DRAFT WATER RESOURCES MANAGEMENT PLAN 2019

Transcription

1 DRAFT WATER RESOURCES MANAGEMENT PLAN

2 Our ning CONTENTS 2 1 Executive 3 Our Draft Water Resources Management Plan at a glance 3 Consultation of our Draft WRMP Background Guide to this submission Our business today Legislative and policy framework Customer engagement Regional and national stakeholder collaboration Formal Draft WRMP 2019 preconsultation 40 4 Our ning Problem Characterisation Our ning Water Resource Zones (WRZs) The Principal and Adaptive Planning Scenarios Quantifying impacts Development of strategic demand options Supply-side option development Determining the preferred investment Population growth Climate change AMP7 Sustainability reductions Increasing resilience to severe drought AMP8 Sustainability reductions Future exports Selected demand Principal Planning Scenario Adaptive Planning Scenario our Selected Options Investment in drought resilience Adaptive ning Deferring climate change impacts Drought permits and orders Drought Plan Drought permits and orders in Draft WRMP

3 Our ning 1 EXECUTIVE SUMMARY Our Draft Water Resources Management Plan at a glance Our supply demand is under significant pressure from population growth, climate change, the need to protect the environment and increase our resilience to severe drought. These challenges are acute in our region 1, and they drive the need for investment, particularly in the short and mediumterm. In some cases, water company abstractions have been found to cause, or the potential to cause, environmental harm. As a result, the company may be required to reduce the amount of water they can abstract from the environment. If this reduces the amount of water available to put into supply, then it is known as a sustainability reduction. There is significant uncertainty over the scale of the sustainability reductions required of water companies in AMP8 ( ). We need to ensure that for the Draft Water Resources Management Plan (WRMP) 2019 are flexible enough to be adapted to meet unknown AMP8 ( ) needs, including possible future exports to Affinity Water (Central) and South Staffs Water (Cambridge Water). In order to manage this uncertainty, we have created two ning scenarios: a Principal Planning Scenario and an Adaptive Planning Scenario. The Principal Planning Scenario includes the confirmed impacts of growth (104 Ml/d), climate change (84 Ml/d), AMP7 ( ) sustainability reductions (73 Ml/d) and severe drought (46 Ml/d). The Adaptive Planning Scenario builds on this, and includes the additional uncertain impacts of AMP8 ( ) sustainability reductions (57 Ml/d) and future exports (60 Ml/d). The size of the challenge we face in the Principal Planning Scenario is 307 Ml/d, which is equivalent to 28% of the average daily distribution input in The additional impact in the Adaptive Planning Scenario is up to 165 Ml/d, making the total 472 Ml/d; approximately 43% of the average daily distribution input in Given the scale of, we have collaborated and engaged extensively in the development of our Draft WRMP. Our ongoing of customer engagement is extensive and innovative. We have worked hard to ensure our engagement is meaningful, that customers understand the issues and trade-offs that we are facing. We have established Water Resources East, a leading example of collaborative, multisector ning. Through Water Resources East we have worked with water companies, agriculture, energy companies, the drainage boards, conservationists and regulators to develop a long-term, joined-up for water stewardship in the East of England. Our Draft WRMP uses a twin-track to mitigate risk. It meets shortterm needs, but is flexible enough to adapt to an uncertain future. It puts in place the s we need to underpin sustainable economic and housing growth. Our priority is to manage demand. We put less water into supply today than in 1989, despite an increase of more than 30% in the number of properties we serve. In addition, our leakage performance is industry leading and by the end of AMP6 ( ) we aim to have 93% of households metered and 86% paying measured charges. Demand continues to be our priority because it: Meets customer and government expectations to continue to reduce leakage and manage demand Saves water that would otherwise be abstracted from the environment, mitigating deterioration risk, and Is required to ensure the reliability, sustainability and affordability of water resources over the long-term. We intend to build on these past successes and have developed an ambitious, cost beneficial demand that will more than offset the effects of growth. Using new technology and innovation, our will unlock estimated demand savings of up to 43 Ml/d by the end of AMP7 ( ), and 123 Ml/d by the end of the ning period (2045). Our includes: The installation of smart meters across our region, enabling more effective behaviour change to reduce water usage. We to reach the limit of feasible meter penetration by the end of AMP8 ( ). This will result in demand savings of up to 7Ml/d by the end of AMP 7, and up to 23Ml/d by A 15% (30Ml/d) reduction in leakage over AMP7, from 177 Ml/d in 2020 to 147 Ml/d in We will then continue to reduce our leakage to 107 Ml/d by 2045, which represents a 40% (70Ml/d) reduction in total. This includes the savings in Customer Supply Pipe Leakage that are facilitated by smart meters. 1 We include Hartlepool Water as a Water Resource Zone. Hartlepool Water remains in surplus throughout the ning period. 3

4 Our ning A combination of further water efficiency activity that together will result in demand savings of up to 6 Ml/d by the end of AMP7, and up to 31 Ml/d by the end of the AMP. By the end of the period (2045), we expect that our average PCC will be 117 l/head/d, a reduction of 14% (19 l/head/d) compared with The total cost of our demand is 251 million (totex) in AMP7. It does not result in an impact on the average customer bill as the costs are offset by the additional revenue from new connections (assuming forecast growth materialises). We have undertaken an assessment of costs and benefits which shows that our is cost beneficial. Despite our ambitious demand, the scale of is such that we still need carefully targeted investment in supplyside capacity. We completed an options appraisal based on both the Principal and Adaptive Planning Scenarios using the industry-standard Economics of Balancing Supply and Demand methodology. Our preferred is based on the scheme selection in the Principal Planning Scenario. We then used the Adaptive Planning Scenario to identify opportunities to future proof our Plan against potential AMP8 sustainability reductions, by increasing option capacity. The preferred is also consistent with the WRE. Our consists of: Trading water with Affinity Water and Severn Trent Water Increasing connectivity, extending our current network of large capacity mains to create a strategic grid, and The development of new resources, including to allow for the treatment and transfer of surplus water in North Lincolnshire to deal with deficits in other parts of our system. Component parts include: New treatment processes Potable and non-potable transfers mains and pumping stations, and Storage reservoirs We welcome alternative options in relation to the Market Information. The fully addresses our obligations under the relevant provisions of the Water Industry Act 1991 and the Water Supply (Water Quality) regulations Our Strategic Environmental Assessment, Habitats Regulation Assessment and Water Framework Directive Assessment confirm that there are no unacceptable environmental impacts, provided all the identified mitigation measures are implemented. The total cost of our preferred of supply-side is 534 million (capex) in AMP7, which equates to a bill impact of around p.a. on average household bills by 2025 (assuming the other factors that influence bills remain unchanged). It would cost an additional 88 million to future proof our Plan, which equates to a bill impact of 1.70 p.a. by Within this overall, the investment required to increase resilience to drought is relatively modest, and equates to approximately 2.20 p.a. of the overall p.a. on the average household bill by 2025 (again assuming the other factors that influence bills remain unchanged). We are undertaking an assessment of the costs and benefits, and the preliminary results indicate that this investment is cost beneficial. Our Draft WRMP has been subject to a detailed assurance process and has been approved by the AWS Board. The scheme selection in the Adaptive Planning Scenario shows that large supply options, such as a new winter storage reservoir, desalination and water reuse, may be required by AMP8 ( ). These options have long lead times and cannot be delivered within one AMP cycle. In order to manage this uncertainty, we have developed an Adaptive Plan, that includes starting detailed pre-ning work on options that may be required, even though these needs have not yet been confirmed. This work is required to ensure we can meet the statutory deadlines associated with future sustainabilty reductions. In, our supports our customer outcomes, particularly Resilient Services, Supply Meets Demand and Flourishing Environment. We are making best use of available water before developing new resources. We are increasing our resilience to severe drought, meaning that no customers are at risk of rota-cuts and standpipes in a drought event of around a 1 in 200 year return period, by the end of AMP7 ( ). Increasing the connectivity of our network increases the resilience of our systems to unforeseen events, creates opportunities for trading and allows for more efficient network operations. Our technical work and preferred is consistent with the Water UK Water Resources Long-Term Planning Framework and the Water Resources East. 4

5 Our ning Our Draft WRMP meets customer, government and regulatory expectations Our Draft WRMP 2019 is reliable Our customers told us We should be ning for the long-term and taking preventative action to address foreseeable future challenges, including drought. They support investment to increase resilience. Government expects companies to Take a long-term, strategic to the development of the WRMP. Enhance the resilience of public water supplies. Identify an appropriate level of service based on meaningful engagement with customers. Our Is based on extensive customer and stakeholder engagement, including through Water Resources East. A particular focus of our engagement was drought resilience. Has been through a thorough drought vulnerability assessment. Is resilient against the median climate change scenario and severe drought (approximately 1 in 200 year return period), meaning that we will be able to maintain supplies to customers without the need for rota-cuts and standpipes. Increases our resilience to unforeseen events by reducing demand and increasing system connectivity to fully integrate our northern, eastern and western systems, creating a strategic grid. Our Draft WRMP 2019 is sustainable Our customers told us They generally prefer options that make best use of existing resource and infrastructure. Leakage reduction continues to be a priority. They are willing to play their part by reducing their consumption. Government expects companies to Protect and enhance the environment, acting collaboratively. Promote the efficient and effective use of available resources, including reducing levels of leakage. Value nature in decision-making. Provide enough water to meet local authority growth targets. Plan to meet all statutory drinking water quality requirements and ensure that there is no deterioration in the quality of water that is supplied to customers.meaningful engagement with customers. Our Makes best use of existing water resources before developing new ones. It does this through: An ambitious demand, that will more than offset growth in demand Fully integrating our northern, eastern and western water supply systems, allowing us to move water to where it is needed, and, Trading with Affinity Water and Severn Trent Water Provides sufficient water to support housing targets in the South and East of England. Protects and enhances the environment. It does this by: Meeting all statutory environmental obligations in AMP7 ( ), and preparing for potential AMP8 ( ) sustainability reductions Mitigating unacceptable environmental impacts and identifying opportunities for enhancement through the Strategic Environmental Assessment and Habitats Regulation Assessment processes Adopting natural capital and ecosystem service es Is low regret. Most of the options selected in the Principal Planning Scenario were also selected in the Adaptive Planning Scenario, demonstrating that they will be required regardless of AMP8 ( ) needs. Is flexible and adaptive. and the creation of a strategic grid meet our short-term needs, whilst giving us the capacity to meet uncertain future needs. We have used the options appraisal in the Adaptive Planning Scenario to identify opportunities to future proof our against potential AMP8 sustainability reductions, by increasing option capacity. By undertaking pre-ning work in AMP7 ( ), we will be able to meet statutory deadlines associated with AMP8 sustainability reductions, and future exports should they be required. Is aligned with the Water Resources East long-term regional and the Water Resources Long-Term Planning Framework 5

6 Our ning Our Draft WRMP 2019 is affordable Our customers told us That whilst they are prepared to accept bill increases for service improvements that they value, many of our customers are feeling under financial pressure. Government expects companies to Ensure that water supplies are affordable. Take a strategic to water resources ning that represents best value over the long-term. Consider every option, including those outside of company boundaries, collaborating with other sectors, inter-company transfers, and trading. Our Identifies the best value solution through a combination of: Cost-benefit assessment to help determine the preferred demand Least-cost optimisation to determine the preferred investments Including investment for pre-ning options that may be required in the future, and Minimising potential for stranded assets, by determining our preferred investments in the Principal Planning Scenario, and then testing it in the Adaptive Planning Scenario. Ensures that investment not driven by statutory requirements is kept within a range affordable for all customers: Additional revenue from new properties offsets the cost of demand Investment to increase resilience to drought is modest, and equates to approximately 2.20 p.a. on the average household bill, The overall bill impact of our Plan on average household bills is (including future proofing) p.a. by 2025 (assuming the other factors that influence bills remain unchanged), and, We have a comprehensive system of support available for customers who struggle to pay their bills. 6

7 Our ning Consultation on our Draft WRMP 2019 Once published, we have 26 weeks to carry out a public consultation on our Draft WRMP 2019 and produce a Statement of Response, along with our Final WRMP The public consultation period closes on 1 June The specific issues that we wish to discuss in the public consultation include: 1. Growth is a key challenge our WRMP sets out to meet. We have used the latest local authority growth targets to develop our, ensuring there will be enough water to meet these targets. We have taken this because housing growth is regularly cited as a top priority for national and local Government. Of course, targets do not always turn into achieved growth and currently, in some areas, local growth targets are not quite being met. Do you agree with our of ning to meet local authority growth targets, or should we switch to an of using trend-based projections using past delivery rates? 2. We have developed an ambitious, cost beneficial demand that will more than offset the effects of growth. Using new technology and innovation, our will unlock estimated demand savings of up to 43 Ml/d by the end of AMP7 ( ), and 123 Ml/d by the end of the ning period (2045). The delivery of our, however, depends not only upon action by us, but also by our customers. And given the innovative nature of our the savings that it ultimately delivers are uncertain. Are we right to prioritise demand? 3. The results from multiple sources show that, generally, customers are much more supportive of compulsory metering than has been the case previously. However, customers who pay measured charges tend to support compulsory metering, whereas those who pay unmeasured charges do not. We believe the higher levels of support for compulsory metering reflect the larger proportion of customers paying measured charges compared to previously, and we have not included compulsory metering in our Draft WRMP Should we consider compulsory metering in AMP7? 4. We have used the scheme selection in the Adaptive Planning Scenario to identify opportunities to future proof our Plan against potential AMP8 sustainability reductions, by increasing option capacity. It would cost an additional 88 million to future proof our Plan, which equates to an additional bill impact of around 1.70 p.a. on average customer bills by 2025, i.e. and overall total of (assuming the other factors that influence bills remain unchanged). Should the investment that we deliver include this additional investment? 5. Our Plan is designed to increase our resilience to drought, so that no customers are exposed to a risk of rota-cuts and standpipes in a severe drought event. The investment required to increase resilience to drought is relatively modest, and equates to approximately 2.20 p.a. on the average household bill by 2025 (assuming the other factors that influence bills remain unchanged). Is this an acceptable? 6. Climate change is one of the key strategic risks our business faces. As a result, we have decided to adopt the Environment Agency s 2017 method for calculating climate change impacts, which is designed to better account for the impact of climate change on current DO. This results in a large impact in It would, however, be possible to defer these impacts and the associated investments until Doing so would remove circa 300 million from the AMP7 investment, which equates to a bill impact of around 6.10 p.a. on average customer bills by 2025 (assuming the other factors that influence bills remain unchanged). Should we delay investment in climate change? All responses should be sent to the Secretary of State, using the water.resources@ defra.gsi.gov.uk or postal address Secretary of State for Environment, Food and Rural Affairs WRMP, c/o Water Resources Policy, Area 3D Nobel House 17 Smith Square London SW1P 3JR 7

8 Our ning 1.1 Background Overview Figure 1.1 Our region We are the largest water and wastewater company in England and Wales by geographic area and we employ almost 4,500 people. Everyday, we supply over 1 billion litres of water into 2.2 million households in the East of England and Hartlepool. We also provide wastewater services to over 2.7 million households. Companies must also have regard to broader government policy, for example, as set out in Defra s Guiding Principles (3). Through the WRMP process, water companies are expected to: Take a long-term, strategic to developing their WRMPs, enhancing the resilience of public water supplies while simultaneously protecting and enhancing the environment. Engage meaningfully with customers, and collaborate with others, to develop a that represents best value over the long-term. This includes identifying an appropriate level of service for the restrictions that companies can impose in response to drought. Fully consider every potential option, including those outside of company boundaries, including collaboration with other sectors, inter-company transfers, and trading. Promote the efficient and effective use of available resources, including reducing levels of leakage (wherever the benefits outweigh the costs). This document is our Draft Water Resources Management Plan (WRMP) 2019 covers the 25 year period from 2020 to It describes the pressures on our (growth, climate change, sustainability reductions and increasing resilience to severe drought), and our twin-track for mitigating the related impacts. Through the formal consultation process this will be refined and then finalised, with AMP7 investments in the Final WRMP 2019 fully aligned with the PR19 Business Plan Statutory water resources ning We have a legal duty to produce a WRMP every five years, by following the technical specified in the Water Resource Planning Guidelines (1) (referred to as WRP Guidelines ). The purpose of the WRMP, as stated by the Environment Agency, is to ensure a secure and sustainable supply of water, focus on efficiently delivering the outcomes that customers want, while reflecting the value that society places on the environment. (2) 8 1 Environmental Agency & Natural Resources Wales, April 2017, Water Resources Planning Guideline: Interim update 2 Environment Agency & Natural Resources Wales, April 2017, Water Resources Planning Guideline: Interim update, Pg 9 3 Defra, May 2017, Guiding principles for water resources ning

9 Our ning 1.2 Given the scale of, we have collaborated and engaged extensively in the development of our Draft WRMP Customer engagement We believe customer engagement must be at the heart of all that we do as a company, not just for set piece consultations. We have therefore embedded it as business as usual. Our on-going of customer engagement is extensive, robust and innovative, involving some 45,000 customers to date. To ensure that our engagement is meaningful, from the outset we involved customers in the co-creation of our. This developed our understanding of the world from a customer s point of view, and ensured that we developed initiatives, language and materials that would best engage customers in the risks and issues we are facing. As part of this, we have sought to explore differences of opinion, experience and behaviours between different groups of customers. This is particularly important when considering the potentially different needs and preferences of customers in vulnerable circumstances. Specific activities include the targeted deliberative research via our Love Every Drop online community, the Anglian Water tour bus, the H2OMG water festival, research to segment customers attitudinally and societal valuation surveys Regional and national stakeholder collaboration The challenges we face from drought, climate change, growth and meeting the needs of the environment are common to our neighbouring water companies, as well as to the other abstractors and users of water in the region and adjoining regions. To ensure that we all have access to reliable, sustainable and affordable supplies in the future, we are leading a number of collaborative water resource ning efforts. These include: Water UK Water Resources Long-Term Planning Framework (WRLTPF) Water Resource East (WRE) project, and, Trent and Ouse Working Groups. We have also participated in Water Resources South East (WRSE) and have had regard to project outputs in the development of our Draft WRMP While the Water UK WRLTPF and the WRSE projects consider public water supply issues only, WRE and the Trent and Ouse Working Groups consider multisector needs. The purpose of these collaborations is to develop a common understanding of water resource ning issues and to identify costeffective options for sharing available resources, including transfers and trading. Partners in our different collaborations include representatives from agriculture, drainage, power, environment, local government, business and finance sectors, other water companies, Defra, Ofwat, the Environment Agency and Natural England Formal WRMP 2019 pre-consultation Through the formal pre-consultation process, we have engaged with regulators, other water companies and retailers, local authorities, environmental and conservation groups and catchment partnerships. Our pre-consultation letter was sent to over 150 key stakeholders outlining the issues we are facing, and how to get involved in the consultation of our Draft WRMP 2019 once published. We have worked closely with the Environment Agency via an agreed methods discussion process, holding 18 meetings between May 2016 and November 2017, to develop and. We have also engaged with Ofwat (holding a WRMP Masterclass in December 2016, a formal pre-consultation meeting in August 2017, and two follow-up calls) and Natural England (as part of the Strategic Environmental Assessment and Habitats Regulation Assessment processes). 1.3 Our supply demand is under significant pressure from population growth, climate change, sustainability reductions and the need to increase our resilience to severe drought. These challenges are acute in our region, and they drive the need for investment on both demand and supply-side options, particularly in the short- and medium-term. Although AMP7 ( ) sustainability reductions have been confirmed in the Water Industry National Environment Programme (WINEP), there is significant uncertainty regarding further sustainability reductions that water companies may need to make in AMP8 ( ), driven by the Water Framework Directive. This uncertainty will not be resolved until 2023 at the earliest. Not only would this affect our supplydemand directly, we may need to develop additional resources to support our neighbouring water companies, Cambridge Water (South Staffs) and Affinity Water (Central and East). This means we need to ensure that for Draft WRMP 9

10 Our ning 2019 are flexible enough to be adapted to meet (unknown) AMP8 ( ) needs. In order to manage this uncertainty, we have created two ning scenarios: the Principal Planning Scenario and the Adaptive Planning Scenario. The Principal Planning Scenario includes the confirmed impacts of growth, climate change, AMP7 ( ) sustainability reductions and severe drought. The Adaptive Planning Scenario includes the additional uncertain impacts of AMP8 ( ) sustainability reductions and other company requirements. The combined impact in the Principal Planning Scenario is 307 Ml/d, equivalent to 28% of the average daily distribution input in The additional impact in the Adaptive Planning Scenario is up to 165 Ml/d, making the total up to 472 Ml/d; approximately 43% of the average daily distribution input in Figure 1.2 Pressures on our (by 2045, DYAA scenario) These impacts, however, are not distributed evenly; some areas are affected more than others. Out of a total of 28 Water Resources Zones (4), 12 are in deficit in the Principal Planning Scenario, and 15 are in deficit in the Adaptive Planning Scenario by the end of the period. Ruthamford Central and South, South Essex, South Fenland and South Lincolnshire are particularly affected as shown in the map below. Figure 1.3 supplydemand in 2045 (Principal Planning Scenario DYAA) 10 4 Water Resources Zones, or WRZs, are the building blocks of a WRMP. They represent an area within which, managing supply and demand for water resources is largely self-contained. The definition of a WRZ (from Water Resources Planning Tools (WR27), UKWIR, 2012) is: The largest possible zone in which all resources, including external transfers, can be shared and hence the zone in which all customers will experience the same risk of supply failure from a resource shortfall.

