Wessex Water Partnership Annual Report July 2017

Transcription

1 Wessex Water Partnership Annual Report July 2017

2 CONTENTS FOREWORD... 3 EXECUTIVE SUMMARY Introduction Partnership s membership and activities during the year: 2.1 Membership Meetings Challenges Issues identified last year Partnership s findings: 3.1 Reporting and assurance Outcomes and Performance Commitments Customer engagement for PR The Partnership s focus for 2017/ Conclusions APPENDICES: Appendix 1 Glossary Appendix 2 List of Partnership members Appendix 3 Detailed commentaries on Wessex Water s performance in 2016/17 against its Final Determination Outcomes and associated Performance Commitments

3 FOREWORD On behalf of the members of the Wessex Water Partnership, I m pleased to present our report for the 2016/17 year. We exist to represent the interests of Wessex Water s customers and stakeholders and that directs our focus and challenge. During the twelve months since our last report we have been proactive in challenging the company, including at a face-to-face session where we questioned a panel of Wessex Water staff over issues ranging from customer service to water efficiency and sewer flooding. We have taken up the areas of interest we set out in our last Annual Report and our challenges have resulted in the company improving the effectiveness of its customer engagement, the clarity of its Strategic Direction Statement and the information provided to customers on their bills. In order to provide better assurance as to how customer engagement is carried out, we have established a Customer Research Sub-Group. This has already undertaken more detailed examination of the projects commissioned by the company. I am grateful to the Sub-Group s members and its Chair, Ian Walker, for this additional work. As you will read, we continue to comment on annual performance and our work is presented to the company Board as well as to the Audit Committee. As we move forward in the price-setting cycle we expect our focus in the coming year to be more on the emerging Business Plan for the next billing period; this is known in the sector as Price Review 2019 or PR19. We welcome the views of customers and stakeholders on our work. You can contact us via our website Dan Rogerson Chair Wessex Water Partnership Wessex Water Partnership Annual Report

4 EXECUTIVE SUMMARY The Wessex Water Partnership (the Partnership) was established in January 2016 to work on behalf of customers by challenging Wessex Water (WW) to achieve the best results for bill payers, the environment and the local economy. The Partnership recruited additional members during the year from the student community (to reflect the views of future customers), and from academia (to support its challenge on customer engagement processes and findings). The purpose of this Report is to provide the WW Board and customers with the Partnership s opinion on the company s progress in delivering its Final Determination Performance Commitments in the second year of the price control period and its customer engagement activities undertaken during the year for the next Price Review (PR19). The Partnership published its first Annual Report in July This Report also includes comment on issues and opportunities raised at that time. The Partnership had the opportunity to review and challenge WW s performance against its Final Determination Commitments for 2016/17, the company s emerging and ongoing PR19 customer engagement activities and to follow up on performance issues identified last year. The working relationship with the company and its external advisers and auditors was open and transparent. The company has continued the good performance it achieved last year by meeting or exceeding most of its Final Determination Performance Commitment targets for 2016/17. This has brought welcome benefits to its customers through improvements in certain aspects of customer service and in water supply resilience and sewer flooding and security of supply. The environment has benefitted through improvements to rivers, lake and estuaries and bathing waters, increases in water efficiency and reductions in greenhouse gas emissions. The Partnership notes and accepts the company s explanations why certain customer, water quality and environmental targets were missed or where performance slipped from the previous year. In several cases improved performance is dependent upon the completion of investment in new systems and process or other assets or that there were contributing factors outside the company s control. The Partnership accepts this and welcomes the company s intention to do all it reasonably can to maintain and improve performance and meet its future targets. The Partnership reviewed and challenged information provided by the company on performance issues and other topics identified last year. Most issues were resolved to the Partnership s satisfaction but some remain outstanding and will be pursued further in the coming year. A number of performance-related issues and opportunities have been identified where the Partnership will be seeking further information from WW during 2017/18. It will continue to challenge the company to do as much as it can to achieve and where possible exceed its targets for the benefit of customers and the environment. In some cases the company has earned rewards or suffered penalties under the Ofwat PR14 incentive regime as a result of its performance in 2016/17. Any rewards and penalties earned in 2016/17, as well as those earned last year, will be accrued for payment at the end of 2019/20. The Partnership will be discussing with the company its use of any rewards or penalties achieved and it will encourage the company to consult its customers on this. The company made improvements to its performance reporting methodologies and processes where necessary. The Partnership received assurance from the company s independent Technical Auditor that the company s performance information for 2016/17 is robust and that the resulting rewards or penalties have been correctly calculated. The Partnership has established a Customer Research Sub Group (CRSG) in order to strengthen its review and challenge of the company s PR19 customer engagement programme. The company has taken on board comments and recommendations made by the Partnership and the CRSG during the year. As a result the Partnership considers the ongoing customer engagement work being undertaken by WW for PR19 is soundly based. It is looking forward to reviewing the customer engagement planned for next year, the outcome of this and the use of the results in the company s development of its Business Plan. 4

