Reading through the Ofwat initial feedback on companies’ PR19 business plans, there are some stand-out issues from our perspective at Servelec Technologies.
The first one has to be the fact that Ofwat has included companies’ planned expenditure to achieve ambitious leakage reductions (15% in most cases) within the costs that are compared with their base cost econometric models. From the way that these models have been developed from historical data, they are suitable for assessing costs to maintain existing levels of service, plus perhaps a ‘normal’ level of improvement in areas such as leakage. It seems clear to us that applying these models to an unprecedented 15% improvement in leakage is stretching them further than is credible. This approach is certain to be challenged by companies, and it will be interesting to see the eventual conclusion.
George Heywood, Technical Director Asset Management at Servelec Technologies said:
“Whatever happens, the 15% target is likely to remain so companies will need to pull all the levers available to them. At Servelec we are working hard to help our customers meet the challenge this will pose; both real-time leak detection via Datective FlowSure, and optimised expenditure planning with PIONEER are sure to play a significant role”.
The second stand-out issue is resilience. Ofwat gave plenty of warning that this would be a key theme at PR19, but the striking thing from the detailed feedback is that no company has completely hit the mark in their resilience approach. The criticism that companies “do not use a systems-based approach to assessing risks to resilience” comes up over and over again in the detailed feedback. Companies such as United Utilities that used our Miser supply system modelling software to assess resilience risk came out better than most, but applying a systems-based approach to “resilience in the round” is still a work in progress for all. Companies have until 22nd August to make a plan to address this, and we will be posting thoughts on the kind of approach that we would recommend over the coming weeks.
The third stand-out item is the £360m funding that Ofwat is including to facilitate the development of strategic water resources options for the South and South East of England. As well as potential major new water resources in the South, the option of national transfers from North to South is firmly on the table.
Marcus Fowler, Technical Director Miser commented:
“We have long considered what could be achieved if our customers’ Miser models were patched together into a nation-wide water grid, and it looks like that day is coming a step nearer. We’re hoping for the chance to get involved in this exciting project”.
The final stand-out issue for us is innovation, and here Ofwat’s comments chime with what we continue to experience as a technology supplier. Ofwat wants companies to be “cooperating more effectively with third parties” and “moving from successful pilots to swiftly embed best practice … into their day to day business”. There are of course many practical challenges when it comes to embedding innovation, but as an industry we need to continue to push the pace.
As a “third party” to the water industry Servelec Technologies stands ready to take up the challenge and to help companies achieve their PR19 goals.
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