Introduction / Ownership model Dŵr Cymru Welsh Water is a not-for-profit water and wastewater company that operates throughout most of Wales, parts of Deeside, and Herefordshire. It supplies water and wastewater services to more than 1.3 million households and businesses, amounting to more than three million customers. Welsh Water is owned by Glas Cymru, a company formed in 2001 with the sole purpose of running Welsh Water and serving its customers. It is a company limited by guarantee, meaning it has no shareholders or share capital. It has a Board (the majority of which are Non-Executive Directors) but also has around 60 independent Members. These Members do not make strategic decisions but hold the Board to account and also play an essential governance role, helping to promote the good running of the company. Welsh Water is the fifth-biggest company based in Wales in terms of revenue. An economic impact assessment undertaken by Cardiff University s Business School in 2012 estimates that Welsh Water contributes around 1 billion a year to the Welsh economy. The report also shows that for every 10 jobs created by Welsh Water, a further 15 are created in the supply chain, supporting more than 6,000 jobs across Wales. Funding model Our investment funding is secured through long-term, low-risk bonds and other largely-fixed interest debt instruments, including loans from the European Investment Bank. We do not receive any funding, or any other financial support, from the Welsh or UK Governments. Our financial strength has also been boosted by a long-term move to greater financial efficiency in 2001 the company s financial gearing (ratio of net debt to regulatory capital value) was 93%, leaving very little financial leeway, to a situation today where we have the best credit rating of any utility company in the UK and gearing at around 57%. This has meant we can do more for our customers including: - being on track to deliver a decade of below or at Retail Price Index inflation price increases by 2020 - helping a record 63,000 customers who genuinely struggle to pay their bills - accelerating investment in key areas where we need to improve services such as 120 million in building or upgrading 15 water treatment works between 2012 and 2015 - committing to investing a record 1.7 billion in our network between 2015 and 2020 - nearly 1 million a day
The Board of Glas Cymru has set a gearing target of around 60%. This is the level at which we believe we can achieve our optimal level of financing costs and therefore provide best long-term value to customers. Annual capital and operating expenditure Year Operating Expenditure Capital Expenditure 2012-13 298 million 338 million 2013-14 296 million 354 million 2014-15 295 million 379 million 2015-16 297 million 279 million Public engagement and transparency Welsh Water s stated vision for all its employees is to earn the trust of our customers every day. This drives our strategic thinking and operational planning underpinning our five-yearly asset management plans and our day-to-day work. Our not-for-profit model and 25-year vision is for a resilient water and wastewater service, geared towards serving the needs of our customers and was the motivation for forming Glas Cymru on that basis. To make sure we can identify our customers needs, we have placed a great deal of emphasis on directly engaging with customers to find out what they want and value from the services we provide. Our award-winning customer consultation in the summer of 2016 Have Your Say involved more than 15,000 customers sharing their views on how any financial surpluses are reinvested back into the business for the benefit of customers. These priorities ranged from support for the lowestearning households, to investment in our network to solve repeated problems, investing in innovation, and a flat reduction in household bills. The results are informing how we will invest the return of value later this year. This is supplemented by a much wider programme of qualitative and quantitative research and customer engagement that is undertaken throughout the year. Metering / Conservation We know that using water efficiently is a key concern for customers and this can help keep bills lower. Each year we help more than 20,000 domestic customers to reduce their water bills by supplying a Water Efficiency Welcome Pack when opting for a water meter, or where a new property is connected to our network. We estimate a saving of 1.3 million litres of water per year through this initiative but we plan to do more to improve awareness of the potential benefits of metering, particularly around customers having a two-year period in which they can switch back to their previous charging method if installing a meter has not met their expectations. Around 40% of our household customers are metered. In addition, we have a wide-ranging education programme which promotes the responsible use of water and informs future generations about the work we do. This involves a team of Welsh Water staff including teachers on a year s secondment who work with local groups and schools to inform people about the drinking water and wastewater cycles, water efficiency, safety campaigns, and messaging around how customers behaviour can help maintain our network. This programme
reached a record 55,000 school pupils in 2015-2016, meaning this year we will exceed 350,000 pupils since it was instituted 12 years ago. Role of regulators The water and wastewater industry in Wales and England must comply with substantial domestic and European Union regulation, placing significant statutory obligations on water and wastewater companies with regard to, among other factors, the quality of drinking water supplied; wastewater treatment; the effects of our activities on the natural environment; the levels of services we provide and the bilingual choice we offer to customers who wish to communicate with us. A full list of regulators can be seen in Appendix 1. EU compliance Much of the legislation for driving environmental improvements across the area we serve originated at EU level and has since been now transposed into UK and Welsh law. This includes directives and legislation relating to water resources but also the treatment of wastewater and bathing water quality which has led Welsh Water to invest more than 1 billion in improving the treatment of wastewater since the 1990s and resulted in Wales securing a third of the UK s Blue Flags in 2016 with only around 13% of the UK s coastline. The UK is also the biggest recipient in Europe of investment for water from the European Investment Bank (EIB), which holds around 4.5 billion debt in our sector. This includes Welsh Water which currently has around 708 million in outstanding loans and facilities provided by the EIB. Equity and fairness Welsh Water s not-for-profit status means the customer is central to our work not shareholder interest. At the heart of our strategy is to ensure that those who are able to pay their water bill do so, while those who genuinely struggle to pay are given every assistance to do so. We have invested in tariffs which are specifically designed to assist our lowest-income customers the most prominent of which is HelpU which is now potentially available for households with an annual income of 15,000 or less. As of February 1, we announced a further 4 million of investment in our social tariffs as we aim to increase the number of customers benefiting from these tariffs to 100,000 customers or more by 2020. Combined with the pursuit of customers who are able to pay, but choose not to pay (which costs paying customers an extra 20 on their annual bills), this ensures a greater degree of fairness throughout our customer base. End
Appendix 1 Regulator Role Ofwat Welsh Water is regulated, on economic matters, by the Water Services Regulation Authority (Ofwat), which regulates all water and wastewater providers across Wales and England. As such, the company is subject to the same standards and oversight afforded to those based across those areas. Limits on water charges are set on a five-yearly cycle by Ofwat, informed by the policy context set by the Welsh Government and other regulators. Health and Safety Executive National independent regulator for workrelated health, safety and illness. Welsh Government Department for Environment, Food and Rural Affairs Sets the framework for public policy matters for Wales, including policy and legislation on water and environmental matters. The UK Government department currently responsible for wastewater policy in relation to Wales. Drinking Water Inspectorate Drinking water quality is regulated and monitored by the Drinking Water Inspectorate. The Consumer Council for Water WATRS Natural Resources Wales / Environment Agency Welsh Language Commissioner An independent body established to represent the interests of customers relating to price, service and value for money. It also investigates customer complaints about water quality. The independent adjudicator for disputes between customers and the water and wastewater companies of England and Wales. Our environmental performance, especially the way we abstract water from rivers and reservoirs and then discharge wastewater after it has been cleaned, is regulated by Natural Resources Wales and the Environment Agency. They oversee our management of designated sites for nature conservation and how we meet our obligations to conserve and improve biodiversity and our natural resources. The principal aim of the Welsh Language Commissioner is to promote and facilitate the use of the Welsh language. We submit an annual compliance report to the Commissioner s office detailing how we have
complied with the provisions of our statutory Welsh Language Scheme which outlines how we provide bilingual services to our customers.