Challenge: Delivering a reliable service in a changing world

In an increasingly digital and instant economy, customers expect more from services now than ever before. This includes the water sector, with high expectations not just for the reliability of services but the water we supply and the assets we operate. Many of our assets are ageing compared to other utilities. In order to meet the expectations of customers and regulators, it is critical that we combine modern technology into our networks and management of customer service. Quick response to issues raised by stakeholders, often through digital means such as social media, is part of this growing expectation.

Ensuring a reliable service in the face of a growing population, changing climate and increasing expectations of service requires integrated long-term thinking and targeting investment to ensure both short and longer-term reliability.

The importance of how we respond to this challenge can be seen in some of the material issues identified:

Resilience

Innovation

Customer service and operational performance

How we respond

Our culture of innovation and Systems Thinking approach drive us to adapt our assets and the way we operate to use modern technology and the best new ways of working. Examples include sensors across our network that allow remote monitoring and control from our integrated control centre, and our fleet of alternative supply vehicles (ASVs) that can inject treated water directly into supply while we undertake repairs. We have a substantially enhanced social media presence to respond quickly to stakeholders.

During the year we needed to react quickly to repair a pipeline damaged by severe flooding during Storm Ciara, which was further impacted by the remote location of the pipeline and adverse weather conditions. Co-ordinating the incident through our Integrated Control Centre we were able to mobilise our fleet of ASVs to keep customers supplied during the repair and ensure regular communications with our customers.

The availability of regional water supply was also impacted during the year by restricted production capacity at our Oswestry water treatment works due to ongoing work trialling a potential solution to a water discolouration issue.

Link to strategic themes

We are installing over 100,000 sensors across our networks to proactively manage issues and sort them before customers are impacted.

We balance our capital and maintenance expenditure to ensure affordability and reliability over the short, medium and long term.

We are targeting a 15 per cent reduction in leakage over the 2020–25 period to further protect the reliability of service and water resources.

Our future plans

We have a number of challenging targets for the 2020–25 period that will help improve the reliability of our service, including helping and encouraging customers to use less water. Further deployment of Systems Thinking will deliver further improvements in the reliability of services.

Challenge: Securing long-term operational resilience

It is vital to our operational resilience that we have plans in place to manage future challenges and maintain the provision of our essential services to customers. Our assets must be prepared to cope with a growing population, and comply with increasingly challenging environmental constraints in areas such as water abstraction and wastewater treatment levels. We must build increased resilience to cope with the anticipated impacts of a changing climate in the long term, including improvements to flood defences.

Balancing the risk of service interruptions against investment for the future is a constant challenge for water companies. Understanding what matters to stakeholders to plan our investment programme requires in-depth engagement and analysis, especially in the context of longer-term challenges that span more than five years.

The importance of how we respond to this challenge can be seen in some of the material issues identified:

Resilience

Customer service and operational performance

How we respond

It can take many years and require substantial investment to increase the resilience of existing assets or build new ones, which is why our long-term planning is so important. We have detailed plans in place to anticipate future challenges and understand what we need to do to address these, and we build these needs into our business plans for each five-year regulatory period to ensure we can agree the funding we need to act at the right time. We have invested an additional £250 million over 2015–20, from the outperformance we earned over the period, to improve our operational resilience further.

Read more about our approach to resilience on Our business model

We monitor the performance and health of our assets, with the help of sensors across the network, and this allows us to be proactive. For example, by monitoring pressure in the water network we can spot issues and fix them before we get a burst, saving costs and sparing customers the impact. Where possible, we design our assets to work in tandem with the natural environment, which provides more sustainable and efficient solutions, such as our innovative catchment management approach. Read more in Our business model.

Link to strategic themes

Our Systems Thinking approach is improving the reliability and resilience of our assets, reducing unplanned service interruptions, and enabling us to be more proactive.

By monitoring the health and performance of our assets we can ensure we invest at the right time in solutions that offer the lowest whole life cost.

We invest in training centres to build technical skills and promote future skills through our education programmes.

Our future plans

Systems Thinking provides opportunities for us to increase our resilience further. Our Haweswater Aqueduct Resilience Project (HARP) will be progressed through direct procurement for customers in AMP7 and AMP8, addressing our biggest operational risk in a critical pipeline that transports water from the Lake District to Greater Manchester.

What Matters

Responding to extreme weather


Keeping the taps flowing during Storm Ciara.

Hundreds of employees worked around the clock in treacherous conditions to keep customer taps flowing as Storm Ciara swept across the UK on Sunday 9 February 2020.