5 1. INTRODUCTION The independent Customer Challenge Group (CCG) for Wessex Water (WW) is known as the Wessex Water Partnership (the Partnership). The Partnership s primary roles are to monitor, challenge and report on WW s performance against the commitments set out in the Final Determination on behalf of customers, and to advise and challenge the company on its customer engagement, policies and procedures, and priorities for the next Price Review (PR19). A description of the role of the Partnership together with its membership, governance, terms of reference, the minutes of its meetings and its previous Annual Report can be found on its website www. wessexwaterpartnership.co.uk. A glossary of terms used in this Report is provided in Appendix 1. For information on the economic regulation of the water industry in England and Wales including the setting of prices and Ofwat s expectations of CCGs, the reader is directed to the regulator s website www. ofwat.gov.uk. The purpose of this Report is to provide the WW Board and customers with the Partnership s opinion on the company s progress in delivering its Final Determination Performance Commitments in the second year of the price control period - including the qualification and amounts of any rewards and/or penalties accrued this year as a result of its performance. The Report also provides the Partnership s opinion on the WW s PR19 customer engagement policies and activities as presented and discussed with them during 2016/17. The Environment Agency (EA), as a member of the Partnership, supports the views expressed in this Report. However these views will not necessarily influence any subsequent position the EA takes as part of its ongoing statutory and regulatory duties associated with Wessex Water s environmental obligations. Wessex Water Partnership Annual Report

6 2. PARTNERSHIP S MEMBERSHIP AND ACTIVITIES DURING THE YEAR 2.1 Membership The Partnership was established in January 2016 with an independent chair and diverse membership representing various customer and stakeholder groups. A list of the current Partnership members is given in Appendix 2. The Partnership periodically reviews its membership to ensure it has adequate and appropriate representation to fulfill its role on behalf of customers. During the year the Partnership recruited members from the student community (to reflect the views of future customers), and from academia (to support its challenge on customer engagement processes and findings). The Partnership would like to attract members from WW s business customer base. The areas of focus and challenge of each of the current Partnership member organisations are as follows: ORGANISATION CCWater Environment Agency Citizens Advice Wiltshire Age UK South Gloucestershire Money Advice Trust AdviceUK Wessex Water Catchment Panel University of Bath University of Bath AREA OF FOCUS AND CHALLENGE Interests of all water customers Environmental regulation and compliance Customer service and vulnerability Interests of customers in later life Affordability and vulnerability Affordability and vulnerability Environmental priorities and outcomes Specialist knowledge on customer engagement Interests of students and future customers At its request, The Drinking Water Inspectorate (DWI) is a sleeping member of the Panel. WW s Senior Independent Non-Executive Director is the Partnership s liaison point with the WW Board and attended each meeting of the Partnership. 6

7 2.2 Meetings The Partnership was given adequate opportunity to scrutinise and challenge the company s policies and performance as presented to it and the process has been open and transparent. The Partnership s meetings held during the year and topics covered at them were as follows: WWP Meeting 6 October 2016 WWP Meeting 26 January 2017 WWP Meeting 22 March 2017 CRSG Meeting 9 May 2017 CRSG Meeting 13 June 2017 WWP Meeting 22 June 2017 Debrief from industry wide CCG events WW s mid year performance Customer and stakeholder information assurance process Charges Customer engagement updates including research on SDS WWP Trust Fund update and code of conduct Customer engagement update Information assurance Strategic Direction Statement Areas of focus 2016/17 Environmental programme for PR19 Customer engagement update Future timetable Terms of reference for the sub-group Status of customer research and forward programme Future workload of the sub group and timing Customer valuation research Biodiversity update Resilience research debrief Feedback from CRSG Feedback from Blueprint for Water PR19 launch event Year-end performance Executive and non-executive directors of WW, along with other senior company staff attended the Partnership meetings as presenters and/or observers. The Partnership s Chair attended a meeting of the WW Board during the year at which he outlined the work of the Partnership, its areas of focus and challenge and its findings. The Chair also attended meetings with Ofwat with other CCG chairs and informed members of the topics discussed and the outcomes. The Chair of the WW Catchment Panel is a member of the Partnership and this enabled the views of the Catchment Panel on environmental outcomes to be taken into account. The Partnership has not attended meetings held between WW and its economic, quality or environmental regulators. However the EA representative on the Partnership has alerted members of any material issues associated with WW meeting its statutory environmental obligations. The Partnership was grateful for WW s assistance in organising and facilitating its meetings and in fulfilling its requests for information and access to key staff. Wessex Water Partnership Annual Report

