme of investment in order to meet the requirements of our regulators and the desire of our customers to receive safe and high quality water. Maintenance of our assets is essential. We have no choice about delivering the parts of this investment area that are covered by DWI notices. We have however worked with the DWI to challenge down the scope of notices where possible. In the area of resilience, we have dramatically reduced the cost of the run to waste programme by proposing permanent solutions at critical sites only and making provision for temporary facilities at non-critical sites. Resilience is further enhanced through our innovative mobile temporary treatment programme. Rather than shutting off sites and installing permanent plant in response to an incident, we will make provision for the connection of our mobile temporary treatment plant. This will enable us to respond more rapidly to incidents, before customers see any impact with respect to quality or sufficiency. We have acknowledged the concerns of the DWI and have commenced an ambitious transformational programme which will ensure that we become brilliant at the basics. We are also developing emergency plans which will make use of our run to waste facilities and our fleet of mobile temporary treatment plant to improve the resilience of our water supply works. Performance Commitments supported by this business case PC Compliance Risk Index (CRI) water quality compliance Taste & Odour Water supply interruptions Asset Health (unplanned outage) How relevant is this business case? High Medium Medium High Comment Water quality shutdowns impact CRI. Maintenance of treatment plant affects performance of Granular Activated Carbon (GAC) and chlorination plant control which both contribute to taste and odour complaints. Water quality shutdowns contribute to supply interruptions. Good asset health is maintained through planned maintenance. Schemes and scheme-level options Schemes over 10m Options 5 TA.11 WN03 Water Treatment Business Case

5 Description Works upgrade and refurbishment Works upgrade and refurbishment Works upgrade and refurbishment Cost 30.8m 20.0m 32.8m Selected option and rationale Scope defined by DWI notice Scope defined by DWI notice Scope defined by DWI notice 6 TA.11 WN03 Water Treatment Business Case

6 2. Scope of Technical Annex Our wholesale plan has been valued at 3.9 billion. This technical annex covers capital maintenance and base opex investment in our water treatment works, funded from within the Water Networks+ price control, and shown below. Figure 1 We have 91 sources with a combined Dry Year Critical Period Yield (DYCP) of 758Ml/d 9 surface water (30%) and 82 groundwater sources (70%). Through Network 2030, we will rationalise and combine treatment works to improve operability and cost efficiency and maintain taste and odour compliance Increasing raw water nitrate levels impact our treatment works, however mitigation falls outside the scope of this technical annex. Distribution, borehole, intake pumping station and booster pumping station investment is also excluded from this business case. 7 TA.11 WN03 Water Treatment Business Case

7 3. AMP6 Strategy 3.1. Investment Strategy Through AMP5 and AMP6 our focus has been to refurbish and replace water treatment assets as identified through the Drinking Water Safety Plan (DWSP) processes and prioritised through our risk reviews. Our aim being to protect public health and maintain stable serviceability. By installing triple validation and Control and Shutdown (CSD) systems at the majority of our sites we were able to maintain stable serviceability and enhance public health protection. In AMP5, we carried out the following major investment at water treatment works: Triple validation CSD systems installed across the region New surface water source developed at Hardham Compliance programme (sample line replacement, bypass removal) Contact tank/main extensions Installation of Ultra Violet (UV) irradiation installation In AMP6, we carried out the following major investment at water treatment works: GAC pesticide removal plant installed at two water supply works in Hastings Gas stores and chlorinators upgraded at 26 sites OSEC chlorine generation plant replaced at five sites UV plant replaced at 7 sites Nitrate removal plant installed at five sites (see technical annex TA.11.WN02 Nitrate for details) Major multi-amp investment programme started for five strategic surface water works Security and Emergency Measures Directive (SEMD) improvements to site security and flooding resilience Table 1 shows our forecast AMP6 totex is 320.8m. This is primarily due to the need for additional investment to upgrade three major surface water works to maintain compliance. Significant investment on SEMD and pesticide removal measures also increased our AMP6 totex. 8 TA.11 WN03 Water Treatment Business Case

