Anglian Water has today responded to Ofwat’s initial assessment of its Business Plan for the period from 2020-2025, which it received at the end of January.
In documents submitted to the regulator, Anglian Water has restated its belief that its Plan is the right one for its customers, its region, and the environment, alongside responding to feedback from the regulator.
The company’s response continues to propose a c.30% increase in investment over the prior period. The bulk of the investment relates to work to ensure the region is resilient to the risks of drought and flood, while continuing to make environmental improvements and support sustainable growth in what is one of the UK’s driest yet fastest growing regions.
The recently announced Government ban on metaldehyde has also allowed the company to cut back on investment that previously proposed to treat water containing the pesticide. This means the major increase in investment that is needed can be achieved whilst simultaneously delivering a small reduction in bills (-0.1%), with average household bills falling from £426 in 2020/21 to £421 in 2025/26.
The Plan still proposes no dividends for Anglian Water shareholders throughout the period, unless the company outperforms the regulatory settlement.
Commenting on the response, Peter Simpson, Anglian Water’s Chief Executive, said:
“Given we are proposing to increase our total investment by roughly one third, it’s absolutely right that Ofwat provides strong scrutiny and challenge. Both we and our customers expect nothing less.
“There were many positive elements within Ofwat’s initial feedback on our Plan, not least its acknowledgement that it is built on a customer engagement process that was considered to be the best in the country. This gives us confidence that we are accurately reflecting the needs and priorities of the customers and communities we serve, whilst protecting and enhancing the natural environment. I believe our Plan has only grown in strength as a result of Ofwat’s challenge.
“We strongly believe that the investment we have proposed is essential in our water-scarce and rapidly growing part of the country. The increase in expenditure is necessary and driven by demands related to significant growth, and climate change pressures. Our customers were clear that we should take action to increase resilience to these pressures now, rather than to wait.
“It is also, we believe, the appropriate response to the clear direction that Government has set out in its various policy statements, to the National Infrastructure Commission’s conclusions in its 2018 ‘Preparing for a Drier Future’ report, and to the recent warnings from Sir James Bevan, Chief Executive of the Environment Agency, about the urgency of addressing the growing problem of water scarcity.
“That’s why we’ve redoubled our efforts to show Ofwat how our plan has been constructed, to give robust evidence to support our proposals, and to test again that our customers support the proposals we are making – which they have confirmed they do. Taking all of the issues into account, it is clear that it is essential we move ahead swiftly with this Plan which will provide the right platform for the sustainable future our region needs.”
Ofwat will now assess Anglian Water’s response. It will produce a Draft Determination in July, before Final Determinations are made in December 2019.
Notes to Editors
Anglian Water’s business plan was initially submitted to the regulator in September 2018.
It proposed a record £6.5 billion investment programme, nearly 30% larger than for the last period.
The £6.5 billion programme of investment breaks down into:
• £240 million to drive down consumption, including a further 22% reduction in leakage, going from sector-leading to world-leading levels
• £630 million to make the region resilient to the risks of drought and flooding, nearly eight times larger than the last period
• £783 million to support the environment, more than double the last period
• £650 million to enable sustainable growth through improvements to the water and water recycling networks, backed up by over £3.7 billion of base operating expenditure and maintenance costs
The plan also contained plans to support more than 475,000 customers each year who have affordability and vulnerability issues.
This 30% increase in investment is being delivered alongside what is now a marginal price reduction over the period of 0.1%, with average real bills at the end of the period £5 per year lower than at the start (£426 in 2020/21, to £421 in 2025/26).
Following the proposed metaldehyde ban (announced subsequent to the plan’s initial submission), Anglian Water has removed £65m of associated investment from its plan. This, alongside other minor changes to the proposals and the inclusion of even more recent figures, has resulted in proposed bills now decreasing slightly over the five year period to 2025.