8 2.3 Challenges The Partnership uses a Challenge Diary to document the challenges, key questions and information requests it makes to WW and the company s responses to these. The Partnership and the company consider the challenge process to be constructive and effective. 43 challenges and key questions were logged during the year. The company s responses to the challenges and key questions were considered by the Partnership. Most were addressed to the Partnership s satisfaction with some resulting in changes to the company s policies or approach. Some issues remain outstanding and will be considered further during the coming year. The Challenge Diary also contains 34 challenges logged in 2015/16, the vast majority of which were addressed satisfactorily with only a few minor issues remaining open. The issues raised during 2016/17 and the current status of them is as follows: Performance Water use Information assurance Charges and bills Customer research (general) Customer research (SDS) Customer research (resilience) PR 19 environmental programme Bathing waters investment Number of challenges Issue remains open Issue closed, no change Issue closed resulting in change 8

9 2.4 Issues identified last year Several areas of focus were identified last year and have been followed up with WW during 2016/17 including: The affordability of WW s bills for customers on lower incomes Increased and improved documentation of reporting methodologies and assumptions Strengthening of the reporting of unwanted contacts Water saving initiatives Simplification of the leakage reporting methodology Delivery of agreed bathing waters schemes Comparison of customer service with high performers outside the water sector The extent of monitoring the company undertakes at the point of contact with customers and whether it uses such information to identify opportunities for service improvement and cost efficiency Consultation with Natural England to more fully understand the detail and challenges associated with Biodiversity The areas that do not receive water supplies from more than one source The sizes of bursts suffered and the relative influence of these on leakage The effectiveness and relative contribution of WW s leakage reduction initiatives Making the costs of leakage control more transparent and understandable by customers Comparison of the company s reporting methodology for leak repairs with other companies. Incentives to fix leaks quickly in the event that the target fix time has already been exceeded The feasibility of any potentially more cost beneficial leakage reduction measures The number of water quality contacts that lead to some form of remedy and whether the company could be doing more to educate customers about water quality and the influence of their plumbing arrangements on water quality The opportunity for sharing with customers any of the performance information now being obtained from CSOs Challenge the company that it is doing all it reasonably can to reduce the risk of sewer flooding More fully understand the impact on sewer flooding risk of further urban development and the different forms this can take The company s approach to reducing greenhouse gas emissions Seeking clarification from Ofwat on whether the Partnership will or should have any relationship with future non-household customers of Water2Business The company provided information on these topics upon request which was scrutinised and challenged by the Partnership. Most issues were resolved to the Partnership s satisfaction but some remain outstanding which will pursued further in the coming year. The Partnership made a visit to Burnham North Jetty to more fully understand the issues at the site so it could consider whether the company was doing all it reasonably can to contribute towards compliance. The Partnership s detailed comments on these topics are given in its commentaries in Appendix 3. Wessex Water Partnership Annual Report

10 3. PARTNERSHIP S FINDINGS 3.1 Reporting and assurance WW presented the Partnership with updates to its information reporting and assurance processes during the year and gave members the opportunity to comment on its Information Assurance Plan published in April. The Partnership questioned the company over its information risk assurance process and whether it was doing as much as it can to make sure customer communications are in plain English. It was satisfied with the company s responses. It also asked whether the company had suffered any breaches in its assurance policy or failures of its assurance processes. WW confirmed that it had not. The Partnership wished to understand the reasons why WW is Targeted under Ofwat s assurance assessment and the implication of this on the company and its customers. For WW the one item scored as serious concern by Ofwat was the Board Risk and Compliance Statement, understood to be due to interpretation of the wording used. The Partnership was informed that the WW Board has published an amended and compliant form of words for use in future Statements. The Partnership has some sympathy with companies as information assurance under Ofwat s assessment regime appears to be a competition with no bar set. There appears to be an overemphasis on the assurance but not if the company is doing enough with the data it has. In May 2017 the company provided the opportunity for the Partnership to review the findings of its external Technical Auditor s review of its Performance Commitment reporting methodologies and its internal and external assurance processes. The Partnership s Report Writer met with WW and its external Technical Auditor to discuss and challenge reporting processes, performance and assurance findings. He also attended the WW Audit Committee at which the Technical Auditor presented his findings to the company and the company provided its management response to them. WW s Technical Auditor has confirmed that the company s reporting methodologies are sound, comply with regulators requirements where appropriate and that actual performance has been calculated on the same basis upon which the FD targets were set. A number of continuous improvement recommendations made last year regarding the documentation of reporting methodologies and the strengthening of governance have been implemented to the satisfaction of the Technical Auditor. As a result of its scrutiny and the assurance received, the Partnership is satisfied that the reported performance for 2016/17 has been robustly reported and that the resulting rewards or penalties have been correctly calculated. 3.2 Outcomes and Performance Commitments One of the key roles of the Partnership is to scrutinise and challenge WW s delivery each year against the nine strategic Outcomes and the 32 associated Performance Commitments set out in the Final Determination and the resulting impact on customers. The company s Outcomes and associated Performance Commitments are described in Appendix 3. In addition to reviewing the company s performance in 2016/17, the Partnership wished to understand and challenge the company s eligibility for any rewards or penalties earned in the year as a result of the performance achieved. In so doing the Partnership has taken into account the views of the EA on environmental outcomes. The Partnership acknowledges that any rewards or penalties earned this year are accrued for possible payment at the end of the five-year period. Towards the end of the five-year period, the Partnership will be discussing with the company how it can best use any rewards that have accrued and its consultation with customers in doing so. The Partnership was also keen to understand how the performance achieved this year compared with 2015/16 and whether it would be sustained next year and beyond, particularly whether there are any inherent or emerging risks, and the company s plans to address any performance shortfalls. The Partnership is pleased to report that the company has continued to perform well in delivering its Final Determination Performance Commitments and the resulting benefits to customers. In most cases it has 10

