PR24: Southern admits ambitions are risky

Southern Water has requested the regulator to be mindful of the position the company is in as it submits ambitious business plan with “significant delivery risks”.

The company has proposed the highest bill increases as part of the PR24 plan which company chair Keith Lough described as “beyond anything attempted by the company before”.

The company said its plans, which includes upping its spending for water services by 90%, comes with significant delivery risks.

Lough said: “The plans do not sit easily within Ofwat’s standardised model, and we ask Ofwat to recognise the uniqueness of our situation; discussions will need to continue with regulators as to the final extent and timing of investments.”

Accepting the potential delivery risks, the board wants to see learnings heeded from trials of nature based solutions

“We need to do things differently for water resilience, for surface water management, for the environment and for customers and to remain agile as we learn. Taken together, this means that the proposed plan has a number of uncertainties that we expect to be further determined over the five-year investment period to 2030,” Lough said.

The company will almost double its spending from £4 billion to £7.8 billion in the five years to 2030, which will add 44% to household bills.

By the end of 2030 the average forecast bill will rise to £674 with water services increases charges by 69% and sewerage by 27%.

This will allow the company to spend 90% more on water services to £3.4 billion, and 29% extra on wastewater to £4.1 billion.

The company will invest £682 million to reduce the use of storm overflows by 40% by 2030 at 179 priority locations; it plans to cut overall pollution incidents by half and eliminate serious events by installing new mains and increasing power resilience at pumping stations as well as adding monitoring across wastewater networks. The plan specifies spending £600 million on upgrading 38 sewage works to meet statutory nutrient requirements.

On the supply side, investment will be directed at lowering abstraction by 10%; modernising four treatment works that serve two-thirds of the customer base; delivering 189 megalitres of additional resource capacity by 2035 with new recycling plants and pipelines; rollout more than one million smart water meters as part of the Target 100 programme; lower leakage rates from 17% to 13% by 2030 with an investment of £517 million during AMP8

Southern said spending on the WINEP is phase dover eight instead of five years to balance affordability and avoid an additional £100 per household being added to bills during AMP8.

Laurence Gosden, chief executive of Southern, said the plan builds on the company’s “transformational foundations” and reflects customer demand for a shift to higher environmental expectations and standards.

“Our plan sees a near doubling of investment over the next five year period. It will deliver major improvements in water resilience, in the way we surface and treat wastewater and to customer service. It will produce significant improvements to the environment in our region, with its unique combination of coastline, bathing waters, chalk streams and diverse habitats.

“We know there will be major challenges in delivering the plan, and its design has sought to balance ambition and affordability alongside those challenges.”