Southern underperforms against key AMP7 targets

Southern Water has said it has underperformed against a series of key targets for the second year of AMP7, whilst setting out plans to improve performance across the business.

In its interim report for the six months to 30 September, the company highlighted its strategies to boost performance for customers and the environment.

Southern said it is has exceeded its commitment for providing priority services for vulnerable customers but saw its performance decline against other service-linked performance targets such as for water pressure, internal and external sewer flooding, and the Drinking Water Inspectorate’s compliance risk index.

Despite achieving year-on-year improvements, the company also missed its targets on drinking water appearance, taste and odour, supply interruptions, customer experience, and supporting the vulnerable.

For the year 2021/22, Southern has a performance commitment of a maximum of 334 internal sewer flooding incidents, which it has already exceeded in the first six-months and now anticipates reaching 700 by year end. The company has likewise forecast it will exceed its external sewer flooding target of 4,141 incidents per year by 352. It has begun block clearance work in the worst affected regions to improve these scores.

Southern’s own forecast suggests it will not meet its leakage reduction target of 93.9Ml/day despite having lowered its three year rolling average from 95.4Ml/day to 94.6Ml/day. To reach the longer term target, the company has begun a new leak detection framework that focuses on mains replacement and its Calm Networks plan to avoid pressure fluctuations at times of higher demand. Southern said it remains committed to its reduction target of 84.9Ml/day by 2025 and is in discussions with Ofwat to hold any reward or penalty payments while it establishes the best approach to take with leakage reduction.

Like the rest of the sector, Southern saw consumption rise during lockdown but less so than other regions. Against an industry average rise of 12%, Southern’s per capita consumption (PCC) rose by 8%. As a result, the company predicted it will not meet its annual target of 125.4 litres per day. The lower rise, the company suggested, was attributable to its Target 100 campaign to help households better understand and lower their usage.

The company admitted it had further work to do in improving customer experience and said it expected its low score in Ofwat’s C-Mex rankings for the year, in which Southern was 16th out of 17 companies in England and Wales. From March 2020, it launched a transformation programme for its customer service and appointed its first chief customer officer, Katy Taylor, in March this year to drive the strategy.

On environmental targets, the company’s performance relating to renewable generation deteriorated. It improved performance but did not hit its goal for six environmental targets including for pollution incidents, river water quality and combined sewer overflow (CSO) monitoring. Southern met or exceeded its targets for eight categories including maintaining and improving ‘excellent’ standards bathing waters, natural capital and bioresource recycling.

The business’ half-year financial results showed a pre-tax loss of £84.4 million, compared to a loss of £3.2 million in the same period last year. Revenue was up 6.9% year-on-year to £424.9 million.

Southern’s board announced in 2020 it would not pay dividends until it was clear these would not be detrimental to its financial position.