In Cumbria, the heavy rain and strong winds damaged a 100 metre section of water main where it crossed a river near Shap. The damage jeopardised water supplies to approximately 8,000 properties in the Eden Valley area.

The Cumbria Local Resilience Forum co-ordinated a response including prioritising snow clearance on the A6 to allow access by our water-on-wheels tankers.

In all, around 500 employees pulled out all the stops so that by 6pm on Wednesday 12 February the water main was repaired. It was then fully recharged with 90 million litres of water and all customer taps were turned back on by Friday 14 February.

Contingency planning for the storm began three days before it hit the UK to make sure we were well prepared. This included:

  • More than 40 water-on-wheels tankers to help maintain supply;
  • 144,000 litres of bottled water made available from ten manned water stations. More than 60,000 bottles were handed out to customers;
  • 347 deliveries of bottled water to Priority Services customers;
  • A special helpline for farmers struggling to make sure livestock had access to water. Around 100 farmers were assisted with tankers or bowsers; and
  • 17,000 proactive messages, 5,500 social media interactions and 16 broadcast interviews to keep the community updated.

Feedback from the community after the incident was overwhelmingly positive, including a letter of gratitude from a local Parish Council and even an offer of discounted fish and chips for United Utilities employees.

Generating value for:


Challenge: Protecting and enhancing the natural environment

The UK government's current goal is to be the first generation to leave the environment in a better state than we found it. Water management is a key part of this and our industry has a leading role to play. However, the cost of solutions has an impact on customer bills and so we need to balance this goal with the need to maintain affordability and avoid bill shocks. Environmental regulators set stringent consents for our activities to ensure the environment is protected. We take these obligations seriously and work hard to maintain compliance. This requires striking a balance with environmental impacts, such as the use of natural resources and emissions of greenhouse gases.

Our region is fortunate to have some of England's finest countryside and wildlife, much of it legally protected being designated as National Parks and Sites of Special Scientific Interest. There is growing realisation of the physical and mental health benefits that access to green space has for people and communities.

The importance of how we respond to this challenge can be seen in some of the material issues identified:

Natural resources

Environmental impacts

Land management and access

How we respond

The EA assesses water companies' performance across a basket of measures, and we were the joint best performing company over the last five years.

Our regulatory framework shapes the way we manage natural resources and our interaction with the environment, and we work with our environmental regulators to agree long-term plans.

A phased, long-term approach to address all of the concerns and interests of our many stakeholders, including environmental regulators, ensures that the necessary work can be delivered without the costs placing too much pressure on customer bills by agreeing to spread some of the spend required by legislation over several years.

Our catchment land is open to the public with millions of visits a year, and we work with partners to improve the quality of rivers and bathing waters in our region, providing access to the recreational benefits of the natural environment and boosting the local tourism industry.

Link to strategic themes

Our consultation tells us customers value the natural environment in our region and want us to protect and enhance it, while maintaining affordable bills.

We use pioneering catchment projects that combine multiple partners and access to other sources of funding to achieve more together for less.

>We provide free public access to our land, many of which are in areas of outstanding beauty, with over nine million visits every year.

Our future plans

We are expanding our catchment systems thinking approach to more catchments to create further value for the natural environment, and we have started some of our AMP7 environmental improvement plans early this year.

Challenge: Adapting to a changing climate

The biggest anticipated impact on our natural environment comes from climate change. We must plan well into the future to understand what changes we are likely to experience in our region as a result of climate change, and continually adapt to meet the risks and opportunities this presents.

The main opportunity is the potential for water sharing, as our region typically receives more rainfall than the comparatively drier south.

The main risks from climate change are the impact of prolonged severe dry periods, which constrain water resources, and intense periods of heavy rainfall, which increase the risk of flooding and pollution incidents.

We need to ensure we have access to resilient water resources, reduce leakage, and encourage less water use in the future to protect this critical resource. We need to ensure our infrastructure can cope with increased surface water to reduce the risk of flooding.

The importance of how we respond to this challenge can be seen in some of the material issues identified:

Environmental impacts

Climate change

Leekage and water efficiency

How we respond

Our response to climate change risk involves mitigation (minimising our greenhouse gas emissions) and adaptation (ensuring our services are resilient to a changing climate). Where practical, we generate renewable energy on our sites through solar panels, wind turbines, and the use of bioresources at wastewater treatment works, helping to reduce our emissions. We have reduced our carbon footprint by 73 per cent since 2005/06. During the year we have committed to six pledges to help us achieve significant further reductions in emissions.

