SES Water boss: Affordability can’t dominate all that we do

Supplying 160 million litres of water daily to people in the South East, SES Water is by no means the largest water company in the UK, but chief execu­tive Ian Cain has no doubts about its importance to its customers.

Cain, who joined from Centrica in February 2020, has a vision for the company that puts the environment at the heart of every decision, from the boardroom down. This is something Cain wants to see happen without losing sight of mounting affordability issues hitting householders.

“I want us to be a business people can trust, that fulfils its promises, and is known for its purpose.” That purpose, Cain explains, is about looking after custom­ers, communities and “showing love” for the environ­ment at every investment decision.

The team has taken to heart the motto “we’re at our best when nature is at its best”, which Cain says will be the bedrock for the company’s thinking feeding into its business plan for PR24 and beyond.

He says all investment decisions will be framed through that purpose and he believes the “mood music” from both the Department for Environment, Food & Rural Affairs (Defra) and Ofwat for the upcoming price review is encouraging for an industry that has its sights set on the longer term.

“The test will be how the Ofwat team in their PR24 methodology genuinely support this being a founda­tional step in a longer-term approach to resilience. It’s possible that a short-termism might creep in because affordability issues have been heightened more than was anticipated earlier in the pandemic.”

He says not making the next price review different “ought to be seen as deeply unacceptable”.

“There’s no doubt the industry recognises Ofwat’s role to lead and to scrutinise but we’d all feel better knowing what they are scrutinising for, for the bigger goal rather than a short term one.”

The short term need is to support households strug­gling to pay bills, which clashes with the urgency of investing for resilience, but Cain sees room for both. “Affordability is something we must solve for those with affordability issues, as opposed to having an affordability focus dominating all we do.” To this end, he supports the single social tariff proposed by CCW but recognises the complexities of achieving it.

Cain is not the first to say the PR24 outlook, as out­lined in Defra’s Strategic Policy Statement and by early indications from Ofwat, lacks specifics and does not say how the regulator itself will be held to account by Defra.

But beyond that, Cain points to broader concerns: “I don’t see enough around the cognisance of recognising ecosystems together: food cannot exist without water, water and energy come together strongly too. We need to consider how those ecosystems come together in partnership to solve our needs better.

“The infrastructure that makes the country work – energy, water, transport – we need to better plan for these multi-sector investments in unison to achieve the needs of our future. Even with the National Infra­structure Commission, I’ve not observed any real sense of long-term planning where infrastructure comes together in a meaningful way.”

He believes infrastructure planning and investment need to look beyond water to where other infrastructure investment is headed over time to recognise the inter­connectedness of these systems.

Incorporating these into the price review framework will be a challenge, but Cain says he’s hopeful that PR24 will present a step change.

While some sector commentators have already written off the upcoming price review, saying there will not be sufficient time to see the change needed, Cain disagrees. “I don’t think it’s too late for PR24. It’s down to whether people can step back and be brave enough quickly enough,” he says.

“In order to have different outcomes in the long term the modelling needs to appre­ciate the outcomes and how you get there. We have to assume they’ve been working hard on that.”

There will be some serious questions to ask if the framework isn’t different, Cain believes, and adds that this is the opportunity to make it “different enough to genuinely have a longer-term outlook than price reviews of the past” but getting there will take bold decisions in key areas – “specifically around environmental points and a sensible and informed approach to affordability”.

Even without a major overhaul of the existing regula­tory framework, Cain believes the way incentives and penalties are looked at, or how innovation spend is allocated, could still be different, as could performance commitments to sharpen focus.

Although the cost of living crisis may influence cus­tomer sentiment around bill affordability, Cain believes consumers still want their water company to act in a sustainable way. With a longer-term focus, SES is setting bold goals to become a trusted company with a clear purpose that Cain envisions for customers and the environment.

“There no excuse for doing things in a short-term way that will cost more in the future and we simply can’t store up long-term expenditures for the last of the five-year period of the 25-year plan,” Cain says. “Price has been a dominant factor for too long in the price review cycle, it is possible that other things are then de-emphasised.”

Reflecting on the first two years of this Asset Manage­ment Period (AMP7), Cain describes the pandemic and start of lockdown as exacerbating an already challeng­ing business plan.

“PR19 left many water compa­nies with significant challenges and performance to deliver that were very stretching in nature. I inherited a very ambitious business plan, rightly, but one we were looking further off trying to achieve based on where we had finished the previous AMP.” Tough performance commitments include per capita consumption rates, which went up instead of down during 2020 lockdown, making already stretching targets harder to meet.

However on leakage the company is expected to perform well against its PR19 target in the opening years of this AMP, thanks to data-gathering devices across its network running on Vodafone’s narrowband Internet of Things network, allowing the company to access near real-time data.

Cain describes the additional data, along with software from Royal Haskoning, as “an absolute game-changer” to the company’s ambition to detect and repair leaks proactively with minimum leak runtime. The data informs the teams about the condition of pipes to understand where vulnerabilities are, and also pres­sure changes in the network that could lead to leaks.

He describes the benefits not only to customers but poten­tially to the wider sector. “If we can do it across our entire network, then so can others in the industry,” Cain says, explaining that here “the company can play its size to an advantage”.

Cain expands on this theme: “We could set ourselves up as a company that really hot houses new technology at relative scale, with or on behalf of the industry. Our scale can be turned to our advantage on behalf of many, not just those we serve.”

SES Water is already a respected voice in industry conversations about leakage, having met its target for 21 years, so Cain believes this influence could apply to other areas if the company continues to work at pace to trial innovative practices.