11 Our ning Severe drought Since the drought, we have been concerned that parts of our system are vulnerable to severe drought (5), meaning that we would not be able to maintain supplies without imposing rota-cuts and standpipes. These measures would be unacceptable to the majority of our cusotmers. In our last WRMP, we estimated that we would need an additional 150 Ml/d of capacity to improve the drought resilience of our Ruthamford system. We stated that a deficit of this size would need a large strategic raw-water transfer to support our Ruthamford reservoir system. Our 2014 Business Plan included undertaking a detailed assessment of this need and some preliminary ning and design work. We have undertaken a technical vulnerability analysis to understand and quantify the risk from severe droughts. This work shows that many of the events already experienced are more severe than previously understood, and our systems are broadly resilient to them, but that there are still some vulnerabilities. Both Ruthamford and Lincolnshire have experienced droughts of at least a 1 in 200 year return period in the last century. The implication is that parts of our system have been designed to cope with severe drought; for example, the design drought for Grafham reservoir is which has been shown to have an approximate 1 in 200 year return period. Furthermore, investments made since privatisation have substantially improved our resilience, particularly in Lincolnshire and Ruthamford. For example, following the groundwater drought and the drought, we have invested 37 million and 47 million respectively in new assets designed to improve resilience. We estimate the benefit of this investment to be approximately 100 Ml/d in Lincolnshire and 44 Ml/d in Ruthamford. There are, however, some remaining vulnerabilities in the Central Lincolnshire, Cheveley, Newmarket, North Fenland and South Fenland WRZs. Based on our systems modelling, the total impact of severe drought on our is 46 Ml/d. To ensure we can maintain supplies to all of our customers, without having to impose standpipes and rota-cuts, we need to develop an equivalent capacity from new supplies. 5 Defined as an event with a return period of approximately 1 in 200 years 11

12 Our ning 1.4 We have developed an ambitious, cost-beneficial, multi-amp demand that will more than offset projected growth in household demand. The savings are estimated to be up to 43 Ml/d by the end of AMP7, and up to 123 Ml/d by Since privatisation, demand has been at the heart of our to supply and demand. We have proven our ability to manage demand for water supplies: we put less water into our network today than we did in 1989, even though the number of properties supplied has increased by 34%. Our leakage performance is industry leading, when assessed using a composite measure of both per property and per kilometre of pipe we are the frontier company in England and Wales. We also have one of the highest levels of metering in the industry and our customer base is close to being fully metered. By the end of AMP6, we aim to have 93% of households metered and 86% paying measures charges (6). And our average per capita consumption is below average. Figure 1.4 Water company leakage performance in (data from Discover Water) Demand continues to be our priority Both government and our customers expect us to continue to reduce demand for water supplies. Our customers have told us that they prefer options that make best use of available resources and that leakage reduction should be a priority. The importance of demand is emphasised in Defra s Guiding Principles, for example: We expect you to choose demand-side options as part of the preferred wherever it is reasonably likely that the benefits will outweigh the costs. (7) In addition, demand is essential to mitigating short-term environmental risks. As already noted, the Water Framework Directive may drive further large sustainability reductions in AMP8. Increasing our current abstractions to meet growth related requirements would represent a serious deterioration risk. We are using demand to offset any growth in demand, mitigating this risk The difference results from our Enhanced metering, where we compulsorily install meters, but then encourage the customer to switch to paying measured charges voluntarily. 7 Defra, May 2017, Guiding principles for water resources ning, Pg 6

13 Our ning Demand also has wider environmental benefits. It directly benefits our local environment as we are saving water that would otherwise have to be abstracted, increasing the well-being and resilience of aquatic habitats. Avoiding the need for additional abstractions is particularly important in our region, which is home to many internationally important wetland ecosystems and classified as an area of serious water stress by the Environment Agency. In addition, water saved does not need to be treated and distributed which reduces our operational energy consumption, making us more efficient and saving carbon. Finally, analysis from WRE suggests that demand is an essential component of any longterm, sustainable water resource for the region. Where demand is left to grow unchecked, it results in widespread deficits and service failures (including rota-cuts and standpipes) by the 2060s. WRE s options appraisal process shows that a reliable, sustainable and affordable depends upon a combination of demand and supply-side. This is confirmed by our own analysis, which shows that our offsets significant investment in supply-side infrastructure, which could include desalination, aquifer storage and recovery and water reuse. We estimate the cost of avoided supply-side infrastructure to be over 530 million (8) Our future We believe there is great potential for future demand savings, driven by innovation. We to continue to build on our past successes, and have developed an ambitious 25-year demand, which will more than offset the projected growth in household demand. Our preferred consists of smart metering combined with behaviour change, leakage reduction (using state-of-the-art technology) and additional water efficiency activity. Figure 1.5 The cumulative savings of our selected demand 8 This number was calculated using EBSD outputs. It includes capex investment only and has been discounted over a 25 year period. 13

14 Our ning Smart metering We to install smart meters across our region, reaching the limit of feasible meter penetration by the end of AMP8. Specifically, we will install Advanced Meter Infrastructure (AMI) that takes meter readings every 15 minutes, which are then transmitted centrally every hour over a fixed, longrange radio network. This data is then provided to customers over a dedicated website or customer portal. Critically, smart meters offer the potential to deliver significant future demand savings, as customers with a smart meter save more water than those with a dumb meter. In addition, smart meters make possible a range of future water efficiency initiatives, such as non-price behavioural change incentives, financial incentives, or rising block tariffs. Smart metering is also an integral part of our leakage. Using smart meter data, we can analyse individual customers consumption patterns and identify customer supply pipe leaks (CSPL) and leaks within the property (plumbing losses). We will then notify customers proactively of the leak so that they can fix it, saving both water and money. By the end of AMP 7, we estimate that smart meters, combined with the behavioural change and improvements in leakage performance that they enable, will result in up to 7 Ml/d demand savings, and up to 7 Ml/d reduction in CSPL. By 2045, we estimate smart meters will result in up to 22Ml/d demand savings, and up to 28 Ml/d reduction in CPSL Water efficiency Our includes a range of household water efficiency and conservation activity. This is based on the continuation of current activities, such as the Bits and Bobs campaign (where we retrofit water efficiency devices free of charge) and The Potting Shed (where we provide water efficiency advice to gardeners). It also includes a significant amount of new initiatives, including initiatives that draw on insights from behavioural economics (9), such as a rewards scheme that incentivises water savings, incentives for customers to replace old toilets with more efficient brands and the installation of water butts. We will also work collaboratively with developers to ensure that new housing is as waterefficient as possible. This includes trialling the use of greywater and rainwater harvesting technology at a development scale to achieve 80 l/head/d potable consumption. We forecast that these activities will result in savings of 6 Ml/d by the end of AMP7, and 30 Ml/d by our ambition our ambition is illustrated in the figure below, which shows the percentage change in the number of properties supplied, the water we put into our network and leakage since We have considered compulsory metering, but do not believe it is currently the right (see Consultation Question 3) Ambitious leakage reduction As already noted, our target for AMP6 is to reduce our leakage to a three year average of 177 Ml/d by Our target for AMP7 is to reduce leakage by a further 30 Ml/d (15%), from a three year average of 177 Ml/d in 2020 to 147 Ml/d by the end of the AMP. By 2045, we to reduce our leakage by a total of 70Ml/d (40%), down to 107 Ml/d. This includes the savings in CSPL facilitated by smart meters described above Behavioural economics is a method of economic analysis that applies psychological insights into human behaviour to explain economic decision-making.

15 Our ning Figure 1.6 Demand : past achievements and future ambition The impact of our demand on PCC is shown in the figure below. By the end of the period (2045), we expect that our average PCC will be 117 l/head/d, a reduction of 14% (19 l/head/d) compared with Figure 1.7 The impact of our demand on average PCC 15

16 Our ning 1.5 Despite having developed an ambitious demand that more than offsets the effects of growth, the scale of our challenge is such that we will still need carefully targeted investment in supply-side capacity to maintain our supplydemand. Our Draft WRMP 2019, and the that we to deliver in AMP7, are based on the Principal Planning Scenario. We have used the industrystandard Economics of Balancing Supply and Demand (EBSD) methodology to determine the preferred. This is based on least-cost optimisation and includes: Our involves the treatment and transfer of surplus water and new resources in North Lincolnshire to deal with deficits in other parts of our system. We currently have a water treatment works at Elsham that supplies non-potable water to industrial customers on the South Humber Bank. We to treat this water to potable standards (including metaldehyde treatment) and transfer it south, then east, via strategic mains. Non-potable demand on the South Humber Bank will be met by treating water from Pyewipe water recycling centre to non-potable standards. Trading with Affinity Water and Severn Trent Water Increasing system connectivity to fully integrate our northern, eastern and western systems, thus creating a strategic grid, and A series of that create new water resources. Figure 1.8 Scheme selection in the Principal Planning Scenario 16

17 Our ning Each of the selected consists of a series of component parts (such as new treatment processes, transfers mains, and pumping stations), as shown in the table below. Table 1.1 New resource development AMP Solution Capacity (Ml/d) Component parts 7 Elsham Non-Potable to Potable 31 New treatment process Transfer mains Pumping station Storage reservoirs Connection to existing potable system Pyewipe Water Reuse for non-potable use 21 New treatment process Transfer mains Connection to existing non-potable system 8 Foxcote Recommissioning (1) 6 Environmental mitigation New treatment process Pumping station Connection to existing potable system Severn Trent Water Import 36 Trade only 9 Colchester Water Reuse (2) 15 Raw water main River outfall River intake upgrade New treatment process Connect to existing potable system 1. Only required if the options to trade water with Affinity Water are not available. 2. Only required if the options to trade water with Affinity Water are not available. Increasing system connectivity in this manner has multiple benefits. Firstly, it allows us to make best use of existing resources by transferring water around our region, before developing new resources. It builds flexibility into our supply systems, increasing resilience to unforeseen events and reducing the number of customers who are served by a single supply system. (10) It also increases opportunities for trading and more efficient network operations. Finally, it creates flexibility, giving us the capacity to meet very uncertain future needs. By increasing network connectivity in AMP7, we will ensure we have the widest range of options available, as their suitability will not be constrained by their location. The total cost of our preferred of supply-side is 534 million (capex) in AMP7, which equates to a bill impact of p.a. on average household bills by 2025 (assuming the other factors that influence bills remain unchanged). It would cost an additional 88 million to future proof our Plan, which equates to an additional bill impact of 1.70 p.a. by The investment required to increase resilience to drought is relatively modest, and equates to approximately 2.20 p.a. of the overall p.a. on the average household bill by 2025 (assuming the other factors that influence bills remain unchanged). We are undertaking an assessment of the costs and benefits, and the preliminary results indicate that this investment is cost beneficial. 10 We are currently undertaking technical work to quantify the benefit of our in relation to the number of customers served by a single supply system. 17

18 Our ning Adaptive ning As already noted, we have created an Adaptive Planning Scenario to help us manage the uncertainty associated with AMP8 sustainability reductions and future exports. Although our preferred is based on solution selection in the Principal Planning Scenario, we have also undertaken an options appraisal in the Adaptive Planning Scenario. Many of the selected in the Principal Planning Scenario are also selected in the Adaptive Planning Scenario, demonstrating that these are low regret assets that will be required regardless of the need in AMP8. It also shows that the selected represent best value and that we would not be able to identify a better value solution even if uncertain AMP8 impacts were confirmed at this stage. Figure 1.9 Scheme selection in the Adaptive Planning Scenario If it is determined that further sustainability reductions are required in AMP8, then we need to ensure that we can make them in time to meet statutory obligations. The solution selection in our Adaptive Planning Scenario demonstrates that large supply-side options, such as a new winter storage reservoir, water reuse and desalination, may be required. These options have long lead times and cannot be delivered within one AMP cycle. They require detailed technical design work, such as raw water quality monitoring, environmental impact assessments, and licence applications. A new reservoir would also require geotechnical investigations. In addition, some options (such as new reservoirs and desalination ts) may be classified as Nationally Significant Infrastructure and so be required to go through the Development Consent Order ning route. This includes a formal consultation process with Local Planning Authorities and other stakeholders. Unless we start these pre-ning activities in AMP7, these options will not be available for delivery if they are selected in WRMP

19 Our ning In order to manage this uncertainty, we have developed an Adaptive Planning to delivering our WRMP This involves undertaking pre-ning activity for specific options that are may be selected in WRMP 2024, including: South Lincolnshire Reservoir Fenland Reservoir Felixstowe Desalination South Humber Bank Desalination Cliff Quay Water Re-Use, and Trent Transfer. As a result of this pre-ning activity there will be a need to submit a ning application or an application for a Development Consent Order to progress one or more of the potential options listed above. If selected in WRMP 2024, these will then be available to meet statutory obligations associated with the Water Framework Directive. Their delivery remains contingent upon selection in WRMP 2024 and we will not progress that are not required. This dependency will be made clear in any related ning activity. It is also worth noting that these options are selected in the WRE by 2060, which demonstrates that the pre-ning will not be abortive work. 19

20 Our ning 2 INTRODUCTION Key Messages About this document: This document is Anglian Water s Draft Water Resources Management Plan (WRMP) 2019 that covers the period from 2020 to It is supported by technical documents, that explain our methodologies and provide the detailed results of our analysis. About us: We are the largest water and wastewater company in England and Wales by geographic area. Everyday, we supply over 1 billion litres of water into 2.2 million households in the East of England and Hartlepool. The particular characteristics of our region mean that s we face from climate change and environmental protection are particularly acute. The East of England is comparatively dry and designated by the Environment Agency as an area of serious water stress. It is also environmentally sensitive and home to many internationally important wetland ecosystems that need protecting. Our region has the highest population growth outside of London. We have proven our ability to manage demand for water supplies: we put less water into our network today than we did in 1989, even though the number of properties supplied has increased by over 30%. 2.1 Guide to this submission We have set ourselves ambitious goals to reduce our carbon emissions over AMP7 ( ), and have already made great progress towards them. In we reported an 11% reduction in operational carbon (from a 2015 baseline) and a 55% reduction in capital carbon (from a 2010 baseline). We now to become carbon neutral by Legislative and policy framework: Water companies have a statutory obligation to prepare and maintain a Water Resources Management Plan (WRMP). WRMPs should ensure a secure and sustainable supply of water, focus on efficiently delivering the outcomes that customers want, while reflecting the value that society places on the environment. Government views the WRMP process as a vital part of delivering key policy, including: to deliver secure, reliable, sustainable and affordable supplies of water value nature in decision-making, and, connect people with the environment. Drinking water quality must be central to, and accounted for, in all aspects of water company ning, including the development of WRMPs. The Drinking Water Inspectorate expects companies to to always meet their statutory obligations for drinking water quality. Figure 2.1 Draft WRMP 2019 submission This document is our Draft WRMP 2019, which covers the 25 year period from 2020 to It describes the pressures on our (growth, climate change, sustainability reductions and increasing resilience to severe drought), and our twin-track for mitigating the related impacts. Our draft WRMP 2019 submission is comprised of several reports, as set out in the diagram below. The main submission is supported by technical documents that explain our methodologies and provide the detailed results of our analysis. 20

21 Our ning In addition, our submission includes the results of our statutory environmental assessments: Habitats Regulation Assessment Report (Draft WRMP 2019) Strategic Environmental Assessment: Environmental Report (Draft WRMP 2019) We have checked national security information or data and any commercially confidential or sensitive information. 2.2 Our business today Figure 2.2 Our region Our region The East of England is comparatively dry, receiving only two thirds of the average rainfall for England and Wales. Water resources are already under pressure: the region is designated by the Environment Agency as an area of serious water stress, and opportunities for new consumptive abstraction are limited to winter storage, high summer flows, reuse and desalination. We value the environment: our business depends on a healthy, flourishing environment to supply clean water and receive recycled water after treatment. Our region is home to many internationally important wetland ecosystems that need protecting, including 40 Special Areas of Conservation (SAC) (1), 28 Special Protection Areas (SPA) (2) and 28 Ramsar wetlands (3). In addition, many unique habitats are located within our area, including reedbeds, intertidal mudflats, and grazing marshes. At the same time, our region is predominantly agricultural and important for national food security, producing half of the UK s sugar beet, a third of its potatoes and a quarter of its wheat. We are the largest water and wastewater company in England and Wales by geographic area and we employ almost 4,500 people. Everyday, we supply over 1 billion litres of water into 2.2 million households in the East of England and Hartlepool. We also provide wastewater services to over 2.7 million households. Our assets include: 143 water treatment works 38,200 km of water mains 77,000 km of sewers 1,130 water recycling centres (18% of all those in England and Wales) Circa 6,000 pumping stations Nearly 4 in every 5 households are billed based on meter readings. Our water sources Our upstream resources are secured from a combination of groundwater and surface water sources. The groundwater system extends to 450 operating boreholes, exploiting groundwater resources from six major aquifers, with treatment to maintain compliance with drinking water standards. Some of the groundwater requires treatment to remove point and diffuse source contaminants and some requires treatment for naturally occurring iron and manganese. A small percentage of supply is derived from direct river intakes. The of resource is derived from surface water stored in five large capacity predominantly pumped storage reservoirs. There are also three smaller reservoirs, one of which is shared with Affinity Water under the Ardleigh Reservoir Order Delivering for customers and the environment In our AMP 6 Business Plan, we developed 10 outcomes for customers and the environment. They are designed to address the issues that matter most to our customers, and that deliver for them, the region and the environment. 1 SAC is an area classified under the EC Habitats Directive and agreed with the EU to contribute to biodiversity by maintaining and restoring habitats and species. 2 SPA is an area classified under the EC Birds Directive to provide protection for birds, their eggs, nests and habitats. 3 An area of international conservation importance classified at the Convention on Wetlands of International Importance 1971, ratified by the UK Government in

22 Our ning Figure 2.3 Outcomes for customers and the environment Water companies deliver outcomes through a set of Performance Commitments (PCs), which are the pledges made to secure the desired outcomes. Each PC has a target that sets out how the company is expected to perform. Outcome Delivery Incentives (ODIs) encourage us to deliver PCs; they can either be financial (rewards and penalties for over or under performance) or reputational Demand : a proven track record We have proven our ability to manage demand for water supplies: we put less water into our network today than we did in 1989, even though the number of properties supplied has increased by over 30%. This has been achieved by moving water around the region to where it is needed most, increasing the number of customers who are metered, reducing our leakage and encouraging and supporting our customers to become more water efficient. Since privatisation in 1989, demand has been at the heart of our to supply and demand. We believe demand to be especially important given that our region is classified as an area of serious water stress by the Environment Agency, environmentally sensitive and experiencing fast growth. 22

23 Our ning Figure 2.4 Our proven ability to manage demand This is a significant achievement. For example, the National Rivers Authority s (NRA) for the Anglian Region (published in 1994) showed that demand for public water supplies doubled between 1964 and The NRA emphasised that the majority of the reliably available water resources in the region were already allocated, and that developing new resources would be both expensive and environmentally damaging. As a result, the NRA advocated that all users of water work hard to reduce their demand, to the extent that it is economically justified. (4) Through our commitment to demand we have risen to this challenge. Our target for the end of the AMP is to reach 172 Ml/d (5), which is 27 Ml/d below the AMP 6 Sustainable Economic Level of Leakage (SELL) (6) (calculated to be 199 Ml/d). Leakage reduction Our leakage performance has improved dramatically in the last 20 years. We now lose 20% less water through leaks than we did in 1998, despite the expansion of our pipe networks to connect over 500,000 more properties. In we achieved our lowest ever leakage of 183 Ml/d. Furthermore, our current leakage performance is industry leading. When assessed using a composite measure of both per property and per kilometre of pipe we are the frontier company in England and Wales. 4 NRA, 1994, A sustainable for secure water supplies and a better water environment 5 Equivalent to a three year rolling average of 177 Ml/d 6 Up to 2015, targets for reducing leakage in the water industry were set by Ofwat and the Environment Agency using a methodology known as the Sustainable Economic Level of Leakage (SELL). SELL seeks to determine the level of leakage at which it is uneconomic to invest further; as the cost of providing an extra unit of water from leakage reduction would be more expensive than providing in another way, such as metering or a supply scheme. 23

24 Our ning Figure 2.5 Water company leakage performance in (data from Discover Water) Metering We believe that meters are the fairest way to charge for water, because customers only pay for what they use. Customers who are metered generally use around 15% less water than customers who pay an unmeasured charge. We have consistently sought to increase the number of customers who are metered, without a compulsory metering. An important part of our metering is our enhanced metering. This involves proactively installing a meter at an unmeasured property and then either encouraging the customer to switch on the basis that it will reduce their bill, or using our statutory powers to switch on change of occupancy. We also have one of the highest levels of metering in the industry and our customer base is close to being fully metered(7). By the end of AMP6, we aim to have 93% of households metered and 86% paying measured charges. In addition, the majority of our non-household customers are metered, and only 0.5% of non-household demand is unmeasured. Water efficiency An important part of managing demand is empowering customers to control and reduce their water usage, and this involves encouraging customers to use less of our retail product. We have a dedicated water efficiency team that lead our work in this area and carry out our communications. We assess our success in encouraging water efficient behaviour by measuring average water consumption per-property. Our target is to reduce average consumption by 7 litres per household per day (l/household/d), from 312 l/household/d to 305 l/household/d. We have not developed an ODI for the numbers of meters installed or water efficiency audits conducted, because it is the actual water savings achieved by these and other activities that is important. There is a strong link between our work to address water affordability in our region and our water efficiency and metering activities. The provision of water efficiency advice to metered customers helps them reduce consumption and consequently their bill. Because of this, we coordinate our metering and water efficiency work to support customers and encourage them to reduce their water consumption. Our combined metering and water efficiency divides the region into areas that are visited in turn, offering all elements of the in the same place at the same time. We believe there are significant opportunities to work with land developers to promote sustainable developments and water efficiency. Local Authority 24 7 Achieving 100% household meter penetration is disproportionately costly, as it would involve splitting shared supply pipes (for example, in blocks of flats). We estimate that the practical limit on household meter penetration is 95%.

