South West Water Business Plan 2020-2025 Empowering customers Presentation to Ofwat 17 September 2018
Summary Empowering customers of our plan their say their their community stake their plan Empowering our customers – New Deal Waterlevel c. 1 million customers engaged • Most thorough customer and stakeholder engagement ever News from South West Water Spring 2018 • Moved from engagement to empowerment Over 27,000 customers directly • Customers have the opportunity to be in control providing feedback Read our proposals for 2020-2025 • Customers to share fairly in our success Sally Mills For every person Crossword welcomes you that responds we Your chance to win to this special will donate £2* £100 High Street edition of to • Ambitious radical plan – New Deal for customers shopping vouchers! Waterlevel Page 7 Page 7 Prices £300m totex outperformance • Historically number one issue for South West Water driving down prices • 11% / 9% reduction in real prices from 2020 • Lower in 2025 than 2010 in cash terms (nominal prices) • Our totex efgiciency continuing to drive real price reductions SWW plan (real prices) BW plan (real prices) • Our prices mean we will no longer be an outlier 2019/20 £477 2019/20 £139 • Eliminate water poverty by 2025 2024/25 £418 2024/25 £127 • Dual bill all remaining unmeasured customers, giving choice of bill and removing 10,000 11% lower 9% lower customers from water poverty 3
Summary of our plan continued Delivering our promises PR14 commitments and Board • Delivering all our PR14 commitments, delivered Board pledges – track record to trust pledges on track to be delivered • Includes delivering promised improvements to SIM and environmental performance • Delivered Bournemouth Water integration synergies – better industry comparator • Achieving tough PR14 Outcome Delivery Incentive (ODI) targets • Ambitious PR19 plan – set tough service, cost and efgiciency targets again Straightforward transparent financials Driving frontier efgiciency • Simple listed structure 3% opex efgiciency • Natural PAYG / RCV run ofg rate 5% capex efgiciency Pennon Group Contributing to society • Transparent dividend policy – endorsed by the WaterFuture Customer Panel through a responsible approach to tax March 2018 • Further ambitious totex efgiciency targets – stretching ODIs • Innovative sustainable financing framework – environmental and social capital markets • Transparent tax strategy following customer consultation Innovation and markets • National Innovation Centre for Water, Waste and Environmental Resilience – partnership with Exeter University • Roll out ground breaking Mayflower WTW to Bournemouth area • Unique ‘internal market’ developed for water resources • Isles of Scilly ‘Smart Islands’ exemplar • Paid eco systems services market embedded since 2006 OF • Unique customer ownership plan – first of its kind in UK • Customer behavioural change incentive programmes roll out 4
Fair rewards and sharing our success c. £20m unique PR14 benefit expected to be shared with customers in 2020 • Principle of not retaining ‘unearned’ outperformance • PR14 pioneered sharing new debt outperformance Similar quantum of benefit to be • Extending to sharing embedded debt outperformance shared post 2020 from embedded • Outperformance financing – facilitates WaterShare+ debt sharing (new mechanism) Customer support and stakeholder engagement 92% of Bournemouth Water 1.1 categ customers accept plan • WaterShare has transformed relationships • Continuous challenge and scrutiny by independent WaterShare panel 88% of South West Water • Highest ever customer trust and highest customer support of our plan customers accept plan • Customer engagement on £50 government contribution – led to solution South West Water Customer Challenge Group Report on the SWW PR19 business plan 55 WaterShare panel meetings • Strong support with and without £50 government contribution 3 September 2018 New deal for customers • Customers hold us directly to account • Customer AGM to hold WaterShare panel and company to account • Tangible stake in business – past and future outperformance provides free customer shareholding option • Set new benchmarks for service and efgiciency • Completely eliminate water poverty by 2025 • Ambitious and radical plan Empowering customers 5 South West Water Business Plan 2020-2025