11 built upon the good start it made last year. It has met or exceeded the vast majority of its targets for the year. The Partnership understands the reasons why Performance Commitment targets were missed in seven out of 32 cases. Three of these were within the associated performance deadband as defined by Ofwat in the Final Determination. The Partnership has discussed and challenged the company s plans to remedy the performance shortfalls and is encouraged to hear that it is planning to meet its future targets wherever possible. The Partnership s detailed views on the company s performance in 2016/17 against all its Performance Commitments are given in Appendix 3, together with the challenges it made to WW as part of its review. 3.3 Customer engagement for PR19 The Partnership is aware of and understands Ofwat s requirement on CCGs to provide independent challenge to companies and assurance on the quality of companies customer engagement and the extent to which the results of the engagement are driving decision making and are reflected in companies business plans. In its work the Partnership will be mindful of the company s statutory obligations for PR19. It will be keen to review and challenge any willingness to pay that WW identifies through its customer engagement for investment that goes beyond the statutory requirements, particularly on water quality and environmental improvement. The Partnership has established a Customer Research Sub-Group (CRSG), which became effective in April this year. Prior to this all members of the Partnership were involved in reviewing WW s customer engagement activities. The CRSG is led by a Partnership member from the University of Bath with extensive academic and practical knowledge of customer engagement. The CRSG has the primary objective of assisting and supporting the Partnership in its review and challenge of WW s customer engagement and in the Partnership s reporting on this to Ofwat. The CRSG has three main roles in supporting the Partnership: To review and challenge the detail of WW s ongoing and future customer engagement methodologies and results and the company s use of these in its service provision and its business planning To report its findings and opinions to the WWP and To receive instruction and direction from the WWP as necessary The CRSG s review and challenge also includes: WW s engagement with customers about its performance in AMP6; and The company s engagement with its future customers and with other stakeholder groups including other water companies During the year the Partnership, either directly or through its CRSG, was given the opportunity to review and challenge the methodologies and results from WW s completed and ongoing customer engagement activities covering: The Strategic Direction Statement Customer valuation research of service and price Resilience research Leakage research Members of the Partnership observed two customer focus groups as part of the resilience research. The Partnership raised and recorded challenges and key questions associated with the various engagement activities including: Clarification and consistency of the wording and visual presentations used for stimulus material provided for the online survey of willingness to pay to aid participants understanding and interpretation References in the SDS to leakage, new business areas, industry disruptors and influencing the future The use of industry comparative data to put WW s situation into context Avoiding bias in questioning The meaning of resilience and its understanding by customers Providing customers with adequate context and sufficient information on leakage in order for them to engage effectively To ensure the aims relating to the qualitative work on leakage are appropriate to generate sound ideas and the scope for the later quantitative research WW responded positively to these points and in several cases made changes to its methodologies and research materials. The Partnership welcomed the company s responses. Both the Partnership and its CRSG look forward to scrutinising the company s PR19 engagement activities and their outcomes during the coming year. Wessex Water Partnership Annual Report

12 4. THE PARTNERSHIP S FOCUS FOR 2017/18 The Partnership s general areas of focus and challenge for 2017/18 will include: The Information Assurance Plan update Customer engagement for PR19, particularly the outcomes on resilience, leakage, valuation of service and price, revealed preference research and post event surveys to provide additional valuations Monitoring WW s performance The company s response to Ofwat s PR19 methodology statement, due to be published later this year The Water Resources Management Plan The preparation and content of early drafts of the Business Plan and the company s proposals to test its acceptability with its customers As a result of its work this year, the Partnership will also investigate and challenge the company in a number of areas including: Monitoring the company s progress in achieving further improvements in customer service The effectiveness of the company s Customer Experience Group (CEG) in achieving its objectives for improving customer service The appropriateness of the Ease of Contact Resolution performance commitment. The opportunities for WW to further understand the water use behaviour of its customers and to do more in connection with water saving initiatives including influencing government policy on the sale of non-compliant plumbing equipment The affordability of WW s bills for customers on lower incomes and benefits in relation to other companies The relationship between the company s abstraction licences and their impact on the environment. The size of water mains bursts and the relative influence of these on leakage The effectiveness and relative contribution of WW s leakage reduction initiatives Consistency of WW s leakage reporting methodologies with other companies The incentives place are to fix leaks quickly in the event that the target fix time has been exceeded WW s plans to ensure the long term resilience of its water and wastewater systems and its service to customers Actions to achieve the maximum possible water quality for customers Progress in delivering the remaining bathing water schemes in the National Environmental Programme The company s plans to fulfill its statutory obligations in PR19 for water quality and the environment Taking all reasonable measures to meet the performance target for sewer collapses and bursts for the benefit of customers and the wider environment The degree of greenhouse gas emission improvement that is within the company s control and the relationship between its increasing energy usage and self-generation. The risk of inequity associated with meter rollout The potential for passing back savings to customers who move in and out of the company s supply area 12

