What we plan to deliver in AMP7


We have transformed our performance and exit the current period as a high-performing, responsible company – well prepared for the next period. One of the benefits of being fast-tracked was the ability to begin implementation of our delivery plans and make a flying start. We are confident we will rise to the challenges ahead and continue to create long-term value for all of our stakeholders.

Steve Mogford

Chief Executive Officer

21 May 2020

Our business plan was shaped by what matters to stakeholders

In preparing our business plan, we undertook our most extensive ever engagement campaign, reaching 1.7 million people and asking over 140,000 customers and stakeholders across our region for their views on what matters most to them.

The feedback was very clear – stakeholders wanted lower bills, improved services (including extra support for those customers in vulnerable circumstances), and a commitment to continue to protect the environment in the region. This feedback was fundamental in shaping our proposals.

We have made a flying start to our plans for the 2020–25 period (AMP7)

Fast-track status allowed us to start early with our delivery plans. We have tendered and selected our two delivery partners for the period and awarded contracts for the first tranche of our capital programme, getting us ahead of the curve and giving our partners time to start the design stage.

We reinvested £350 million of outperformance earned over the 2015–20 period, with £250 million targeted to increase our resilience, and £100 million invested in 2019/20 to give us a flying start to the 2020–25 period. We have used this to improve performance sooner in areas with the most challenging outcome delivery incentive (ODI) targets such as leakage, supply interruptions and sewer flooding. This means we will start the period in a stronger position.

We will deliver further improvements and share our success

We are targeting stretching service levels for customers and the environment, and aim to support even greater numbers of vulnerable customers, while average bills are predicted to fall in real terms.

We are committed to sharing success with customers, who will receive matching benefits if outperformance leads to dividends that are much higher than proposed in our business plan, consistent with our responsible approach over the last ten years, during which we have voluntarily shared over £600 million of our delivered outperformance.

Strategic themes

The best service to customers

At the lowest sustainable cost

In a responsible manner

Delivering a better service and real bill reductions


Key deliverables:

  • 13.8 per cent real reduction in average customer bills over 2020–25 in the final determination
  • Targeting 34 per cent reduction in customer contacts about water quality and 58 per cent reduction in supply interruptions

Our 46 performance commitments contain a broad spectrum of areas in which we are targeting further improvements for customers and the environment in 2020–25. We aim to reduce the number of customer contacts about taste and smell and the number of supply interruptions, all at an efficient cost with the help of our Systems Thinking approach and innovation culture. As a result, the average customer bill is expected to reduce in real terms over the period, on top of the 10 per cent real bill reductions we have already delivered since 2010.

Link to strategic themes:

Helping vulnerable customers


Key deliverables:

  • Committed £71 million voluntary funding to provide financial assistance for customers
  • Targeting to help 66,500 customers out of water poverty through financial assistance
  • One of the first water companies to achieve BSI accreditation for Priority Services

In its initial assessment Ofwat commended our plan for including "ambitious, innovative and sector-leading proposals to make customers' bills affordable and on providing support for vulnerable customers". This is particularly important in our region, which has high levels of extreme deprivation. Our planned bill reductions will help customers struggling financially, and on top of this we are aiming to lift thousands out of water poverty through financial assistance, and have committed £71 million voluntary funding into our CommUnity Share scheme to provide help for customers who need it. We lead the sector with over 100,000 customers now registered for Priority Services, and this year we became one of the first water companies to achieve British Standards Institution (BSI) accreditation for this, in line with the common ODI target for 2020–25.

Link to strategic themes:

Driving further environmental improvements


Key deliverables:

  • Targeting 20 per cent reduction in pollution and 15 per cent reduction in leakage
  • Committed to targets for improving water quality in the natural environment, and a unique commitment to enhance natural capital value

Our targets for 2020–25 include stretching performance improvements for the environment, with significant reductions in pollution and leakage. We have committed to targets for improving water and air quality, reducing the risk of sewer flooding, and protecting the environment from the impact of growth and new development. Our unique natural capital ODI incentivises us to create added value for stakeholders by using non-conventional catchment solutions to deliver water quality improvements through natural capital approaches and assets.