8 Table 1 AMP6 spend on Water Treatment AMP6 Actual m AMP6 2015/ / / / /20 Total TOTEX CAPEX Water Supply Works Water Supply Works - Schemes Water Supply Works - Surface water works compliance Turbidity SEMD & Resilience Pesticides OPEX Customer Benefits and Resilience Figure 1 Our improvement in water quality compliance The current water quality compliance measure will be replaced in AMP7 by the Compliance Risk Index, (CRI), further details are in section 5.4. Since 2011, both our performance and industry position has improved significantly as shown in Figure 1. Our investment in water treatment successfully secured reliable supplies for customers, protected public health and maintained stable serviceability. 9 TA.11 WN03 Water Treatment Business Case

9 4. Drivers for Change 4.1. Customer and Stakeholder Views As outlined in Chapter 4 Customer and Stakeholder engagement, we used insight from our extensive programme of customer and stakeholder engagement to develop a deep understanding of the views and priorities of our customers. All insight gathered from our customer and stakeholder engagement programme can be found in TA4.4 - Customer and Stakeholder engagement deliverables. Customers view safe and high quality water as a top priority Customers say that providing clean, safe, high quality water is an absolute basic of any water company in the UK. They see this as one of the most important parts of our job. From a customer perspective, quality comprises taste, smell and appearance of water. While household customers have reported widespread issues around chalky/cloudy/discoloured water, it was generally accepted as momentary and occasional. Customers want access to water that is as natural as possible; they don t want too many chemicals to be added to their water supply. For example customers would like softer water, but have stated that they would be less accepting of softer water if it had been treated with additional chemicals. Although customers do not want excess chemicals in their supply, they do acknowledge that chemicals are sometimes necessary to ensure water safety. In general, most customers agree with the above narrative. However, the priority of customers of the future is protecting and enhancing the environment. They consider water quality a necessity, but tend to take it for granted and so believe high quality and safe water is a medium priority. Stakeholders believe safe and high quality water is a given Stakeholders believe that providing clean, safe, high quality water is a given and so do not view it as a significant area of interest. Customers believe interruptions to supply are a high priority, whilst unplanned outages are a medium priority When we presented our comparative data for interruptions to supply in England and Wales, broadly speaking customers found our performance to be acceptable in this area. However, customers found unexpected interruptions to supply highly irritating which is why they rated this as a high priority. Moreover, they highlighted the importance of communicating any issues. Our non-household customers placed a higher emphasis on maintaining a reliable supply of water, without unexpected interruptions, or restrictions such as quotas or restricted access hours during summer. This can be explained by the potential impact interruptions would have on their ability to continue to operate that such restrictions may bring. Although customers believed interruptions to supply is a high priority, they view unplanned outage PC as just "simply part of the service a water company provides" and therefore a given rather than something that would need to be highly prioritised, therefore it was ranked as medium priority. Stakeholders Stakeholders felt water supply interruptions were a medium priority, and that unplanned outages were a low priority. They noted that these were basic functionalities of a water company that they needed to get right. 10 TA.11 WN03 Water Treatment Business Case

10 Figure 1: Relative priority of services according to our customers We have used this understanding of our customers priorities to define a set of performance commitments and investment proposals and validated and refined these over the course of our programme of customer engagement. Our success at delivering on these priorities for our customers will be measured by the performance commitments outlined in this business case. Our proposals will ensure we reliably supply wholesome, safe water for customers. Additionally, by using temporary treatment plant during extended investigations we can reduce the overall time additional treatment is carried out for transient issues, thus increasing the resilience of supplies Future Trends and Pressures There are a number of future trends and pressures relating to the water treatment assets base, broadly grouped into industry-wide, region-specific and company-specific. Industry wide: A step-change in regulatory compliance expectations including the introduction of CRI and the Event Risk Index (ERI) by the DWI Pressure from government to ensure long-term asset health of infrastructure. A report commissioned by Defra 1 outlines the need to double water infrastructure renewal spending by 2030 and then again by 2050 to maintain current levels of serviceability and affordability 2 There is increased focus on, and need to demonstrate, resilience as enshrined in the Water Act 2014 and highlighted in government policies 3. Ofwat and the DWI require companies to quantify current and future resilience, however there is no common resilience metric within the sector. This is one of the primary considerations behind Networks 2030 Region specific: 1 UKWIR - Long Term Investment in Infrastructure (2017) 2 Also shown in our deterioration model trends found in Technical annex TA.11.WN04 Water Networks 3 Such as Defra s strategy policy statement to Ofwat, the 25 Year Environment Plan and the National Infrastructure Assessment 11 TA.11 WN03 Water Treatment Business Case