13 5. CONCLUSIONS The Partnership had the opportunity to review and challenge WW s performance against its Final Determination Commitments for 2016/17 and the company s emerging and ongoing PR19 customer engagement activities. The Partnership welcomes the company s performance in delivering its Final Determination Performance Commitments and the benefits to customers that have resulted. WW has continued the good performance it achieved last year by meeting or exceeding most of its targets for 2016/17. Of particular note is the continuing strong performance in 2016/17 associated with delivering all commitments associated with resilient services and carbon footprint. The company maintained an industry leading rating against EA s Environmental Performance Assessment. Most targets were met relating to providing excellent service to customers, affordable bills, rivers lakes and estuaries, highest quality drinking water, improved bathing waters and sewer flooding. The Partnership notes the company s explanations why certain customer, water quality and environmental targets were missed or where performance slipped from the previous year. It accepts that in several cases improved performance is dependent upon the completion of investment in new systems and process or other assets or that there were contributing factors outside the company s control. The Partnership welcomes the company s intention to do all it reasonably can to maintain and improve performance and meet its future targets. The Partnership will continue to challenge the company to do as much as it can to achieve and where possible exceed its targets for the benefit of customers and the environment. In some cases the company has earned rewards or suffered penalties under the Ofwat PR19 incentive regime as a result of its performance in 2016/17. The most significant of these is a reward of some 5.5m for performance against internal sewer flooding incidents. Any rewards and penalties earned in 2016/17, as well as those earned last year, will be accrued for payment at the end of 2019/20. Towards the end of the fiveyear period, the Partnership will be discussing with the company its use of any rewards or penalties achieved and it will encourage the company to consult its customers on this. Information provided by the company on performance issues and other topics identified by the Partnership last year was reviewed and challenged. Most issues were resolved to the Partnership s satisfaction but some remain outstanding and will be pursued further in the coming year. A number of additional performance-related issues and opportunities arose during the year. The Partnership will be seeking further information from WW during 2017/18 on these. The Partnership had the opportunity to review and challenge the company s information reporting and assurance regime. It received assurance from the company s independent Technical Auditor that the company s performance information for 2016/17 is robust and that the resulting rewards or penalties have been correctly calculated. The Partnership welcomes the improvements carried out during the year by WW in relation to its information reporting processes and governance. The Partnership has also reviewed and challenged the company s PR19 customer engagement methodologies that were developed and implemented during the year. The company took on board comments and recommendations made by the Partnership. As a result the Partnership considers the ongoing customer engagement work being undertaken by WW for PR19 is soundly based and looks forward to reviewing the further work planned for next year, the outcome of this and the use of the results in the company s development of its Business Plan. Wessex Water Partnership Annual Report

14 APPENDICES Appendix 1 Glossary AMP BAP Caps and Collars CEG CCG CCWater CSO Deadband Defra DWI EA Asset Management Plan Biodiversity Action Plan Upper and lower limits of performance beyond which no financial incentive applies WW Customer Experience Group Customer Challenge Group The Consumer Council for Water Combined Sewer Overflow A range either side of the performance target within which no financial incentive applies Department for Environment, Food and Rural Affairs Drinking Water Inspectorate Environment Agency FD Final Determination (Ofwat December 2014) Ml/a Ml/d NEP OBR ODI Ofwat ONS Outcome Performance Commitment Megalitres per annum Megalitres per day National Environment Programme Office of Budget Responsibility Outcome Delivery Incentive. Delivery of each Performance Commitment was assigned a financial or reputational incentive by Ofwat in the Final Determination Water Services Regulation Authority - The economic regulator of the water sector in England and Wales Office of National Statistics Nine strategic outcomes for customers, derived from WW s customer engagement, and defined in its Strategic Direction Statement (SDS) published in 2012 Performance measures supporting the Outcomes. The levels of performance (targets) were set by Ofwat in the Final Determination PR14 Price Review 2014 PR19 Price Review 2019 SIM WRMP WW WWP Service Incentive Mechanism Water Resources Management Plan Wessex Water The Wessex Water Partnership For information on the economic regulation of the water industry in England and Wales including the setting of prices and Ofwat s expectations of CCGs, the reader is directed to the regulator s website 14

