Thames Water responds to Ofwat: “Our network needs investment”

'I’m concerned about how we can significantly increase resilience while spending less than we currently do,' writes Thames chief executive Steve Robertson, exclusively for Utility Week.

Last September we asked our regulator for permission to invest a record amount in our “here for you” business plan for 2020-25, to tackle issues that really matter to our 15 million customers.

These priorities include reducing leakage from our 20,000 mile network of water pipes and protecting the environment from pollution incidents, while keeping bills flat.

It was therefore disappointing to learn last week that Ofwat has asked us to review many areas of our plan, including resilience, and to deliver it with an investment considerably lower than our proposed £11.7 billion.

I’m concerned about how we can significantly increase resilience while spending less than we currently do – especially in the face of population growth and climate change. I’m now looking forward to engaging with Ofwat to fully understand the position we find ourselves in.

If we don’t invest in our network it simply will not be able to perform at the level it needs to in the future. Hence we remain committed to our plan. As I said on BBC Radio 4’s Today programme last week, this plan is like a baby to me and I’m the proud dad.

The plan is based on the feedback of nearly one million customers – with seven out of 10 of them approving the final proposals – and what they want us to do. It includes significantly increased investment, which has been prioritised over shareholder dividends, and will support thousands of jobs and regional economic growth.

It’s a plan we can be really proud of, ensuring our service remains affordable for all and improving how we deliver across the board, while keeping average bills flat in real terms. Our bills are already among the lowest in the country, and will stay around that level despite plans to invest heavily and reduce company debt. There is a clear message from our customers that they want us to prioritise higher investment over reducing bills.

However, we recognise that those customers who are struggling to pay need extra help. That is why another key highlight of our plan includes increasing four-fold the number of families we will support with discounts of up to 75 per cent off their bills.

We will also reduce leakage by 15 per cent, with a target to halve it by 2050, cut the number of pollutions we cause by at least 18 per cent, significantly reduce debt, restrict shareholder dividends and invest £2.1 billion in our pipes and IT to improve our operational resilience.We want to invest more in areas where we know it is needed. When I speak to MPs and councillors they tell me “you need to invest more”. We know we need investment, and this plan is all about investment.

Don’t just take my word. John Dickie, the director of policy and strategy at business group, London First said last week that London’s businesses “strongly support Thames Water’s plan”. He understands how it will strengthen the security of supply for the City and Canary Wharf and, by building a new reservoir near Abingdon, for the whole of the South East. Dr Adrian Butler of Imperial College London last week also released a report which warned of droughts in London. We know water shortages would be extremely damaging for a wide range of regional businesses – the cost is unthinkable. But without investment there is a real risk of this becoming reality, and we all saw what happened in Cape Town.

Our plan includes preparing for a strategic reservoir for the South East region of England and exploring the potential of water transfers to mitigate these emerging challenges. Climate change is real. Take last year’s Beast from the East or the recent extremes in Australia and the US Midwest. And with population growth in our region at twice the average for the rest of the country, we must act way ahead of time to ensure we have the capacity to cope. We must invest now.

Instead, from Ofwat’s initial assessment, it appears that we are being asked to reduce our current levels of spending. We are very concerned this will make it harder to meet the needs and expectations of our customers.

What’s next? We’ll now continue to study the feedback in detail and look forward to engaging constructively with Ofwat throughout the ongoing price review process. We need to work together to understand the basis of this initial critique before resubmitting our plan.

I remain really excited about delivering on these proposals on behalf of our customers, and ensuring London and the Thames Valley has the modern and high-quality waste and water network our 15 million residents expect.