Severn Trent questions whether water industry is sustainable

In a constructive move, Severn Trent has published its views on the challenges facing the water industry. The report called “Changing course” challenges whether its sustainable for water bills to continue to rise – up 45% in real terms since privatization. 

Debt has increased to around £33bn from nothing at privatization and carbon emissions are rising in direct contrast to the Government target of a 34% drop by 2020.Severn Trent questions whether these trends can continue.

The main changes proposed are:

• A review of the current regulatory framework including a more efficient price setting process involving customers, and a more flexible approach to implementing the EU Water Framework Directive
• Greater support for competition and trading within the industry allowing more efficient distribution of water resources, benefiting customers, stakeholders and the environment.
• Greater policy support for energy efficiency which rewards those companies which significantly reduce carbon emissions, and a consenting regime which recognises the trade-off between higher absolute standards and curbing increases in carbon emissions

It is a critical time for everyone on the water industry. It is clear that with bad debts spiraling out of control and carbon emissions rising the current plans are not viable. It is vital to stand back and question the way forward currently proposed. This report is a welcome contribution to the debate and worth reading. 

Benchmarking the water utilities

Photo: Severn Trent Water

Severn Trent Water was named 2009 Utility Company of the Year last night (Monday 14^th December) at the Utility Industry Achievement Awards ceremony in London.

Tony Wray, Chief Executive of Severn Trent, said: “This national award is the latest milestone on Severn Trent’s journey of continuous improvement. It results from a clear and focused programme in which we drive for ever-higher standards to achieve better levels of customer satisfaction and improve our environmental, financial and regulatory performance.

Ofwat has also announced their view of who are the most efficient water and wastewater companies.  For the water service, the most efficient company, the frontier, is Southern Water, closely followed by Portsmouth, South Staffs and Yorkshire Water. For the sewerage service, Thames Water is the frontier company followed by Wessex Water.

These efficiency assessments are important and undoubtedly drive higher performance and stimulate competition. Its always tricky to ensure that like is being compared with like but the methodology has been extensively refined over the last twenty years and is a valuable tool. Benchmarking is a very powerful methodology to identify scope for improvement and a process all businesses should be using.