Our approach to planning
Our three business areas – wholesale water, wholesale wastewater, and household retail – align with the distinct price controls in Ofwat's regulatory model. Each area undertakes long, medium and short-term planning.
Long-term (25+ years) planning identifies requirements to cope with challenges and opportunities in line with our strategy. This influences our medium-term planning, which sets out how we will deliver the commitments agreed for each five-year regulatory period.
Short-term (one year) planning enables us to monitor and measure progress towards those regulatory commitments. We retain flexibility in these short-term plans to ensure we meet those commitments in the most effective and efficient way as circumstances change.
25+ years– reflecting the long-term nature of our business, which provides an essential service to customers, and helping us to define what we need to deliver in each five-year regulatory period to ensure long-term resilience
5 years – reflecting the regulatory review periods within which our revenue allowances are set, and helping us move towards achievement of our long-term goals
1 year – reflecting the annual targets we set to help move us towards achievement of our five-year goals
Our plans take into account the internal and external drivers and relationships shown in our business model, and we consult with and consider the interests of all our stakeholders.
Read more about How we create value for stakeholders
We continuously assess our performance against our plans using key performance indicators (KPIs) and other performance metrics of interest to our stakeholders.
Read more about How we measure our performance
Long-term planning (25+ years)
In order to maintain a reliable, high-quality service for customers far into the future, we have to look a long way ahead to anticipate and plan for the changes and core issues that are likely to impact on our activities.
Over the next 25+ years we will face many challenges and opportunities, including:
- Climate change;
- Population growth;
- The UK's exit from the European Union;
- A more open, competitive market;
- More stringent environmental regulations;
- Developments in technology; and
- Combining affordable bills with a modern, responsive service.
There is a section of our website that deals with our future plans, where we examine the challenges ahead and how we will focus our resources and talents in order to meet them.
Read more online at unitedutilities.com/corporate/about-us/our-future-plans
This includes our 25-year Water Resources Management Plan (WRMP). Our current plan was published in 2015 covering the 2015–40 period, and we consulted with stakeholders during the year on our new draft WRMP covering the 2020–45 period. These long-term plans set out the investment needed to ensure we have sufficient water to continue supplying our customers, taking into account the potential impact of climate change.
We create long-term value for stakeholders by:
- Systems Thinking and innovation;
- Long-term planning and responding to challenges and opportunities, including management of water resources;
- Sustainable catchment management;
- Disciplined investment, based on a sustainable whole-life cost modelling approach, to ensure the resilience of our assets and network;
- Investing in our employees to maintain a skilled, healthy and motivated workforce;
- Close collaboration with suppliers; and
- Maintaining a robust and appropriate mix of debt and equity financing.
Medium-term planning (5 years)
Each five-year business plan aims to help us work towards our long-term plans and ultimately to achieve our vision.
We submit a balanced plan to Ofwat in order to agree a regulatory contract that allows for the best overall outcomes for our customers, shareholders and the environment.
Read more about our economic regulation
Once each regulatory contract is set, we create value principally by delivering, or outperforming, that contract by providing the best service to customers, at the lowest sustainable cost, in a responsible manner.
In the 2015–20 period we are delivering:
The best service to customers
- Improving customer service further, fixing issues proactively before they impact customers, reducing the number of complaints, and improving our communication channels
At the lowest sustainable cost
- Minimising our total costs on a sustainable basis, enhancing debt collection activities to deliver a more efficient retail service, raising low-cost finance and managing financial risk to reduce volatility
In a responsible manner
- Meeting regulatory commitments to protect and enhance the environment, increasing our renewable energy generation to reduce our carbon footprint, and providing the best support for vulnerable customers
Our wholesale water team are:
- Maintaining high levels of reliability and water quality, and reducing the number of times customers need to contact us;
- Making better use of technology for remote monitoring and control of assets;
- Maintaining leakage at or below the sustainable economic level;
- Limiting the customer impact of increases in operating costs, such as chemicals and rates, by making cost savings elsewhere through continuous improvement in operational efficiency; and
- Linking 150,000 customers in West Cumbria to Thirlmere reservoir to protect sensitive ecology in their previous water source and ensure a long-term, reliable supply of drinking water.
Our wholesale wastewater team are:
- Making better use of technology, automation and control to drive better customer service at lower costs;
- Reducing the number of customers' properties exposed to sewer flooding, working in partnerships to deliver cost-effective schemes and promoting the use of more sustainable drainage systems;
- Improving bathing water quality and working with other organisations to support them in delivering improvements to our region's beaches;
- Improving water quality in rivers and lakes and engaging with others in our innovative catchment management approach;
- Increasing the production of renewable energy from waste; and
- Constraining the costs of taking responsibility for all private sewers and private pumping stations in the region.
Our household retail team are:
- Continuing to improve the customer experience by being more proactive, anticipating problems before they materialise, and improving our communication channels in line with customer preference;
- Further reducing the number of customer complaints, and resolving them whenever we can to avoid the need for referral to the Consumer Council for Water;
- Reducing the debt burden for customers and the company by engaging with those who are struggling to pay, helping them return to sustained payment behaviour;
- Expanding our assistance offerings, including the social tariff, and contributing to our trust fund, 'Restart', which has proven effective in helping customers in difficulty return to regular payment; and
- Reducing the cost to serve our customers.