25 Our ning requirements for housing developments are pushing developers to build homes to a standard of 110 litres per head per day. Ahead of the next AMP we are ning to go further, from 1 April 2018 we are ning to offer developers a discount on infrastructure connection charges to build homes to a standard of 100 litres per head per day. What factors influence household consumption? Our Per-Capita Consumption (PCC) is below average. In we reported an average PCC of 136 l/head/d, compared with the industry average of 141 l/head/d. There is, however, a large variation in PCC from 127 l/head/day to 160 l/head/day (in the reporting year ). Together with three other companies from the Water UK Water Resources Long-Term Planning Framework project, we commissioned a study to: Investigate the factors that explain the differences and complexity in household consumption, in the UK and in Europe Recommend a of research that will ensure the right data and information on household consumption is available to deliver ambitious demand in the future, and To better understand and manage risk and uncertainty when considering strategies for demand. This study concluded that although occupancy is a significant exatory variable for household consumption, other factors are also important. These include (but are not limited to): Property type Age of occupants Socio-demographic factors (such as social status, affluence, culture, lifestyle, values) Metering, and, Weather. These factors vary regionally, and provide an exation for the regional variation seen in household consumption. As a result, the study concludes that while PHC and PCC are useful metrics for tracking company performance over time, they should not be used as a performance comparator between companies unless the factors that influence household consumption can be normalised Carbon reduction: a proven track record Climate change is a global challenge; however, we believe it is particularly important that we play our part to reduce carbon emissions and mitigate its impacts. Not only is our region particularly vulnerable to climate change, but we are one of the largest emitters of greenhouse gases in the East of England. We are cutting our carbon emissions; reducing the energy and materials used to maintain our infrastructure; generating our own, renewable energy; increasing the efficiency of our equipment; driving out waste and finding uses for the byproducts of our treatment processes in pursuit of a truly circular economy. By doing so we also continue to reduce costs, drive innovation and set a powerful example for others to follow. As a result, we have set ourselves ambitious goals to reduce our carbon emissions over AMP7 ( ): To exceed a 7% reduction in real terms in gross operational carbon by 2020 from a 2015 baseline. (This is the carbon emitted as a result of our operational activities.) To deliver a 60% cent reduction in capital carbon by 2020 from a 2010 baseline. (This is the carbon emitted as a result of construction projects we undertake.) We have already made great progress towards these goals, and in reported an 11% reduction in operational carbon (from a 2015 baseline) and a 55% reduction in capital carbon (from a 2010 baseline). We have now set ourselves an even more ambitious long-term goal, to become carbon neutral by Future challenges In our Strategic Direction Statement , we identify six long term challenges. The first three challenges are particularly acute in our region. climate change population and economic growth environmental protection affordability and customer expectations ning for the long-term, and markets, structure and financing of the industry. 25

26 Our ning Figure 2.6 The six long-term challenges we face Climate change Our region is particularly vulnerable to climate change low lying, with a long coastline and low rainfall. Hotter, drier weather can cause water scarcity and drought. All the 2009 UK Climate Projections (UKCP09) scenarios suggest summer rainfall will decrease and winter rainfall increase at the 50th percentile. Defra, Ofwat and water company risk assessments identify priority risks to water supply and flood resilience. The key impacts of climate change for the water sector are expected to include the following: Lower summer rainfall More intense rainfall events Increased evaporation Increased coastal erosion Less groundwater recharge Warmer summers Increased flood risk of all types, including coastal, and Higher sea levels. National risk assessments show climate change poses a serious threat to the water sector. The UK Climate Change Risk Assessment 2017 Evidence Report assigned the highest urgency category to mitigating the risks of cascading failures from interdependent infrastructure networks; risks to infrastructure services from coastal, river, surface water and groundwater flooding; and risks of sewer flooding due to heavy rainfall. New policies and stronger coordinated, cross-sector effort are needed to deliver more ambitious reductions in water consumption and establish strategic ning of new water-supply infrastructure. (8) Population and economic growth Our region has the highest population growth outside of London. The number of households we supply has grown 30% since the privatisation of the water industry in 1989, and is expected to continue at a rapid pace in coming decades. Population growth is not distributed evenly, but concentrated in specific areas, most notably in Ruthamford and the areas surrounding Cambridge. Three out of the five fastest growing cities, as classified by the Centre for Cities, are located in our region (Cambridge, Peterborough and Milton Keynes) (9) Centre for Cities, 2017, Cities Outlook

27 Our ning We have a vital role in facilitating new housing and commercial development. This is recognised by the WRP Guidelines, which state that we must ensure our ned property forecast and resulting supply does not constrain the growth ned by local councils (10) Environmental protection We value the environment: our business depends on a healthy, flourishing environment to supply clean water and receive recycled water after treatment. Our area is home to important wetland ecosystems that need protecting, and well-functioning ecosystems are likely to be more resilient to shocks and disturbances. We have been proactive in assessing the impact of our abstractions on the environment since AMP3 ( ), and have continued to work with the Environment Agency to develop es that maintain the between environmental need and public water supply. This includes promoting investigations through the AMP3 National Environment Programme (NEP), the AMP4 Water Resources Environment Programme (WREP), the AMP5 NEP and the AMP6 NEP. Restoring abstraction to sustainable levels The AMP6 NEP specified 28 waterbodies and designated sites where the Environment Agency suspected that our current abstractions were, or had the potential to, cause environmental harm. We are required to take action where it is confirmed that an abstraction is causing a problem, and there is a cost beneficial and affordable solution to address the impact. The solution could be either a reduction to licensed abstraction (also known as a sustainability change), or an NEP mitigation option, or a combination of both. Following a detailed investigation and options appraisal process, we have agreed the NEP mitigation measures and sustainability changes that we need to deliver in collaboration with the Environment Agency and Natural England, and these have been set out in the AMP7 Water Industry National Environment Programme (WINEP). Selected NEP mitigation options include: relocating the abstraction point (also known as source relocation), river restoration works to improve habitats (such as restoring characteristics of natural chalk streams) and river support schemes, where flow is augmented via a transfer of water into the river. It is worth noting that the sustainability changes listed in the WINEP are based on the assumption that the NEP mitigation options are implemented. If they were not delivered, the sustainability changes required would be much greater. A reduction in licensed volume does not necessarily result in a reduction in deployable output (DO). (11) Reductions in DO that are caused by sustainability changes are known as sustainability reductions. Preventing deterioration In order to achieve the Water Framework Directive (WFD) objective to prevent deterioration of the status of all bodies of surface water and groundwater, or no deterioration, the Environment Agency cannot authorise abstraction which may in future cause deterioration in water body status. At the beginning of 2016, the Environment Agency indicated that all of our time-limited abstraction licences (12) may need to be capped at recent actual abstraction rates, and similar restrictions could follow shortly thereafter for non-time limited licences. There is significant uncertainty regarding the scale of the sustainability reductions that this may drive, which will not be resolved until 2023 at the earliest. Possible future exports Two of our neighbouring water companies, Cambridge Water (South Staffs) and Affinity Water (Central and East), are facing potential sustainability reductions in AMP8. Given the limited options for them to develop new resources, they may need to compensate for this reduction by seeking a transfer from within our region. We have worked closely with both companies to determine the size of this potential impact, through both the WRE process and discussions specific to the development of Draft WRMP Affordability and customer expectations Customer expectations have been transformed in recent years, a change accelerated by social media. Customers compare our service with that of the top UK brands and they expect us to be as good, if not better. They expect us to cope with the six long-term challenges identified in our Strategic Direction Statement, while ensuring that bills remain affordable and that the costs of increasing our resilience are shared fairly between current and future customers. 10 Environment Agency & Natural Resources Wales, April 2017, Water Resources Planning Guideline: Interim update, Pg As part of the WRMP process, water companies need to determine how much water is available to them. They do this through calculating deployable output (DO), which is essentially the volume of water that each water treatment works can put into supply. Multiple factors are considered in the calculation of DO, including the hydrological yield of abstraction sources (assessed against the historic hydrological record), treatment works capacity, licensed volume and any licence constraints, such as Hands-Off Flow conditions. 12 We currently hold 210 abstraction licences, of which 116 are time limited and due for renewal on 1st April

28 Our ning Planning for the long-term The nature of the water industry requires us to take the long view ning years, and even decades, ahead on issues including water resources, the maintenance of assets, advances in technology and closing the skills gap. We look to tackle these long-term issues in collaboration with others. That includes delivering our capital through long-term alliances with our contractors and suppliers, and joint research and ning on issues like drought resilience. Where possible, we look to lead and shape the regional and national conversation to secure the action and investment needed for a sustainable future. Our contribution to the debate We have been actively involved in the development of the debate on the future of water resources, and have been proactive at undertaking research to understand what a sustainable future might look like. This includes the projects listed below: Trading theory for practice A right to water? Research into water allocation through effective water trading Sink or Swim? A multi-sector collaboration on water asset investment Markets, water shares and drought: Lessons from Australia Financing multi-sector water supply assets Positive engagement in Defra s abstraction reform proposals National Long Term Water Resources Strategy Ongoing - Water Resources East project Ongoing - Water in the American west: New es to decision making Reports available at: co.uk/about-us/statutory-reports/ and cisl.cam.ac.uk/business-action/natural-resourcesecurity/natural-capital-leaders-platform Shop Window We do not know what our business could look like in 25 years time, or the context within which it will need to operate, but we will still need to protect our customers, environment and assets. So we have to learn to be more agile and responsive, challenge our traditional es, and make the most of collaboration, innovation and engagement. We are looking for answers through our Newmarket Innovation Shop Window: a real-world location where we drive innovation through collaboration across our business, supply chain and the entire man-made water cycle. By concentrating innovation in one place, we unlock synergies between new technologies and different ways of working. This accelerates our learning and allows us to improve customer service, environmental stewardship and the efficiency of our business at a much faster pace. In this respect, our Shop Window is a microcosm of what a future water company looks like, today. The strength of the Innovation Shop Window is the sheer number of partners engaged and number of projects running simultaneously. As of March 2017, just one year into the Shop Window initiative, there are already 98 organisations working on 62 projects, with more coming on board all the time. These projects are designed to solve the most challenging questions facing our industry. While the Shop Window provides a base for accelerated learning, it will ultimately create benefits right across our region as successful findings are applied and rolled out more widely. For example, thermal imaging technology used to identify hardto-locate leaks has already been rolled out to Norfolk and Suffolk, having been pioneered in the Shop Window. In the Shop Window, we have set ourselves ambitious, aspirational goals to drive change and inspire our people and partners. We don t yet know for certain how we will make these goals a reality, but they are already transforming the way we work. Our seven goals are listed below: 100% customer satisfaction Reduce consumption to 80 l/head/day Zero leakage and bursts Zero pollutions and flooding 100% compliant and chemical free drinking water Become carbon neutral Build a circular economy Markets, structure and financing of the industry Structural changes currently under way in the water industry will present new challenges and significant opportunities. In April 2017, the market opened for nonhousehold customers, allowing them to choose who they buy their water and water recycling services from. 28

29 Our ning Anglian Water Services now supplies wholesale services to the retailers serving non-household customers in our region while continuing to supply services to our domestic customers. The Government and Ofwat have also indicated that further reform is likely in the future, including in upstream markets, sludge treatment and the provision of new water resources. Furthermore, Ofwat has proposed that large-scale discrete new investments should be subject to Direct Procurement. We are working to secure long-term, stable investment and embrace the opening of markets and other changes as an opportunity to increase efficiency and add value. 2.3 Legislative and policy framework Legal requirements Water companies have a statutory obligation to prepare and maintain a WRMP, as set out in Section 37A-37D of the Water Industry Act 1991 (as amended by Section 62 of the Water Act of 2003). Further detail is specified in the Water Resources Management Plan Regulations 2007 and the Water Resource Management Plan Direction In addition, companies must take account of the following relevant legislation: Strategic Environmental Assessment (SEA) Directive Habitats and Wild Birds Directives Water Framework Directive (WFD) Drinking Water Directive Water Resources Act 1991 Environment Act 1995 The Eels (England and Wales) Regulations 2009 Wildlife and Countryside Act 1981 Countryside and Rights of Way Act 2000 Natural Environment and Rural Communities Act 2006 EU Regulation (1143/2014) on invasive alien (nonnative) species (2015) In the development of a WRMP, companies must follow the Water Resources Planning Guidelines (13) (referred to as WRP Guidelines ) and have regard to broader government policy. This WRMP is accompanied by a Strategic Environmental Assessment (SEA) and Habitats Regulation Assessment (HRA). The requirement for an SEA and HRA is specified in The Environmental Assessment of Plans and Programmes Regulations (2004), while the preparation is subject to UKWIR guidance ( Strategic Environmental Assessment and Habitats Regulations Assessment - Guidance for Water Resource Management Plans and Drought Plans UKWIR 2012, Ref: 12/WR/02/7). In the WRMP, companies should set out how they will ensure that they have sufficient water resources to meet the current and future demands of their customers, over a minimum 25 year period. The Environment Agency states that WRMPs should ensure a secure and sustainable supply of water, focus on efficiently delivering the outcomes that customers want, while reflecting the value that society places on the environment. (14) Government policy Defra s Guiding Principles The key policy priorities the government expects WRMPs to address are set out in Defra s Guiding Principles for Water Resources Planning, published in May Government include: to deliver secure, reliable, sustainable and affordable supplies of water value nature in decision-making, and, connect people with the environment. In addition, the Guiding Principles emphasise the importance of the themes described below. Take a long term, strategic to protecting and enhancing resilient water supplies WRMPs should represent best value to customers over the long-term, and companies are encouraged to consider a ning horizon that goes beyond the 25 year minimum. Defra emphasises the importance of resilience, stating: we want to see a real change in to your WRMP so that it properly examines the value of resilience for your customers, is informed by your customers views and identifies what actions you will take to reduce risk now and in the future. This is particularly important where you identify there is a greater risk of supply interruptions than your customers expect. (15) 13 Environment Agency & Natural Resources Wales, April 2017, Water Resources Planning Guideline: Interim update 14 Environment Agency & Natural Resources Wales, April 2017, Water Resources Planning Guideline: Interim update, Page 9 15 Defra, May 2017, Guiding principles for water resources ning, Page 2 29

30 Our ning This includes consideration of an appropriate Level of Service that is informed by meaningful customer engagement, the potential impacts of restrictions on households and businesses, and more thorough testing of water supply systems to events more severe than those contained within the historic record. (16) Consider every option to meet future public water supply needs In order to determine the best value solution, companies must fully consider every potential option, including those outside of company boundaries, collaborating with other sectors, inter-company transfers, trading, and demand. Companies are expected to thoroughly investigate and report on the environmental and social costs and benefits associated with options, including carbon costing and the value of natural assets. Protect and enhance our environment, acting collaboratively The Guiding Principles emphasise the important role that water companies play as leaders and stewards of the natural environment. As such, companies are expected to contribute towards the delivery of a healthier water environment, more resilient to drought and pollution that offers economic and social benefits. (17) As stated above, companies are expected to thoroughly investigate environmental and social costs and benefits, in order to make informed decisions that reflect the value of the environment. The Guiding Principles refer to the government s for the environment including those set out in Defra s (18) and the appropriate parts of the EU Water Framework Directive. WRMPs should support River Basin Management Plan. Promote efficient water use and reduce leakage WRMPs are expected to continue to reduce the overall demand for water through demand activity, such as leakage reduction and metering (although compulsory metering is not seen as the right way forward), especially for companies in an designated area of serious water stress. Companies are expected to continue to reduce leakage. The Guiding Principles state: We expect you to choose demand-side options as part of the preferred wherever it is reasonably likely that the benefits will outweigh the costs. (19) Wider government policy We have also taken into account wider government policy in relation to the water industry, including: Defra s Strategic Policy Statement The government s housing growth ambitions, and, The economic growth aims in the Idustrial Strategy, including those for the Oxford, Milton Keynes and Cambridge corridor, the bulk of which is located within the Anglian region Technical guidance When developing a WRMP, water companies must follow the technical guidance issued by the Environment Agency (known as the WRP Guidance). (20) In many areas, the WRP Guidance is supplemented by supporting guidance, also issued by the Environment Agency. More detailed technical guidance can also be found in various UKWIR reports. A full list of all the relevant technical guidance can be found in the tables below. Unless otherwise stated, we have followed this technical guidance in the development of our WRMP Defra, May 2017, Guiding principles for water resources ning, Page 2 17 Defra, May 2017, Guiding principles for water resources ning, Page 4 18 Creating a great place for living: Defra s to Defra, May 2017, Guiding principles for water resources ning, Page 6 20 Environment Agency & Natural Resources Wales, April 2017, Water Resources Planning Guideline: Interim update

31 Our ning Table 2.1 Supporting technical guidance issued by the Environment Agency Document title Final guidance issue date Climate change es in water resources ning new methods Jan 2013 Drought options supporting document Nov 2016 Drought links supporting document Nov 2016 Environmental and social costs supporting document (including Appendix B Excel file) Nov 2016 Invasive Non-Native Species position statement Jan 2017 Leakage in WRMP19 supporting document Aug 2017 Outage supporting document Jul 2016 Sustainable abstractions supporting document Jun 2017 Water resource ning table instructions (version 16) May 2017 Water resource zone integrity supporting document Jul 2016 Table 2.2 UKWIR reports Document title Assessment of the significance to water resource s of the UK climate projections Publication date 2009 Customer behaviour and water use 2012 Decision making methodology 2016 Handbook of source yield methodologies 2014 Impact of Climate Change on Water Demand 2013 Integration of behavioural change into demand forecasting and water efficiency practices 2016 Peak water demand forecasting methodology 2006 Population, household property and occupancy forecasting 2016 Outage and 2016 Risk based ning 1995 and 2016 Resilience ning: good practice guide including the list of hazards 2013 Strategic Environmental Assessment and Habitats Regulations Assessment guidance for water resources 2012 The economics of balancing supply and demand (WR27 water resources tools project) 2012 WRMP19 Methods Household Consumption Forecasting 2016 WRMP19 Methods Risk based ning methods

32 Our ning The main considerations from the technical guidance have been summarised in tabular format in the Environment Agency s Water company checklist. Each requirement is assigned an action number. We have used this document to ensure our WRMP complies with all requirements and statutory obligations Drinking water quality The Drinking Water Inspectorate (DWI), has issued a Guidance Note to provide water companies and other stakeholders with guidance on long-term ning for the quality of drinking water supplies. (21) The Guidance Note contains no new policy initiatives or legal obligations; instead it focuses on the delivery of existing obligations within a longterm ning context. The requirement to ensure that there is no deterioration in the quality of water that is supplied to customers, is particularly relevant to our Draft WRMP We currently have 4 Undertakings that cover 19 water treatment works that have been identified as being at risk of supplying unwholesome water due to the presence of metaldehyde. In the development of Draft WRMP 2019 we have had to ensure that we are not increasing the number of customers exposed to metaldehyde. The Guidance Note sets out broad considerations that companies should take into account in their long-term ning. The points that are particularly relevant to the development of WRMPs are summarised below. Companies should always to meet their statutory obligations for drinking water quality, and drinking water quality considerations should be central to, and accounted for, in all cost benefit assessments of options to supply and demand. As part of this, companies must ensure that there is no deterioration in the quality of water that is supplied to customers. This duty may have an impact on both transfers of water within a company s supply area, and for exports and imports across company boundaries. To demonstrate compliance, companies are expected to have carried out risk assessments on the potential impacts on public health, wholesomeness and acceptability to consumers of new or altered supply arrangements, including within- and cross-boundary transfers of drinking water supplies. Catchment schemes should be the first consideration when seeking to reduce water quality risks prior to treatment, and ultimately mitigate all significant risks to public health, wholesomeness and acceptability of water supplies. 21 DWI, 2017, Guidance Note: Long term ning for the quality of drinking water supplies 32

33 Our ning 3 A COLLABORATIVE PLAN Key Messages Given the scale of, we have collaborated and engaged extensively in the development of our Draft WRMP, particularly through WRE. Our conversation with customers Customer engagement is central to both the daily running of our business and our longterm decision making. We have refreshed our customer engagement and s, and embedded it as a business as usual activity. Our new places greater emphasis on ensuring our engagement is meaningful to customers and explores differences of opinion, experience and behaviours between different groups of customers. To date, over 45,000 customers have been involved in a range of initiatives including: Targeted deliberative research via our Love Every Drop online community The Anglian Water tour bus The H2OMG water festival, and Research to segment customers attitudinally and societal valuation surveys. Key conclusions include: Ensuring that supply meets demand is one of our core responsibilities. Customers support investment to increase resilience and believe we should be ning for the long-term and taking preventative action to foreseeable future challenges. Generally, customers prefer options that are perceived to make best use of existing resource and infrastructure. However, many customers also recognise our expertise and trust us to make complex investment decisions. Regional and national collaboration The challenges we face from drought, climate change, growth and meeting the needs of the environment are common to our neighbouring water companies, as well as to the other abstractors and users of water in the region and adjoining regions. To ensure that we all have access to reliable, sustainable and affordable supplies in the future, we are leading a number of collaborative water resource ning efforts. These include: The Water UK Long Term Planning Framework The Water Resource East (WRE) project, and, The Trent and Ouse Working Groups. WRE and the Trent and Ouse Working Groups consider multi-sector needs. Partners in our different collaborations include representatives from agriculture, drainage, power, environment, local government, business and finance sectors, other water companies, the Environment Agency and Natural England. Formal pre-consultation process Our pre-consultation letter was sent to over 150 key stakeholders. We have worked closely with the Environment Agency via an agreed methods discussion process, holding 18 meetings between May 2016 and November 2017, to develop and. We have also engaged with Ofwat (holding a WRMP Masterclass in December 2016 and a formal pre-consultation meeting in August 2017) and Natural England (as part of the Strategic Environmental Assessment and Habitats Regulation Assessment process). Leakage continues to be a priority and an emblematic issue. Although customers are prepared to accept bill increases for service improvements that they value, many customers are feeling under financial pressure and are concerned about future bill increases. 33

