The best service to customers

Customer service: Putting customers at the heart of everything we do has helped us deliver substantial improvements in customer service in recent years, becoming the most improved company in the 2010–15 regulatory period with a reduction of over 70 per cent in the overall number of customer complaints.

We have continued to improve at a faster rate than the industry average in AMP6, positioning us as one of the leading water and wastewater companies. We outperformed against Ofwat's SIM measure across the first four years of AMP6 (the measurement period) and have performed well this year against the shadow C-MeX pilots. We finished third out of the water and wastewater companies, and fourth out of the 17 companies in the sector in total, for the year overall. We finished first in the third and fourth quarter surveys of customers who have contacted us. This performance is mirrored in the number of complaints that we receive. Since 2015/16 we have seen a 41 per cent reduction in complaints and a 65 per cent reduction in repeat complaints.

During AMP6, we have developed new services that increase the speed and quality of the customer service we provide. These include a new system that enables us to proactively keep customers informed of events on our network, increasing the hours we are available for customers to contact us, and increasing the channels by which they can contact us so they do not always need to call.

We have driven an increase in digital engagement through a new customer-centric website, the introduction of an easy to use mobile app and a substantially enhanced social media presence on commonly used platforms such as Facebook and Twitter. In support of our most vulnerable customers we launched our Priority Services proposition, setting up dedicated teams for those that need it most, and now have over 100,000 customers registered.

We have received external recognition for the improvements that we have made in the quality of service that we deliver to customers. We are one of only 14 companies nationally to be awarded the Service Mark with Distinction from the Institute of Customer Service, the only water company to receive Shaw Trust Accessibility status for our website and the only water company to be awarded the 'Best Practice' Accreditation (CICMQ) from the Chartered Institute of Credit Management.

Leading north west service provider: We are consistently ranked in the top three out of ten leading organisations in the North West, through an independent brand tracker survey which is undertaken three times per year. This covers key attributes such as reputation, trustworthiness and customer service and in the most recent survey, we have been ranked first for being both environmentally and socially responsible. We are behind only Amazon and Aldi, and ahead of seven other major organisations across utilities, telecoms, media, banking and retail.

Robust water supply: Customers benefit from our robust water supply and demand balance, along with high levels of water supply reliability; although, with our water resources predominantly being from impounding reservoirs, we remain at risk from short intense dry periods of weather. Our overall water quality continues to be good, and our water quality service index and Mean Zonal compliance both slightly improved compared with the prior year. We have consistently delivered a reliable water service. Although we have experienced some water no-supply incidents in the 2015–20 regulatory period, our Systems Thinking approach and the largest water tanker fleet in the industry has resulted in sustainable year on year performance improvements.

Throughout February 2020 the UK experienced a succession of severe winter storms. Although the storms did cause some service interruptions, our workforce worked tirelessly throughout this period to minimise the impact on customers and the environment.

Reducing sewer flooding: We have continued to invest heavily in schemes, projects and programmes of work designed to reduce the risk of flooding of customers' homes, including incidence-based targeting on areas more likely to experience flooding and defect identification through CCTV sewer surveys and other innovative technologies. Our plan for the 2015–20 regulatory period included a target of reducing sewer flooding incidents by over 40 per cent, in line with customers' affordability preferences. During that period, we have delivered an average reduction of 38 per cent. Although marginally below our target, this represents strong performance given the unprecedented storm events over the five year period. In terms of internal repeat flooding (occurring more than once in ten years) we have delivered a reduction of over 70 per cent over AMP6.

Our final determination for the 2020–25 regulatory period includes a target of reducing internal sewer flooding by 73 per cent. Although a challenging target, we have invested some of our outperformance reinvestment in 2019/20 targeting improved performance in this area. Our wastewater network will continue to benefit from significant investment going forward in terms of innovative proactive targeting of operational flood risk and through ground-breaking monitoring of the sewer network which will be underpinned by artificial intelligence techniques to interpret and forecast flood risk. In addition, we will continue to seek to work in collaboration with other external flood authorities and associated partners, paying our fair share, to address the widespread flooding events that hit our region, as we aim to help mitigate the effect of changing weather patterns likely to result from climate change.

