Dani's dWRMP round-up - are we doing enough for customers??

At Skewb our teams have been analysing the potential impacts of the recent consultations from government and water companies to determine what the future might look like for the next Asset Management Period and beyond.?

We’ll be publishing our insights in a series of short articles over the next few weeks.??

Last week Poppy Durkan provided insights on Regional Planning and this week, Danielle Emerson looks at what companies have set out in their draft Water Resources Management Plans to achieve household and non-household water use reductions.

What are Water Resources Management Plans?

Water companies are required to publish Water Resource Management Plans (WRMPs) every 5 years. The plans set out how companies will manage water resources over the next 25-year planning period to ensure that there is enough water for people and the environment in the face of climate change and population growth. Companies must demonstrate how they will provide a reliable water supply, through combinations of increasing the supply and reducing the demand for water. Draft plans are reviewed by Ofwat and the Environment Agency as well as customers through statutory public consultations.

Since the plans were published at the end of 2022, I’ve read 17 draft WRMPs and have focused my review on companies demand-side options, specifically their plans to reduce household and non-household usage through water efficiency interventions. Water companies are currently consulting on these plans, ahead of final WRMP submission from September 2023 onwards.

What is the level of ambition for household demand reduction?

Most water companies in England have committed to deliver the government’s ambition of 110 litres a day (measured as l/h/d) by 2050 as set out in the 2021 Environment Act1. Three companies have not committed to achieving this target, as Wessex Water focus on delivering the least cost plan to prevent bill impacts, Thames Water claims that there isn’t enough available evidence on the impacts of government-led intervention to meet the ambition and South East Water have set out to deliver 112 l/h/d by 2050. Southern Water are the only company that have committed to go significantly beyond this to reach 100 l/h/d by 2040 through their ambitious Target 100 programme.

Whilst there are varying levels of ambition with PCC targets, it’s clear that there is ambiguity around government-led interventions. Issues such as delayed central timescales, and unclear PCC benefits for the schemes (including white goods labeling and changing housing and WC standards), has created planning uncertainties. Companies have included various assumptions on these initiatives, making it difficult to compare the level of ambition and company-led benefits across the sector. Yorkshire Water for instance will reach 112 l/h/d without, and 106 l/h/d with, government intervention whilst others have included assumptions in their benefit modelling. This will undoubtedly be a challenge for regulators when assessing the plans.

It's also evident that companies have varying levels of supporting data and insight in relation to the benefits of PCC activities. Affinity Water and Thames Water have robust measurement data to draw from current delivery, whereas others have explicitly called out the need for better data on the effectiveness of demand activities to prioritise their PCC interventions.

What PCC activity have companies included?

There is a range of PCC activity proposed for AMP8 and beyond, as companies look to drive down PCC through a suite of interventions shown below.

Comparative summary of key demand activities?

I was impressed by the level of ambition but thought the range of activities were similar to those we’ve seen in previous WRMPs. There’s also a lack of unique ideas, with most companies choosing to adopt the tried and tested approaches of their peers. Key headlines from the plans include:

·???????All companies will be delivering home water efficiency checks in some form, Bristol Water have the latest planned roll-out date of 2030 (AMP9) and some companies such as Hafren Dyfrdwy and South Staffordshire will focus their visits to support customers living in social housing.

·???????The provision of free or subsidised water efficiency devices for customers continue to feature heavily in PCC programmes. Anglian Water have stated that they will continue to drive a step change by introducing new smart devices to target the most water intensive aspects of consumption.

·???????9 out of 17 companies will explore the introduction of new innovative tariffs, with rollout closely aligned to the completion of their smart meter programmes. Southern Water have the most ambitious rollout target of 2037. Others have been more cautious in their plans with some, such as Yorkshire Water and United Utilities discounting them as an option due to misalignment with smart metering programs or fairness concerns. ?

·???????Numerous trials are planned, particularly around testing the feasibility and benefits of rainwater / grey water harvesting solutions and flow regulator devices.

·???????Education programmes being delivered in AMP7 will continue, such as Northumbrian’s ‘Ripple Effect’ programme and Dwr Cymru’s ‘Project Cartref’.