Our plans for the 2020–25 period are set out in our business plan submission.
Read more in Our business plan submission for 2020–25
We will extend our integrated water supply network into West Cumbria
We will work to enable future national water trading
We will install additional water meters to achieve coverage of around 75 per cent of households
We will continue to contribute to improving bathing water quality
We will halve the risk of requiring drought permits to augment supply
We will work with others to achieve ‘Blue Flag’ beaches along our coastline
Short-term planning (1 year)
Short-term planning helps us work towards our medium and long-term goals and is important to monitor and assess our progress against these. This approach helps us ensure the long-term resilience and sustainability of our business through short and medium-term goals that we can monitor and measure our progress against.
Before the start of each financial year, we develop a business plan for that year, which is reviewed and approved by the board. This sets our annual targets, which are designed to help deliver further improvements in service delivery and efficiency, and to help move us towards achievement of the five-year goals.
Performance against these annual targets determines annual bonuses for executive directors and employees right through the organisation. To avoid short-term decision-making and ensure management is focused on the long-term performance of the company, as well as these annual targets executive directors are also assessed against three-year performance, covering total shareholder return, sustainable dividends and customer service, through long-term incentive plans. Details of the 2018/19 annual bonus and vested long-term incentive plans for our executive directors are shown in the Annual report on remuneration.
The executive directors hold quarterly business review meetings with senior managers across the business to monitor and assess our performance against our annual targets, helping to ensure that we are on track to deliver our targets for the year, and longer term.
It is vital that we retain flexibility within this short-term planning so we can adapt to meet challenges that may arise during each year, and deliver high-quality and resilient services to customers in the most effective and cost-efficient way possible.
This may involve bringing enhancements forward to deliver improvements for customers early, investing further into the business to maintain service or delaying projects to occur later in the regulatory period in order to prioritise expenditure and allow our people to spend their time dealing with any unexpected challenges that arise.
For example, during 2018/19 we needed to allocate additional resources to deal with the impact of extreme weather events. We entered the year having experienced a deep freeze followed by a rapid thaw, which had an impact on our levels of leakage, and it was not long before we entered a period of intense hot, dry weather that depleted reservoir levels and saw a surge in water demand.
In response, we substantially increased our leak detection teams and allocated resources to bring additional water resources into operation and increase pumping around the region to balance risk and support the worst affected areas. This resulted in us needing to commit to additional expenditure, as detailed in Our performance in 2018/19, but was managed in a way that maintained service for customers and we successfully met our leakage target for the year despite these challenges.
Our approach to resilience
As detailed in Our business plan submission for 2020–25, in its initial assessment of our business plan for 2020–25, Ofwat commended our approach to resilience as sector-leading and said we set the standard for other companies to aspire to.
Innovation is a critical enabler for resilience, and our Systems Thinking approach gives us an advantage. Sensors across our network and remote monitoring and control from the Integrated Control Centre at head office allows us to spot issues and respond proactively before customers are impacted and/or the issue becomes more serious. For example, spotting changes in pressure in the network to identify issues so that we can send a team out to repair them before customers are affected.
As well as our use of innovation, we have enhanced our approach to resilience through lessons learned from previous events. We introduced new incident management procedures with detailed contingency plans and a director-led incident review board in response to events in 2015 and 2016. This was instrumental in the way we coped with extreme weather events in 2018, including both the freeze-thaw and the hot, dry summer.
Read more about how we responded to the challenges of climate-change.
Another development in our approach as a result of lessons learned was the introduction of Priority Services, which offers tailored support to the more vulnerable members of society in emergencies.
The main risks to the resilience of our operational assets are the potential for failure of ageing infrastructure and the challenges presented by predictions for climate change and population growth.
Our business plan submission for 2020–25 contains proposals to address our biggest operational asset risk, the Haweswater Aqueduct that transports water from the Lake District to Greater Manchester. Read more in Our business plan submission for 2020–25.
Our draft 2019 Water Resources Management Plan considered a range of future challenges, including:
- Extreme drought, freeze-thaw, and flooding;
- Climate change (100 scenarios under the latest UK climate projections at the time of creating the plan, UKCP09); and
- Demand (population growth, economic trends and patterns of water use).
We assessed risks over the 2020–45 planning period and looked beyond this into the 2080s. We published two adaptation reports, in 2011 and 2015, which outline our holistic, integrated and partnership approach to a range of short and long-term challenges, including a changing climate.
Read more online at unitedutilities.com/corporate/responsibility/environment/climate-change/
We have some key highly skilled roles, and our talent succession pipeline is critical to the seamless transfer of skills from one generation of employees to another.
We have active graduate and apprenticeship programmes, we have partnered with Teach First, and we are an active participant in the STEM (science, technology, engineering and mathematics) programme encouraging the younger generation to study and pursue careers in these fields.
Corporate and financial resilience
As a public listed company, we consistently adhere to the highest levels of governance, accountability and transparency.
Long-term financial resilience starts with a strong and robust balance sheet and a prudent risk management approach, and we believe we are at the frontier in this respect. We have maintained a responsible level of gearing and well-controlled pension position for many years, and our prudent financial risk management is one of our competitive advantages.
Read more about our competitive advantages