11 We forecast a 10.5% increase in population across our region by , requiring investment in new assets. Detail can be found in our draft WRMP and TA11.WN01 - Supply and Demand. Climate change and sustainability reductions will impact the amount of water available for public supplies, particularly in our Western Region Company specific: Raw water deterioration, particularly nitrate contamination, is a challenge. Network 2030 and TA.11.WN02 - Nitrate provide detail of planned mitigations Overall regional resilience is challenged due to our unique network configuration of five geographically separate areas with limited interconnectivity, this is further stretched due to the region and industry-wide pressures outlined. Our investment delivered stable serviceability and maintained high-quality supplies for customers, as demonstrated by Figure 1 above. The implementation of Control and Shutdown (CSD) systems in AMP5 led to a significant number of Water Quality Shutdowns (WQSD) per month (see Figure 2). As operators are required to physically attend to restart a site, this has meant a significant number of reactive work orders per month creating inefficiencies and challenges to proactive planning. Number of Water Quality Shutdowns per month Date (Year/Month) Figure 2 Graph to show number of Water Quality Shutdowns (WQSD) per month These challenges have shaped our approach for AMP7 and beyond. We have refined our AMP6 approaches, to develop three key transformational programmes: Through Network 2030 we will rationalise, integrate and modernise our water supply infrastructure to enhance the resilience of our water supply zones. This includes consolidating service reservoirs, building new treatment works and increasing interconnectivity 4 PR19 data table WS3 12 TA.11 WN03 Water Treatment Business Case

12 By working with customers, we will achieve Target 100 our ambitious per capita consumption target of 100 litres per person per day by 2040 by first reducing average consumption to 120 litres by 2025 Building on our Integrated Water Cycle Management approach, Catchment First will deliver holistic catchment management solutions and measure the additional benefits they secure 13 TA.11 WN03 Water Treatment Business Case

13 5. AMP7 Strategy 5.1. Investment Strategy Asset level approach to asset management has led to no significant changes to the configuration of the water supply network since its construction. We are changing this approach from site level to zonal and enterprise level investment planning due to significant growth, environmental, license and raw water deterioration challenges such as pesticides and nitrate. This change means we must adopt a multi-amp approach to design. This will lead to more efficient, long-term solutions and ensure our networks can adapt to accommodate significant new sources, such as desalination and water reuse, if future pressures mean they are required. Making these changes will require significant, sustained investment but will lead to a more resilient, more efficient service for customers. Delivery of Network 2030, particularly rationalising sources, enhancing monitoring and control and increasing interconnectivity, will enhance water treatment resilience Water treatment is an essential part of Network 2030 by ensuring retained assets continue to reliably produce wholesome, safe water. Specifically, we predict the following benefits from Network 2030: Resilience Opex Taste Improved interconnectivity of sources with treatment Improved interconnectivity of treatment with network storage Improved resistance to and recovery from incidents through increased monitoring, control and automation of treatment Improved response and recovery from water quality incidents through increased run to waste provision and the deployment of rapidly deployable temporary plant capable of removing/treating cryptosporidium and/or turbidity Reduced need for energy and chemical intensive treatment processes Reduced labour costs and increased operational efficiency Consistent blending of sources meaning more homogenous water is in our network Table 2 Breakdown of Water Treatment AMP7 Expenditure by Programme (below) shows how this area of investment is broken down. Table 2 Breakdown of Water Treatment AMP7 Expenditure by Programme m AMP7 Price Control Ofwat QBEG Table AMP7 Total TOTEX CAPEX Water Supply Works - Capex Water networks + Base Main - WS Water Supply Works - Schemes Capex Non Infra Water networks + Base Main - Non Infra WS TA.11 WN03 Water Treatment Business Case