Our Board pledges to 2025 We will deliver Target zero customers in water poverty by 2025 efgiciency, keeping In real terms average customer bills are forecast to fall by 11% (South Board areas bills as low as West Water) and 9% (Bournemouth Water) by 2025 of scrutiny possible and South West Water customer bills are forecast to be lower in 2025 than address water they were 15 years earlier and lower than they are today Sharing success with poverty customers Continue to focus on cost control and the use of innovation and markets to drive efgiciency. Bill level in 2024/25 We will provide Target excellent service performance across all areas and sector Bill profile to 2024/25 leading C-MeX performance outstanding customer service Scale of afgordability support Meet stretching service performance commitments in the areas which matter most to customers Addressing lessons learned Continue to provide a resilient service for now and the long term, from Storm Emma regardless of any challenges faced Deliver major drinking water quality enhancement programme to Ambition on pollutions deliver wide scale benefits for customers. performance Smart metering policy We will deliver 100% wastewater compliance environmental Direct procurement Strive to eliminate harmful pollutions to the environment and reduce leadership and markets minor pollutions to record lows in the industry Upstream Thinking programme improving 80% of our catchments 6
Targeting industry leading leakage, delivering 15% reduction from 2020 Our largest environmental improvement plan for 15 years to deliver region wide benefits for the environment and economy. We will empower Share the benefits of success with customers fairly and transparently, developing our transformational WaterShare+ framework our customers by giving them Evolve our sharing mechanism for customers to continue to benefit from financing gains a stake and more of a say in our Receive oversight from the independent WaterShare+ panel business Introduce a first of its kind customer share ownership option from 2020 Hold customer annual general meetings where customers can vote Hold quarterly public customer meetings chaired by independent WaterShare+ panel. We will deliver Invest over £1bn in the region to enhance the communities and environment we serve our promises, supporting Deliver key projects to protect rivers, bathing and shellfish waters for our customers, tourists and businesses who depend on them the regional economy and Invest in two new water treatment works in the Bournemouth region our communities Extend our area of operation to include the Isles of Scilly Provide new employment opportunities through our regional investments Use our regional supply chain to support regional economic growth Invest in people, skills and personal development, including our apprenticeship programme. Empowering customers 7 7 South West Water Business Plan 2020-2025
Supplementary information Prices 10 Address water poverty by 2025 11 Delivering our promises 12 Stretching service and efgiciency commitments 14 Innovation and markets 16 Straightforward and transparent financials 18 Customer support and stakeholder engagement 20 WaterShare+ 22 9
Prices Customers have told us that keeping 2024/25 average bills South West Water bill waterfall bills low is a key priority for them £489 Focus on efgiciency has +£ 4 South West Water (with £50 GC) -£ 98 +£ 12 +£ 71 kept costs and customer bills Isles of Scilly £539 Legislative obligations as low as possible South West Water (without £50 GC) £ 550 Inflation £ 539 Efgiciencies South West Water and £ 493 £145 Bournemouth Water customer bills lower in 2025 than today Bournemouth Water household household household Average Average Average South West Water customer bills bill bill bill lower in 2025 than 15 years earlier South West Water plan (real without inflation) 2009 /10 2019 /20 2024 /25 88% 2019/20 £477 Established as a ‘normal’ customer 2024/25 £418 acceptance company, in the pack 11% lower 2024/25 bill (£) Bournemouth Water plan (real without inflation) 449 Average £394 423 418 417 409 393 92% 2019/20 £139 382 378 345 customer 327 2024/25 £127 acceptance 9% lower Customers currently receive a South West Water plan without £50 GC £50 government contribution (GC) 80% towards their bill. We have tested 2019/20 £527 WESSEX ANGLIAN SOUTH WEST WATER DWR CYMRU SOUTHERN YORKSHIRE UNITED UTILITIES THAMES NORTHUMBRIAN SEVERN TRENT customer customer acceptability at a higher 2024/25 £468 acceptance bill level, and 80% still find the plan acceptable. 10
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