15 Appendix 2 Partnership members 2016/17 Dan Rogerson Richard Cresswell David Heath Michael Barnes Jeremy Bailey Ian Walker Nicola Morris Martin Green David Hawkes Matthew Vaughan Wilson Sarah Cardy Jeremy Hawkins (Report Writer) Chair Chair of WW Catchment Panel CCWater CCWater Environment Agency University of Bath University of Bath Age UK South Gloucestershire AdviceUK The Money Advice Trust Citizens Advice Wiltshire Creoda Consulting Wessex Water Partnership Annual Report

16 Appendix 3 Detailed commentaries on Wessex Water s performance in 2016/17 against its Final Determination Outcomes and associated Performance Commitments Background One of the key roles of the Partnership is to scrutinise and challenge WW s delivery each year against the strategic Outcomes and associated Performance Commitments set out in the Final Determination and the resulting impact on customers. These Outcomes were defined by the company in 2012 from its customer engagement and are: Household retail service Excellent service for customers Affordable bills Wholesale water and wastewater service Rivers, lakes and estuaries protected Resilient services Reduced leakage Highest quality drinking water Improved bathing waters Sewage flooding minimised Reduced carbon footprint There are one or more Performance Commitments for each Outcome. Ofwat s Final Determination includes targets for each Commitment for each of the five years between 2015/16 and 2019/20 in the Price Control period. The performance against each Commitment is measured and reported each year by the company. Delivery of each Commitment was assigned a financial or reputational incentive in the Final Determination. These are known as Outcome Delivery Incentives (ODIs). The financial incentives may be rewards or penalties or penalty only. In many cases limits on rewards and penalties (caps and collars) and neutral zones (deadbands) were also set in the Final Determination. Commentaries on WW s achievements in 2016/17 against its Performance Commitments 1. Household Retail Outcome A: Excellent service for customers RA1 - SIM SERVICE SCORE > WW out-performed the SIM service score target in 2016/17 and improved its performance over 2015/16. The out-performance against the target for 2016/17 was within the reward deadband. 16

17 In 2015/16 the company s Technical Auditor considered the reported SIM performance to be robust but recommended that the company strengthen the reporting of unwanted contacts to ensure all contacts, not just complaints, were identified. The Partnership has received assurance from the Technical Auditor that the WW has acted on this recommendation satisfactorily and the company and the Technical Auditor have provided assurance that a review conducted during the year found no evidence that the reported number of unwanted contacts was not robust. The Partnership challenged the company during 2016/17 to compare its customer service with high performers outside the water sector to determine if it can further improve its service and the efficiency of delivery. WW informed the Partnership that it uses two sources of external benchmarking data; the Net Promoter Score (NPS) and the Institute of Customer Services (ICS) UK Customer Satisfaction Index (UKCSI). The Partnership noted that WW is performing very well against these indices within the water industry but wished to understand its future plans and aspirations for customer service. WW told the Partnership that it aspires to be the best amongst all service providers. Its Customer Excellence programme is designed to achieve this through the review and improvement of transactional service, response on the ground and engaging with communities. The Partnership welcomes the company s aspiration and will track the company s progress during the coming year. RA2 PERCENTAGE RATING GOOD/VERY GOOD (from customer contacts regarding operational queries and complaints) >95% 96% 96% WW out-performed the 2016/17 target for this performance commitment but performance was effectively flat from the previous year. The rating is assessed from customer contacts regarding operational queries and complaints. Data is taken from the results of customer surveys undertaken by the company, which are independently audited. The incentive is reputational. The Company told the Partnership that there will be natural volatility in this measure from year to year and that no single issue had been identified that had caused the drop in performance. The Partnership noted this and welcomes the company s intention to meet or exceed the target for the next three years. The Partnership noted last year that WW s Technical Auditor recommended that the company s reporting methodology be more extensively documented to ensure consistency of interpretation. The Partnership was pleased to learn that this has been completed satisfactorily this year. RA3 PERCENTAGE RATING GOOD VALUE FOR MONEY 72% 84% 78% WW outperformed its target for 2016/17, further improving its performance from previous years. Performance is measured from the results of the company s annual image tracking survey, which involves questioning 1,000 randomly selected domestic customers. The incentive is reputational. The company s bills remain around the highest in the industry and the Partnership was pleased to see the level of performance against this Commitment is improving. Wessex Water Partnership Annual Report