Key performance indicators:

Outcome delivery incentives (ODIs): We have 19 wholesale financial ODIs, ten of which are structured to provide the potential to earn a reward for good performance or for us to be penalised for poor performance. The other nine wholesale financial ODIs are structured in order to protect customers in key areas and do not offer a reward for good performance, only a penalty for poor performance.

In 2019/20 we have delivered another strong performance against our ODIs, resulting in a net outperformance payment of £22.4 million. During the year we achieved the final AMP6 milestone in relation to our West Cumbria project, earning an outperformance payment of £21.6 million. We are pleased with our overall AMP6 performance, having earned a total net outperformance payment of £43.9 million over the five-year period. This demonstrates the benefits of our targeted investment alongside our Systems Thinking approach and given the ODI targets have typically become tougher each year, it is particularly pleasing that our best performance has been achieved in the final two years of the AMP. This gives us confidence heading into AMP7.

Service incentive mechanism (SIM): We have previously stated our target was to move towards the upper quartile in the medium-term, and we are particularly pleased with the progress we have made over AMP6, ending the four year period to 2018/19 in fourth place overall for the water and wastewater companies and earning an outperformance payment of £6 million.

In AMP7, SIM will be replaced by a new customer service measure, C-MeX, with the industry reporting against C-MeX for the year 2019/20 (although not contributing to any outperformance or underperformance) before the measurement period begins in AMP7.

There are two elements to C-MeX, a contactor survey based on a survey of customers who have contacted the company and a perception survey of a random selection of individuals who may or may not have had a previous interaction with the company.

For the contactor element, we achieved first place (out of 17 companies) in each of the final two quarters. For the perception survey, we achieved eighth place in the fourth and final quarter. This means on the combined scores we were fourth in the final quarter and also fourth out of the 17 companies and third out of the water and wastewater companies for the year overall.

What Matters

Supporting vulnerable customers

Delivering industry-leading assistance schemes.

With more than a quarter of households in the North West earning less than £21,000 a year and just under a fifth experiencing water poverty, affordability continues to be a key focus for us.

We've continued to build on our affordability support and became the first water company to have our affordability schemes included in the Turn 2 Us customer support search tools.

We introduced a friends and family helpline for customers who want to assist loved ones who are struggling financially, and we held our third Affordability Summit in Liverpool, welcoming more than 180 attendees.

The Hardship Hub continues to prove a useful tool for the region's debt advice community, with over 500 registered users.

In the last 12 months an additional 25,487 customers registered for our Priority Services scheme, meaning we now have more than 100,000 customers benefiting from our tailored services which help support their particular needs.

After completing a number of audits with British Standards Institute, in February 2020 we successfully passed the verification for 'inclusive service provision for identifying and responding to consumer vulnerability for water supply and wastewater services'.

We continue to work with external charities and organisations from around the region, with expertise in customer vulnerability, to help promote the Priority Services scheme. We provide financial assistance to more than 100,000 customers, and through our Payment Matching Plus scheme, 15,000 customers became water debt free in 2019/20.

To help prevent customers getting into debt we provide flexible payment plans and the option for low income customers to take a payment break if they experience a change of circumstances.

We continue to actively promote our support schemes through customer communications, doorstep visits, social media and partner organisations. Last year, our customer outreach managers carried out over 250 visits to 120 organisations to spread awareness of our schemes.

Generating value for:

At the lowest sustainable cost

Power and chemicals: Our Systems Thinking approach and more effective use of operational site management continues to optimise power and chemical usage alongside combined heat and power assets to generate renewable energy. In addition to the electricity we generate from bioresources, we are developing other renewable energy facilities. This is primarily in the area of solar, where we have invested £62 million across the 2015–20 regulatory period. We continue to lock-in our power commodity costs, providing greater cost certainty for the next regulatory period.

Proactive network management: Through our Systems Thinking approach we are more proactive in the management of our assets and networks. We have improved our predictive modelling and forecasting through better use of sensors in our network and better analysis of other data, such as weather forecasting, enabling us to address more asset and network problems before they affect customers. This reduces the level of reactive work and improves our performance and efficiency.