·???????Proactive leak alarms identifying opportunities to repair supply pipe leaks have been proposed by some companies including Severn Trent. Anglian Water have set out to alert customers within three days of identifying a leak on their property whilst South West Water propose to take over ownership of supply pipes from 2025.

·???????Some companies will establish, or continue to deliver, community water efficiency funds. This removes delivery from within direct company control and the challenge for companies will be to ensure that they can demonstrate measured outcomes from the funding.

·???????A few companies mentioned the introduction of digital engagement platforms to support customers to better understand their usage, such as Sutton & East Surrey, Thames Water and Anglian Water.

·???????A number of companies have included targeted support for customers living in social housing, such as home visits and leak repairs or providing dedicated support teams.

·???????Various incentives for house builders to build water efficient properties also featured in the plans.

What is the level of ambition for non-household demand reduction?

The draft plans to reduce non-household demand were much less defined. Few companies referenced the governments ambition to reduce non-household consumption by 9% by 2037 and most companies provided little information on planned activity to reduce non-household demand. Some chose to not include non-household at all in their demand reduction plans.

This is not hugely surprising given that business or public demand hasn’t been included in previous regulatory frameworks. Some companies cited the 2017 non-household retail separation as an additional complexity making it difficult to directly support non-household customers to reduce water use. Affinity Water have stated that market innovation will be required to achieve non-household water efficiency to any significant extent and Yorkshire Water have said that the customer willingness to pay is below the efficient cost to supply these services.

However, there are pockets of planned activity, such as Portsmouth Water’s plans to deliver online water audits for businesses, Affinity Water’s extension of Water Smart Holiday Parks, and Bristol Water’s plans to spend around ￡4m a year to engage their non-household customers. Multiple companies have also set out school retrofit programmes.

Since the draft WRMP’s were published, Ofwat’s final determination outlined a new?common performance commitment for non-household demand which will undoubtedly encourage an enhanced focus in this area. There is likely to be more detailed plans for how all companies will address non-household demand in the final WRMPs which are due to be published later in the year.

My key reflections on the draft WRMPs

·???????Most companies aren't currently effectively measuring the impact of their PCC activity. This has created uncertainty in the savings they will achieve in their household and non-household demand reduction plans. Companies need to get better at tracking benefits from their initiatives.

·???????Smart meter data is often cited as the key to unlocking more personalised customer experiences. However, there is already a wealth of customer usage data from traditional meters that is being grossly underutilised in order to target demand interventions at those who need it most. If companies are not leveraging usage data from 6 monthly meter reads to support their customers, it brings into question how they will manage with 100x the amount of hourly meter read data. Waiting for access to smart meter data to effectively support and communicate with customers is a risky plan given the projected water deficits, particularly in the south and south east of England.

·???????There isn’t enough integration between creating better customer experiences and reducing domestic demand. Few companies have set out plans for how they will better understand customers’ water use to target their water efficiency interventions, and very few mention new digital platforms for engagement. There is a need to think more holistically about water efficiency and customer experience, rather than taking a siloed approach.

·???????Some companies are relying heavily on innovation to reduce household demand through new devices and technology. However, industry track record shows this isn’t an area that is recognised for the adoption of innovative solutions. There are already innovative devices on the market which companies are not embracing. In fact, most of the proposed activity in the draft plans is a continuation of what is already being delivered in AMP7. To meet the ambitions government targets, companies must truly embrace innovation.

·???????A lot of companies, particularly neighbouring firms, are currently delivering or proposing to deliver the same activity. Efficiencies could be achieved through more industry cross-collaboration or even a national approach. Failing that, there needs to be mechanisms in place for companies to learn quickly from one another to avoid duplication of costs, time and effort.

·???????There is a lack of ambition and detail for how companies will reduce non-household demand. This is perhaps unsurprising given the relatively new focus on the area. However, companies will need to test and establish credible delivery plans in the next two years in order to be match ready for delivery in AMP8.

Dani Emerson is a Management Consultant in the Demand Management team at Skewb focused on customer research and insights. Dani and the team have an excellent track record of working with water companies to develop, deliver and measure successful demand management strategies. To speak to her about this topic in more detail, you can connect with her on?LinkedIn.

1 The Welsh government have not stipulated a similar requirement for Hafren Dyfrdwy and Dwr Cymru.