Read more about our approach to climate change in Our approach to climate change

We have detailed plans that set out how we will adapt to meet the challenges of climate change, and we are targeting a 15 per cent reduction in leakage over AMP7. We work with third parties to encourage sustainable drainage solutions to help cope with surface water in periods of heavy rainfall, and we encourage customers to use less water.

Link to strategic themes

We help customers to use less water, with advice and free water saving gadgets, saving them money as well as protecting this resource.

Our renewable energy generation helps to reduce our reliance on purchasing energy and therefore save costs.

We have reduced our carbon footprint significantly in recent years and are committed to further reduce our emissions.

Our future plans

We have a detailed 25-year Water Resources Management Plan, Drought Plan, and two adaptation reports published in 2011 and 2015 that set out how we aim to adapt to meet the challenges of climate change. Read more at unitedutilities.com/corporate/about-us/our-future-plans

What Matters

Catchment systems thinking

Working with the environment to find better solutions.

We're moving away from purely asset-based solutions towards a more integrated approach where man-made and natural assets work together more effectively to improve the water environment.

This catchment systems thinking includes blue-green infrastructure solutions and looks at a catchment as a wider system where our assets are only a part of the whole. By understanding all the risks and benefits we can consider how to combine asset and catchment solutions for better outcomes, aligning the needs of multiple stakeholders and pooling investment.

As part of this innovative approach we're working with leading academic institutions, customers and stakeholders to design and deliver sustainable treatment solutions, alongside interventions, in 26 catchments across our region.

One of the best ways to deliver this integrated catchment strategy is by using markets which engage multiple stakeholders, aligning their interests and allowing them to trade catchment interventions effectively. We are adopting the use of alternative market mechanisms and innovative business models to align our interests with others in the catchments and incentivise different ways to deliver improvements. Through this combined approach, we are exploring the concept of 'blended finance' (which offers both financial and non-financial returns) to deliver environmental schemes that go beyond statutory requirements because they seek added natural capital value.

We are piloting this model in the River Elms catchment with representation from a wider group of stakeholders including Green Alliance, 3 Keel, Natural England, Nestlé and First Milk. This pilot is assisting Defra's development of its catchment system operator concept.

Our natural capital performance commitment will ensure the natural environment is protected and improved in the way we deliver our services.

Generating value for:


Challenge: Helping customers with affordability and vulnerability

The socio-economic situation in the UK is still very challenging and water poverty is an important issue. The COVID-19 lockdown and slow down of the economy will only make this more difficult for many customers. How we respond will be crucial to securing and maintaining customers' trust and confidence in the sector in the years ahead.

Our region suffers high levels of extreme deprivation. 18 per cent of households in the North West are affected by water poverty, higher than the national average, and research indicates that many customers who are behind on water charges are behind on other bills and many have a pay-day loan. Our stakeholders are interested in how we provide support for customers in vulnerable circumstances other than financial distress as well, such as disability, first language not being English, or temporary vulnerability brought on by illness or a life event.

The importance of how we respond to this challenge can be seen in some of the material issues identified:

Affordability and vulnerability

NW regional economy

How we respond

We have a leading approach to affordability and vulnerability, with the sector's widest range of assistance schemes. We are helping over 120,000 customers through our affordability schemes, more than double the commitment we made at the start of the 2015–20 period, and through our Payment Matching Plus scheme 15,000 customers became water debt free this year. We offer flexible payment plans and the option for customers to take a payment break if they experience a change in circumstances and we have widened eligibility for our 'Back on Track' social tariff for an initial interim period to 2020/21 and 2021/22.

We led the sector in establishing our Priority Services scheme, with dedicated teams providing additional support to customers with health, mental or financial difficulties during an incident. This scheme is now accredited by the British Standards Institute (BSI), and over 100,000 customers are now registered for this support with more joining every day.

Link to strategic themes

We have a wide range of schemes that help customers struggling with affordability concerns and other vulnerable circumstances.

Through initiatives such as our affordability schemes, our underlying household bad debt expense has halved in the last five years.

For three years, we have brought together regional organisations through our Affordability Summit and launched the 'North West Hardship Hub'.

Our future plans

Through bill reductions and financial support we will help move over 300,000 customers out of water poverty by 2025, extend our Priority Services offering to over 210,000 customers, and improve the quality and scale of the support we provide.