Customer receipts and financial support: Our region suffers from high levels of income deprivation and we offer wide-ranging schemes to help customers struggling to pay. We now have 120,000 customers on affordability schemes, more than double the commitment we made at the start of AMP6. Notwithstanding our industry-leading debt management processes, we expect bad debt to continue to be a challenging area for us due to the level of deprivation in our region and the impact COVID-19 will have on the ability of customers to pay their bills.

Prior to any COVID-19 impact, our household bad debt expense had been maintained at the 1.8 per cent of revenue we communicated at the half year. This is a reduction from the 2.1 per cent last year, reflecting our ongoing attention to bad debt through initiatives such as our affordability schemes. At 31 March 2020, recognising the higher risk of future non-payment of household customer bills as a result of COVID-19, we have increased our reported bad debt expense by £17 million. Although this is excluded from underlying profit measures as an adjusted item, on a reported basis the impact is to increase household bad debt to 3.1 per cent of revenue.

Pensions: We have taken progressive steps to de-risk our pension provision. The group had an IFRS retirement benefit surplus of £754 million as at 31 March 2020, compared with a surplus of £484 million as at 31 March 2019. Further details of the group's pension provision are provided in the pensions section in the Notes to the financial statements and Notes to the financial statements – appendices.

In April 2019, the group accelerated £103 million of deficit repair contributions to its defined benefit pension schemes. This represents the final acceleration of deficit repair contributions agreed with the schemes' trustees and reduces the pension scheme deficit repair contributions due from the company down to £nil.

Capital delivery and regulatory commitments: We place great emphasis on delivering our commitments efficiently and on time, and have a robust commercial capital delivery framework in place. Across the 2015–20 regulatory period, we have worked with a single engineering partner and four design and construction partners to deliver our regulatory capital investment programme of just under £4 billion. We have involved our partners much earlier in project definition and have packaged projects by type, geography and timing in order to deliver efficiencies. Projects have been allocated on an incentive or competitive basis leading to our partners presenting a range of solutions, innovations and pricing.

We accelerated our 2015–20 investment programme in order to improve services for customers and deliver early operational and environmental benefits. Regulatory capital investment in 2019/20 was £722 million including £143 million of IRE, £184 million of additional investment made available through sharing our net outperformance and £13 million additional capex associated with the dry weather in the summer of 2018. This, combined with our investment in the first four years of the regulatory period, brings our total spend to just under £4.0 billion across the 2015–20 regulatory period.

We are driving more effective and efficient delivery of our capital programme and applying a tougher measurement mechanism to our time, cost and quality index (TCQi) score for this regulatory period. Despite this tougher approach, our TCQi score remains high at 95 per cent, representing very good performance.

Key performance indicators:

Total expenditure (totex) performance: Our totex allowance for the 2015–2020 regulatory period represented a significant challenge compared with the costs we originally submitted as part of our business plan. Not only have we closed the gap but we have now delivered the original scope for around £100 million less than our allowance. This has been achieved through a combination of driving efficiency into our capital programme and through Systems Thinking.

Financing outperformance: Our leading treasury management helped lock in a low cost of debt, delivering significant financing outperformance for the 2015–20 regulatory period compared with the industry allowed cost.

Household retail cost to serve: We have continued to deliver against a challenging benchmark set for AMP6. Our target has been to minimise our costs compared with our revenue allowance and on an underlying basis we have delivered a good performance in 2019/20, outperforming this year's revenue allowance (including margin) by around £13 million. This reflects underlying performance and therefore excludes an additional regulatory bad debt charge associated with the higher risk of future non-payment of household customer bills as a result of COVID-19. The statutory bad debt charge component of this (£17 million) is excluded from underlying profit measures as an adjusted item as outlined in the underlying profit measures table in Our performance in 2019/20. On an underlying basis, cost to serve is in line with the regulatory cost allowance of £35 per household and we are confident that our cost plans will move us towards upper quartile performance in AMP7.

What Matters

Improving cost and service levels in our procurement process

New methodology makes significant savings, helping us deliver more efficient services for customers.

When we co-sponsored a PhD programme in partnership with the University of Salford and the Engineering and Physical Sciences Research Council (EPSRC), we realised that there was the potential to engage with markets and our supply chain differently.