34 Our ning 3.1 Customer engagement Our conversation with customers Customer engagement is central to both the daily running of our business and our long-term decision making. We have built on the extensive engagement undertaken for PR14 business ning to embed it as a business as usual activity. In Autumn 2016 we began refreshing our customer engagement and s. From the outset we involved customers in the co-creation of our, to ensure that our engagement is meaningful. This developed our understanding of the world from a customer s point of view, and ensured that we developed initiatives, language and materials that would best engage customers in the risks and issues we are facing. In addition, we have sought to explore differences of opinion, experience and behaviours between different groups of customers. This is particularly important when considering the potentially different needs and preferences of customers in vulnerable circumstances. To date, over 45,000 customers have been involved in a range of initiatives that have been designed to better understand our customer base, reach a large number of customers, and to explore more complex issues in depth. This includes the activities listed in the table below. Table 3.1 Customer engagement initiatives Type of research Specific research Customers involved Representative Understanding our customers Focus groups to develop our understanding the world from a customer perspective Focus groups to test how we should best engage customers in discussion around long-term challenges Depth interviews that explore the concept of vulnerability, including how it should be defined and barriers to accessing support Understand attitudinal differences across our customer base and develop bespoke customer segments 45 household customers N 70 household customers N 20 household customers N 1,200 household customers Y Reach a large number of customers The touring Anglian Water Bus 5,100 household customers N The H2OMG Water Festival 33,000 household customers N Explore more complex issues in depth Focus groups to discuss our crisis response with customers recently affected by a supply interruption Focus groups to explore results from stated preference surveys in more detail Depth interviews to develop our understanding the impacts of water-use restrictions with non-household customers Survey to explore the acceptability of our long-term and customer outcomes, as set out in our Strategic Direction Statement Stated preference research that focuses specifically on water resource options and restrictions 16 household customers N 32 household customers N 13 non-household customers N 1,029 household customers and 498 non-household customers 1008 household customers and 408 non-household customers Y Y 34

35 Our ning Type of research Specific research Customers involved Representative Explore more complex issues in depth Trial our on-line community, and discuss our long-term challenges and customer outcomes Deliberative research via our online community focused on drought resilience, severe restrictions and water resource options 300 household customers N 70 household customers N We have engaged extensively with household and non-household customers to understand their views on the risks and impacts of severe restrictions. It can be difficult to communicate risk to customers in a way that is accessible. For example, a recent Environment Agency study on the communication of flood risk found that Many practitioners feel that the main problem for the communication of flood risk is related to how people understand (or fail to understand) risk. (1) As a result, we have worked hard to ensure that our engagement is meaningful. We have tested the language and materials used to communicate risk, and ensure that the descriptions and indicators used can be readily understood. This was done partly through our co-creation process and partly through the testing of materials used for each initiative. In addition, we have discussed drought risk with customers through a range of different activities, including qualitative deliberative work and quantitative stated preference surveys. The results of these different initiatives have been synthesised independently and then triangulated to draw conclusions Conclusions The conclusions from our customer engagement activity are summarised below. About resilience Our customers told us that ensuring that supply meets demand is one of our most important core services. We should be ning for the long-term and taking preventative action to build resilience to future challenges. Many customers were surprised to learn about current drought risk and were not previously aware of the severe restrictions that could be implemented during a drought. They were particularly concerned about standpipes, which they view as a gross failure and completely unacceptable in a developed country like Britain. Generally they felt that rotacuts should also be avoided, but they were less concerned about them because they anticipate being able to stockpile water when supplies are available. They are, however, satisfied with the current Levels of Service for hosepipe bans and nonessential use bans and don t see these restrictions as a priority area for investment. Once customers understood that we have a longterm to supply and demand, they placed more responsibility on us to maintain supplies during a drought. They did not feel we should ignore a known risk, especially when we have a range of to mitigate it. However, customers will not support bill increases to reduce drought risk unless they can see that we are fulfilling our responsibilities. This includes doing everything we can to save water, giving customers the tools to save water (and therefore money) and investing in additional supply where required. Customers said... I think that our water company should regard having to put water-restricting measures in place as a failure on their part to adequately for the future. (2) Lots of countries drink entirely from bottled water. But not being able to wash or flush toilets sounds horrible. I think that is where I would draw the line. (3) In the 21st century it is unacceptable to have any of these measures implemented. We are paying customers and water companies have a contractual obligation to supply us. I would forgo having a bath as I seldom do anyway, but other measures would be unacceptable. (4) 1 Environment Agency, 2015, Public dialogues on flood risk communication, Final Report SC120010/R1, Page 6 2 Incling, August 2017, Drought resilience: Exploring customer acceptance and buy-in, Page 9 3 Incling, August 2017, Drought resilience: Exploring customer acceptance and buy-in, Page 20 4 Incling, August 2017, Drought resilience: Exploring customer acceptance and buy-in, Page 20 35

36 Our ning About water resource options Customers do not want a deterioration in service and all water resource options (including both demand and supply-side) were preferable to an increase in restrictions. The one exception being sea-tankering, which customers did not perceive to be a credible option. Generally, customers prefer options that make best use of existing resource and infrastructure, as opposed to options that involve developing new resources. This explains a clear preference for demand, particularly leakage reduction. Even when customers understood that our leakage performance is industry leading, and that reducing leakage does not reduce bills, it remains an emblematic issue and a priority for investment. Customers were, however, clear that we must fulfil our responsibilities and take steps to conserve water before we can ask customers to save more water themselves. There was a lot of spontaneous interest from customers in using smart meters to help them to save money by reducing their consumption. Smart meters were seen as central to behavioural change and expected to be the norm in the future. The results from multiple sources show that, generally, customers are much more supportive of compulsory metering than has been the case previously. However, customers who pay measured charges tend to support compulsory metering, whereas those who pay unmeasured charges do not. We believe the higher levels of support for compulsory metering reflect the larger proportion of customers paying measured charges compared to previously. The reliability (5) of water resources options is an additional important consideration to customers, and generally they prefer options that are described as having higher reliability, as opposed to medium or lower reliability. For example, in the Water Resources Stated Preference Survey all options were defined as either higher, medium and lower reliability. Overall, leakage reduction was the highest ranked option. However, when leakage was described as lower reliability, it was less preferable to some supply-side options described as medium or higher reliability (including water reuse and reservoir extensions). Although customers express a preference for demand, they also want to see a costeffective of supply and demand options. When it was explained to customers that there are cheaper alternatives to leakage reduction, many felt that while leakage reduction is important, affordability should also be a key consideration. Finally, many customers also recognise our expertise and trust us to make complex investment decisions, and choose the mix of that will be most efficient and cost effective. Customers said... Just like folks now using smart meters are less inclined to leave a myriad of appliances on standby it will, through education and individual customer cost savings, become the norm to use water sparingly. (6) It is blindingly obvious that AW needs to BOTH increase water availability AND reduce water usage per person. A two pronged attack is needed in case one or the other fails. (7) The needs to be d and costs vs. benefits of everything need to be considered. Leaks are important to the end user and are visible for domestic consumers - but it s not the only way water is wasted and not the only thing that money can be spent on. (8) About bill impacts... Many of our customers are feeling under financial pressure and are very concerned about money in general. However, there is evidence that suggests rent and other utility bills tend to be much more of a concern than water bills, because they are higher and tend to fluctuate more. The results emerging from our societal valuation work indicates that customers are prepared to accept bill increases for service improvements that they value. However, this work also shows that there is a big difference between the attitudes of more affluent customers and less well-off customers. In addition, results from the qualitative research suggest that customers would be prepared to accept moderate bill increases, such as 2.20 per year, to increase drought resilience. 5 The term reliability refers to the certainty over option yield or saving. For example, how confident are we that a reservoir option will achieve the expected 100Ml/d yield, or a water efficiency option will deliver 10 Ml/d of water savings. 6 Incling, August 2017, Drought resilience: Exploring customer acceptance and buy-in, Page 27 7 Incling, August 2017, Drought resilience: Exploring customer acceptance and buy-in, Page 25 8 Incling, August 2017, Drought resilience: Exploring customer acceptance and buy-in, Page 20 36

37 Our ning There is a strong link between affordability and water efficiency. As already noted, customers want Anglian Water to support them to save money by reducing their consumption. Customers said... Sometimes you feel, I ve worked all month and I have nothing left. (9) Though already on a tight budget I would pay up to 10% more on my bill if it meant no interruption to my home supply should there be a drought situation. (10) I would suggest a good quality money saver guide, which could be sent out. This should include things like would you be interested in a water butt for xx? Or a poly brick for the cistern? Do you want to save money? This could follow up with local meetings and a knowledgeable attendance at local event. (11) 3.2 Regional and national stakeholder collaboration The challenges we face from drought, climate change, growth and meeting the needs of the environment are common to our neighbouring water companies, as well as to the other abstractors and users of water. To ensure that we all have access to reliable, sustainable and affordable supplies in the future, we are leading a number of collaborative water resource ning efforts. These include: The Water UK Long Term Planning Framework The Water Resource East (WRE) project, and, The Trent and Ouse Working Groups The Water Resources Long-Term Planning Framework We led the work to create the national Water Resources Long-Term Planning Framework (WRLTPF), which was published by Water UK in September It is the most technically comprehensive study of national water resource availability and pressures ever completed in England and Wales. The technical work and analysis was steered by water industry technical experts, conducted by independent consultants and peer reviewed by a panel of leading experts. The study was undertaken in response to a Government challenge to the water industry, to understand more fully the risk of drought and what sort of are required to reduce that risk. It looked across England and Wales, and considered current drought risk and how it is affected by the combined impacts of climate change, population growth and the need to reduce abstractions to protect the environment over a 50 year period. The key conclusions of this study include those listed below. There is a significant and growing risk of severe drought impacts, which is exacerbated by climate change, population growth and the need to reduce abstraction to protect the environment. The investment needed to increase resilience is relatively modest compared with the cost of drought. A twin track that includes supply enhancement, with associated transfers, as well as demand, is the most appropriate strategic mix for the future. This includes consideration of: New and emerging technologies such as smart meters, and A strategic transfer from the River Trent to support storage in the Anglian region (plus onward transfer to Affinity) (12). 12 Water UK, 2016, Water Resources Long-Term Planning Framework Summary Report 37

38 Our ning Water Resources East We recognise that we cannot address the long-term challenges we face from drought, climate change, growth and environmental protection on our own. These challenges are common to our neighbouring water companies and other abstractors and users of water in the region. Unless they are addressed collaboratively, we cannot hope to find the most efficient, robust, and cost effectively solution that works for everyone, including the environment. As a result, we have established Water Resources East, a leading example of collaborative, multisector ning to address the long-term challenges and uncertainties in the East of England. Water Resources East is independently chaired, and brings together water companies, farmers, energy companies, the drainage boards, conservationists and regulators to develop a long-term, joined-up for water stewardship. Using the first application of shared vision ning and robust decision making in the UK, Water Resources East is creating a more integrated to long-term water resource and ning. The project has developed an overarching and supporting action that is resilient to s faced by the region, and provides a framework for individual companies WRMPs. Key conclusions and features of the include those listed below. Demand will be key, addressing approximately 30% of the ning problem. Our work shows that uncontrolled demand will drive catastrophic failure of water resource and water supply systems. In terms of new supplies, desalination and effluent re-use ts are needed at key locations along the east coast, along with imports from public water supply systems in the Thames and the Trent basins. More reservoir storage is required. This will capture high winter flows and store them to meet increased demand and enhance resilience. To distribute resources around the region, and support all sectors, a strategic network of transfers (sub-regional water grid) is also needed. To protect the environment, the volume of groundwater abstracted for agriculture and public water supply needs to be limited. In some cases to less than 50% of that which is assumed to be available. Figure 3.1 A multi-sector regional-scale problem 38

39 Our ning Picture 3.1 Water Resources East Strategy The Trent and Ouse Working Groups The Trent Working Group The opportunities for new consumptive abstractions in the Anglian region are limited to winter storage which captures surplus river flows. The River Trent, however, has the potential to provide significant raw water resource to feed a number of new water resource and storage options. As such, it is a key strategic resource and it is possible that several water companies may develop options that rely on water from the Trent. However, there are many complex issues associated with the development of Trent resource, including the availability of water and the environmental and drinking water quality implications of regional transfers, and the need to protect existing abstractions, including by the power sector. Given the above, it is important that water companies and others develop a shared understanding of these issues and a coordinated to the development of Draft WRMP Consequently, we established and chaired the Trent Working Group to ensure that options for Draft WRMP 2019 are mutually inclusive and take into account the interests of all stakeholders. The specific of the WG as set out in the Terms of Reference were to develop a shared understanding of: The current and future availability of water resources in the River Trent The options available for resource development, including: Storage (such as the South Lincolnshire Reservoir) Transfers (such as a Trent to Ruthamford transfer and canal transfers from Birmingham to Ruthamford) Any related environmental issues (such as WFD no-deterioration and invasive non-native species), and The options available for future raw or treated water transfers and trades between sectors. The group included representatives from Anglian Water, Severn Trent Water, South Staffordshire Water, Affinity Water, Yorkshire Water, the Environment Agency, Natural England, Energy UK and the Canal and Rivers Trust. A draft final report was issued to the Group on 10th Nov This will be updated in due course to reflect any Trent water resources options that emerge through company specific water resource s. The Ouse Working Group Options to use water resources in the lower Ouse system emerged during discussions between the water companies operating in the Anglian region. The Ouse Working Group was established to drive a fully coordinated and collaborative between all key stakeholders. The overall purpose of the Group was to develop a shared understanding of: Current and future resource availability in the lower Ouse systems, including the Ely Ouse Essex Transfer and Great Ouse Groundwater Development systems 39

40 Our ning The options available for resource development in the lower Ouse systems including: Storage in the lower Ouse area (for example, Feltwell Reservoir), and Transfers utilising the Ely Ouse and Essex Transfer Scheme. Outputs from the Group have been included in feasible option sets for both the Water Resources East and company Draft WRMPs Formal Draft WRMP 2019 preconsultation Through the formal pre-consultation process, we have engaged with regulators, other water companies and retailers, local authorities, environmental and conservation groups and catchment partnerships. Our pre-consultation letter was sent to over 150 key stakeholders outlining the issues we are facing, and how to get involved in the consultation of our Draft WRMP 2019 once published. To date we have had responses from local authorities, the National Farmers Union, and wildlife trusts Methods discussion process We have engaged with the Environment Agency extensively in the development of our es, via the methods discussion process, as demonstrated in the table below. All the Methods Discussion meetings have been minuted and we have maintained an action log. Working collaboratively in this way with the Environment Agency has materially improved es and consequently the that we have produced. For example, the Environment Agency have provided constructive feedback on the Aquator model build and deployable output assessment, the constrained options list, and the relationship between the Water Resources East and water companies WRMPs. Table 3.2 Method discussion meetings Meeting date Agenda items s, Methods discussion process, Project, Schedule of meetings Draft Problem Characterisation, Development of feasible supply-side options Alignment between WRMP and Water Resources East Deployable output assessment, Process for including NEP mitigation options in options appraisal, Severe drought impact assessment, Table Technical, Future schedule of meetings Process for developing the constrained options list (supply-side), Constrained options list (supply-side) Aquator model build and Water Resource Zone Integrity Assessment Climate change impact assessment, Severe drought selection, Severe drought impact assessment Constrained options list (supply-side) Constrained options list (supply-side) Problem characterisation and decision making framework, Customer engagement, Valuation Demand forecast Approach to WFD no deterioration, Incorporating WFD into the DO assessment WRMP DO assessment methodology for the supply forecast, Early DO outputs from Aquator SEA scoping report, Technical (including how the SEA fits in) Drought permits, EBSD modelling 40

41 Our ning We have engaged with Ofwat during the preconsultation period: Table 3.3 Pre-consultation meetings with Ofwat Date Meeting WRMP masterclass Formal WRMP preconsultation meeting Follow-up call Follow-up call We have engaged with Natural England via the SEA and HRA consultation process, and held a preconsultation meeting with them on 6th June

42 Our ning 4 OUR PLANNING OBJECTIVES 4.1 Problem Characterisation In accordance with the technical guidance, we have completed a Problem Characterisation assessment to better understand our vulnerability to strategic risks and uncertainties.(1) We completed a draft Problem Characterisation assessment that we discussed with the Environment Agency in June 2016 and used to develop and methodologies. We have since updated this initial assessment and completed a Final Problem Characterisation assessment, which confirms that we are facing moderate and high levels of concern across our region. In addition, the assessment made several conclusions around the nature of the problem, strategic risks and uncertainties, including: There are multiple plausible ning scenarios, and the ning scenario that we select will have a material impact upon the type of that we produce. At the time of the draft assessment, we were concerned that our systems are vulnerable to severe and extreme drought, meaning that we would not be able to maintain supplies to customers without imposing severe restrictions. This conclusion was based in part on expert judgement and in part on the experience of the drought. In addition, we had concerns that the reliable yield used to calculate deployable output (DO) at WRMP 2015 (this involves assessing DO at a source works level and then aggregating the results) does not fully account for nonlinear effects linked to connectivity and supplysystem operation. In order to better understand conjunctive DO, we needed to develop a model that can realistically simulate the company s supply system under a range of historic conditions and future scenarios. Our is under significant pressure from population growth, climate change, sustainability reductions and the need to increase our resilience to severe drought. is such that, although there is great potential for future demand, additional supply-side capacity will still be required. 4.2 Our ning The overall aim of our Draft WRMP 2019 is to develop a system of supply that is reliable, affordable and sustainable. This includes meeting customer and government expectations and complying with all statutory obligations. We have used the results of our Problem Characterisation together with the outcomes of customer and stakeholder engagement to develop the specific ning listed below. Reliable: Ensure our system is resilient to the combined effects of severe drought (defined as an event with an approximate 1 in 200 year return period) and climate change, so that none of our household and non-household customers are exposed to an unacceptable risk of standpipes and rota-cuts. Sustainable: Provide enough water to meet local authority growth targets. Meet all of our statutory environmental obligations. These include restoring abstraction to sustainable levels and preventing deterioration in water body status. Make best use of available water resources, before developing new ones. This includes prioritising cost-beneficial demand and trading to share any available surpluses. Ensure that for the Draft WRMP 2019 are flexible enough to be adapted to meet unknown AMP8 needs, including possible future exports to Affinity Water (Central) and Cambridge Water (South Staffs Water). Affordable: Ensure our Plan represents best value over the long-term. Minimise the risk of delivering assets that become stranded or under-utilised in the longer term. Ensure that investment not driven by statutory requirements is kept within a range affordable for all customers The problem characterisation assessment is a tool for assessing a company s vulnerability to various strategic issues, risks and uncertainties, to allow the development of a proportional response, in terms of the effort and cost devoted to adopting the selected decision making. Companies must demonstrate the need for extended decision making es using the Problem Characterisation Process set out in the new UKWIR Guidance WRMP 2019 Methods Decision making process: Guidance.