18 Improving trend RA4 PERCENTAGE RATING EASE OF CONTACT RESOLUTION 75% 81% WW s performance fell from the previous year, a deteriorating trend causing the target to be missed. Performance is measured from the results of the company s annual image tracking survey, which involves questioning 1,000 randomly selected domestic customers. The incentive is reputational. Whilst the Partnership was disappointed to see a reduction in performance against this measure, it notes (as reported last year) that any future increases in performance depend on system and process improvements currently being designed and due to be implemented in phases over the next two to three years. The company has informed the Partnership that, as allowed in the FD, it wishes to discuss this measure with them during the coming year, as it is finding the sample size it is managing to achieve through its tracker is insufficient to produce a meaningful answer. During the year the Partnership wished to understand the extent of monitoring WW undertakes at the point of contact with customers and whether it uses such information to identify opportunities for service improvement and cost efficiency. WW informed the Partnership of the work of its Customer Experience Group (CEG) which monitors customer service performance data, including customer feedback and root cause analysis and manages the continuous improvement of the customer experience through a variety of sub-groups and forums. The Partnership noted this and has requested evidence to illustrate that the CEG is effective in achieving its objectives and will review this during the coming year. BS18477 and Customer Service Excellence Award held RA5 ACCESSIBLE COMMUNICATION BS18477 and Customer Service Excellence Award held BS18477 and Customer Service Excellence Award held The Partnership notes that the company maintained its BS18477 accreditation and the Customer Service Excellence Award in 2016/17 and so met this reputational performance commitment. WW also secured a number of other customer service awards during 2016/17. Outcome B: Affordable bills RB1 (i) VOLUME OF WATER USED PER PERSON 134 l/per/day 141 l/per/day 138 l/per/day WW missed the target for 2016/17 by 7 l/person/day (5%). The incentive is reputational. WW considers performance against this particular measure is driven by factors largely outside its control such as weather conditions. The Partnership notes that the volume of water used per person in 2016/17 was around 2% higher than the previous year. It recognises that many months during 2016/17 were the driest on record in WW s region and that this may explain the increase usage. 18

19 The Partnership has received information on the company s water saving initiatives and has been able to challenge and question the company over them, their effectiveness, the basis upon which it estimates water usage per person and the relevance of national estimates of water use to its customers. Climate change is likely to mean hot and dry conditions becoming more frequent. Whilst the company s water saving initiatives are welcomed, the Partnership wishes to explore whether it could and should do more including influencing government policy on the sale of non-compliant plumbing equipment. The EA expects the reported volume used per person for 2016/17 to be consistent with the Water Resources Management Plan (WRMP) annual review data and commentary the company will report to Defra on 30 June this year l/per/day RB1 (ii) VOLUME OF WATER SAVED BY WATER EFFICIENCY PROGRAMME 1.56 l/per/day 0.68 l/per/day The company has out-performed the target for 2016/17 by 0.31 litres per person per day, a greater margin than last year. The incentive is financial (penalty only). The Partnership notes that whilst water saved per person has improved in 2016/17, water usage per person has increased. The Partnership recognises that the two measures are very different in proportion to each other and that they may not always change in the same way due to customer behaviour. However, as mentioned above, the Partnership notes that WW is fulfilling its duties to encourage water efficiency but wishes to explore whether there is scope for the company to do more to understand the water use behaviour of its customers in order to further promote water saving and to influence national policy on non-compliant plumbing fittings. The EA expects the reported volume of water saved for 2016/17 to be consistent with the Water Resources Management Plan (WRMP) annual review data and commentary the company will report to Defra on 30 June this year. RB2 BILL AS A PROPORTION OF DISPOSABLE INCOME Reducing trend 1.4% 1.5% WW met its target for the Commitment in 2016/17. Performance is measured by dividing the company s average household bill by average disposal income (derived from ONS and OBR data). The incentive is reputational, but the company has no control on the level of disposable income. The Partnership has concerns over the affordability of WW s bills for customers on lower incomes and requested detailed statistics from WW on households on benefit incomes. It was also interested to know what happens to customers who are below average income but fall outside the company s affordability schemes and whether WW monitors this. The company responded that it models some expected changes for those on lower incomes and how benefit changes are making an impact. Its affordability schemes are designed to pick up customers in financial difficulty, and its eligibility criteria are broad. It has undertaken some analysis although forward-looking income data is limited. WW is preparing some comparative industry information on bills as a proportion of lower incomes. The Partnership will review this when it s made available. Wessex Water Partnership Annual Report

20 2. Wholesale Water Outcome B: Rivers, lakes and estuaries B4 COMPLIANCE WITH ABSTRACTION LICENCE 100% 100% 100% WW met the target in 2016/17 and forecasts 100% compliance over the next three years. The incentive is reputational. The EA has informed the Partnership that it is unaware of any significant failures in compliance against this measure and so can support the reported performance on this basis. B5 ABSTRACTIONS AT MERE EXPORTED 172 Ml/a 341 Ml/a 100 Ml/a WW missed the river abstraction target at Mere in 2016/17, a similar outcome to last year although the level of over-abstraction was greater than in 2015/16. This was anticipated last year and has resulted in a small, accrued refund to customers as part of this penalty-only incentive. The Partnership understands that WW plans to use Mere until its new water supply grid is fully commissioned. The company has informed the Partnership that abstraction at 2016/17 was above target due to unplanned and planned operational circumstances caused by the dry weather. The current abstraction licence conditions allow the company some flexibility in order to meet changes in demand. The penalty is small in value to reflect this. The EA has informed the Partnership that it is happy with the ongoing trial at Mere and is working closely with the company to ensure a sustainable abstraction. 70% B6 BAP LANDHOLDING ASSESSED AND MANAGED FOR BIODIVERSITY 71% 60% The company exceeded the target in 2016/17 and increased the percentage of BAP landholding assessed and managed for biodiversity by 11% from the previous year. The incentive is financial (penalty only). Last year WW s Technical Auditor recommended the company automated its reporting process for this measure and documented its key assumptions. The Partnership is pleased to learn that the company has made good progress in documenting its assumptions. The reporting process has not been automated but is now more systematic and is now considered to be satisfactory. The Partnership consulted with Natural England in order to more fully understand the detail and challenges associated with this Commitment. 20