That was the beginning of our journey towards the introduction of the Market Engagement Methodology (MEM), which has resulted in £359 million in savings for customers and led to us winning the Chartered Institute of Procurement and Supply (CIPS) Best Process Improvement Award.

From the formation of our AMP6 and AMP7 capital works agreements through to our major networks delivery transformation, we sought to engage our supply chain by focusing on what is best for both parties and looking at where we can improve in terms of cost and service level.

The MEM process moves beyond the confines of traditional approaches. Working with more than 20 different organisations over an 18-month programme, we analysed, challenged and tested the entirety of our spend base.

By using automated tools and through rigorous challenges with new and existing suppliers, we transformed our procurement approaches towards over £2 billion worth of spend across a variety of categories through the AMP, and committed to the delivery of £359 million worth of savings directly through to our customers.

Generating value for:

In a responsible manner

Behaving responsibly is fundamental to delivering on our purpose, and the group has for many years included corporate responsibility factors in its strategic decision-making. Our environmental, social and governance performance across a broad front has received external recognition. Earlier in the year, we achieved a World Class rating in the Dow Jones Sustainability Index for the 13th consecutive year, again achieving industry leading performance status in the multi-utility/water sector. We look at our performance across a range of other environmental, social and governance (ESG) indices, where we also perform well.

Leakage: We have continued our strong operational focus on leakage, alongside our network resilience improvements and a range of initiatives such as active pressure management, acoustic loggers, satellite technology and the UK's first leakage sniffer dogs specially trained to pinpoint the exact location of leaks.

We continue to encourage customers to save water through water efficiency programmes as this enables them to help preserve this precious resource and can save money on their water bill.

Our final determination for 2020–25 assumes a 15 per cent reduction in leakage. Although a challenging target, we have invested some of our outperformance reinvestment in 2019/20 in our water network to help further improve our performance in this area.

Environmental performance: This is a high priority for us and an area where we have performed well, achieving Industry Leading Company status in the Environment Agency's annual assessment in three of the last four years. This is a result of our approach to managing our assets in an integrated way to minimise the number of environmental incidents. Further detail is provided in the KPI section on the right of this page.

Carbon footprint: We set a target to reduce our carbon footprint by 50 per cent by 2020 compared with a 2005/06 baseline ,and achieved this target a year early. A major contributor to this has been the purchase of certified renewable electricity, with over 95 per cent of the electricity we use having zero emissions. This year our total greenhouse emissions were 159,243 tonnes of carbon dioxide equivalent, a reduction of 73 per cent since 2005/06.

We generated the equivalent of 191 gigawatt hours, an increase of 18 gigawatt hours on the previous year. This illustrates good progress in our energy strategy to use less and generate more renewable energy.

We have committed to six climate change mitigation pledges – see Our approach to climate change.

Employees: Our primary concern throughout the COVID-19 pandemic has been to protect the safety of our employees and those they work alongside. We have put safeguarding measures in place, distributed additional personal protective clothing and issued key worker cards to frontline employees to explain their presence in communities. We have not furloughed any employees and recognising that some may face challenging financial issues within their own families as a result of changing circumstances, we created a Staff Outreach Scheme to provide one-off grants through a confidential application process.

We continue to work hard to engage all of our employees in the transformation of the group's performance. Employee engagement was at 84 per cent this year, consistent with the UK high-performing norm. We remain committed to maintaining high levels of employee engagement.

We have been successful in attracting and retaining people and have continued with our apprentice and graduate programmes for 2019/20. We now have a total of 36 graduates and 102 apprentices across the business. Our investment in recruiting graduates and apprentices is already benefiting the company, with 269 employees who have previously been on either the graduate or apprentice scheme having secured permanent roles across our business.

Over the last 12 months all of our employees have attended health, safety and wellbeing training as part of our home safe and well programme, which has been designed to support colleagues understand how our individual decision-making and behaviour can ensure we look after ourselves and each other.

More than 300 colleagues then volunteered to become front line coaches and following their training are now 'peer influencing' colleagues to think again about the activities they are undertaking and consider if there is a safer way to do it. We are seeing a positive improvement in our performance.