43 Our ning The importance of demand Demand has been, and continues to be, our priority. In developing our Draft WRMP 2019, we have looked first to see what risk could be offset from demand, before seeking to develop supply-side options. We believe this is justified by the reasons set out below. Our customers expect us to continue to reduce demand for water supplies. Across multiple evidence sources, customers have been clear that we must fulfil our responsibilities and take steps to conserve water before we can ask them to save more water themselves. This is consistent with research conclusions at PR14 following the hosepipe ban in Leakage reduction continues to be a priority for investment, even when it has been explained to customers that we are the frontier performing company, and that leakage reduction does not lead to a reduction in bills. Finally, analysis from the WRE project suggests that demand is an essential component of any long-term, sustainable water resource for the region, and has interdependencies with the need to ensure sustainable energy supplies. Where demand for water is left to grow unchecked, it results in widespread deficits and service failures (including rota-cuts and standpipes) by the 2060s. WRE s options appraisal process shows that a reliable, sustainable and affordable depends upon a combination of demand and supply-side. This is confirmed by our own analysis, which shows that our offsets significant additional investment in supply-side infrastructure that would otherwise be needed. This could include desalination, aquifer storage and recovery and water reuse. We estimate the cost of avoided supply-side infrastructure to be over 530 million. (3) There is also a clear government expectation that we should continue to reduce demand for water supplies. Defra s Guiding Principles state that companies are expected to continue the trend of reducing the overall demand for water, and reducing leakage. They go on to state that: We expect you to choose demand-side options as part of the preferred wherever it is reasonably likely that the benefits will outweigh the costs. (2) In addition, demand is essential to mitigating short-term environmental risks. As already noted, we have an obligation under the Water Framework Directive to ensure that our abstractions do not result in a deterioration of waterbody status. Increasing our current abstractions to meet growth related requirements would represent a serious deterioration risk. However, this is risk can be largely mitigated by using demand to offset the effects of growth. Demand also has wider environmental benefits. Our Strategic Environmental Assessment concluded that all of the demand options have a positive environmental impact in the short, medium and long-term. It directly benefits our local environment as we are saving water that would otherwise have to be abstracted, increasing general ecosystem well-being and reducing vulnerability to pollution and droughts. In addition, water saved does not need to be treated and distributed which reduces our operational energy consumption, making us more efficient and saving carbon. 2 Defra, May 2017, Guiding principles for water resources ning, Pg 6 3 This number was calculated using EBSD outputs. It includes capex investment only and has been discounted over a 25 year period. 43

44 Our ning An appropriate level of service Since the drought, we have been concerned that parts of our system are vulnerable to severe drought. In vulnerable areas, we would not be able to maintain supplies to customers without imposing severe restrictions, including rota-cuts and standpipes. What happened in the drought 2011 On the 10 July 2011 the Secretary of State announced that the Environment Agency s Anglian region had moved to drought status, as a result of nearly 6 months of exceptionally low rainfall and the soil moisture deficit being at its highest recorded level. This exceptionally low rainfall in 2010 and 2011 had a significant impact on flows in the River Nene, and affected our ability to refill Pitsford Reservoir and Rutland Water. As a precautionary measure, we applied successfully for two drought permits on the River Nene By March 2012 it was being reported as the driest 18 months ever recorded. The low reservoir storage situation in March 2012 was compounded by low river flows across the Anglian region impeding refill opportunities. In addition, the drought area was starting to extend into our groundwater system. On 5 April 2012 we imposed temporary use restrictions on our customers for the first time in 20 years, alongside six other water companies in the south and east of England. At that time, we were growing increasingly concerned about the potential impact of a third-dry winter, and that we would not be able to maintain supplies to customers in our Ruthamford WRZs without imposing severe restrictions. We responded to this risk by: Reducing our leakage to record low levels (189Ml/d, 10% below our target of 211Ml/d) Launching Drop 20, our biggest ever watersaving campaign, where we asked every customer to reduce their daily use by 20 litres Identifying and delivering a 47 million of capital investment to increase our resilience and protect customers supplies, and Leading the industry-wide response through the National Drought Management Team Thankfully, the drought was brought to a rapid conclusion by six months of record rainfall between April and September We lifted the restrictions on 14 June 2012, just 10 weeks after they had started. Our current Levels of Service are set out in the table below. Table 4.1 Our Levels of Service as set out in WRMP 2015 and our Drought Plan 2014 Type of restriction Number of restrictions should not exceed LoS 1 Temporary use ban (includes hosepipe ban) 1 in 10 years LoS 2 Non-essential use ban 1 in 40 years LoS 3 Rota-cuts and standpipes 1 in 100 years 44

45 Our ning In the development of our Draft WRMP 2019, we have thought carefully about what Levels of Services are appropriate for our customers and our region. We believe that our Levels of Service for Temporary Use Bans and Non-Essential Use Bans are appropriate and we do not propose to make any changes to them in our Draft WRMP Following extensive consultation with our customers, we do not believe that our Level of Service for severe restrictions is appropriate or acceptable. In our Draft WRMP 2019, our objective is to ensure that no customers are exposed to the risk of standpipes and rota-cuts in a severe drought event (equivalent to a return period of approximately 1 in 200 years) by the end of AMP Customer expectations As noted in Section 3.1.2, customers want us to be ning for the long-term and taking preventative action to build resilience to future challenges. They do not believe that a known risk should be ignored, and are prepared to accept moderate bill increases to reduce the risk of severe restrictions Government expectations Severe restrictions in response to drought have not been implemented in the UK since 1976, and Ministers have made it clear that such measures should be avoided at all costs and introduced only as a last resort. (4) Ensuring the long-term resilience of water supplies is a clear Government priority for the sector. As noted in Section 2.3.2, Defra s Guiding Principles emphasise the importance of identifying an appropriate Level of Service that is informed by customers views and the impact of restrictions on households and businesses. Furthermore, in the Strategic Policy Statement to Ofwat, Defra state: Ofwat should further a reduction in the long-term risk to water supply resilience from drought and other factors, including through new supply, demand and increased water trading. (5) Economic impacts We have sought to understand the impact of drought on our region by commissioning Nera Economic Consultants to estimate the economic output that would be lost following the imposition of restrictions. This work built on the taken by the Water UK Long Term Water Resources Planning Framework (referred to as the Water UK project ). This study estimates a loss in GVA of between per non-household customer, for everyday a severe restriction is in place. The Water UK Project concluded that: The costs of increasing resilience to drought are relatively modest (less than 4 per customer per annum) to achieve resilience to severe events and the economic benefits far outweigh those costs. (6) Rota-cuts and standpipes could not be implemented at a large scale In response to the 2012 drought, we reviewed our emergency s for extreme restrictions. This showed that the number of staff required to implement rota-cuts and standpipes makes them impractical to implement at a large scale or for long periods of time. The implementation of standpipes would require our staff to locate and switch-off every customers individual stop tap, and we would not be able to prevent customers from switching them on again. In order to implement rota-cuts, large numbers of staff are required to open and close network valves in order to turn supplies on and off at the appropriate times. This is consistent with the learning from the 1976 drought: Rota-cuts require very detailed ning... Considerable manpower demand arises in their daily operation. A sufficient team is required to operate all the control points twice every day, and to do so with unfailing regularity and punctuality. A deskstudy done in South West Water Authority of the effort required in rural areas indicated a team of 200 men to operate rota-cuts for communities numbering 50,000-60,000 people... The manpower strain is likely to become more severe the longer the period over which cuts have to be continued. (7) In addition, the use of rota-cuts would raise significant public safety concerns associated with fire-risk. This is particularly acute in urban areas. Even in the 1976 drought this made it impossible to impose rota-cuts in urban areas: In South Wales rota-cuts were not imposed in city centres because of fire risks in many of the major buildings, including department stores, which had sprinkler systems. (8) 4 UKWIR, 2014, Managing through drought: code of practice and guidance for water companies to use on water use restrictions, Report Ref. No. 14/WR/33/6, Page 35 5 Defra, Sept 2017, The government s strategic priorities and for Ofwat, Page 6 6 Water UK, 2016, Water Resources Long-Term Planning Framework , Page National Water Council, 1977, The Drought, Page 30 8 National Water Council, 1977, The Drought, Page 33 45

46 Our ning The benefit of rota-cuts is questionable The implementation of rota-cuts would require us to frequently depressurise and repressurise the network, with consequences for water quality and leakage. Particularly concerning is the potential public health risk arising from infiltration into the network. As a result, we would be required to flush the network each time the cut was lifted, putting further strain on the water resources situation. Rota-cuts are also expected to result in an increase in bursts and leakage. For example, when rota-cuts were implemented in South Wales during the 1976 drought, leakage levels increased as a result. In the Gwent area, difficulty was experienced in containing the build up on night-time pressures in trunk mains during rota-cuts. This resulted in several large and unusual bursts, two of which occurred in Newport at the start of the campaign and caused some initial loss of credibility to the authority s actions. Similar bursts occurred in West Wales... (9) As noted in the above, an increase in visible leakage and the frequent flushing of mains, are likely to negatively affect our credibility and discourage customers from saving water. We have had a consistent message from our customers that we must take steps to save water before we can ask them to save water themselves, and that they would not accept restrictions unless they perceive us to be fulfilling our responsibilities. The importance of maintaining credibility and legitimacy is illustrated by the drought crisis in West Yorkshire. Through a combination of PR mistakes and high leakage levels, Yorkshire Water lost the confidence of its customers. Despite the severity of the crisis (10) company pleas to reduce water consumption were ineffective, ultimately resulting in a worsening of the situation. (11) Finally, our customer engagement work suggests that both household and non-household customers would respond to rota-cuts by stockpiling water, making the restriction ineffectual and further increasing the strain on resources The impact on vulnerable customers would be unacceptable Our customers rely on us for water and wastewater recycling services, and we take this responsibility very seriously. While we believe that the imposition of severe restrictions on any of our customers is unacceptable, in many instances it would be particularly irresponsible. Non-household customers such as hospitals, care homes, and prisons simply cannot have their water supplies cut-off for any length of time, and vulnerable domestic customers, such as the elderly and disabled, cannot be expected to collect water from the street or endure the long hours of a rota-cut. The practicalities of operationalising standpipes and rota-cuts, however, do not allow for individual exemptions. We would provide for care homes, hospitals and prisons by either tankering directly to the premises, or by exempting the District Metering Area (DMA) where the customer is located. We would deliver bottled water to vulnerable domestic customers, including those on our priority care register, however, in many cases this extra support would be completely inadequate. For example, when rota-cuts were imposed during the 1976 drought, patients on home dialysis had to be evacuated from the area to stay in hospital until the restriction was lifted (12). During the 1995 drought, thousands of customers were facing the prospect of standpipes and rota-cuts in West Yorkshire. Following the drought crisis, a independent public inquiry was held where the imposition of severe restrictions was widely condemned. The director of public health for the West Yorkshire Health Authority stated: The health and well being of the population at large of West Yorkshire were under serious threat had the proposed rota cuts gone ahead. Lives could have been lost. Bradford Council s representative stated: Public services would have been stretched to breaking point. Social services believe the effects of rota cuts would have been catastrophic. (13) 46 9 National Water Council, 1977, The Drought, Page (reservoir levels fell to10.6% in the regional capital, Leeds, 11.6% in Kirklees, 9% in Calderdale (Halifax) and 13 7% in Bradford) 11 Haughton, 1998, Private profits public drought: the creation of a crisis in water for West Yorkshire, Page National Water Council, 1977, The Drought, Page Independent, Paul Field Tuesday 19 March :02 GMT, Water firm `ned to move 1m people, Accessed on 26th October

47 Our ning 5 OVERVIEW OF OUR TECHNICAL APPROACH Our technical can be broadly divided into six phases: The development of the Principal and Adaptive Planning Scenarios Assessing current Deployable Output Quantifying the impacts of growth, climate change, sustainability reductions and severe drought Selecting the preferred demand Calculating baseline s Determining the preferred of supplyside In this section we highlight key features of our technical. Please refer to the supporting technical documents for more detailed information if required. Water Resource Zones, or WRZs, are the building blocks of a WRMP. They represent an area within which, managing supply and demand for water resources is largely self-contained. The definition of a WRZ (from Water Resources Planning Tools (WR27), UKWIR, 2012) is: The largest possible zone in which all resources, including external transfers, can be shared and hence the zone in which all customers will experience the same risk of supply failure from a resource shortfall. Our WRMP 2015 was based on19 WRZs, including Hartlepool Water. In the development of WRMP 2019, we have undertaken a Water Resource Zone Integrity Assessment in accordance with WRP Guidance. This recommended splitting many of our WRZs, and as a result we now have a total of 28 WRZs including Hartlepool. Note that Hartlepool is not shown on the map below. 5.1 Water Resource Zones (WRZs) Figure 5.1 WRZs in Draft WRMP

48 Our ning Table 5.1 WRMP 2015 WRZs compared to Draft WRMP 2019 WRZs Final WRMP 2015 WRZ West Lincolnshire Draft WRMP 2019 WRZ Nottinghamshire Central Lincolnshire Central Lincolnshire South Lincolnshire South Humber Bank East Lincolnshire Hunstanton Fenland North Norfolk Coast Norwich and the Broads Norfolk Rural Ely Newmarket Cheveley East Lincolnshire Bourne North Fenland North Fenland South Fenland North Norfolk Coast Happisburgh Norwich and The Broads North Norfolk Rural South Norfolk Rural Ely Newmarket Cheveley Thetford West Suffolk Ixworth Bury Haverhill Sudbury East Suffolk Central Essex South Essex Ruthamford North Sudbury East Suffolk Central Essex South Essex Ruthamford North Ruthamford South Ruthamford South Ruthamford Central Ruthamford West Hartlepool Hartlepool 48

49 Our ning 5.2 The Principal and Adaptive Planning Scenarios The Principal and Adaptive Planning Scenarios Although AMP7 sustainability reductions have been confirmed in the Water Industry National Environment Programme (WINEP), there is significant uncertainty regarding further sustainability reductions that water companies may need to make in AMP8, driven by Water Framework Directive legislation. This uncertainty will not be resolved until 2023 at the earliest. We are obligated to ensure that we do not cause deterioration of the environment from the River Basin Management Plan baseline (2015). This means that we cannot increase abstraction above recent actual levels unless there is no risk of deterioration. Not only would this affect our directly, we may need to develop additional resources to support our neighbouring water companies, Cambridge Water (South Staffordshire Water) and Affinity Water (Central and East). This means we need to ensure that for Draft WRMP 2019 are flexible enough to be adapted to meet (unknown) AMP8 needs. In order to manage this uncertainty, we have created two ning scenarios: a Principal Planning Scenario and an Adaptive Planning Scenario. The Principal Planning Scenario includes the confirmed impacts of growth, climate change, AMP7 sustainability reductions and severe drought. The Adaptive Planning Scenario includes the additional uncertain impacts of AMP8 sustainability reductions and other company requirements. Table 5.2 The Principal and Adaptive Planning Scenarios Impacts Principal Planning Scenario Adaptive Planning Scenario Growth X X Climate change X X AMP7 Sustainability reductions X X Severe drought X X AMP8 Sustainability reductions Possible future exports X X 5.3 Quantifying impacts Demand forecast methods Our to forecasting demand is summarised below. For more details on how we have followed the steps in Section 5 of the Environment Agency s Checklist please refer the to Draft WRMP 2019 Technical Document: Demand Forecast Forecasting household demand Population and property forecasts We have a vital role in facilitating new housing and commercial development. This is recognised by the WRP Guidelines, which state that we must ensure our ned property forecast and resulting supply does not constrain the growth ned by local councils. The WRP Guidance states: For companies supplying customers wholly or mainly in England you will need to base your forecast population and property figures on local s published by the local council or unitary authority. (1) As a result, we have based our demand forecast on Local Authority Plan data, where available. We commissioned Edge Analytics (independent demographic specialists) to collate Local Authority ning projections ( Local Pans ) for all the Local Authorities located within our supply area. Edge Analytics used the household projections within Local Plans together with occupancy trends to derive population forecasts in the near term. 1 Environment Agency & Natural Resources Wales, April 2017, Water Resources Planning Guideline: Interim update, Page 22 49

50 Our ning Local Plans, however, only cover the first years of the ning period, and so we have used Official ONS (Office for National Statistics) census data, and DCLG household projections, to inform our longerterm forecasts (approximately ). Question 1: Do you agree with our of ning to meet local authority growth targets, or should we switch to an of using trendbased projections using past delivery rates? Household consumption We have developed a household consumption forecast using a bottom-up that forecasts the components of demand separately. Base year values were derived from the Water Balance, as reported in the Annual Review. To determine future consumption, we completed a microcomponent analysis that drew on available data sources and literature to forecasts trends in water use. Our Demand Forecast (excluding the benefit of demand options) assumes some limited benefit of demand activity. Firstly, that unmeasured customers will continue to switch to paying measured charges until 95% of our customer base is metered (meter penetration beyond this point is assumed to be unfeasible as it involves splitting shared supply pipes). Secondly, that there is a continuation of current water efficiency activity, such as established campaigns and endorsement schemes for watersaving white goods. As a result, our baseline per capita consumption (weighted average) is forecast to fall from 134 l/ head/d in , to 126 l/head/d before the savings associated with our demand come into effect Forecasting non-household demand The WRP Guidance defines non-household demand as: the demand for water being used for non-domestic purposes (eg businesses and industrial processes) and for the population living in communal establishments (eg hospitals, prisons and educational establishments). (2) Our non-household demand forecast has been developed using geographical and sector specific trends. We have described the makeup of nonhousehold demand in different sectors by using Standard Industrial Classification (SIC) categories published by the Office for National Statistics. The model implicitly assumes that historical trends in factors such as the impact of water efficiency s continue Forecasting leakage As described in Section , we are committed to driving down leakage and now have the lowest levels of leakage in the industry. Our leakage in was assessed at 185 Ml/d, which is 26 Ml/d lower than our AMP5 target of 211 Ml/d, equivalent to the demand from approximately 100,000 new homes. We are on track to achieve 172 Ml/d (177 Ml/d three year rolling average) by the end of AMP 6. (3) As a result of this commitment, we have used 177 Ml/d as the baseline leakage figure in our draft WRMP Given that we are now operating significantly below the Sustainable Economic Level of Leakage (assessed as 199 Ml/d for AMP 6), we have assumed that the 177 Ml/d three year leakage average will be maintained throughout the ning period in the baseline supply demand Other components of demand Other components of demand have been forecast in line with Guidance requirements Climate change impact on demand We have assessed the potential impacts of climate change on demand in accordance with UKWIR (2013) Impact of Climate Change on Water Demand Supply forecast methods Our to forecasting supply is summarised below. For more details on how we have followed the steps in Section 4 of the Environment Agency s Checklist please refer the to Draft WRMP 2019 Technical Document: Supply Forecast Deployable Output (DO) assessment At WRMP 2015 we used a source-based to calculate DO, assessing DO at an individual source works level and then aggregating the results for each WRZ. Whilst this is robust and consistent with WRP Guidance, it does not fully account for nonlinear effects linked to connectivity and supplysystem operation. In 2015 we conducted a review into the calculation of DO and this highlighted the limitations of the source-based, especially when assessing conjunctive DO. In addition, our 50 2 Environment Agency & Natural Resources Wales, April 2017, Water Resources Planning Guideline: Interim update, Page 24 3 Our AMP6 leakage Outcome Deliver Incentive (ODI) uses a three year rolling average to measure performance against the Ofwat AMP6 target of 192 Ml/d.

51 Our ning draft Problem Characterisation demonstrated that there are significant concerns over system reliability/ resilience during severe drought events. Following the drought, the Environment Agency recommended the use of a model that can realistically simulate the company s supply system under a range of historic conditions and future scenarios. As a result we have built a system model in Aquator that we have used to calculate system DO and refine our understanding of issues relating to system connectivity and performance, such as how the Ruthamford and Lincolnshire systems can support each other, and where existing DO may be constrained by connectivity or network issues. We have systematically tested this system model under a range of historic and future climate scenarios. Understanding how different parts of our system interact is particularly important given our ning objective to ensure no customers are exposed to the risk of standpipes and rota-cuts in a severe drought by the end of AMP7. In providing a representation of our wider system, Aquator includes additional network constraints that in some cases has lowered the reported DO when compared to WRMP More details can be found in the Draft WRMP 2019 Supply Forecast: Technical Document Climate change assessment In our we have accounted for the impact of climate change on our DO. We have closely followed the Environment Agency guidance to quantify the impact of climate change our our supply forecast, as provided in Climate change es in water resources ning new methods (2013) and Estimating impacts of climate change on water supply (2017). The WRP Guidance states that our climate has changed and will continue to change, and we must assess the impact on both current and future DO. Following WRMP 2015, there was a concern that the 2013 methodology did not adequately account for climate change impacts on current DO, and so the 2017 method has been updated to include, amongst other things, a change in the scaling factor. Using the 2017 method may result in a greater impact of climate change on sources in the first 0-5 years, compared with the 2013 method which results in a more gradual impact over the ning period. Although the WRP Guidance encourages companies to account for climate change that has already happened as quickly as possible, it also states that companies may still use the scaling factor as outlined in the 2013 methodology. Should they do so, they must explain why the additional risk from climate change is tolerable. As climate change is one of the key strategic risks our business faces, we have followed the 2017 method, profiling climate change from the base year with impacts from onwards. As the 2017 method results in a large upfront impact, we have had to delay it until to allow for scheme delivery. The timing of climate change impacts is discussed further in Section AMP7 Sustainability reductions We have included all certain and indicative sustainability changes in our draft WRMP 2019 as adjustments to deployable output. There are no uncertain AMP7 sustainability changes. This is consistent with the Environment Agency s supplementary guidance note Sustainable Abstraction (June 2017) Severe drought assessment Our draft Problem Characterisation identified serious concerns around our system s vulnerability to severe drought. However, we acknowledged that the assessment was based on expert judgement and experience of the drought, and that a systematic analysis of our system s vulnerability was required to quantify the risk. As a result, we have completed an extensive analysis of our vulnerability to severe drought. This includes testing the risks posed by a range of drought scenarios that are more severe than, or different to, those experienced in the historic record.our analysis included the following: Review of historical droughts, back to Use of a stochastic weather generator to generate alternative droughts. Extreme value analysis of historical and stochastic droughts to estimate return periods. Hydrological and water resource system modelling of droughts. Selection of new reference droughts. There have been at least seven notable droughts in our supply area since 1920, that have varied in location, length and severity. In general, our supply system is relatively insensitive to short-duration droughts like 1976, except in a few locations where river abstractions go directly into treatment. Groundwater and our reservoir systems (especially Ruthamford) buffer short-term variations in weather, but are sensitive to successive dry winters, as recorded in the early 1930s, 1940s and between 1989 and