14 Water Supply Works - Surface water works compliance Capex Water networks + Base Main - Non Infra WS Turbidity Water networks + Base Main - Non Infra WS Temporary Plant Water networks + Base Main - Non Infra WS OPEX Source: Lockdown 4 investment plan Water Supply Works This investment will resolve minor interventions (estimated to be less than c 400K) from the DWSP D and E risks, with costs based on deterioration modelling. D and E risks are those identified as requiring resolution but where there is not currently a scheme planned to resolve the risk. These risks align with the Regulation 28 report submitted to the DWI on 28 October Water Supply Works Schemes This investment has been generated through review of all significant DWSP D and E risks. These risks align with the Regulation 28 report submitted to the DWI on 28 October This work is typically like-for-like replacement of individual assets, such as pumps or electrical panels, and has already been defined. This work is essential for delivery of wholesome water to customers. The resilience of customers supply is also increased through resolution of water quality risks and improved reliability of new plant. Water Supply Works Surface water works compliance This investment is a continuation of AMP6 work and is supported by DWI notices. The programme is already defined and is essential for delivery of wholesome water to customers. This investment also contributes to our performance on pesticides and taste and odour by installing or refurbishing GAC plants at major surface water works like. Where they have not yet been received, we are working with the DWI to develop notices which will be issued in December The resilience of customers supply is also increased through resolution of water quality risks and improved reliability of new plant. Turbidity (run to waste) This investment directly contributes to improving resilience, particularly containment, response and recovery. Through the provision of full run to waste facilities at strategic works and the provision of temporary run to waste facilities at all other sites. This investment also contributes to our performance on appearance and taste and odour. In addition to the investment identified here, an additional 10m will be spent on provision of run to waste facilities at our surface water works. This area of investment integrates with our temporary plant programme. Temporary Plant Through provision of temporary plant, we can improve our containment of, and response and recovery from, pathogenic contamination from cryptosporidium, turbidity and other incidents. This approach has been developed with the DWI. Costs are based on the provision of amazon style filters and UV plant. 15 TA.11 WN03 Water Treatment Business Case

15 By maintaining a fleet of temporary plant and ensuring we can connect these at our treatment works, we are able to more effectively respond to incidents. This also removes the need to install permanent assets to mitigate transient risks protecting customers from unnecessary expenditure and aligning with their preference for their water to be as natural as possible 5. Water Treatment (Supply) Operating Costs This comprises all other Opex expenditure directly related to the operation of water supply works including: Labour Licenses Power Materials and Equipment Across the whole water investment area, Opex has been subject to a global efficiency challenge. Additionally, 55m of water treatment opex has been allocated to supply and demand (see technical annex TA.11.WN01 - Supply and Demand Balance for further information). While we have been developing our proposals, markets and market mechanisms have been used as a tool to reduce raw water pollution, which in turn reduces or eliminates the need for additional treatment at sites. In water treatment, the use of markets is predominantly focussed on catchment management whereby land users are paid to change practices to protect water quality. Further details can be found in the technical annex WR03 Catchment Management Solutions. Water treatment works spend is expected to reduce between AMP6 and AMP7 for two reasons. In AMP6, we needed to invest more than expected on pesticide removal, SEMD measures and surface water works and in AMP7 some water treatment opex has been allocated to supply and demand. During both AMP6 and AMP7, significant investment is allocated for surface works which account for 30% of our DYCP yield. Table 6 shows higher expenditure in these AMPs mean lower forecast spend in future AMPs as little maintenance will be required. Table 3 below shows our medium and long term investment proposals to protect water treatment resilience. Table 3 Medium and long term investment proposals m AMP6 AMP7 AMP8 AMP9 TOTEX CAPEX Water Supply Works - Capex Water Supply Works - Schemes Capex Water Supply Works - Surface water works compliance Capex Turbidity Temporary Plant SEMD & Resilience Project Eau (Breathe), Debrief Stage Eau V5.pptx 16 TA.11 WN03 Water Treatment Business Case

16 Pesticides OPEX Source: Lockdown 4 investment plan 5.2. Plan options Maintenance of treatment works (such as replacing a failed pump) is often relatively straightforward and minor. This limits opportunities to consider alternative, more innovative options. Where substantial interventions are necessary, such as refurbishing surface water sources, whole life cost models and customer willingness to pay data are used to compare asset replacement, process replacement and asset refurbishment. In the run to waste investment area, options for discharging to watercourses, sewers, boreholes and soakaways will be assessed. This assessment will include operational, financial and environmental considerations. After further developing our risk based approach to microbiological pathogen treatment we refined our selected option. This change led us to increase monitoring and develop a fleet of temporary treatment plant, which can be rapidly deployed to sites as required. This minimises the potential time sites are unavailable and facilitates timely investigations. It also means permanent treatment plant is not installed, only to quickly become redundant. Temporary plant can also be used to control turbidity. We considered options to reduce and increase AMP7 spend in this area. The Capex, Opex and NPV for these options are shown in Table 4, alongside a customer willingness to pay NPV which includes customer benefits. These programme level options have used cost benefit analysis to assess options, with benefits primarily based on willingness to pay. Final selection also takes account of a wider triangulation of customer priorities. The stated NPV is cost based, with negative values indicating a good cost benefit. For consistency, all NPVs cover a 20 year period extracted from a full 60 year whole life cost model. Our methodology is explained more fully in Technical Annex TA PR19 Approach to Optioneering and TA.14.4 Bottom up Cost Estimation. Table 4 NPV costs for alternative options Option 1 Selected 2 Increased spend Brief Description All DWI noticed surface water works improvements included. All DWI D&E risks mitigated. Increase run to waste and reactive spend. AMP7 Totex 20 year financial NPV 20 year customer willingness to pay NPV Willingness to Pay support Ofwat priority Regulator (DWI/EA) priority Customer / CCG priority Business Strategic Alignment 210m + 510m + 230m Accelerate spend on 235m + 525m + 280m 3 Reduced spend Remove DWI D&E risk schemes (c 20m). Remove run to waste schemes (c 8m). Remove temporary plant for crypto (c 5m). 180m + 555m + 370m Major adverse impact Some adverse impact Minimal / no adverse impact 17 TA.11 WN03 Water Treatment Business Case

17 3 Remove DWI D&E risk schemes, RTW and temp plant 2 Increased RTW & reactive and accelerate 1 All DWI noticed schemes and D&E risks Figure 3 Plan Options (Totex Vs CBA) According to the NPV analysis shown above, there are only marginal difference between each of the options, and none are shown to be cost beneficial. The reduced spend option is not viable because the work to mitigate DWI D and E risks is likely to become mandatory if not delivered. Continuing our run to waste and temporary plant programmes are important to improve resilience and control costs. Enhancing expenditure would deliver further improvements, however the costs are not supported by NPV or willingness to pay data Innovation Examples of innovation in our AMP7 water treatment proposals include: Taking a zonal and enterprise, rather than asset level, approach to consider broader solutions to deliver benefits over longer timespans through Network 2030 Temporary mobile plant will be used to respond to turbidity and pathogenic bacteria incidents, rather than permanent alternatives Resilience improvements are quantified and maximised through our resilience assessment framework Demand will be reduced through leakage reduction and Target Customer Benefits and Resilience Serviceability measures Our investment will ensure we become an upper quartile company by the end of AMP7. This is primarily achieved by improving surface water works in to comply with current DWI notices. Table 5 shows our AMP6 performance against AMP7 performance measures alongside our forecast performance. 18 TA.11 WN03 Water Treatment Business Case

