All water companies across England and Wales are today submitting their business plans to Ofwat for the years 2020 to 2025. Thames Water's plan includes a record investment of £11.7bn, including £2.1bn to boost network resilience and reduce leakage.
Thames Water currently loses approximately 25% of all the water that it treats and puts into its system. In June 2018 it was fined £120m by Ofwat for lacking oversight and control of its leaks. [See our previous report here.]
Thames Water said that its ne wbusiness plan would cut leaks by 15% and pollution incidents by 18%. The longer term ambition is to halve leakage and have zero pollutions.
After 2020, management bonuses and dividends will be tied to meeting targets on reducing leakage and pollutions, and increased customer satisfaction. Thames is also overhauling its corporate structure to make it easier to understand, and plans to lower operational unit costs by nearly 14%.
The five-year business plan also allows for dividends of around £20m a year for shareholders.
Thames Water chief executive Steve Robertson said: “More than 15 million people in the UK depend on Thames Water every day to go about their lives. Our responsibilities to the environment and customers are huge, and we will partner with them and our peers to insulate our region from the effects of changing climate patterns. This includes planning for a strategic reservoir for the SE region of England and exploring the potential of water transfers.
“Our proposals are ambitious, well-costed and widely-supported by our customers, who agree we should prioritise the most vulnerable. Bills will be flat in real terms over the five-year period and our shareholders will receive annual distributions of around £20m as we prioritise investment on significantly improving service."
As part of Ofwat’s 2019 price review, all water companies must set out a detailed business plan outlining how they will meet the needs of their customers from 2020 to 2025 and beyond. Plans cover investment plans, what they propose to charge customers, how they will support vulnerable customers and how they will ensure the long-term resilience of their infrastructure and operations.
Ofwat will scrutinise all of the business plans before publishing an initial assessment of each company’s plan on 31st January 2019, where it will categorise companies’ plans according to the level of quality, ambition and innovation they have demonstrated. Ofwat will make final decisions on the services water companies must deliver and limits on the prices they can charge customers in December 2019.
Ofwat senior director for strategy & planning John Russell said: “We’ve reached a key milestone in our price review process. From now until January 2019, we’ll pore over each and every business plan and we’ll be looking for evidence that they are robust, ambitious and, crucially, that they have been shaped by customers.
“All companies have had an opportunity to develop high-quality plans, but where plans aren’t sufficiently ambitious or stretching, we’ll step in to protect customers and the environment.”