52 Our ning Using a stochastic weather generator, we created 200 statistically plausible, alternative sequences of weather data (each covering a period of 91 years). We then analysed these sequences to identify droughts that are more severe or of a different character to those in the historic record. In order to understand the likelihood of these stochastic droughts, we commissioned the Met Office to estimate their return periods. This allowed us to create a short list of severe (equivalent to 1 in 200 year return period) and extreme (equivalent to 1 in 500 year return period) droughts for further analysis. The Met Office also estimated the return period of the seven historic droughts identified above. In order to quantify our vulnerability to the shortlisted droughts, we first assessed their hydrological impacts (on both surface and groundwater), and then used our Aquator model to assess their impact on DO AMP 8 Sustainability reductions We have worked closely with the Environment Agency to understand how no deterioration obligations can be met without causing security of supply issues or excessive investment in the short-term. This includes completing a risk-based assessment of each of our sources according to future predicted demand growth factors to 2027 and This was done following Environment Agency Guidance. (4) We have used the output of this work to agree a of work according to priority, which is detailed in the WINEP. This includes 53 investigations and options appraisals to be carried out in AMP7. In order to understand the potential impact of sustainability reductions in AMP8, we have assessed a range of scenarios, including capping all of our licences at recent actual use Management of uncertainty and risk Approach to risk The of risk and uncertainty in a WRMP relates to the risk of under-estimating supply, or over-estimating demand resulting in a Level of Service failure. This includes the potential combination of risks from certain events, for example drought and pollution events, and uncertainties such as population growth and climate change. Risks have to be considered for average dry years and droughts, including critical periods of higher peak demand. Risk matters more in WRZs where there is higher vulnerability to key factors such as drought, climate change and population growth. We have assessed such vulnerability and captured it in our Problem Characterisation assessment, which confirms that we are facing moderate and high levels of concern across our region. Therefore we have adopted an to risk (known as Risk Composition 2) that has led us to produce a Resilience Tested Plan. In particular we have tested a range of alternative drought events using behaviour models, along with scenarios that include uncertain AMP8 sustainability reductions Headroom Headroom is a buffer between supply and demand. Actual or available headroom is the amount of water available minus demand. Target headroom is a minimum allowance - taking into account critical risks and uncertainties - required to maintain levels of service for the situation with a given level of confidence. We are managing risk into the medium to long-term through our Adaptive Planning Scenario: some risks are managed through identification of robust options that cope well with uncertainty; other uncertainties (especially those associated with regulatory change) will be resolved in the next AMP. We are using the Basic Approach as defined in the UKWIR Risk-Based ning guidance. We have developed a new, simpler and standalone headroom model, which allows us to clearly identify critical uncertainties and easily control the risk glidepath. As a result of our adaptive ning, we have been able to reduce our headroom glidepath so that headroom is no greater than 7.5% of distribution input in AMPs 8-10, and 6.5%in AMP11. In our headroom assessment we have only included well-defined risks that we have quantified and are critical to overall target headroom (tested through sensitivity analysis). Other uncertainties have been assessed in scenario testing. The risks included in our headroom assessment are: Base year (demand-side) uncertainties Population growth Consumption and weather-related leakage uncertainty Climate change Long-term point source pollution, and, Drought water quality constraints Environment Agency, Feb 2017, PR19 Driver Guidance: Water Resources (Hydrological Regime), page 2

53 Our ning As we are rapidly moving towards full metering and full measured billing, we no longer require uncertainties associated with switcher uncertainty and household demand segments. Headroom varies by WRZ and year depending on the risks and uncertainties, and the adopted glidepath (please see table below). It is typically 5% of DI in , increasing notably in at the point that climate change is introduced, and increasing in response to longer-term risks, especially population growth and long-term point source pollution (the latter for groundwater dominated WRZs only). Weather-related leakage uncertainty is constant throughout. Table 5.3 Headroom by WRZ at end of AMP7 ( ) and the end of the ning period (2045) Water Resource Zone Headroom (Ml/d) Headroom (% DI) Headroom (Ml/d) Headroom (% DI) Bourne Bury Haverhill Central Essex Central Lincolnshire Cheveley East Lincolnshire East Suffolk Ely Happisburgh Hartlepool Ixworth Newmarket North Fenland North Norfolk Coast Norfolk Rural North Norfolk Rural South Norwich and the Broads Nottinghamshire Ruthamford Central Ruthamford North Ruthamford South Ruthamford West South Essex South Fenland South Lincolnshire Sudbury Thetford

54 Our ning Outage Outage describes an allowance of water which represents the risk of short-term (less than 3 months) supply-side failure. This may be caused, for example, by pollution incidents or an unexpected need to repair a water treatment works. Such incidents rarely affect the amount of water available for supply because of spare capacity in resources and treatment, and supply interruptions are further minimised by short-term storage in the distribution network. More local failures, typically associated with bursts in pipes, are not considered as part of outage and are subject to separate investment drivers. For the Draft WRMP 2019 our outage assessment is based on the same as WRMP Outage is evaluated in relation to asset failure rates and resource failures due to pollution. We have considered water quality issues as part of outage, rather than in our system modelling at this stage. Pollution impacts on water quality are split into surface and groundwater risks; we have updated the assessment for groundwater risks based on a new version of our Catchment Risk Assessment for Groundwater Sources (CRAGS). Outage ranges from 2.3% to 4.0% of deployable output at WRZ level, and outage remains constant across the ning period. For the final WRMP we will revise our outage assessment based on the conclusion of our resilience assessment. This has modelled the loss of sources and the potential for supply interruptions based on improvements to our network which include dual sources of supply. This will reduce the level of outage we need to for. 5.4 Development of strategic demand options In the development of draft WRMP 2019, we have sought to develop an integrated, multi-amp demand that: Recognises the value of demand to our customers and the environment Develops demand s holistically Recognises the role demand can play in managing future uncertainty, and, Challenges us and our customers to push the boundaries of what is achievable. In order to do this, we have developed three strategic demand options, each of which consists of a combination of smart metering, leakage reduction and water efficiency activity. The methodology for developing these strategic options is summarised below, but more detail can be found in the Draft WRMP 2019 Technical Document: Demand Management Strategy Development of the feasible options list As already noted, we have a proven track record on demand : we put less water into our system now than we did in 1989, despite supplying 34% more properties. Our leakage performance is industry leading, (5) and by the end of the AMP we aim to have 93% of households metered and 86% paying measured charges. (6) Our success, however, means that there is limited potential to achieve further savings through tried and tested demand activity as these have effectively been locked-in. The next stepchange in demand will be achieved through technological innovation (such as smart metering) and initiatives that are relatively untested in a UK context. In order to consider the widest possible range of options, we developed an unconstrained options list that drew on: Our current business practises and how we could improve them Current practises and s of other UK water companies Practises in other sectors (e.g. gas and electricity) to encourage demand and behaviour change Practises in other countries or localities that experience water stress Opportunities provided by technology and innovation, and, Latest academic research. This process identified options such as the use of rewards and competitions to incentivise behaviour change, and development-scale greywater reuse systems to reduce potable consumption to 80 l/ head/d. It also included an option to install smart meters, specifically Advanced Meter Infrastructure (AMI). AMI meters offer the opportunity to collect significantly more consumption data than dumb meters (which are currently read annually). They 4 When assessed using a composite measure that combines leakage per property and per kilometre of pipe 6 The difference results from our Enhanced metering. 7 UKWIR, 2012, The economics of balancing supply and demand (WR27 water resources tools project) 54

55 Our ning take meter readings every 15 minutes, and then transmit them centrally every hour over a fixed, long-range radio network. This data is then provided to customers over a dedicated website or customer portal. Screening the unconstrained list We then assessed the unconstrained list to identify feasible option-types using the screening criteria set out in Economics of Balancing Supply and Demand (EBSD) methodology. (7) As a result of this process, a number of option-types were screened out. Tariff and price signals In order to assess the feasibility of tariff options, through the Anglian Centre for Water Studies, we commissioned the University of East Anglia Centre for Competition Policy to review international experience of price and non-price es to manage water demand. This research suggested that, before price signals can be implemented successfully, certain preconditions must be met. These include, but are not limited to, the points listed below. The installation of smart meters, in order to provide both customers and the company with timely consumption information. (Companies would also require accurate information on household occupancy in order to implement Increasing Block Tariffs.) Unless customers understand their consumption and engage positively, any tariff is unlikely to achieve the desired effect, and may even result in unintended consequences. These preconditions for successful implementation of tariffs have not yet been realised. We understand from our engagement with customers that some find their bills and the basis for charging unclear or confusing. (8) Smart metering could help improve this understanding by making consumption information more visible to customers. We believe it is necessary that we trial the effects of different tariffs (including the messaging and presentation of tariffs) in our region before we can consider wide-scale roll-out. Without effective testing new tariffs could have unintended consequences, such as encouraging consumption for some customers or negatively impacting the vulnerable. We believe price incentives may well have a place in our future demand activity and we are continuing our consideration of how these could be tested in the future. However, we have not included tariffs as a feasible option in draft WRMP Compulsory dumb metering As we are in an area of serious water stress, we have an obligation to consider the costs and benefits of compulsory dumb metering. The results from multiple sources show that, generally, customers are much more supportive of compulsory metering than has been the case previously. However, customers who pay measured charges tend to support compulsory metering, whereas those who pay unmeasured charges do not. We believe the higher levels of support for compulsory metering reflect the larger proportion of customers paying measured charges compared to previously. We are undertaking further customer engagement activity to explore this result in more detail. Defra s Guiding Principles state that the government does not believe a blanket to water metering is the right way forward. As a result, we have not included compulsory metering in our Draft WRMP Our strategic demand options; however, assume that we will reach the limits of feasible meter penetration by the end of AMP8 or 9 (depending on the option). We will be required to reassess the case for compulsory metering in the development of WRMP 24. Our selected demand is discussed further in Section 7.1. Small Area Networks (SANs) Options such as Small Area Networks (SANs, which involve breaking District Metering Areas into smaller units (SANs), renewing mains and communication pipes within that area, and installing additional monitoring equipment), have been screened out because they are excessively expensive. Automatic meter reading (AMR) meters Under AMR, radio meters installed and targeted by a mobile network of passive readers. The data is collected periodically. We have decided not to progress AMR metering following the findings of the AMR trial in Colchester (2012 to 2017). We equipped around 10 refuse collection lorries operated by Colchester Borough Council with passive readers which listened for the 21,000 AMR water meters installed at properties on their weekly refuse collection rounds. Reading yields vary from week to week but are generally only around 50% of meters are read every week and 75% read every four weeks. These results do not give us the confidence that we could use this method of data retrieval for our 7 UKWIR, 2012, The economics of balancing supply and demand (WR27 water resources tools project) 8 Sophie Ahmad, Aug 2017, Customer Research and Engagement Synthesis report, Page 77 55

56 Our ning customers, as it is clear that around a quarter of our customers would miss out altogether on weekly and even monthly reads. We would not be able to meet the customer expectation of a regular and reliable reading. We would still need to visit the properties to guarantee a billing read, which effectively provides us with no benefit on reducing meter reading costs or carbon. Even if the data was reliable and comprehensive, the data can not be used to track down leaks on the network a benefit we seek from the hourly smart meter data Development of strategic options Using the feasible option list, we went through a definition process to develop the detail of each option (for example, for smart metering options this included roll-out trajectories, meter technology, customer interaction and supporting technologies), understand dependencies and exclusivities, and to create options that are specific to WRZs. There are significant synergies between leakage reduction, smart metering and water efficiency activity. For example, before we can ask our customers to conserve water resources we must show that we are doing our bit, particularly by reducing leakage and fixing visible leaks as quickly as possible. The frequent meter readings provided by smart meters allow us to identify customer supply pipe leakage (CPSL) (9), and we can then proactively contact customers so that they can repair those leaks. Smart metering data will also allow us to identify leaks on our network more efficiently. Many potential water efficiency initiatives are dependent upon the installation of smart meters, including the introduction of targeted behavioural change initiatives, tariffs, and the installation of smart appliances. Given these synergies, it was essential to consider demand s holistically through the development of strategic options. Each strategic option includes smart metering, leakage reduction and water efficiency activity, and has been built from the bottom-up by combining WRZ options. Decisions regarding the geographical focus of each strategic option were informed by Draft Problem Characterisation scores, current levels of leakage and metering, and the practicalities of implementation. This is consistent with the to demand in the Water UK study, Water Resources Long Term Planning Framework (WRLTPF), which developed four demand scenarios consisting of a combination of leakage, metering and water efficiency initiatives. (10) The strategic options The three strategic options are described in the tables below. Table 5.4 The strategic demand options Impacts Extended Extended plus Aspirational Smart metering 3 AMP AMI roll-out, estimated demand savings of: 6 Ml/d by end of AMP7 2 AMP AMI roll-out, estimated demand savings of: 7 Ml/d by end of AMP7 2 AMP AMI roll-out, estimated demand savings of: 7 Ml/d by end of AMP7 22 Ml/d by Ml/d by Ml/d by 2045 Leakage reduction Total leakage reduction (including CPSL) of: 15 Ml/d by end of AMP7 38 Ml/d by 2045 Total leakage reduction (including CPSL) of: 30 Ml/d by end of AMP 7 70 Ml/d reduction by 2045 Total leakage reduction (including CPSL) of: 45 Ml/d by end of AMP7 105 Ml/d reduction by 2045 Household water efficiency Estimated demand savings of: 5 Ml/d by end of AMP7 11 Ml/d by 2045 Estimated demand savings of: 6 Ml/d by end of AMP7 30 Ml/d by 2045 Estimated demand savings of: 8 Ml/d by end of AMP7 40 Ml/d by CPSL is included in our reported leakage performance, and represents a sizable portion of our total leakage. For example, in CSPL accounted for 25% of our total leakage. 10

57 Our ning Smart metering It is important to note that all of the strategic options include the installation of smart meters across our region, reaching the limit of feasible meter penetration by the end of AMP9 (in the Extended option) or AMP8 (in the Extended Plus and Aspirational options). By smart meters we specifically mean Advanced Meter Infrastructure (AMI) meters and the associated transmission networks, with the data is then provided to customers over a dedicated website or customer portal. We believe that smart meters offer the potential to deliver significant future demand savings. Firstly, the provision of appropriately frequent consumption data to customers will encourage them to save water, over and above what they would save with a dumb meter. We have estimated this additional water saving associated with smart meters to be 3% (11). Secondly, they make possible a range of future water efficiency initiatives, such as non-price behavioural change incentives, financial incentives, or increasing block tariffs, which can generate further water saving. In addition, the frequent consumption data that smart meters generate will allow us to unlock a range of additional benefits. For example, a better understanding of demand allow us to improve the efficiency of our operations through targeted network optimisation. Finally, smart metering is also an integral part of our to achieve the leakage targets associated with each of the strategic options. Smart metering data will help us to identify leaks on our network which can then be fixed more quickly, saving water. It will also allow us to identify customer supply pipe leakage and even leaks inside the customer s property. Although these leaks are not our legal responsibility to fix, they represent a significant proportion of total water lost through leakage. For example, in , CPSL accounted for nearly 25% of our total leakage. Once we have identified these leaks, we will then contact customers proactively and encourage them to fix it. Leakage reduction All of the strategic options represent a ambitious reduction in our total leakage. Further reductions of this magnitude can not be achieved without the use of innovation to transform the way we manage our networks. The key activities include: The reduction in CPSL that is facilitated by smart meters Optimised Water Networks, in which bursts are prevented through better pressure Intensive Leakage Detection teams that track down hard-to-find leaks and target areas with ageing pipes, and, An Integrated Leakage and Pressure Management system to bring together network information, making it easier to control leakage and target work. We are actively exploring how the use of state-ofthe-art technology can help us to achieve further reductions, and that is why we have made zero leakage and bursts one of the seven goals of our Shop Window initiative (12), and we are actively trialing technologies such as thermal imagining drones to detect leaking pipes. Water efficiency All of the strategic options include a range of household water efficiency and conservation activity that build on current activities (included in the Demand Forecast, see Section for more details). New initiatives include the installation of water butts, an extension of our current Bits and Bobs audits (where we retrofit water efficiency devices in a customer s home free of charge), a rewards scheme that incentivises water savings, and incentives for customers to replace old toilets with more efficient brands. We will also work collaboratively with developers to ensure that new housing is as water-efficient as possible, this includes the development of a blueprint for water efficient gardens, and updating our Water Calculator to how to meet per capita consumption (PCC) standards of 110 and 80 l/ head/d. The Extended Plus option also includes trialling the use of greywater and rainwater harvesting technology at a development scale to achieve 80 l/head/d potable consumption. The Aspitational option also includes the widespread roll-out of this technology Cost benefit analysis In order to determine the preferred strategic option, we have undertaken a cost benefit analysis of the three strategic options. This included identification of all of the costs and benefits, the majority of which we have monetised. Of course there are important non-economic benefits associated with demand, and it was important to consider the qualitative benefits 11 For more details on this assumption, please refer to the Draft WRMP 2019 Demand Management Strategy: Technical Document 12 For the last year, Newmarket in Suffolk has been the location for our Innovation Shop Window. Within this area we showcase the combined effect of existing and future innovation, to show in microcosm what a 21st century water company could look like. 57

58 Our ning (that cannot be easily monetised) associated with each strategic option. The qualitative benefits assessed include: Water left in the environment as a result of demand activity Helping connect customers to their environment, Improved resilience of our systems, Offsetting demand growth, Offestting or mitigating the impacts of climate change, and Enabling future innovation, such as smart meters potentially unlocking smarter tariffs. More details on the costs and benefits assessed can be found in the Draft WRMP 2019 Technical Document: Demand Management Strategy. In addition, all of the strategic demand options were assessed in the Strategic Environmental Assessment and the qualitative Ecosystems Services Assessment. More details can be found in the Draft WRMP 2019 Technical Document: Option Appraisal. 5.5 Supply-side option development The WRP Guidance states that, where we identify a deficit, we should assess options to remove it. A supply-side option refers to a series of investments which together increase deployable output. Component parts can include the development of raw water assets, raw and treated water pumping stations, treatment processes, raw and potable water mains as well as connectivity to the existing potable or non potable supply system. As a result, the different components of a single option straddle one or more price controls including raw water abstraction, raw water distribution and water supply. The process for the development options is outlined in the figure below. Picture 5.1 Development options 58

59 Our ning Development of the unconstrained options list The WRP Guidance states that we should compile a list of all possible options that could be reasonably used in our, known as the unconstrained options list. We did this by reviewing the unconstrained options list developed for WRMP 2015, and by using the generic options list provided in the Economics of Balancing Supply and Demand (EBSD) methodology. (13) Unconstrained options were considered for all water resource zones, including Hartlepool. Our unconstrained option list includes options for all WRZs and lists circa 800 options Development of the constrained options list We then completed a coarse screening of the unconstrained options list to derive the constrained options list. To assess option feasibility, the screening criteria were developed expanding the criteria set out in the EBSD methodology (see table below). Table 5.5 Option feasibility coarse screening criteria Main screening criteria Does not address problem Breaches unalterable ning constraint Option is not promotable Sub-criteria category Programme Sustainability Technical Third party Cost Sustainability Third party Third party Sub-criteria description Is the forecast DO output likely to be ready in xx period/by year xx? (i.e. from a water resource availability point of view) Will the option be resilient and deliver the predicted DO and water quality both now and in the future (i.e. within the option s life)? Does the option provide the the required DO? (average and peak) Are there any likely significant outage risks? Are there any likely significant risks at this stage to regulators and other third parties that may make the option difficult to implement (e.g. abstraction licence issues, etc)? Is the option likely to be involving excessive whole life cost (capex and opex) that is not worth progressing further for more detailed costing? Are there any likely significant environmental/ecological risks (including WFD compliance risks) that would make the option too risky when an environmental / social assessment is undertaken? Are there any likely significant risks at this stage to regulators and other third parties that may make the option difficult to implement (e.g. abstraction licence issues, etc)? Are there any likely significant risks to AW customers that may make the option difficult to implement? We completed high-level environmental screening, designed to identify environmental risks and constraints. Where impacts were identified, the process either recommended high level mitigation or the rejection of the option. For example, the option ES40 Sea Tankering was rejected because of significant ecological risks identified in this process. (14) In order to determine if water is available for the options identified, we reviewed the the Environment Agency s Catchment Abstraction Management Strategies (CAMS). This resulted in the rejection of options such as new groundwater abstractions in catchments that are currently over-abstracted or over-licenced. 13 UKWIR, 2012, The economics of balancing supply and demand (WR27 water resources tools project) 14 The option was recommended for rejection as a result of significant impacts on two two highly designated Natura 2000 sites. This resulted from increased tankering presence, the construction of pipelines and the storage of tankered water within, or close to, the designated sites. 59

