Interview: Sarah Venning, chief executive, NI Water

“Our world’s a part of government and as part of government, we are subject to what government can afford.”

Draining sewers; sifting sewage: water professionals are used to taking on the jobs that no-one else wants to do. For the new chief executive of NI Water, this is as true as for those on the front line: Sarah Venning stepped up to be the interim chief executive from her previous role of director of customer delivery, while the job was externally advertised twice, with the board turning down six shortlisted applicants.

Venning was finally appointed permanent chief executive in April and she certainly seems happy about the new job today, as she welcomes Utility Week to her modest yet functional office, overlooking one of NI Water’s treatment works in north Belfast. She’s frank about the challenges she faces and the structural idiosyncrasies that dog NI Water. With rumours abounding that the Northern Irish government could be about to introduce charges for water for the first time and water company workers taking beatings in the street, it could be that things get worse before they get better.

First, some history: domestic customers in Northern Ireland have never paid directly for their water. NI Water was formed in 2007 from the local water authorities. It is funded directly by government – to the tune of £277 million last year – and must compete for its cash with other public authorities such as health. It is regulated by Northern Ireland’s answer to Ofwat, simply called “the Regulator”, yet still governed by corporate company codes – a mix of cultures that Venning calls “sub-optimal”.

NI Water hit its lowest point at the beginning of 2011, when chief executive Laurence MacKenzie resigned over the mishandling of a cold weather crisis that saw 450,000 lose their water supply. Before that, in 2010, chairman Chris Mellor, along with three other board members, was sacked amid controversy on how the company was awarding contracts. NI Water’s first chief executive, Kathryn Bryan, quit in 2008 after it emerged the company had miscalculated its projected income by £20 million.

These fiascos perhaps explain why it was so difficult to find a new chief executive when Trevor Haslett stepped down last August, citing “personal reasons”. NI Water has had five chief executives at the helm since 2007. Venning was made permanent chief executive in April after its initial recruitment campaign failed last October, when six shortlisted candidates were considered unsuitable for the £150,000 a year post. The company made its second attempt to recruit a chief executive in January, but no external candidate was chosen.

Despite this, Venning does not see her role as a poisoned chalice and says that stability will bring benefits. She didn’t apply for the position the first time around because she “wasn’t sure if the time was right”, having been at the company for only three years. However, her opportunity to test drive the role in an interim capacity made it clear to her that she had the skills to succeed.

“The staff are more than happy that they know who their CEO is, how their CEO thinks, and they are clear on their goals and directions and the place that we want to drive the organisation to,” she says.

So much for history. Now in post, Venning has two main areas of focus: the price review and the controversial possibility of introducing charges for water customers.

NI Water is now at the negotiating table with the utility regulator for its third price control period, PC15, which is based on the Ofwat model for PR14 in England and Wales, but runs from 2015 to 2021. The company has asked for £990 million of capital investment in its business plan, submitted in March, and will find out if the regulator will allow it the full amount in its final determination at the end of the year.

The regulator has allowed the water company £1.2 billion of investment since 2010, but investment arrives in peaks and troughs, dictated by the annual government budgetary cycle. In 2012/13, for example, its budget was cut from £192 million to £148 million as a result of the government’s spending review, tying its hands on capital projects.

It is a sensitive subject, but Venning admits that government holding the purse strings is far from ideal.

“In England and Wales and other areas you are probably not competing with the health service and education service for your funding, whereas very much here our executive has a certain amount of money and we are competing [with those services] for our funding,” she says. “It is a constraint we live with. If more money was made available, we could certainly invest it and that would be better. Our world’s a part of government and as part of government, we are subject to what government can afford.”

Venning also believes NI Water could more efficiently discharge its duties to customers “if it had a less burdensome governance model”. Formerly under the control of the Department for Regional Development and known as the Northern Ireland Water Service, NI Water was created as a government-owned company in 2007 and in 2009 became a non-departmental public body. This means that while the government makes decisions on funding, it still has to operate under company legislation.  