Challenge: Maintaining trust and confidence

Strong relationships are based on trust. Being open, honest and transparent is key to building and maintaining trust and legitimacy. As well as reporting openly this means setting out commitments and delivering on them. Our stakeholders want to know that we are treating suppliers fairly, safeguarding human rights, and protecting personal information from the risk of cyber-crime.

The increasing pace of globalisation means many customers feel disconnected from a lot of large businesses. This has led to growing calls for companies to demonstrate how they are contributing to society as a whole and operating in the public interest.

In recent years the UK water sector has faced challenges to its legitimacy, amplified by some specific issues at a small number of companies. Consequently, trust has been eroded and questions raised about the ownership structure of the sector, and Ofwat has called for further transparency and disclosure around board leadership and decision-making processes.

The importance of how we respond to this challenge can be seen in some of the material issues identified:

Trust, transparency and legitimacy

Corporate governance and business conduct

How we respond

We have open and transparent reporting around all of our equity and debt financing arrangements, do not use offshore financing vehicles, and our reporting is trusted by Ofwat who has awarded us 'self-assurance' status three years in a row.

Our human rights policy can be found on our website, with links to other related policies including our modern slavery policy and sustainable supply chain charter.

We work with suppliers and contractors whose business principles, conduct and standards align with our own. Our key suppliers have committed to our sustainable supply chain charter. We support the appointment of a small business commissioner to investigate companies who do not treat suppliers fairly, are a signatory to the Prompt Payment Code, and fully comply with rules on reporting payments to suppliers.

Link to strategic themes

We engage continually with customers to understand their expectations in relation to service and behaviour, through things like our quarterly Brand Tracker.

We maintain a stable A3 credit rating with Moody's for United Utilities Water Limited, which helps us maintain efficient access to the debt capital markets.

We obtained the Fair Tax Mark and retained self-assurance in Ofwat's Company Monitoring Framework assessment for three years.

Our future plans

Operating in a responsible manner is a key driver of trust with our stakeholders. Our continued compliance with the corporate governance requirements of a listed company helps ensure the transparency of our reporting and behaviour.

Challenge: Protecting corporate and financial resilience

The availability of skilled engineers depends on economic and social conditions, and we need to ensure an appropriate pipeline of skills in younger generations too, especially in the areas of science, technology, engineering and mathematics (STEM). As the world becomes increasingly digital, we need to have the right people and skills to manage our business in the modern world.

We believe the most resilient and effective companies have a diverse, engaged and motivated workforce, who can bring their different ideas and perspectives to help us find solutions.

Long-term financial resilience starts with a robust balance sheet and management of financial risks. Companies have to be aware of their own financial situation and make sure that they understand the financial resilience of others such as suppliers and former employees.

The importance of how we respond to this challenge can be seen in some of the material issues identified, such as resilience, and financial risk management.

Affordability and vulnerability

NW regional economy

How we respond

We build skills resilience through training and development, including digital skills. We have graduate and apprentice schemes, and ambassadors that work with schools and education institutes to encourage the younger generation to pursue STEM careers. We maintain good relationships with employees and trade unions, to ensure an engaged and motivated workforce, and we continually strive to build diversity across all types of role and all levels within our business. We have a Gender Equality Network that helps by providing role models, mentoring and opportunities. Women are represented at all levels of our company, and a third of our combined board and executive team is female, as can be seen below. Further information on diversity can be found in the Corporate governance report.

As a public listed company, we consistently adhere to the highest levels of governance, accountability and assurance. We have a strong and robust balance sheet, a secure pension position, and take a prudent approach to financial risk management, as detailed in Our competitive advantages.

Link to strategic themes

In its initial assessment of our business plan for 2020–25, Ofwat commended our approach to resilience as sector leading and setting the standard for others to follow.

Our robust capital structure and relatively low gearing provide long-term financial resilience and future financial flexibility.

We have award winning training centres, the only ones in the water industry approved to run Ofsted accredited programmes.

Our future plans

Creating strong relationships with employees and suppliers will help build a resilient value chain, and our focus on good corporate governance and prudent financial management ensures we have a basis for long-term success.

Group board(1)

6

3

Executive team(2)

8

4

Senior managers(3)

28

5

Wider employees(4)

3,571

1,830

  1. Group board as at 31 March 2020
  2. Executive team excludes CEO and CFO, who are included in group board figures
  3. As at 31 March 2020, there were eight male and thr ee female employees appoin ted as statutory directors of subsidiary group companies but who do not fulfil the Companies Act 2006 definition of 'senior managers'
  4. Wider employees as at 31 March 2020