60 Our ning 60 We discussed the screening process and the constrained options list with the Environment Agency at three methods discussion meetings held in January Our constrained option list includes circa 400 options Development of feasible options list For each of the options on the constrained options list we completed feasibility studies, which consisted of a more detailed assessment of technical feasibility and the development of generic options into detailed options suitable for options appraisal. This included developing option descriptions and schematics, assessment of option yield, and understanding interdependencies. Water quality We have assessed each of the supply side options to ensure compliance under Section 68 of the Water Industry Act 1991, which sets out our statutory duty to supply wholesome water. The requirements for wholesomeness are further described in the Water Supply (Water Quality) Regulations 2016 (in England) and the Water Supply (Water Quality) Regulations 2010 (in Wales), and associated amendments. To meet the requirements of Regulation 15 of the Water Supply (Water Quality) Regulations 2016 (in England) and the Water Supply (Water Quality) Regulations 2010 (in Wales) we have carried out appropriate risk assessments for all new sources, cross boundary bulk transfers and internal company transfers. This includes an assessment of the potential impact of mixing of different water types within our distribution network. The options have been thoroughly assessed to include the treatment steps required to meet our water quality standards, including metaldehyde treatment. Invasive non-native species We have assessed all new supply-side options to understand the risks of spreading Invasive Non Native Species (INNS) through transfers of water. Following discussion with the Environment Agency, the assessment has focused on the potential pathways created by the option. We have assessed options that: Create a hydrological connection between locations not already connected, and Where new schemes provides a pathway between locations that have an existing hydrological connection. We have identified the potential INNS pathways for each of the supply-side options and assessed the frequency and severity of impact of these. Where required, we have included robust mitigation that is completely effective for removal of all life stages. Environmental assessments Options assessed as technically feasible were then subject to further environmental assessments, which built on the high-level environmental screening of the constrained options list: Strategic Environmental Assessment (SEA) Habitats Regulation Assessment (HRA) Water Framework Directive (WFD) Assessment Qualitative Ecosystems Services Assessment (ESA) In some instances, it is possible to avoid adverse environmental impacts by incorporating mitigation measures (for example, rerouting pipelines away for sensitive sites, or using directional drilling to lay pipelines without digging). Where the SEA, HRA and WFD assessments have recommended mitigation measures, these have been included in the option design and costing. Strategic Environmental Assessment (SEA) The WRP Guidelines state that a Strategic Environmental Assessment (SEA) is required where options are needed to a deficit. The objective of SEA, according to Article I of the SEA Directive, is: to provide for a high level of protection of the environment and to contribute to the integration of environmental considerations into the preparation and adoption of s with a view to promoting sustainable development. In order to do this, the SEA Directive requires s and s to undergo environmental assessment, and suggests that among other factors human health, population and water should be considered as criteria. Habitats Regulation Assessment (HRA) In addition, a Habitats Regulation Assessment is required to assess the potential impact of s and s to ensure that there will not be any likely significant effects (LSE) on sites of European nature conservation importance. European sites of nature conservation importance include Special Protection Areas (SPAs), Special Areas for Conservation (SACs), candidate SACs and proposed SPAs, as well as Sites of Community Importance (SCIs) which have been adopted by the EC, but not yet formally designated by the government of a Member State. In the UK, Ramsar wetland sites of international importance are also required to

61 Our ning undergo an assessment when a is considered likely to have a significant effect upon them. The HRA first assessed all of the options on the constrained options list for LSE. Where no LSE were identified there is no requirement to undertake further assessment. However, where LSE were identified those options were subject to a Task 2 assessment (also known as an appropriate assessment) to understand the potential adverse impacts and, if possible, recommend mitigation measures. If the adverse impacts cannot be addressed through mitigation then alternative options must be considered. Water Framework Directive (WFD) Assessment The WRP Guidance states that we must ensure that feasible options do not pose a risk of deterioration, or prevent the achievement of good status (or potential). As a result we have undertaken a WFD assessment on options in accordance with the guidance. The assessment consisted of an initial screening, followed by a detailed assessment that investigated both operational and construction impacts. Natural Capital and Qualitative Ecosystems Services Assessment (ESA) Defra s Guiding Principles and the WRP Guidance encourage companies to use a Natural Capital or Ecosystems Services to assessing the environmental and social costs and benefits of options. Ecosystem services are defined as the benefits provided by ecosystems that contribute to human well-being. A qualitative ecosystem services assessment considers the effects of development on natural capital, and its ability to provide ecosystem services. (e.g. starter, pump). The cost models are common for all investments and the cost is driven by the asset attributes entered (i.e. pump kw) Once the options are developed in C55, they follow a Quality Assurance process, where the cost base team challenges the scope, in order to ensure alignment with current business practice. The current cost models in C55 are based on 2012 prices and AWS cost data from completed projects. We are in the process of updating the cost model library for PR19, therefore the costs used for EBSD have been inflated to 2017 ahead of the updated library being published. Where cost models did not exist, we have developed new ones (i.e. surface water intakes, desalination intakes/outfalls, deep boreholes & large diameter pipes). Any new model is developed using a standard robust methodology that aligns with the corporate cost modelling. For the new reservoir cost model, we do not have sufficient historic data available due to lack of recent case studies. The quantities used to develop the cost model have been verified by external cost consultants, and we have reviewed the unit rates used internally. Consequently we have completed a qualitative ESA, that assesses the potential impacts of options on the provision of ecosystem services. In order to compare the impacts of different options, we developed a scoring methodology that was used to produce a ecosystem score, that was then weighted by option yield (ES score / Ml/d) Costing options Our process for costing of WRMP options is aligned with PR19 cost estimation principles. All options have been entered into our C55 Asset Investment Planning and Management tool, which is the tool we use for the estimation of all Business Plan investments. The cost estimation module within C55 contains a comprehensive asset cost model library covering assets from treatment steps (e.g. pumping station, filter), pipelines and equipment 61

62 Our ning Our C55 process is set out in the figure below. Figure 5.2 The C55 process Determining the preferred investment Our baseline shows that, despite having developed an ambitious demand we are still facing deficits in many WRZs. Consequently, carefully targeted investment in supply-side capacity is required Options appraisal We have used the industry-standard Economics of Balancing Supply and Demand (EBSD) methodology, that is based on least-cost optimisation, to determine the preferred in both the Principal and Adaptive Planning Scenarios. We have had to having the greatest choice of options for assessment with having a manageable number of options that are practical from a modelling perspective. The feasible options list contains options for all WRZs, variants of the same option and different combinations of options. As a result we have only modelled a subset of options from the feasible options list that are relevant to the ning problem. In order to manage future uncertainty, we have completed an options appraisal for both the Principal Planning Scenario and the Adaptive Planning Scenario. By comparing the scheme selection in each scenario, we are able to ensure: The options that we deliver in AMP7 are low regret assets, that will be required regardless of the need in AMP8. That the selected represent best value and that we would not be able to identify a better value solution even if uncertain AMP8 impacts were confirmed at this stage. That we are able to meet statutory deadlines associated with AMP8 sustainability reductions, should they be required Future proofing The options reported in WRP Table 6: list of water options are consistent with the least-cost scheme selection in the Principal Planning Scenario. Using the scheme selection in the Adaptive Planning Scenario, we have identified opportunities to future proof the selected options by increasing their capacity to accommodate further sustainability reductions in AMP8. Increasing option capacity in this manner would increase costs in AMP7; however, it would allow us to meet AMP8 needs in the most cost-efficient manner.

63 Our ning Appendices: Price incentives Adaptive ning If it is determined that further large sustainability reductions are required in AMP8, then we need to ensure that we can make them in time to meet statutory obligations. It is possible that that large supply-side options, such as new winter storage reservoir, water reuse and desalination, may be required to enable these. These options have long lead times and cannot be delivered within one AMP cycle. They require detailed technical design work, such as raw water quality monitoring, environmental impact assessments, and licence applications. A new reservoir would also require geotechnical investigations. In addition, some options (such as new reservoirs and desalination ts) may be classified as Nationally Significant Infrastructure and so be required to go through the Development Consent Order ning route. This includes a formal consultation process with Local Planning Authorities and other stakeholders. Unless we start these pre-ning activities in AMP7, these options will not be available for delivery if they are selected in WRMP In order to manage this uncertainty, we have developed an Adaptive Planning to delivering our WRMP This involves undertaking pre-ning activity for specific options that are may be selected in WRMP We used the results from our options appraisal, including the scheme selection in the Adaptive Planning Scenario, to determine which options should be taken forward to pre-ning. 63

64 Our ning 6 THE SCALE OF THE CHALLENGE Key Messages Our supply demand is under significant pressure from population growth, climate change, sustainability reductions and the need to increase our resilience to severe drought. These challenges are acute in our region, and they drive the need for investment on both demand and supply-side options, particularly in the short- and medium-term. The total impact we face in the Principal Planning Scenario is 307 Ml/d, which is equivalent to 28% of the average daily distribution input in The additional impact in the Adaptive Planning Scenario is up to 165 Ml/d, making the total 472 Ml/d, approximately 43% of the average daily distribution input in This consists of: 104 Ml/d: Growth 84 Ml/d: Climate change 73 Ml/d: AMP7 Sustainability reductions 46 Ml/d: Increasing resilience to severe drought Up to 105 Ml/d: Possible AMP8 Sustainability reductions 60 Ml/d: Possible future exports Figure 6.1 Pressures on our (by 2045, DYAA scenario) 64

65 Our ning 6.1 Population growth Overall, total demand is projected to increase by 104 Ml/d from 1109 Ml/d to 1213 Ml/d between 2016 and 2045, assuming no further action is taken to manage demand. This increase is driven by population growth; our demand forecast projects the regional population will increase by over 1 million people and half a million properties between the base year ( ) and Non-household demand is projected to decrease slightly over the same period, from 268 Ml/d to 264 Ml/d. (1) Figure 6.2 Projected total baseline demand (this excludes demand activity) 1 excluding non-household customer supply-pipe leakage and non-potable demand which have been modelled separately 65

66 Our ning As demonstrated by the figure and table below, Ruthamford, and the WRZs bordering Cambridge (Ely, Newmarket and Cheveley) are particularly affected. Figure 6.3 Percentage growth by 2045 (DYAA) 66

67 Our ning Table 6.1 Population growth impacts Water Resource Zone Growth impacts (Ml/d) Bourne 3.50 Bury Haverhill 2.00 Central Essex 0.90 Central Lincolnshire Cheveley East Lincolnshire East Suffolk 4.90 Ely 1.80 Happisburgh Hartlepool Ixworth 0.30 Newmarket 1.50 North Fenland North Norfolk Coast 0.50 Norfolk Rural North 3.10 Norfolk Rural South 1.60 Norwich and the Broads 5.00 Nottinghamshire 2.10 Ruthamford Central 9.80 Ruthamford North Ruthamford South Ruthamford West 3.00 South Essex 7.40 South Fenland 0.10 South Humber Bank South Lincolnshire Sudbury 0.30 Thetford 2.90 Total

68 Our ning 6.2 Climate change Our climate change vulnerability assessment confirms that our most vulnerable sources are our reservoirs and direct intakes. The majority of impacts are experienced in: Lincolnshire, where a combination of groundwater and surface water sources are vulnerable Ruthamford North, particularly vulnerable sources include the River Nene (which feeds Pitsford and Rutland reservoirs), the River Welland (which feeds Rutland reservoir), and Hollowell and Ravensthorpe reservoirs which refill naturally from local watercourses, and Ruthamford South, where the majority of the impacts results from vulnerability on the River Ouse, which feeds Clapham intake and Grafham reservoir. Figure 6.4 WRZs affected by climate change impacts As noted in Section , we have followed the Environment Agency s 2017 climate change assessment methodology (2), which is designed to better account for climate change impacts on current DO. This has resulted in a large climate change impact at the beginning of the ning period, which takes effect in (3) 68 2 Environment Agency (2017) Estimating impacts of climate change on water supply 3 We have delayed the impact from to as this allows time for scheme delivery.

69 Our ning Table 6.2 Climate change impacts Water Resource Zone Climate change impacts (Ml/d) Impact in Additional impact by 2045 Total impact in 2045 Bourne Bury Haverhill Central Essex Central Lincolnshire Cheveley East Lincolnshire East Suffolk Ely Happisburgh Hartlepool Ixworth Newmarket North Fenland North Norfolk Coast Norfolk Rural North Norfolk Rural South Norwich and the Broads Nottinghamshire Ruthamford Central Ruthamford North Ruthamford South Ruthamford West South Essex South Fenland South Lincolnshire Sudbury Thetford Total

70 Our ning 6.3 AMP7 Sustainability reductions In the last NEP, the Environment Agency set out a number of sites requiring investigation and options appraisal to look at addressing and mitigating the environmental impact of abstraction. Following the options appraisal process, we have worked with the Environment Agency to agree a set of confirmed sustainability changes and NEP mitigation measures required in AMP7 in the Water Industry National Environment Programme (WINEP). There are also a small number of schemes which we investigated in AMP5, where we agreed to implement sustainability changes or mitigation measures in AMP7. Sustainability changes and mitigation options, as well as the timescale for implementation, are outlined in the WINEP Selected NEP mitigation options We have carried out a full options appraisal process in order to identify measures to address the environmental impacts of our abstractions. In order to our environmental obligations with the need to maintain a secure public water supply, we have agreed mitigation options wherever possible in order to reduce the scale of the sustainability change required. In order to fulfil our WFD No Deterioration requirements, sustainability changes still apply in addition to the mitigation measure in the majority of cases. The selected NEP mitigation options that we will need to implement in AMP7 include: 4 river support and river restoration schemes 5 river support only schemes 9 river restoration only schemes 1 recirculation scheme 1 adaptive scheme 1 pond support scheme, and 1 source relocation. The selected options are set out in the table below. It is worth noting that, although the table is correct at the time of writing, we are still in discussions with the Environment Agency and there may be some refinement to the final option set in time for our Final WRMP Capex and Opex costs are preliminary costs and will be refined through the PR19 process. More information about the options appraisal process can be found in the Draft WRMP 2019 Sustainable Abstraction: Technical Document. Table 6.3 NEP mitigation options required in AMP7 NEP scheme name Option reference Option name Option description Capex ( k) Opex ( k / year) (1) Barlings Eau BARLE Barlings Eau river support River support to Welton Beck and Hackthorn Beck during periods of low flow. River restoration may be required in AMP8 on the Hackthorn Beck Broughton Brook BROUG Broughton Brook river support River support to the Broughton Brook during periods of low flow Bumpstead Brook BUMPS Wixoe relocation Relocation of the Wixoe source Cavenham Stream CAVEN Cavenham Stream river restoration River restoration on the perennial head of the Cavenham Stream Lee Brook LEEBR Lee Brook river restoration River restoration on the perennial head of the Lee Brook Northern Chalk NCHAL Northern Chalk river support River support to the Kirmington and Brocklesby arms of the Skitter Beck, the Team Gate Drain, Laceby Beck, and Barrow Beck during periods of low flow

71 Our ning NEP scheme name Old Carr Stream River Gadder River Gaywood Option reference OLDCA GADDR GAYWD River Gwash GWASH River Heacham River Kennett-Lee River Lark River Linnet River Sapiston River Slea River Tiffey Stowlangtoft Stream Stringside Stream Tuddenham Stream West and East Glen West Runton Common HEACH KENNL BHV3 LINNT SAPIS RSLEA TIFFY STOWL STRIN TUDDH GLENS SPOND Option name Barlings Eau river support Gadder river restoration Gaywood river restoration Gwash adaptive Heacham river restoration Kennett-Lee river support and river restoration River Lark recirculation Linnet river support and river restoration Sapiston river restoration Slea river support Tiffey river support Stowlangtoft river restoration Stringside river restoration Tuddenham Stream river restoration Glen river support and river restoration Spring Pond support and mains connection Option description River restoration on the Old Carr Stream. River support may be required in AMP8 Capex ( k) Opex ( k / year) (1) River restoration on the River Gadder River restoration on the River Gaywood Adaptive scheme spanning AMP6 and AMP7. AMP7 is likely to include the implementation of a change to the Rutland compensation licence condition, and river restoration on the River Gwash River restoration on the River Heacham River support and river restoration on the perennial reach of the River Kennett-Lee Recirculation of water on the Lark from downstream of Fornham All Saints WRC, to upsteam of Abbey Gardens River support and river restoration in the perennial reach of the River Linnet River restoration on the River Sapiston. River support may be required in AM River suppto the new River Slea during periods of low flow River support to Dyke Beck, Hackford Watercourse, and/or Bays River during periods of low flow. River restoration on the Stowlangtoft Stream. River support may be required in AM River restoration on the Stringside Stream. River support may be required in AMP8 River restoration on the perennial reach of the Tuddenham Stream River support to the East Glen during periods of low flow. River restoration on the East Glen and the lower West Glen Top up Spring Pond during periods of low water level and provide a mains connection k of the total Opex cost is associated with short term monitoring and will only be required for the first 5 years 71

72 Our ning Barlings Eau Environment Agency investigations have confirmed that our abstraction is having an impact on the Barlings Eau, primarily upon the Welton Beck and Nettleham Beck. Following a detailed options appraisal process, we have agreed with the Environment Agency to implement a river support scheme to support low flows on both becks. The ecological impact of this scheme will be monitored to see whether or not a further measure, comprising of river restoration, will be required in AMP8. Broughton Brook Environment Agency investigations concluded that our abstraction is causing low flows in the Broughton Brook, impacting upon ecology. We will implement a river support scheme to support low flows in the brook, as agreed with the Environment Agency. Bumpstead Brook The Environment Agency has determined that flows in the Bumpstead Brook are being impacted by our Wixoe abstraction source. In order to mitigate this impact, we have committed to relocate the source to a new location where the impact on the Bumpstead Brook is reduced or removed. Cavenham Stream and Tuddenham Stream Environment Agency investigations indicate that there is a risk that our abstraction is having an impact upon flow and ecology in the Cavenham Stream and Tuddenham Stream. We have agreed with the Environment Agency to carry out river restoration on both streams. Lee Brook Our abstraction has an impact on the flows in the seriously damaged Lee Brook waterbody. We were required by the Environment Agency to assess options to ensure that further deterioration of flows within the brook is prevented. As such, we will carry out river restoration in AMP7. Northern Chalk In AMP5 we agreed to a phased with the Environment Agency towards implementing a solution for the Northern Chalk, focused on the Skitter Beck and Laceby Beck. In AMP6 we are implementing a river restoration scheme on both becks. A further options appraisal in AMP6 has led to the agreement for river support to the two becks, as well as a further beck on the Northern Chalk, the Barrow Beck. It should be noted that there is a need to the environmental needs of the Northern Chalk with groundwater flood risk and public water supply needs. A working group has been set up with the Environment Agency and the North East Lincolnshire Council to agree the most appropriate way forward. As such, sustainability changes associated with the Northern Chalk sources as subject to change in the Final WRMP following the outputs of the working group. Old Carr Stream, River Gadder, and Stringside Stream Environment Agency investigation suggests that our abstraction impacts upon the flow in the Lower Wissey tributaries; the Old Carr Stream, River Gadder, and the Stringside Stream. We have agreed with the Environment Agency to carry out river restoration on all three waterbodies. The ecological impact of the Old Carr Stream and Stringside Stream schemes will be monitored in order to inform whether or not river support will be required in AMP8. River Gaywood Our abstraction is suspected by the Environment Agency to be impacting upon flow in the River Gaywood. We have agreed to carry out river restoration in order to improve the resilience of ecology to low flows. River Gwash An adaptive is being implemented across AMP6 and AMP7 for the River Gwash in order to address the currently suppressed flow variation caused by the licence conditions surrounding the compensation requirement from Rutland Reservoir. A new licence condition and trial river restoration scheme is being carried out in AMP6 in partnership with the Environment Agency and the Wild Trout Trust, in order to confirm the final licence condition change and river restoration scheme that will be implemented in AMP7. River Heacham There is evidence that the ecology in the River Heacham is vulnerable in periods of low flow due to sediment in the river. We have agreed to carry out river restoration in order to improve the resilience of ecology to low flows. River Kennett-Lee Our abstraction is suspected by the Environment Agency to be impacting upon flows in the River Kennett-Lee. In AMP7, we will implement a river support scheme as well as carry out river restoration on the perennial reach of the river. River Lark Following investigations in AMP3, the Environment Agency determined that our groundwater abstractions in and around Bury St Edmunds were likely to be having an impact on flow in the River 72

73 Our ning Lark. In AMP5 we carried out an options appraisal and agreed with the Environment Agency that we need to implement a solution. Further options appraisal in AMP6 has identified the best option for delivery in AMP7 to be a recirculation scheme in Bury St Edmunds, to increase the flow through the town and at Abbey Gardens. River Linnet Environment Agency investigations show that our abstraction is likely to be having an impact upon flow and ecology in the River Linnet. We have agreed to carry out river support to the perennial reach of the river. This river support is likely to be implemented via a diversion to the Lark recirculation scheme. In order to support the ecology in the river in response to the additional flow, we will also carry out river restoration. West Runton Under the Review of Consents, we moved our Sheringham abstraction away from the Beeston Regis Common SSSI. As part of this relocation, we drilled and commissioned a new source at West Runton. However, operation of the source has identified a connection between the shallow and deep aquifer, leading to impacts upon surface water features and a pond at West Runton Common. In AMP7 we will provide support to the pond during periods of low level. We will also provide a mains connection to the well user. River Sapiston and the Stowlangtoft Stream Our abstraction is suspected by the Environment Agency to be impacting upon flow in the River Sapiston and the Stowlangtoft Stream. As agreed with the Environment Agency, we will carry out river restoration on both waterbodies. The impact of the schemes will be monitored in order to inform whether or not river support will be required in AMP8. River Slea Environment Agency investigations concluded that our abstraction is having an impact upon flows in the River Slea. We will implement a river support scheme to provide additional water during periods of low flow. River Tiffey Environment Agency evidence suggests that our abstraction is impacting upon flows in the River Tiffey. As guided by the Environment Agency, the options appraisal focused on the Dyke Beck, Bays River, and Hackford Watercourse sections of the River Tiffey waterbody, where our impacts are greatest. We have agreed to implement a river support scheme in AMP7. We are currently in discussion as to which tributary to provide support to in order to maximise ecological benefit. West and East Glen Our abstraction has been shown to impact upon flow in the East Glen and West Glen. Since there is already a river support scheme on the West Glen via the Gwash to Glen transfer, we have agreed to carry out river restoration in order to improve the resilience of the ecology to low flows. We will also implement a river support scheme and river restoration on the East Glen, as agreed with the Environment Agency. 73