According to Venning, this hybrid governance model is unwieldy and having to achieve private sector efficiency, while adhering to public sector governance, restricts its freedom to act compared with its privatised English and Welsh counterparts.

NI Water says this dual status structure also means it faces increased scrutiny from central government, which affects time, resources and costs.

And NI Water needs to invest more. The regulator says it is behind the rest of the UK when it comes to tackling pollution and just 29 per cent of water bodies in Northern Ireland have been given a ‘good’ ecological status under EU rules. This could prove a problem given that under the EU’s Water Framework Directive, 59 per cent must make the grade by 2015.

“We could usefully invest more in conjunction with our environmental regulators. We have schemes that they agree they would like to see us do. So yes, we could invest more,” she says. “We could invest more if government could free up more capital for us.”

However, NI Water is not giving up, but is getting on with the job at hand. “We have lived within the governance model we have had and we have delivered under that model and believe we can do more. So rather than focusing our energies on lamenting it… we are about making the most of what we have,” says Venning.

But it is not just a “sub-optimal governance structure” she has to cope with. Heading a company with such a high turnover of chief executives could be daunting for a less determined character, but Venning is unfazed.

“I’m here for the long term and I am very invested in Northern Ireland and NI Water,” she says. “I am a relative newcomer to the industry, but I would like to be here for quite a long time to come. There is a lot of value we can add to Northern Ireland, to its economy.”

The biggest issue on the horizon is water charging. A bill was passed by the Northern Ireland Assembly last year that ensured charging would not be brought in before 2016, but regional development minister Danny Kennedy insisted at the time the move did “not seek to address longer-term policy issues about how water and sewerage services should be governed in Northern Ireland”.

Venning is not ruling anything out and admits that charges could be brought in, although emotions run high on this subject.

“We know that it could happen, so we are aware of that and we are not naïve, but it isn’t for us [to decide] and we should not be attributed with seeking it, because we are a service provider,” she says.

Things came to a head last month when the company was forced to withdraw workers from its £10 million water mains upgrade project in Belfast, after they were attacked by masked men carrying iron bars. This, it was reported, was due to unfounded concerns from locals that meters were being installed in preparation for the introduction of water charges.

Despite this, Venning says NI Water is ready to implement charging if the government signals a change of heart. Currently the regulator sets notional, unmeasured charges for domestic bills, while the NI Executive
provides a corresponding subsidy for households.

“The building blocks are there, the regulated mechanisms – should you have to build – are there. In that respect we are the same as any utility,” she says.

Venning should know: she has a background in electricity, working in customer service at Northern Ireland Electricity (NIE) for 14 years.

“I can go from taking a high-level view in a direction of travel to jumping down into the detail. I am equally comfortable talking to the politicians about how it is we can benefit from Northern Ireland plc as I am talking to the guy at the waste water treatment works about if the screen is blocked or what has happened at the weekend and I’ll know the detail in between.”

She believes there are many comparisons to be drawn from her time in customer service at NIE.

“You are running networks, you are dealing with faults. Fundamentally you are providing a service to customers and you must be able to respond to emergency events quickly and bring customers back to their normal state of supply. A utility is for customers a service they don’t want to think about; it just should always be there – it is 24/7. If you are steeped in that, it is a way of thinking and a way of life. If you are a utility person, you are always thinking about it because your services are always required.”

Venning’s enthusiasm for customer service is paying dividends. Since she joined as director of customer delivery in 2010, the regulator’s overall performance assessment score for customer service rose from 121 to 198 in 2013, beating its 2012/13 target by 17 points. This represents “a material improvement” in service levels for consumers, according to the regulator. Response to billing contacts, written complaints and telephone call handling has improved to levels similar to the rest of the UK.

With a wealth of experience in utilities, Venning jokes that her next position will be in gas. She also quips that one day she would like a job that is less dependent on the weather. As the newly installed chief executive of NI Water, she must be hoping the sun starts shining soon.