Welsh Water – innovating for AMP7

Peter Perry, who joined Welsh Water as an apprentice, became chief executive in the midst of the pandemic after Chris Jones retired in April. He chats with Utility Week about getting through 2020, the projects that excite him for AMP7 and what billpayers expect from their water company

Perry prides himself on being an operational chief executive having worked up through the company as a civil engineer before becoming chief operating officer then managing director as well as a stint at United Utilities in between. Perry acutely knows the operational challenges of the sector and sees its strengths in a crisis.

“One thing the company – and whole industry – does really well, is respond to incidents. Covid isn’t a trunk main that’s gone, or a problem with the treatment works, it’s longer lived but we’ve got a rhythm in place. Although it’s business as unusual, we’ve adapted. It was a strange time to take over and not without challenges, but we’ve taken things in our stride.”

The pandemic is anticipated to cost Welsh Water between £20 million to £30 million this year, which includes revenue losses and protecting staff and customers with extra precautions, but Perry believes the worst may be yet to come.

“I don’t think we’ve seen the full yet impact of the pandemic on the state of the economy and unemployment, that will come through shortly so bad debt and debt recovery will become an issue in time but it hasn’t hit a level yet that is reflective of the macroenvironment we are in.”

Looking ahead, the company has a series of difficult performance targets set by Ofwat as well as a bill cut of 9.4 per cent by 2025.

“By any measure this is a tough period, but we have to keep it in context because it’s going to benefit customers with bills falling in real terms,” Perry explains. “We’re getting to the point where our operation strategies are in place to hit those targets.”

Among the high priorities for the business is to improve water quality. Perry admits Welsh Water is “a bit of an outlier when it comes customer contacts for water discolouration” so a project is underway to upgrade aging cast iron pipes across networks that cause discolouration.

Another pressing concern is on the wastewater side. The Welsh coast gets battered by storms rolling in from the Atlantic and earlier this year Ciara and Dennis led to widespread flooding, including of external sewers. The company is tasked with reducing these incidents by 25 per cent per by 2025.

“We had some really unusual storms this summer. We were stretched back in August but now we are ahead of our targets. That’s the one on the wastewater side that will challenge us,” says Perry.

AMP6 investment in this area is becoming visible, including first-of-a-kind peak flow effluent treatment works to deal with storm overflows (CSOs).

Perry describes them as being “like a micro-plant” that the company was able to build two of within the existing wastewater treatment works in Llanelli.

“If we were to undertake a traditional approach to reduce overflows, we would have to build 35 Olympic size swimming pools capacity.”

He adds these micro-plants, which are being commissioned as we speak, treat storm water very differently to previous methods and the pioneering technology is far less carbon intensive.

“The whole idea of improving wastewater networks we can’t do on our own. There’s surface water that water companies are not responsible for, there’s highway drainage. Sensible legislative changes that can help us in that space would be useful.

“We need societal understanding of the problem and understand that it won’t be fixed overnight – it’s a long process.”

He says all water companies are committed to this and realise the role they play, but adds that each company is just a part in the bigger fix.

“We galvanise around big topics really well,” Perry says. “Areas that we have a common interest everyone recognises the sum of the total is bigger than the parts. There’s a real desire to cooperate.”

One such area is making sure Brexit does not interrupt safe water supplies. Perry chairs the Water UK Brexit preparedness group and says the twice weekly meetings served a double purpose this year. The national incident structure, which has been in place since 2018, was constituted for Covid-19 as well as the EU exit.

“Everything that is in our control is under control,” he assures. “We have an industry level plan for the chemical supply chain, which is the biggest issue. We are trebling stocks at treatment works where we can or in the supply chain so there won’t be any immediate problems. The processes are well tested and we’re finalising stock levels for the end of December.”

Future proofing is important. Welsh Water is spending more than £150 million on its dams, which Perry describes as a long-term climate change investment: “We’ve done a huge amount of work with a number of academics about the impact of climate change in Wales and we know investing now for future generations and getting stores the right size not for today’s weather but for the next 50 or 60 years is hugely important.

The company aims to reach 35 per cent self-generation of energy by 2025. Currently it is at 29 per cent. At the end of the previous AMP two anaerobic digestion plants were commissioned, to make four, and there are a plethora of large hydro schemes from previous AMP cycles.

“We are now at the point of looking at some more leading-edge opportunities.” These include trials to convert advanced anaerobic digestors from producing methane to hydrogen under a partnership with local authorities.

“If we can bulk that up with more local authorities, it’s a good prospect to move forward with powering our fleet. We are designing a route for the hydrogen to go to that will give us the basis for the investment case to convert the plant at Cardiff.”

Welsh Water’s ambition and service appear were recently recognised when the company topped the inaugural C-Mex chart with its strong scores on customer satisfaction. It has also been named the most trusted water company in England and Wales by CCW several years running.

Perry says customers of any business value certain fundamentals, which Welsh strives to get right.

“Customers want a company to do what they say, and when things go wrong to deal with it very efficiently. Our analysis shows people want problems dealt with quickly by someone knowledgeable so we get that decision making as close to the frontline as possible.

“We’re pretty hot on the level of management information and measure C-Mex down to individual teams. That provides us with great data to manage issues. Good information and investment in systems helps, when our people turn up on customers’ doorsteps they already have their history including billing information.”

He says a service ethos runs through the business’s culture.

Does being a not-for-profit company change how billpayers feel? Perry admits it is a consideration and helps with trust issues but says it doesn’t make customers forgiving. “And why should it?” he asks: “If we say to someone sorry you’ve got a problem but we’re not for profit, we’d get the short shift!”

“Customers will always tell us when we’ve got something wrong and how they expect us to perform,” Perry explains. “Although understanding of non-profit has grown considerably to more than 70 per cent, it doesn’t give us any let off that people would forgive poor service.

“It’s almost the other way because there is an expectation we will always do the right thing, which is the way it should be.”