21 B7 - LENGTH OF RIVERS WITH IMPROVED FLOW 0 km 0 km 0 km This Commitment relates to improvements on various watercourses to return flows to within environmentally acceptable ranges in other watercourses where flows are currently low. The Partnership notes there was no target for 2016/17. A target of 99km applies in 2018/19. The incentive is financial (reward and penalty). WW has informed the Partnership that it is on track to deliver against this performance commitment in 2018/19. Outcome D: Resilient services D2 RESTRICTIONS ON WATER USE (HOSEPIPE BANS) No water use restrictions were applied during 2016/17 and none are forecast for the next three years despite the recent weather conditions being the driest on record in the WW area and its customers using more water per head than last year. The Partnership will investigate the relationship between the company s abstraction licences and their impact on the environment. D3 WATER SUPPLY INTERRUPTIONS (>3hrs including planned, unplanned and third party) 16.0 mins/prop 12.8 mins/prop 14.3 mins/prop The incentive associated with this Commitment is financial (reward and penalty). WW significantly out-performed the target in 2016/17. Performance was within the reward deadband so no reward has been accrued for 2016/17. The weather conditions were favourable during the year and that no large-scale interruptions over three hours were experienced. The Partnership welcomes the company s performance but notes that performance can be very sensitive to such interruptions. Last year the WW Technical Auditor recommended the documentation of the company s reporting methodology for this measure. The Partnership is pleased to hear that the company acted upon this recommendation during 2016/17 to the satisfaction of the Auditor. D4 PROPERTIES SUPPLIED BY A SINGLE SOURCE (including the integrated supply grid) 78,000 48,000 78,000 The company well exceeded the target in 2016/17 in line with its progress on work to improve its water supply grid. The associated incentive is financial (penalty-only). Wessex Water Partnership Annual Report

22 The target for 2018/19 falls to 42,000 properties and WW informs the Partnership that work is in hand to achieve this. The Partnership received and noted information from WW on the number of customers affected by the Maundown works (the main area in WW s region that does not receive water from more than one source, after completion of the Grid) and in the other pockets where resilience is similarly lacking. It also reviewed information on WW s contingency plan at Maundown and the other areas where the primary and/or secondary water sources are sub-optimal. The Partnership was satisfied that the contingency plans are appropriate. The Partnership questioned why WW considers the measure and performance commitment to be unsuitable for PR19 and was informed that only considering the number of properties at risk doesn t take into account the probability of an incident. For PR19 WW is considering probability and consequence issues at Maundown and that initial calculations show that the most cost beneficial solution is to carry out work on site to reduce the likelihood of losing supply. The EA expects the reported number of properties supplied by a single source for 2016/17 to be consistent with the Water Resources Management Plan (WRMP) annual review data and commentary the company will report to Defra on 30 June this year. D5 WATER MAINS BURSTS <1,993 1,863 1,663 The Partnership notes that the company met its 2016/17 target but its performance was worse than the previous year despite weather conditions being favourable. The incentive is financial (penalty only). The FD target for water mains bursts remains constant throughout the five-year period. WW informs the Partnership that it manages its investment on its water supply network on a risk basis with the aim of meeting this Performance Commitment target but there is no direct relationship between investment and performance. It has stated in its Strategic Direction Statement that it considers its current investment to be sub optimal and so expects performance to fluctuate from year to year in the current period. It is forecasting to meet the target over the next three years assuming the weather is in line with long-term averages. The Partnership welcomes this. The Partnership requested information from WW on the sizes of bursts it suffers and the relative influence of these on leakage. This is promised in June this year and the Partnership will review and report on it next year. The EA expects the reported number of bursts for 2016/17 to be consistent with the Water Resources Management Plan (WRMP) annual review data and commentary the company will report to Defra on 30 June this year. Outcome F: Leakage F1 VOLUME OF WATER LEAKED 68.6 Ml/d 68.3 Ml/d 68.3 Ml/d The company out-performed its 2016/17 leakage target by 0.3Ml/d. The volume leaked was the same as the previous year. 22