18 Table 5 AMP6 and AMP7 water treatment works performance. Performance commitment Taste & Odour Measure contacts per 1,000 customers End AMP 6 Performance Water quality compliance CRI basket measure Water supply interruptions mins 06:11 05:30 Asset Health (unplanned outage) ml/d pdo unplanned outage % 7.1% 3.2% End AMP 7 Performance The DWI s new CRI measures risk, calculating a value which considers the consequence of failures using the prescribed values in regulations, any potential health risks, the number of customers affected and the assessed actions of the company in response. The measure allows for comparison between companies performance on measuring and mitigating risk to consumers. Reliable operation of all treatment works is a key component of CRI performance. Details of the predicted performance measures outlined in Table 5 are given below in figures 4, 5 and 6. Figure 4 AMP6 and AMP7 CRI performance 7 6 CRI Target = 0 7 Source: PR19 Data Table App1 and TA Water AMP7 Comparative Industry Performance Assessment 19 TA.11 WN03 Water Treatment Business Case

19 Figure 5 AMP6 and AMP7 Interruptions performance 8 Figure 6 AMP6 and AMP7 Taste and Odour performance 9 8 Source: PR19 Data Table App1 and TA Water AMP7 Comparative Industry Performance Assessment 9 Source: PR19 Data Table App1 20 TA.11 WN03 Water Treatment Business Case

20 Resilience There is increased focus on, and need to demonstrate, resilience as enshrined in the Water Act 2014 and highlighted in government policies 10. Ofwat and the DWI require companies to quantify current and future resilience at asset level. However, there is no common resilience metric within the sector though measuring outage reflects asset resilience. We have implemented a tool to assess the relative contribution of schemes to the resilience of the supply network, used when appraising schemes and programmes including Network This will ensure we deliver the most resilient services possible for our customers Value for Customers Customers are highly averse to accepting reductions in service in exchange for lower bills, and in general are willing to pay for improvements in service levels for our proposed wastewater measures. The total amount that SW customers would be willing to pay for a reduction of 1 in the number of cases of Non-ideal taste and smell of tap water for a few days was 48,929 per year. The total amount that SW customers would be willing to pay for a reduction of 1 in the number of 3 hour interruptions to supply was 177 per year. Our additional ODI research into willingness to pay for service level improvements indicated that our customers demand and are willing to invest in improvements to water quality, interruption to supply, and minor improvements for unplanned outage. Full detail on our customer engagement findings can be found in Chapter 4 Customer and Stakeholder engagement. Table 6: Willingness to pay for Water measures Service Attribute Unit WTP [ /Unit/Year] Central Low High Non-ideal TASTE AND SMELL of tap water for A FEW DAYS Unexpected INTERRUPTIONS TO SUPPLY Case/prop 48,929 37,588 60,270 3h case/prop Our plan delivers good value for customers. Using lowest whole life cost modelling ensures we select the most cost-efficient solutions to delivery customers, stakeholders and government s expectations for quality, safety and resilience. Customers expect a continuous supply of safe, high-quality water. Maintaining our water treatment assets is essential to achieving this Such as Defra s strategy policy statement to Ofwat, the 25 Year Environment Plan and the National Infrastructure Assessment 11 Technical Annex TA Customer Engagement Methodology and Findings. 21 TA.11 WN03 Water Treatment Business Case

21 6. Costing Strategy See Technical Annex TA.14.5 PR19 Approach to Optioneering and TA Bottom-up Cost Estimation for information on our costing strategy. 7. Key Risks and Opportunities 7.1. Risks There is a risk of higher than expected construction costs should we encounter problems securing planning permissions or encounter severe ground conditions on site. There is a risk that additional significant needs emerge during AMP7 that cannot be managed within the Water Supply Works budget. This could arise if our deterioration models do not take full account of the growing proportion of shorter life assets (telemetry, sensors, process control systems) used in our treatment plans Opportunities There in an opportunity that zonal/regional procurement packaging could realise greater economies of scale that we have already assumed possible. 22 TA.11 WN03 Water Treatment Business Case

22 Appendix 1: Schemes in AMP7 The following is a list of the schemes within the water treatment part of the business plan: Investment area Scheme Scheme costs Water Supply Works - Schemes Water Supply Works - Surface water works compliance Totals TA.11 WN03 Water Treatment Business Case