High quality and sector-leading across a range of areas

Innovation

Our approach to innovation is deeply embedded throughout the entire organisation and we were the only company to receive the highest possible grade in the sub-test for innovation. We are delivering technology and processes that are not seen elsewhere in the industry.

We have delivered enhanced capabilities through our pioneering Systems Thinking approach, which has delivered both efficiency and improved performance, underpinning the transformation we have delivered in recent years. Our business plan includes significant savings to be delivered from our innovation initiatives.

We are actively working with global innovators, from small start-ups to large, established corporations, reaching far beyond the water sector. Through our Innovation Lab, we have gained unprecedented access to very small businesses with very big ideas – companies across the world that would normally struggle to interact with a large utility.

We will exit the current regulatory period as a high-performing and efficient company, and we have achieved this in part by being at the frontier of innovation and technology.

United Utilities shows the most embedded innovation culture, with an ambitious and sector-leading approach to innovation capability

Source: Ofwat, PR19 IAP – Overview of company categorisation

Affordability and vulnerability

Our ambitious and innovative approach to addressing affordability and vulnerability is seen by Ofwat as sector-leading and we received the highest available grade in this key test area.

Our plan represents a strong value for money proposition, supported by over 80 per cent of customers. Average customer bills are lower with a real reduction of over 10 per cent between 2020 and 2025 supported by targeted financial assistance for those who need it most, while service and environmental quality continue to improve.

Our region is home to some of the most deprived communities in England and Wales. We have worked hard to put in place some of the most innovative and ambitious affordability schemes in the industry, and have taken a lead on transforming the sector's approach to supporting customers in vulnerable circumstances. Our plan will push the industry frontier through innovative affordability schemes, such as our Lowest Bill Guarantee, which gives confidence to customers that a meter would save money, as well as water.

This year we hosted the second North West Affordability Summit, working alongside charities, local authorities and support agencies to find ways to help customers in need. At this second summit we launched the North West Hardship Hub, a one-stop-shop portal for cross-sector information and financial assistance schemes to help the money advice community find the right support for vulnerable people.

United Utilities' plan includes ambitious, innovative and sector-leading proposals to make customers' bills affordable and on providing support for vulnerable customers

Source: Ofwat, PR19 IAP: United Utilities company categorisation

Customer engagement

Our high-quality approach to customer engagement was recognised by Ofwat in its assessment, as was our ambition and innovation in bringing research findings together with other sources of customer data to gauge customer support for our plan. One test area Ofwat asked us to improve was delivering outcomes for customers, with more evidence on some performance commitments and commit to more challenging targets to align with the results of customer feedback and the industry frontier.

Our plan reflected unprecedented engagement with customers, regulators and other stakeholders. Over 140,000 people from all walks of life were involved in informing our plan through over 90 bespoke engagement exercises. We used a range of research techniques, including online surveys, co-creation events and online panels tailored to the target audience. Our use of new techniques, such as immersive research and behavioural economics, to get better insight into customers' preferences and to supplement stated preference approaches, was highlighted by Ofwat as ambitious and innovative. Over 2 million individual data points, from day-to-day interaction with customers, were used to create our plan.

The independent customer challenge group, YourVoice, monitored our performance during the current regulatory period and was deeply involved in challenging our plan for 2020–25.

United Utilities' plan reflects high-quality customer engagement and participation. It uses a range of research techniques . . . tailored to the target audience

Source: Ofwat, PR19 IAP – Overview of company categorisation

Resilience in the round

We have seen record-breaking extremes of weather in the last few years that have tested the industry. Learning from this, we have already made significant progress in enhancing operational resilience, and we are investing an additional £250 million in the current regulatory period to improve this further.

We were assessed as an industry leader in our approach to securing long-term operational, corporate and financial resilience. Our Systems Thinking approach has been fundamental to this assessment, and our robust capital structure, appropriate level of gearing, prudent financial risk management and strong pensions position contribute to the strength of our long-term resilience.

Our plan proposed a major water resilience scheme in Manchester and the Pennines, which will mitigate the most significant operational risk that we face. Ofwat recognises the need for investment to deliver resilience and welcomed the fact that we have embraced the direct procurement approach in our proposal. Given its scale and complexity, this will be addressed outside the constraints of the fast-track timetable.

As a contribution to national resilience, we devised a large-scale north-south water transfer scheme some time ago. Ofwat is proposing to allow up to £25.7 million to further investigate this scheme in collaboration with two other water companies to determine whether it would be a strong value-for-money proposition.

United Utilities has a sector-leading approach to resilience . . . and set the standard for other companies to reach

Source: Ofwat, PR19 IAP – Overview of company categorisation

Aligning risk and return

Our plan provides for a fair balance of risk and return, with rewards available for the delivery of stretching performance. We have a responsible corporate structure aligned with industry-leading environmental performance and strong financial resilience, and we provided strong evidence about the financeability of our proposed business plan.

We committed to provide £71 million of company funding over the period toward financial assistance schemes for customers in need, building on our sector-leading approach to affordability and vulnerability.

In addition, we proposed a clearly defined benefit sharing mechanism through our 'CommUnity Share' scheme, which offers to match benefits for customers if dividends are much higher than assumed in our business plan. We will consult with customers and stakeholders, under the supervision of the independent customer challenge group, YourVoice, about how this funding will be used, with transparency about how this funding would be used for customer benefit.

This builds on the voluntary reinvestment of over £600 million that we have already committed across the current and previous regulatory periods. Ofwat recognises that this approach puts us among the leading companies in terms of voluntary benefit sharing with customers.

United Utilities' plan demonstrates high quality and ambition in its approach to aligning the interests of the company and its investors with customers

Source: Ofwat, PR19 IAP – Summary of test area assessment

Stretching service levels and efficient cost

Driving efficiency is a key focus for management and Ofwat found ours to be one of the most efficient plans when compared with its own view of efficient costs.

Our business plan represented a reduction of over £1 billion in expenditure compared with AMP5 (covering 2010–15), driven by innovation, use of market mechanisms, and the significant improvement that we have made in efficiency in recent years. All three fast-track companies were asked to reduce their cost proposals by about 3 per cent. This compares with the industry average that was 15 per cent above Ofwat's view of efficient costs.

In household retail, we have substantially reduced our cost base in recent years, primarily through tackling levels of household bad debt, and we were pleased to see that our cost projections aligned with Ofwat's own assessment.

There are 14 common Outcome Delivery Incentives (ODIs) for the industry, where targets are based on upper quartile performance expectations, alongside a suite of innovative, company-specific measures. The targets for common ODIs were updated with Ofwat's latest view based on plan submissions, and may change further as the price review process continues for all companies.

United Utilities provides a high-quality plan and made strides towards cost efficiency compared to the last price review

Source: Ofwat, PR19 IAP – Summary of test area assessment