Link to strategic themes:

Efficient total expenditure (totex) proposals


Key deliverables:

  • £5.8 billion net totex allowance
  • We exit this year at the required run rate for our totex allowance for the 2020-25 period
  • 50:50 customer cost sharing rates for out/under-performance on totex

We submitted efficient totex proposals in our business plan, as reflected in Ofwat's assessment in which we were given one of the lowest cost challenges in the sector. The sustainable savings we have delivered in the 2015-20 period give us confidence in our ability to deliver, and we exit the current period at the required totex run rate. In the areas where out/under-performance against our totex allowance is shared with customers, our fast-track status means we benefit from more favourable cost-sharing rates than many of our peers. Our totex allowance includes £57 million for preparatory work needed to progress with our Haweswater Aqueduct Resilience Programme through Direct Procurement for Customers and £44 million for strategic water resource development.

Link to strategic theme:

Opportunities represented by our ODIs


Key deliverables:

  • More balance in our ODI outperformance payment/penalty ranges compared with the 2015–20 period
  • Range of 1.5 per cent reward to 1.8 per cent penalty (as a percentage of regulated equity) set out in the final determination
  • £100 million flying start investment improves our most likely performance

We have 46 performance commitments for the 2020–25 period, including seven that are comparable with the same targets set across the industry, five common commitments that have company-specific targets, 27 bespoke commitments with financial incentives, and seven that are purely reputational. The likely range of possible outcomes presented by Ofwat in the final determination equates to a total over the 2020–25 period of between £337 million outperformance payment and £387 million penalty on ODIs, including C-MeX and D-MeX. However, our projected performance has been improved by the reinvestment of £100 million of earned outperformance during AMP6, targeted at improving performance against our three most challenging targets – sewer flooding, leakage and supply interruptions. Outperformance payment and/or penalties against ODIs in AMP7 will be applied as an adjustment to revenues on a two-year lag basis.

Link to strategic themes:

Sharing our success with customers


Key deliverables:

  • Customers will receive matching benefits where outperformance leads to dividends that are much higher than proposed in our business plan
  • Consistent with our responsible approach over the last ten years

Over the last two regulatory periods (2010–15 and 2015–20) we have voluntarily shared over £600 million with customers from the outperformance we have delivered, as part of being a responsible business. For the 2020–25 period we will continue to share our success with customers, and have committed to this upfront. If dividends are much higher than proposed in our business plan, through us earning and distributing additional outperformance over the period, customers will receive matching benefits through us making further contributions to the CommUnity Share scheme (in addition to the £71 million voluntary contribution we have already committed to). We will consult with customers and shareholders, overseen by the independent customer challenge group, YourVoice, to determine the best use for any additional funding.

Link to strategic theme:

Strategic themes

The best service to customers

At the lowest sustainable cost

In a responsible manner

What Matters

Investing to deliver early improvement


£100 million of earned outperformance has been reinvested to give us a flying start to our AMP7 targets.

One of the benefits of being fast-tracked was that we could immediately start building programmes of work to deliver service improvements. We used the £100 million outperformance reinvestment to give us a flying start against our most challenging performance targets in the 2020–25 period.

Supply interruptions – we have seen dramatic improvements in our performance in recent years due in no small part to our investment in a fleet of alternative supply vehicles (which enable us to inject water directly into the network rather than customers experiencing a loss of supply), and our use of technology and artificial intelligence (with sensors across our systems and predictive analytics to spot potential issues before they impact customers). We have used our flying start money to invest in around 700 sensors on our pressure monitoring valves, enabling us to control pressure remotely from our Integrated Control Centre.

Leakage reduction is critical to the long-term resilience of our water supply. We have met our leakage targets for many years but these get tougher in AMP7 as this is a more prominent area of focus for customers and other stakeholders, particularly with the likely impact of climate change on water availability. Meeting these new targets requires us to look at conventional interventions alongside our continued use of Systems Thinking. Using our flying start investment we have deployed around 44,000 of a planned 100,000 acoustic loggers across our system in order to identify leakage that would otherwise be very hard to find.

Sewer flooding is another area of focus. Around 80 per cent of sewer flooding in the North West is caused by blockages, and around 80 per cent of those blockages are caused by customers flushing things they should not. Our strategy for reducing blockages will drive improvements in sewer flooding. We have developed integrated drainage area studies to understand the connections in our network, and models that can run live scenarios so we can understand where there are potential problems in our network and ensure we are doing the right maintenance at the right time. We have used our flying start investment to conduct over 1,000 kilometres of sewer surveys and used latest modelling technologies to prioritise the repair and re-lining of sewers.

Generating value for: