PR24: SES to ‘fall short’ on net zero

SES Water has said it will miss the water sector’s commitment to cut operational greenhouse gas emissions by 2030.

Its business plan for 2025-30, which said billpayers did not support fast-tracking such work, also outlines additional equity in the event of the company being sold.

SES stipulated equity support of £35 million would be sought by the end of AMP7 into AMP8 if the strategic review, begun earlier this year, leads to a sale of the company.

Its PR24 proposal said in the event of a sale, the board expects new owners to commit around £35 million of new equity as part of ongoing funding arrangements.

Average water bills will rise by 10.5% to fund the company’s plan to invest £413 million to 2030. The £25 annual increase will take water-only bills up to £262 in 2029/30.

Total expenditure is up by £66.5 million compared to the current asset management period (AMP7) to 2025.

In 2019 all companies – coordinated by Water UK – committed to the ambitious goal of reducing operational emissions from carbon and other harmful gases to net zero.

SES said without customer buy-in to continue decarbonising at pace, it will follow a “demand-led, market-based approach that does not require significant additional investment” to cut emissions.

It will, however, work towards the national 2050 target for net zero. SES said without customer buy-in, it will follow a “demand-led, market-based approach that does not require significant additional investment” to cut emissions.

Its plan outlines base spending of £360 million and enhancement spend of £53 million to mitigate against climate change, deliver on statutory requirements and environmental improvements.

Within the plan, SES pledged to:

• Lower household demand by 11% per capita consumption (PCC);
• Reduce business usage by 5.1% by the end of AMP8, compared to 2020 levels;
• Cut leakage by 26.6% by 2030;
• Rollout 194,000 smart meters;
• Remove lead pipes at 170 schools;
• Embed a no-dig technology for maintenance and mains replacements

Other water only companies have also published versions of their business plans today. An overview of the plans for water and sewerage companies can be found here.

Affinity Water is proposing to spend £2.12 billion between 2025 and 2030, a 19% increase on its spend over the AMP8 period. This will see bills rise by 13% compared to 2025 to £216.96.

With an increased focus on reducing unsustainable abstraction, Affinity plans to deliver £78 million of leakage reduction investment totalling 22.4 million litres per day or 30% by 2029-30. It also wants to deliver an investment programme that reduces the water taken from chalk aquifers by 35 million litres per day in the next five years.

It will also be delivering a £76 million package of water quality treatment upgrades to improve water quality, and installing 400,000 smart meters, which is one third of all customers, to help control usage.

Having already reduced its planned expenditure for the upcoming five-year period due to customer concerns around affordability, Affinity will be increasing the social tariff cross subsidy to £9.50, and plans to increase the number of customers benefitting to up to 150,000 by 2030.

Portsmouth Water has requested total expenditure allowances of £347 million – an increase of £130 million when compared the current period. The figure comprises £45 million of spending on water resources, £273 million on the company’s water network and £29 million on its household retail activities. It notably excludes investment in the new Havant Thicket reservoir.

The company said average annual bills would rise by 19% in real terms by end of AMP8 from £107 currently to £128 by the final year.

Portsmouth said its key investments would include £75 million of expenditure on smart metering and £33 million to improve water quality, including through the installation of ultra violet and nitrate treatment. The company has proposed to spend £10 million to reduce leakage by 16%.

South East Water stressed that this was “the most important and ambitious business plan” it had ever submitted, including a near doubling of total expenditure to £1.9 billion.

The company said this level of spend, and the resulting 19.6% increase in customers’ bills by 2030 was necessary to tackle the “unprecedented pressure that our network has been put under”.

While South East’s headline bill increase would see prices rise from £19.33 a month in 2025 to £23.12 by 2030 – or £277.24 a year. However, the company warned that Ofwat’s methodology for PR24, and in particular the investment framework it sets out “may not be sufficient to attract and retain equity capital investors”.

Therefore it has also modelled bill increases on a “more realistic investment outlook”, which see bills rise by 29% over the five years to £24.96 a month – or £299.52 per annum.

To help customers with affordability, South East plans to nearly double the number of customers on our social tariff to a total of 104,000, while also increasing the qualifying threshold by 17%.

Among the pledges included in South East’s business plan are to reduce extreme weather related interruptions to 16.2 min from 48 min if unmitigated, at accost of c£230 million over the AMP.

The company is planning c£12.5 million on being “operationally net zero” by 2050 but like SES stressed that customers see net zero as a “lower priority” and so want investment in this area to be “proportional and balanced”.

The plan includes £389 million of investment in enhancing water efficiency, reducing leaks and utilising smart meters. Meanwhile c£57.5 million will go towards investigating and removing lead pipes and developing solutions for nitrate removal.

On leakage the company is targeting a 24% reduction and a 9.1% cut in per capita consumption.

South East said it had proposed some bespoke outcome delivery incentives (ODIs) but “due to the described impact on the business plan assessment and associated penalties we have not included any bespoke PCs following the feedback from Ofwat”.

South Staffs Water said it plans to spend a total of £819 million, including £40 million to ensure water quality and the reliability of its assets as well as £19 million on environmental measures.

The company said average annual bills would rise from £170 currently to £218 by 2030. The £48 increase would include around £25 of inflation, £7 of above-inflation increases in energy costs and £16 of additional expenditure to maintain water supplies over the long-term.

By 2030, South Staffs said each £1 charged to customers would breakdown to 39p of operational expenditure (excluding energy), 26p of capital investment, 14p of energy costs, 15p of financing costs, 5p of returns to shareholders and 2p of performance incentives.

The firm said it would provide financial support to 60,000 customers each year.

South Staffs said it would spend £13 million encouraging customers to be more efficient and £12.4 million to create a new water transfer from Anglian’s Grafham reservoir to its Cambridge region. The firm said it is aiming to reduce leakage levels by 20% in its Cambridge region and 15% in its South Staffs region.