74 Our ning AMP7 Sustainability reductions Figure 6.5 WRZs affected by sustainability reductions in AMP7 The WINEP also sets out the sustainability changes that are required in AMP7. There are 6 sites where no mitigation options have been selected and hence the sustainability changes are more significant. It is worth noting that the rest of the sustainability changes are dependent upon the delivery of the selected NEP mitigation options; if these options were to be excluded, the sustainability changes required would be much greater. To demonstrate our commitment to achieving sustainable abstraction we to further develop our AMP6 Abstraction Incentive Mechanism (AIM) to include additional abstractions that we judge to be having an environmental impact. This development will form the basis of our AMP7 AIM Outcome Delivery Incentive. The resulting impact of deployable output, or sustainability reduction, is 72.5 Ml/d, as shown in the table below. Table 6.4 AMP7 Sustainability reductions Water Resource Zone Total WRZ sustainability reduction (Ml/d) Bourne 4.0 Bury Haverhill 4.5 Central Essex Central Lincolnshire 14.0 Cheveley East Lincolnshire East Suffolk 6.5 Ely 1.0 Happisburgh 1.3 Hartlepool Ixworth 1.2 Newmarket North Fenland North Norfolk Coast 74

75 Our ning Water Resource Zone Total WRZ sustainability reduction (Ml/d) Norfolk Rural North 6.0 Norfolk Rural South Norwich and the Broads Nottinghamshire Ruthamford Central Ruthamford North Ruthamford South 3.0 Ruthamford West South Essex South Fenland 15.0 South Humber Bank South Lincolnshire 16.0 Sudbury Thetford Total 72.5 Catfield Fen The Environment Agency confirmed that abstraction from the Ludham source presents a risk to features of European interest at Catfield Fen, on the Ant Broads and Marshes SSSI. Following discussion and investigation, it has been agreed with the Environment Agency and Natural England that we will close our Ludham source in AMP7 under the Habitats Directive driver. River Brett The impacts of our Semer and Raydon sources upon the River Brett are subject to ongoing investigation by the Environment Agency. The River Brett is a seriously damaged waterbody. We are currently working collaboratively with the Environment Agency and other local abstractors to identify an appropriate mitigation option to address this. Since the work is not complete, we have ned for the worst case sustainability change. River Nar In AMP5, the Environment Agency modelled the impact of our surface and groundwater abstraction sources against the conservation flow for the River Nar. The assessment required a significant sustainability change to address the impacts of our abstraction upon the River Nar, to take place in AMP7. This includes the closure of our Marham surface water abstraction. As agreed with the Environment Agency and Natural England, we are also implementing an interim measure comprising of river restoration during AMP6. River Idle and River Poulter Following investigations, the Environment Agency concluded that our groundwater abstractions are having an impact on flow in the River Poulter and River Idle. Our options appraisal found that a sustainability change was a cost beneficial solution to recover the flows in the two waterbodies. Witham Limestone The Witham Limestone has been assessed by the Environment Agency as a seriously damaged aquifer due to the ecological status of the surface waterbodies on the Limestone. As required by the Environment Agency, our options appraisal focused on the impact of our abstraction on the Scopwick Beck. As a result, we have agreed to a sustainability change with the Environment Agency. 75

76 Our ning Fish and Eel Passage Figure 6.6 Severe drought vulnerability In AMP6 we are delivering an extensive of work to work towards meeting the Eels (England and Wales) Regulations After discussion with the Environment Agency, we have agreed a further of work to be delivered in AMP7. There is not expected to be any impact on DO from eel passage works. There is no requirement from the Environment Agency for any fish passage schemes in AMP7 in our region. 6.4 Increasing resilience to severe drought In our last WRMP, we estimated that improving the resilience of our Ruthamford system would have required an additional 150 Ml/d. We stated that a deficit of this size would need a large strategic raw-water transfer to support our Ruthamford reservoir system. Our 2014 Business Plan included the detailed assessment of this need and some preliminary ning and design work. We have undertaken an extensive vulnerability analysis to understand and quantify the risk from severe droughts. This work shows that our system is more resilient to severe drought than previously understood, but that there are still some vulnerabilities. In several cases (for example in Norfolk, Cambridgeshire, Suffolk and Essex) the stochastic 1 in 200 year event did not reduce the baseline DO. Many sources are not vulnerable to drought because they are constrained by other factors, particularly their licences, rather than their hydrology. In some instances the conjunctive nature of WRZs allows resources to be shared, mitigating drought impacts. In Ruthamford and Lincolnshire, the stochastic droughts of around 1 in 200 year return period did not reduce baseline DO.Our technical evaluation of historical droughts shows that both Ruthamford and Lincolnshire have experienced droughts of at least a 1 in 200 year return period in the last century. The implication is that parts of our system have been designed to cope with severe drought; for example, the design drought for Grafham reservoir is which has been shown to have an approximate 1 in 200 year return period. Furthermore, investments made since privatisation have substantially improved our resilience. Following the groundwater drought (that affected Lincolnshire and parts of Norfolk and Suffolk) and the drought, we have invested 37 million and 47 million respectively in new assets designed to improve resilience. We estimate the benefit of this investment to be 100 Ml/d in Lincolnshire and 44 Ml/d in Ruthamford. There are, however, some remaining vulnerabilities. In Cheveley, Newmarket, North Fenland and South Fenland WRZs, there were impacts on groundwater that reduced baseline DO at WRZ level. There is also an impact in the Central Lincolnshire WRZ, which is a result of a combination of factors, including an assumption that a drought permit on the Trent would not be reliable in a 1 in 200 year event, and knock-on impacts associated with network constraints. The total impact of severe drought on our supplydemand is 46 Ml/d. To ensure we can maintain supplies to all of our customers, without having to impose standpipes and rota-cuts, we need to develop an equivalent capacity from new supplies. 76

77 Our ning Table 6.5 Severe drought impacts Water Resource Zone Bourne Bury Haverhill Central Essex Severe drought impacts (Ml/d) Central Lincolnshire Cheveley 1.00 East Lincolnshire East Suffolk Ely Happisburgh Hartlepool Ixworth Newmarket 5.00 North Fenland 1.00 North Norfolk Coast Norfolk Rural North Norfolk Rural South Norwich and the Broads Nottinghamshire Ruthamford Central Ruthamford North Ruthamford South Ruthamford West South Essex South Fenland 9.00 South Lincolnshire Sudbury Thetford Total

78 Our ning 6.5 AMP8 Sustainability reductions In order to understand the potential impact of sustainability reductions in AMP8, we have assessed a range of scenarios, including capping all of our licences at recent actual use. The largest potential impact is up to 105 Ml/d and this represents an upper estimate scenario. However, we believe that this upper estimate is unlikely, and so we have modelled a less severe mid estimate impact in our Adaptive Planning Scenario (57.5 Ml/d). At this stage the potential impacts are very uncertain; and we will assess the impact further through options investigations and appraisals in AMP8. The distribution of this impact across our Water Resources Zones is set out in the table below. Table 6.6 AMP8 Sustainability reductions (as modelling in our Adaptive Planning Scenario) Water Resource Zone Total WRZ reduction (Ml/d) Bourne 7.10 Bury Haverhill 0.10 Central Essex Central Lincolnshire 1.10 Cheveley 0.40 East Lincolnshire 9.00 East Suffolk 0.60 Ely Happisburgh 0.30 Hartlepool Ixworth 0.40 Newmarket 1.20 North Fenland 2.20 North Norfolk Coast 0.70 Norfolk Rural North 1.80 Norfolk Rural South Norwich and the Broads 6.20 Nottinghamshire 3.10 Ruthamford Central Ruthamford North Ruthamford South 1.80 Ruthamford West 78

79 Our ning Water Resource Zone Total WRZ reduction (Ml/d) South Essex 0.60 South Fenland 2.10 South Humber Bank South Lincolnshire Sudbury 1.80 Thetford 2.20 Total Time-Limited Licences It has been the Environment Agency s policy in the Anglian region since 1990 to time-limit new licences and licence variations authorising increased abstraction and other variations, such as points of abstraction. The Water Act 2003 subsequently made it law to include a time-limit on all new, full and transfer abstraction licences. The use of time-limited licences allows the Environment Agency to deal with environmental uncertainty whilst ensuring that supplies are used efficiently to meet the needs of the public, business and the environment. As a result, time limits apply in whole or in part to approximately half of our abstraction licences. During AMP6 we have applied to renew 108 licences and have included robust supporting evidence to satisfy the Environment Agency s three tests for renewal. As part of the test for continued environmental sustainability we have a duty under the Water Framework Directive to ensure there is no risk of deterioration in water body status. We have agreed a risk based with the Environment Agency to enable licences to be renewed on the same terms where we have demonstrated that there is no ned abstraction increase or no proven risk of deterioration. Renewals until 2022 will allow us time to investigate further under the Water Industry National Environment Programme and identify alternative supply options should there be a requirement to reduce abstraction licences quantities to recent actual use. If required, we would include these as AMP8 sustainability reduction schemes. In the meantime, we will not increase abstraction above the maximum peak annual quantity abstracted between 2005 and 2015, as defined by the Environment Agency. We will report compliance at our annual performance meetings with the Environment Agency and Ofwat. 6.6 Future exports Our neighbouring water companies, Cambridge Water (South Staffs) and Affinity Water (Central and East), are facing potential sustainability reductions in AMP8. Given the limited options for them to develop new resources, they may need to compensate for this reduction by seeking a transfer from within our region. We have worked with both companies to determine the size of this potential impact, and our best estimate of what they may require is 60 Ml/d in total. 79

80 Our ning 7 OUR DEMAND MANAGEMENT STRATEGY Key Messages Our priority is to manage demand. We put less water into supply today than in 1989, despite an increase of more than 30% in the number of properties we serve. In addition, our leakage performance is industry leading and by the end of AMP6 we aim to have 93% of households metered and 86%paying measured charges. We intend to build on these past successes and have developed an ambitious, cost beneficial demand that will more than offset the effects of growth. Using new technology and innovation, our will unlock estimated demand savings of up to 43 Ml/d by the end of AMP7, and 123 Ml/d by Our consists of: Installing smart metering across our region: estimated demand savings of up to 7 Ml/d by the end of AMP7 and 23 Ml/d by Ambitious leakage reduction: 30 Ml/d (15%) by the end of AMP7, and 70Ml/d by This includes savings in customer supply pipe leakage that are facilitated by smart meters. Initiatives that promote household water efficiency: estimated demand savings of up to 6 Ml/d by the end of AMP7, and up to 30 Ml/d by We will also work collaboratively with developers to ensure that new housing is as water-efficient as possible. This includes trialling the use of greywater and rainwater harvesting technology at a development scale to achieve 80 l/head/d potable consumption. By the end of the period (2045), we expect that our average PCC will be 117 l/head/d, a reduction of 14% (19 l/head/d) compared with We believe this is the right solution because it: Meets customer and government expectations to continue to reduce leakage and manage demand Saves water that would otherwise be abstracted from the environment, mitigating deterioration risk, and, Is required to ensure the reliability, sustainability and affordability of water resources over the long-term. 7.1 Selected demand Our preferred demand will deliver estimated total savings of up to 43 Ml/d by the end of AMP7, and 123 Ml/d by These savings will more than offset the projected growth in household demand from the base year ( ), as shown in the figures below. Figure 7.1 The cumulative savings of our selected demand 80

81 Our ning Smart metering We to install smart meters across our region, reaching the limit of feasible meter penetration by the end of AMP8. Critically, smart meters offer the potential to deliver significant future demand savings, as customers with a smart meter save 3% more water than those with a dumb meter. In addition, smart meters make possible a range of future water efficiency initiatives, such as non-price behavioural change incentives, financial incentives, or rising block tariffs. Smart metering is also an integral part of our leakage. Using smart meter data, we can analyse individual customers consumption patterns and identify customer supply pipe leaks (CSPL) and leaks within the property (plumbing losses). We will then notify customers proactively of the leak so that they can fix it, saving both water and money. By the end of AMP 7, we estimate that smart meters, combined with the behavioural change and improvements in leakage performance that they enable, will result in up to 7 Ml/d demand savings, and up to 7 Ml/d reduction in CSPL. By 2045, we estimate smart meters will result in up to 23 Ml/d demand savings, and up to 28 Ml/d reduction in CPSL Further ambitious leakage reduction By 2025, we will have reduced leakage by 18%, from an SELL of 211 Ml/d in AMP5 to 172 Ml/d (equivalent to 177 Ml/d 3 year average). Our target for AMP7 is to reduce leakage by 30 Ml/d (15%), from 177 Ml/d in 2020 (3 year rolling average) to 147 Ml/d (3 year average) by the end of the AMP. By 2045, we to reduce our leakage further by a total of 70Ml/d (40%), down to 107 Ml/d. This includes the savings in CSPL facilitated by smart meters described above. Optimised Water Networks, in which bursts are prevented through better pressure Intensive Leakage Detection teams that track down hard-to-find leaks and target areas with ageing pipes, and, An Integrated Leakage and Pressure Management system to bring together network information, making it easier to control leakage and target work Water efficiency Our includes a range of household water efficiency and water conservation activity. This is based on the continuation of current activities, such as the Bits and Bobs campaign (where we retrofit water efficiency devices free of charge) and The Potting Shed (where we provide water efficiency advice to gardeners). It also includes a significant amount of new initiatives, including initiatives that draw on insights from behavioural economics, (2) such as a rewards scheme that incentivises water savings, incentives for customers to replace old toilets with more efficient brands and the installation of water butts. We will also work collaboratively with developers to ensure that new housing is as waterefficient as possible. This includes trialing the use of greywater and rainwater harvesting technology at a development scale to achieve 80 l/head/d potable consumption. We forecast that these activities will result in savings of 6 Ml/d by the end of AMP7, and 30 Ml/d by By the end of the period (2045), we expect that our average PCC will be 117 l/head/d, a reduction of 14% (19 l/head/d) compared with A reduction of this magnitude, however, can not be achieved without the use of innovation to transform the way we manage our networks. That is why we have made zero leakage and bursts one of the seven goals of our Shop Window initiative, (1) and we are actively trialing technologies such as thermal imagining drones to detect leaking pipes. The key components of our leakage are: 1 For the last year, Newmarket in Suffolk has been the location for our Innovation Shop Window. Within this area we showcase the combined effect of existing and future innovation, to show in microcosm what a 21st century water company could look like. 2 Behavioural economics is a method of economic analysis that applies psychological insights into human behaviour to explain economic decision-making. 81

82 Our ning our ambition The diagram below shows the percentage change in the number of properties supplied, the water we put into our network and leakage since This clearly demonstrates how ambitious our selected is. Figure 7.2 Demand : past achievements and future ambition The impact of our on baseline demand is set out in the figure below. Figure 7.3 The impact of our selected demand on baseline demand 82

83 Our ning The impact of our demand on PCC is shown in the figure below. Figure 7.4 The impact of our demand on average PCC Cost benefit assessment The total cost of our selected demand are set out in the table below. These are preliminary costs and will be refined through the PR19 process. Totex (including savings) ( M) 2 AMP smart metering Leakage Water Efficiency TOTAL We have undertaken an assessment of costs and benefits of our selected. The results demonstrate that, overall, our is cost beneficial. More details can be found in the Draft WRMP 2019 Demand Management Strategy: Technical Document. Question 2: Are we right to prioritise demand? Question 3: Should we consider compulsory metering in AMP7? 83

84 Our ning 8 BASELINE SUPPLY-DEMAND BALANCE Key Messages We have calculated baseline s for both the Principal Planning Scenario and the Adaptive Planning Scenario. The baseline as reported in WRP Table 4: assumes the benefit of the selected NEP mitigation options. Excluding these options would increase and accelerate baseline deficits. Despite having developed an ambitious demand that more than offsets the effects of growth, the scale of our challenge is such that we will still need carefully targeted investment in supply-side capacity to maintain our. Out of a total of 28 Water Resources Zones, 19 are in deficit in the Principal Planning Scenario by the end of the period. After taking account of the benefits of our demand, 12 WRZs are in deficit in the Principal Planning Scenario and 15 are in deficit in the Adaptive Planning Scenario by the end of the period. Ruthamford Central and South, South Essex, South Fenland and South Lincolnshire are particularly affected. 8.1 Principal Planning Scenario Our baseline regional supply demand for dry year annual average (DYAA) conditions in the Principal Planning Scenario (PPS) is summarised in the table and figure below. The PPS includes expected changes from the following: Policy driven growth targets Climate change Drought, and AMP7 sustainability reductions Table 8.1 Regional baseline to 2045 for dry year annual average (DYAA) conditions in the Principal Planning Scenario (with deficits highlighted in blue) (start of AMP7) (end of AMP7) (end of AMP8) (end of AMP9) (end of AMP10) (end of AMP11) Total DYAA Water available for Use* (Ml/d) Total DYAA Distribution Input (Ml/d) Total DYAA Target Headroom (Ml/d) DYAA (Ml/d)** *includes outage allowance **excludes Hartlepool Water 84

85 Our ning Figure 8.1 Regional baseline supply demand (Ml/d) for dry year annual average (DYAA) conditions in the Principal Planning Scenario (excluding Hartlepool Water) The forecast reduction in Water Available For Use (WAFU) is from the combined effects of drought, climate change and AMP7 sustainability reductions. The net impact is equivalent to 193 Ml/d, 10 Ml/d less than the 203 Ml/d sum of the equivalent challenges. Differences between the two arise from conjunctive use benefits, which result in WAFU at system level being marginally greater than the sum of the WAFU available from individual works; the challenges were estimated at individual works level. The largest WAFU reductions (>10% of the total reduction) are concentrated in a small number of WRZs: Central Lincolnshire (63Ml/d from drought, AMP7 sustainability reductions and climate change) Ruthamford North and South (56Ml/d mainly from climate change) South Fenland (24Ml/d from drought and AMP7 sustainability reductions), and South Lincolnshire (20 Ml/d from climate change and AMP7 sustainability reductions) In total, these account for approximately 84% (163 Ml/d) of the total WAFU reduction in our system. A notable feature of the WAFU forecast is the large, stepped reduction at the end of AMP7 ( ). This arises from a combination of near-term (AMP7) sustainability reduction, climate change and drought related effects. The sustainability reduction impact is driven by a statutory deadline. The drought and climate change impacts have been modelled at the end of AMP7 to allow sufficient time within the AMP for delivery of the related schemes. In total, this stepped change accounts for approximately 80% (155 Ml/d) of the total WAFU reduction. The post AMP7 reductions are smaller and more gradual, and all are climate change related. The timing of climate change impacts in relation to investment is discussed further in Section 9. The increase in distribution input reflects growth in demand from population increase and new development. The net increase is equivalent to 80 Ml/d, approximately 25 Ml/d less than the 104 Ml/d growth related challenge. The difference arises from a reduction in the length of the period being considered; the 104 Ml/d referring to , while the 80 Ml/d refers to Over the 25-year forecast period the numbers are identical. Target headroom requirements remain stable over the forecast period, increasing from approximately 55 Ml/d in to 75 Ml/d in The increase in target headroom is equivalent to 2% of the distribution input and is significantly less than increases in previous WRMPs. We are able to accommodate this reduction in allowances for uncertainty and risk through our use of principal and adaptive ning scenarios. 85

86 Our ning The ning problem in the Principal Planning Scenario Our ning problem is to make sure that we have no deficits in any of our WRZs at any point during the 25-year period between 2020 and We are required to do this for both DYAA and critical period (CP) conditions of higher demand, and to take account of the following exports and imports: Affinity Central: 91Ml/d (average) and 109 Ml/d (peak) export from Ruthamford South WRZ Severn Trent: 18 Ml/d export (average and peak) from Ruthamford North WRZ Essex and Suffolk Water: 3 Ml/d (average) and 4.5 Ml/d (peak) import to South Essex WRZ Our DYAA WRZ supply demand s are summarised below for the PPS. For a small number of WRZs we have equivalent CP deficits and details of these are also given. For more information on our WRZ level deficits, and the related drivers, please refer to the Water Resource Zone reports. Table 8.2 s to (Ml/d) for dry year annual average (DYAA) conditions in the Principal Planning Scenario (excluding Hartlepool Water) (with deficits highlighted in blue) Year WRZ (start of AMP7) (end of AMP7) (end of AMP8) (end of AMP9) (end of AMP10) (end of AMP11) Bourne Bury Haverhill Central Essex Central Lincolnshire Cheveley East Lincolnshire East Suffolk Ely Happisburgh Ixworth Newmarket North Fenland North Norfolk Coast Norfolk Rural North Norfolk Rural South Norwich and the Broads Nottinghamshire Ruthamford Central Ruthamford North Ruthamford South

87 Our ning Year WRZ (start of AMP7) (end of AMP7) (end of AMP8) (end of AMP9) (end of AMP10) (end of AMP11) Ruthamford West South Essex South Fenland South Humber Bank South Lincolnshire Sudbury Thetford Net DYAA Supply Demand Balance (Ml/d)* Sum of WRZ DYAA Deficits (Ml/d) *equivalent to the sum of the WRZ s (WRZ deficits and surpluses added together) Overall, the deficits in our system increase by 80Ml/d between the start and end of AMP7 and then progressively increase by an additional 100 Ml/d over the period to end of AMP11. There are large (>5 Ml/d) DYAA deficits in the following WRZs: Figure 8.2 (Ml/d) in for dry year annual average conditions in the Principal Planning Scenario Bury Haverhill (8.8Ml/d) Central Lincolnshire (23.7Ml/d) East Suffolk (9.5Ml/d) Ruthamford North and South (81.2Ml/d) South Essex (15.2Ml/d) South Fenland (20.7Ml/d), and South Lincolnshire (14.2Ml/d) These deficits account for 173Ml/d (91%) of our total deficit, confirming that the DYAA ning problem is driven by a relatively small number of WRZs, each with large ims. These WRZs are concentrated in the central and western parts of our region, and in Essex and Suffolk. The distribution of DYAA surpluses and deficits in our system is given in Figure 8.3 ( ) and Figure 8.4 ( ) below: 87