Our employee accident frequency rate for 2019/20 was 0.110 accidents per 100,000 hours, representing a 27.6 per cent improvement on last year's outturn of 0.152. Our contractor accident frequency also showed improvement, with 0.083 accidents per 100,000 hours compared to 0.092 in 2018/19. We retained our Gold award status with the Royal Society for the Prevention of Accidents, achieving this status for the eighth year.

We are continuing our strong focus on health, safety and wellbeing and have undertaken extensive engagement across our business to enable the further development of our plans.

Communities: We continue to support partnerships, both financially and in terms of employee time through volunteering with other organisations across the North West. Our approach to integrated catchments helps to tackle water quality issues in lakes, rivers and coastal waters across the North West, and our LoveMyBeach contribution includes employees volunteering to help to keep our region's beaches tidy. We continue to support local communities through contributions and schemes such as providing debt advisory services, and our partnership with Beamont Collegiate Academy FabLab and STEM centre which will enable students from across the North West to gain first-hand experience of using hi-tech equipment and learn more about STEM in a fun and engaging way.

Key performance indicators:

Leakage: Although leakage is included within our outcome delivery incentives, we publish our leakage position separately, with it being an important measure from a corporate responsibility perspective. In 2019/20 we have again met our regulatory leakage target of 463 megalitres per day.

Environmental performance: In the Environment Agency's latest assessment, published in July 2019, we were awarded three stars (out of four) across a range of operational metrics. This is lower than our performance in the previous year where we were awarded the industry-leading 4 star status for the third consecutive year. Our lower score in the most recent assessment was primarily the result of a slight deterioration of performance against the delivery of our National Environment Programme where two projects were delivered late. The two projects were delayed due to unforeseen issues with land purchase, planning difficulties and complex interactions with a flood risk scheme. We have since made good progress with delivery and we are now operating the relevant assets in line with their new Environmental Permit requirements. We brought forward the delivery of two other major schemes to offset the environmental impact. Overall, our performance, earning industry-leading 4 star status in three of the last four years is in line with our medium-term goal of being an upper quartile company on a consistent basis.

Corporate responsibility: We are committed to operating in a responsible manner and are the only UK water company to have a World Class rating as measured by the Dow Jones Sustainability Index. For 2018/19, we achieved our World Class rating for the 13th consecutive year. We demonstrate a very strong performance across a number of leading corporate responsibility indices and report these publicly in our annual report and on our website; for example, we have been named in the FTSE4Good Index every year for the last 17 years, and reconfirmed as part of the Euronext Vigeo Index UK 20.

What Matters

Protecting customers and employees

Our response to the COVID-19 pandemic.

We've responded to the COVID-19 pandemic by focusing on the essential services we provide, with our primary concern being the safety of our people and those they work alongside. Many of our employees are designated as key workers and it's important that during this challenge customers know they can rely on us to continue to supply their drinking water and take away their wastewater.

Where customers have found it difficult to pay their bills we've increased the extensive financial assistance we already provide, for instance by widening eligibility for our 'Back on Track' social tariff for an initial interim period to 2020/21 and 2021/22, alongside encouraging those in vulnerable circumstances to sign up to our Priority Services scheme.

For our employees, we've put safeguarding measures in place, distributed additional personal protective clothing and issued key worker cards to frontline employees to explain their presence in communities. We have not furloughed any employees and recognising that some may face challenging financial issues within their own families as a result of changing circumstances, we created a Staff Outreach Scheme to provide one-off grants through a confidential application process.

To assist our suppliers and contractors we have committed to temporarily accelerating payment terms to seven days.

To safeguard communities, we injected £3.5 million into the United Utilities Trust Fund and took the difficult decision to close our recreational car parks, while keeping pathways open for local walking and exercise.

We've shown our support for other key workers and supported employee fundraising with additional matched funding. We regularly liaise with local resilience forums to provide help dealing with the pandemic wherever we can.

We've been issuing weekly updates to key stakeholders, openly sharing details of our actions, and using social media channels to communicate regularly with customers.

We will continue with this wide-ranging response until restrictions are removed.

Generating value for: