Water Resources Management Plan 2020 to 2080 Our plan to secure water supplies for generations to come through shared know h2ow Water Resources Management Plan 2020 to 2080 What we’ve been doing to date Future challenges Fixing90% of reported leaks 49% population increase in 48 hours Replacing 49.3 million litres of water a day which can’t be used in the future Investing £7 million in detecting leaks because it might not be sustainable 217 million litres of water extra needed a day 90% of customers metered by 2020 Reduce leaks by 43 million litres a day and Reducing water use through efficiency by 2% reduce per capita consumption by 40% by 2080 Climate change

H2O Upgrading water treatment works Our £986 million*, 60 year plan to secure water supplies will provide an additional 267 We will need: million litres of water a day

2020 *Today’s prices

643 million litres Reduce leakage to of water a day Leak reduction 75.1 Ml/d and water efficiency Reduce per capita

H2O consumption to Aylesford Water 139 l/h/d 2025 Treatment Works

654 million litres of water a day Leak reduction and water efficiency Reduce leakage to

H2O Ml/d Water Treatment Works improvements 51.2 Reduce per capita consumption to Water Transfers 118 l/h/d

Arlington Reservoir extension 2045 Broad Oak Reservoir

707 million litres of Reduce leakage to water a day Leak reduction and water efficiency 45.0 Ml/d Reduce per capita 2080 consumption to 814 million 90 l/h/d litres of water a day

= 70 million litres 3

Contents

Executive summary 11

1. Overview 25 1.1 Introduction 25 1.1.1 SEA and HRA 26 1.1.2 Consultation 27 1.1.3 Improving links with our drought plan 27 1.1.4 Water Industry National Environment Programme (WINEP) 28 1.1.5 Links with our business plan 28 1.1.6 Drinking water quality 28 1.1.7 Baseline carbon 29 1.2 Introduction to South East Water 29 1.2.1 History of being separate water companies 30 1.2.2 Our eight water resource zones 30 1.2.3 Flood Risk Management Plan 31 1.3 Challenges and opportunities 31 1.3.1 Area of water stress 31 1.3.2 High reliance on groundwater 32 1.3.3 Biological diversity, cultural heritage and protected landscapes 32 1.3.4 Location within the south east of England – an area with a growing population and housing needs 34 1.3.5 Working with other water companies 34 1.4 What we have achieved since our last plan 34 1.4.1 Metering and water efficiency 35 1.4.2 Per capita consumption 36 1.4.3 Leakage reductions 36 1.4.4 New resource developments 36 1.4.5 Long-term planning 37 1.4.6 Water Industry National Environment Programme 37 Darwell raw water transfer 38 Groundwater abstraction at Greywell 38 1.4.7 Other commitments 39 1.5 Changes to how we prepare a water resources management plan 39 1.6 Problem characterisation 40 1.7 Levels of service 41 1.8 A summary of our overall approach 42

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2. Collaboration and engagement 45 2.1 Introduction 45 2.2 Our approach to engagement 45 2.3 Phase 1: Pre-consultation engagement activities to develop the dWRMP19 47 2.3.1 Engagement with our CCG and customers 48 2.3.2 Engagement with other water companies 50 2.3.3 Engagement with third parties 51 2.3.4 Engagement with third parties 53 2.4 Phase 2: Public consultation 53 2.4.1 New sources of information 53 2.4.2 Our household and vulnerable customers 54 2.4.3 Customer research 55 2.4.4 Our stakeholders 55 2.4.5 Environment Focus Group (EFG) and Customer Challenge Group (CCG) 56 2.4.6 Our colleagues 56 2.4.7 Media relations 56 2.4.8 Our non-household customers 56 2.5 Phase 3: Post-consultation and the statement of response 56 2.5.1 Representations received on our dWRMP19 57 2.6 Conclusion 59

3. How our plan has considered resilience 63 3.1 Defining resilience 63 3.2 Measuring resilience 63 3.3 Customers’ views of resilience 64 3.3.1 Developing a resilient customer approach 65 3.4 Level of service statement 65 3.5 Drought resilience statement 65

4. Baseline supply forecast 67 4.1 Introduction to supply forecast 67 4.2 Our baseline supply forecast 67 4.3 Our supply area 69 4.4 Changes since WRMP14 77 4.5 Water available for use 78 4.6 Baseline deployable output 79 4.7 Process losses, outage, bulk supplies and other changes 79 4.7.1 Process losses 80

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4.7.2 Outage 80 4.7.3 Bulk supplies 80 4.7.4 Other changes 81 4.8 Using our sources in combination (conjunctive use) 81 4.9 An environmentally resilient water supply 82 4.9.1 Climate change 82 4.9.2 Sustainability of current abstractions 84 4.9.3 Water quality 86

5. Baseline demand forecast 89 5.1 Baseline demand forecast 91 5.1.1 Metering impacts 91 5.1.2 Using water wisely: water efficiency 93 5.2 Base year starting position 93 5.3 Forecasting household demand 93 5.3.1 Population, property and occupancy numbers 93 5.3.2 Weather modelling for dry year and peak period 94 5.3.3 Micro-components of water use 95 5.3.4 Trends in water use 96 5.3.5 Household demand compared nationally 97 5.4 Forecasting non-household consumption 98 5.4.1 Approach to forecasting non-household demand 98 5.4.2 Non-household property numbers 100 5.4.3 Non-household peak factors 100 5.4.4 Our non-household demand forecast 100 5.5 Forecasting leakage 100 5.5.1 Current leakage performance 100 5.5.2 Baseline leakage forecast 101 5.6 Impacts of climate change 103 5.7 Other components of demand 103

6. Supply demand balance 105 6.1 Our supply demand balance 105 6.2 Planning horizon 110 6.3 Headroom assessment 110 6.3.1 Calculating target headroom 111 6.3.2 WRMP19 target headroom 111 6.4 Taking account of greater uncertainty 112

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7. Options 115 7.1 The options appraisal process in principle 115 7.1.1 Strategic Environmental Assessment (SEA) for options appraisal 116 7.2 Option types 117 7.2.1 Third party options 119 7.3 The screening process 120 7.3.1 Unconstrained options list 120 7.3.2 Coarse screening of unconstrained options 121 7.3.3 Fine screening of constrained options 123 7.3.4 Environmental and social acceptability of constrained options 126 7.3.5 Promotability of constrained options 126 7.3.6 Deliverability of constrained options 127 7.3.7 Cost of constrained options 128 7.4 Feasible options 128

8. Decision making 131 8.1 Introduction 131 8.2 Constructing an enhanced optimisation model 134 8.3 Developing our dWRMP19 134 8.3.1 Step one: Developing a ‘conventional’ best value plan for dWRMP19 134 8.3.1.1 Planning for drought resilience 135 8.3.1.2 Strategic Environmental Assessment (SEA) – modelling to create a more environmentally resilient preferred plan 135 8.3.1.3 Sustainability reductions 136 8.3.1.4 Customer preference and willingness to pay 136 8.3.1.5 Reducing leakage by 15 per cent by 2025 138 8.3.1.6 Summary of findings from step one 138 8.3.2 Step two: Advanced decision making, consideration of a wider range of future uncertainty 139 8.3.2.1 Recognising uncertainty and ensuring an adaptable plan 140 8.3.2.2 Links to drought plan and more extreme drought events 142 8.3.2.3 Impact of high range climate change scenarios 143 8.3.2.4 Stress-testing of solutions 143 8.3.3 Step three: Comparison of our dWRMP19 with WRSE regional strategy 144 8.4 Developing our WRMP19 144 8.4.1 Step four: Consultation on our dWRMP19 – our approach to incorporating representations 144 8.4.2 Step five: Developing a preferred plan for WRMP19 145 8.4.2.1 Per capita consumption reductions 145

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8.4.2.2 Leakage 146 8.4.2.3 SEA/HRA 147 8.4.2.4 Summary of findings from step five 147 8.4.3 Step six: Comparison of our WRMP19 with the WRSE regional strategy 150 8.4.3.1 Supply-side options 150 8.4.3.2 Regional transfers 150 8.4.3.3 Company transfers 151 8.4.3.4 Demand-side options 151

9. Our preferred plan 153 9.1 Introduction 153 9.2 Our preferred plan 153 9.3 Components of our preferred plan 160 9.3.1 Leakage 160 9.3.2 Water efficiency 162 9.3.3 Groundwater 165 9.3.4 Catchment management 165 9.3.5 Regional transfers 166 9.3.6 Reservoirs 167 9.3.7 Water treatment works 167 9.3.8 Inter-zonal transfers 167 9.3.9 Zonal transfers 168 9.4 Differences between our dWRMP19 and WRMP19 169 9.5 Alternative schemes 171 9.5.1 Water re-use 171 9.5.2 Reservoirs 171 9.6 Building innovation into our preferred plan 172

10. Board assurance and governance 175 10.1 Introduction 175 10.2 Overall plan assurance and governance 175 10.3 WRMP19 programme quality assurance plan 175 10.4 Specific assurance 176 10.4.1 Investment option costs 176 10.4.2 Water resources planning (WRP) tables 177 10.4.3 Concluding statement 178

Glossary 178

Technical appendices 190

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Table of figures Figure 1: Baseline forecasts for supply and demand and our supply demand balance 17 Figure 2: Preferred plan household per capita consumption 19 Figure 3: WRMP19 preferred plan water efficiency options with savings 19 Figure 4: WRMP19 preferred plan leakage options with savings 20 Figure 5: Preferred plan by option type 21 Figure 6: Preferred plan supply demand balance 23 Figure 7: Map of our supply area 29 Figure 8: Map of our water resource zones 30 Figure 9: Map of environmental designations 33 Figure 10: Risk score for each of our water resources zones 40 Figure 11: WRMP19 engagement process 46 Figure 12: Our stakeholders 48 Figure 13: Supply area map showing Local Planning Authority areas 50 Figure 14: Regional map of the WRSE group 52 Figure 15: Acceptability of plan excluding inflation 55 Figure 16: dWRMP19 engagement activities and responses 57 Figure 17: Comparison of engagement figures for dWRMP14 and dWRMP19 58 Figure 18: Components of supply forecast 67 Figure 19: Baseline supply forecast 68 Figure 20: Map of Water Resource Zone 1, Tunbridge Wells 69 Figure 21: Map of Water Resource Zone 2, Haywards Heath 70 Figure 22: Map of Water Resource Zone 3, Eastbourne 71 Figure 23: Map of Water Resource Zone 4, Bracknell 72 Figure 24: Map of Water Resource Zone 5, Farnham 73 Figure 25: Map of Water Resource Zone 6, Maidstone 74 Figure 26: Map of Water Resource Zone 7, Cranbrook 75 Figure 27: Map of Water Resource Zone 8, Ashford 76 Figure 28: Our supply forecast under increasingly severe drought conditions 77 Figure 29: Calculation of WAFU 78 Figure 30: Changes in WAFU in 2020 between WRMP14 and dWRMP19 78 Figure 31: Company bulk supplies at 2020 under baseline and increasingly severe drought conditions 81 Figure 32: Climate change impacts on our sources under annual average and peak conditions 83 Figure 33: Assessed sustainability reductions to our deployable output 85 Figure 34: Components of demand 89 Figure 35: Equation for calculation of total demand 90 Figure 36: Baseline demand forecast 91 Figure 37: Components of demand in 2011/12 and 2017/18 92 Figure 38: Baseline household micro-components 96 southeastwater.co.uk 9

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Figure 39: Baseline per capita consumption 97 Figure 40: Geographical PCC and social grade variation in England 98 Figure 41: Historical leakage levels 101 Figure 42: Effect of changing leakage levels on distribution input 102 Figure 43: Estimated percentage of consumption driven by climate change 103 Figure 44: Baseline supply demand forecast 106 Figure 45: Supply demand balances for Sussex (WRZs 1-3) for average and peak conditions 107 Figure 46: Supply demand balances for Western (WRZs 4-5) for average and peak conditions 108 Figure 47: Supply demand balances for Kent (WRZs 6-8) for average and peak conditions 109 Figure 48: Combinations of possible scenarios 113 Figure 49: Options appraisal process 116 Figure 50: Option types 118 Figure 51: Coarse screening criteria 122 Figure 52: Fine screening criteria 124 Figure 53: Customer order of preference of resilience options 127 Figure 54: Feasible options by type 129 Figure 55: Decision making process 132 Figure 56: Supply and demand measures preferred by our customers 137 Figure 57: Summary of dWRMP model runs to develop best value preferred plan 139 Figure 58: Range of summer peak company-level supply demand balances for generated scenarios 140 Figure 59: Selection of supply-side schemes 141 Figure 60: Summary of Per Capita Consumption targets 145 Figure 61: Summary of WRMP model runs to develop best value preferred plan 148 Figure 62: The yield by option type of our WRMP best value plan 149 Figure 63: Preferred plan supply demand balance 153 Figure 64: A map showing our preferred plan 154 Figure 65: Our preferred plan by water resource zone 156 Figure 66: WRMP19 preferred plan supply side schemes with costs 159 Figure 67: WRMP19 preferred plan leakage options with savings 161 Figure 68: WRMP19 preferred plan water efficiency options with savings 163 Figure 69: Details of water use report, devices and home audit programme during 2020 to 2025 period 164 Figure 70: Summary of our water efficiency programme for the period 2020 to 2025 164 Figure 71: Key changes between options in the dWRMP and WRMP 169

Water Resources Management Plan 2020 to 2080 10

Our plan eliminates the risk of invasive non-native species being transferred between river catchments through raw water transfers

CATCHMENT MANAGEMENT WORKING WITH LANDOWNERS TO PROMOTE BEST PRACTICE PESTICIDE MANAGEMENT TO IMPROVE THE WATER QUALITY OF RIVERS AND GROUNDWATER SOURCES

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Executive summary

Our collaborative preferred plan Our water resources management plan (WRMP19) sets out how we plan to secure water supplies for today’s and tomorrow’s customers, from 2020 to 2080. This plan sets out our estimate of the amount of water we will need, and what we will need to do – where and by when – to meet those future water needs. This plan balances the needs of our customers and the environment as well as the cost of implementing it. It has been developed with our customers, communities, other water providers and stakeholders. It represents a truly twin track and demand management led plan. Over 50 per cent of the new water generated through the plan will come from demand management, with the remainder to be met through the development of a small number of key new water resource schemes. The plan is ambitious and contains stretching, yet feasible, levels of demand management. Having received strong support from stakeholders and our customers. We have a track-record of using innovation and the latest technology to drive down leakage. Between 2010/11 and 2017/18 we have reduced leakage from 95.3 million litres a day (Ml/d) to 87.7 Ml/d – a reduction of eight per cent. In this plan we will reduce leakage by a further 15 per cent by 2025, and we are committed to halving leakage levels by 2050. Engaging with customers we will expect to save 151.6 Ml/d by 2080. This will be achieved by applying innovative behavioural economics techniques as part of our wider water efficiency programme. This will see average customer water use reduce from 150 litres/head/day (l/h/d) in 2017/18 to 139 l/h/d in 2025, 118 l/h/d in 2045 and 90 l/h/d in 2080. Our preferred plan is consistent with regional and national studies and approaches. By collaborating with the Water Resources in the South East (WRSE) Group we have developed a plan that ensures we continue to share resources. We have developed a preferred plan that is resilient to a one in 200 year drought event based on a two dry winter scenario. This means that as a result of this plan we will reduce the risk of customer restrictions and environmental permits being required. Our plan eliminates the risk of invasive non-native species being transferred between river catchments through raw water transfers. Our preferred plan takes account of uncertainty around the impact of necessary abstraction reductions to ensure the water we use is sustainable. This is to be achieved whilst we continue to work with those who also operate within our catchments, such as farmers and landowners, to increase the resilience of our water resources.

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Your water your say Many stakeholders and individuals have contributed significant time towards the development of this plan. We wish to extend our thanks to: the members of our Environmental Scrutiny Group, Customer Challenge Group, the WRSE group for their valued input and challenge; to individuals and stakeholders who met with us during the public consultation; to those customers who were involved with our customer research; and to everyone who took the time to make a formal representation and provide feedback on our plan. Our plan takes into account the challenges and opportunities we face over the next 60 years: • Operating in an area of serious water stress and high environmental sensitivity • future population and housing growth • optimising water sharing with neighbouring companies in the south east of England • high reliance on groundwater resources • uncertainty of climate change impacts • abstraction reductions to ensure our existing water sources are sustainable • resilience and adaptability to future uncertainty • delivering a plan that is affordable to customers • delivering a plan which is environmentally resilient and minimises environmental and social impact The WRMP19 has been developed by listening to customers, stakeholders and regulators and according to the guidelines set out by our environmental and economic regulators. These guidelines require us to forecast the available supply of water, and likely demand for it, across our supply area for the period 2020 to 2045. However we have gone further so that our plan looks forward to 2080. We have done this because our business operates in a water-stressed area and we need to fully investigate, scrutinise and plan future water resource needs – not least because many future options have long lead times. A longer timeframe allows us to more robustly rule in or rule out solutions; and crucially, ensure we have enough time to find alternative solutions to meet any shortfall in water if that becomes necessary. That long-term forecast shows there is insufficient water available to meet demand, and therefore there is a risk of us not meeting our planned levels of service for customers. So we set out in this document the range of demand management measures and new water supply options that could meet that shortfall in available water.

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Our achievements since our last plan, published in 2014 Our last plan was published in June 2014 and covers the 25 year period from 2015 to 2040. In that plan we committed to a range of activities during the 2015 to 2020 period to manage the supply and demand balance. We have made good progress towards completing these and we continue to maintain a secure water supply for our customers. Key highlights of our progress include: • Installing more than 298,000 water meters and providing water efficiency advice and the offer of free water saving devices to all of those customers • developing a “My Water Use Report” through our partnership with Advizzo, an innovative behavioural economics company, which has seen a reduction in consumption of at least two per cent during a pilot of 22,000 customers • despite 47,000 new homes being constructed between 2011/12 and 2016/17 total household demand for water has declined by 21 Ml/d • people are using less water, down from 172 litres per head per day (l/h/d) in 2011/12 to 151 l/h/d in 2016/17 • 90 per cent of reported leaks are now fixed within 48 hours and we have invested an additional £7 million in the very latest technology to help us find more of these smaller leaks in our network (often no greater than a dripping tap) • we committed to reduce leakage to 90.0 Ml/d by 2017/18 but we have gone further and outperformed this as our reported leakage figure for 2017/18 was 87.7 Ml/d • between 2015 and 2020 we will have completed five new resource schemes, including improvements to existing treatment works and building new works • good progress, as expected, against four long-lead schemes including two reservoirs and two water re-use schemes where we have been carrying out investigations and further studies • being on course to deliver our Water Industry National Environment Programme by the agreed dates, including catchment management investigations and biodiversity reports

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Developing our plan with others The success of our progress against WRMP14 is, we believe, underpinned by our continued engagement with customers and stakeholders both as we prepared that plan and as we worked to implement it. With this in mind, we built on the success of our WRMP14 by continuing to work with our Environmental Scrutiny Group, a group of key stakeholders that has advised and challenged us throughout the preparation of WRMP19. This group includes representatives from our regulators, local and national interest groups and local planning authorities. In preparing the WRMP19 we have collaborated with a wide range of customers, stakeholders and regulators. A particular objective of our engagement has been to involve key stakeholders in each step of the WRMP19 preparation process, from the very beginning, and to take on board their views and opinions wherever possible. We are also committed partners in the Water Resources in the South East (WRSE) Group that works for the collective good of customers and the environment in the wider south east region; and are nationally represented in the Water UK water resources long-term planning framework. Cooperating in these groups, as a valued member alongside the other water companies in the region, has helped us identify the optimum solutions that could meet future water needs, provide greater resilience to companies and customers, while taking an appropriate and balanced view on risk. This document outlines our preferred plan and the options which we believe represent the best balance of cost, environmental resilience and deliverability. Making the right choices for our current and future customers and for the wider environment – and how we have developed a balanced plan – has taken into account: • The knowledge and challenge of our Environmental Scrutiny Group (ESG) and Customer Challenge Group (CCG) • the representations and feedback we received from customers, regulators and stakeholders during the public consultation on our dWRMP19 • environmental impact of individual options, and the cumulative impact of the plan as a whole and in combination with other published plans, through a comprehensive Strategic Environmental Assessment • customers’ preferences on resilience, approaches to meeting the shortfall in water, and ranking of demand and supply side options via willingness to pay research and multiple topic specific focus groups • outcomes from the Water UK water resources long-term planning framework and the WRSE Group • a risk assessment of options, and of the plan as a whole, including risks associated with water availability and sustainability; environment and delivery; third parties; resilience; interdependence; and our mix of resources

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Ensuring our plan is resilient In previous plans, we developed our system to be able to continue to supply water through the worst drought that had been previously experienced. We recognise that the future will not necessarily be the same as the past, and so planning for historic events is not always the best, or only way to prepare for the future – we need to be more resilient to more severe droughts. Since WRMP14 there have been several significant changes that affect the way we plan future water resources. We have worked closely with our regulators during the development of new guidelines and methodologies that offer a more flexible, risk-based approach to planning and which forge better links with our drought plan. This step change is important because it allows water companies to develop plans that better reflect the circumstances and challenges of their own supply areas. The new methods allow us to better understand the resilience of our water resources under a wider range of scenarios such as more severe, but plausible droughts, than we have experienced; different population or property growth scenarios; and varying climate change impacts. To embrace these new methods, we have chosen to adopt a longer planning horizon of 60 years. We have also developed more sophisticated demand forecasting tools. For example, we have worked with the Met Office to develop and apply an advanced weather model that allows us a more scientific and evidence-based forecasting of changes in water use under different future weather scenarios. Our plan sets out what we would need to do (and over what period of time) to improve our current levels of resilience from a drought severity of one in 100 years, to achieve a new reference level of resilience equivalent to a one in 200 year drought severity (as proposed by Defra). This change to the level of resilience is intended to ensure that collectively the industry is better prepared for a future drought event that might be worse than any we have previously experienced; for example if the 2010 to 2012 drought event had continued to include a third consecutive dry winter. This in turn will ensure we can reliably operate to our planned level of service across all our water resources zones. During the preparation of this WRMP19 we have consulted with customers on the levels of service they wish us to plan for. This work confirmed that customers support the retention of our existing levels of service. Therefore the WRMP19 continues to be based upon: • Temporary water use restriction: no more than once in 10 years (10 per cent annual probability of occurrence) • non-essential water use restrictions (ordinary drought order): no more than once in 40 years (2.5 per cent annual probability) Our customers support our adoption of one in 200 year levels of resilience in this plan. This means our level of service for severe restrictions i.e. standpipe and rota cuts (emergency drought order) is no more than once in 200 years (0.5 per cent annual probability).

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How much water is available? A baseline forecast of what water is available for use is an important part of our planning process. The forecast considers how this may change over the next 60 years. We have carried out a thorough review of our current resources to determine a robust assessment of how much water they can actually produce, and factored in adjustments for the impacts of climate change, outages, process losses, and abstraction reductions required to protect the environment (referred to as sustainability reductions). To ensure we operate within a resilient environment we have ensured that both sustainable abstraction and the objectives of the River Basin Management Plans are integrated throughout the WRMP process. We have ensured that our plan considers both existing and future water sources to support the achievement of environmental objectives and measures set out in the River Basin Management Plans; and where required we have put forward solutions to remove existing environmental issues caused by abstractions and also to prevent future environmental deterioration. As a result of our review of the supply forecast and the adjustments to ensure our water supply is sourced sustainably, the amount of water available for use reduces over the planning period. Our work for WRMP19 has improved our understanding of our ability to supply, under a range of different drought conditions. We have also taken into account the resilience of our resources and the reliability of supplies, including any we rely on from other water companies within the region, and how the effects of drought and climate change may alter our supplies over the time period of the WRMP19. One of the key objectives of our WRMP19 is to evaluate and reduce demand for water. We will continue to promote conventional water efficiency measures but a step change in approach is needed to drive further significant demand reductions in the future. We believe behavioural economics will play a key role in achieving this significant reduction in water use. This is just one of the ways we are using innovation to reduce demand for water. Other areas of innovation are outlined later in this document. Initiated in 2011, we have continued to successfully roll out our customer metering programme that has now compulsorily installed over 298,000 household meters. In 2011, when our customer metering programme started, around 40 per cent of homes in our area were metered, and by 2020 we expect this to have increased to around 90 per cent. It has resulted in a significant reduction in customer demand over the last 10 years and also helped improve the accuracy of our demand forecast and our understanding of leakage. Our analysis shows this programme has been even more successful than our original forecasts, with the average household reducing their water consumption by 18 per cent (compared to our estimate of 15 per cent) as a result of increased levels of water efficiency take-up and behaviour change amongst metered customers. Fundamental to achieving long term reductions in water use is understanding our customers. We have built on the success of our metering programme and joined forces with behavioural science experts Advizzo to develop new, award winning, innovative approaches that empower customers to better control the water they use and therefore the bill they pay.

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Since November 2016 we have trialled this approach with 22,000 customers and early indications suggest reduction in consumption of at least two per cent could be achievable, equivalent to a per capita consumption reduction of 3 l/h/d. In addition to this, we have continued to drive down leakage from our pipes to below the target we set out in our WRMP14. Our leakage performance is one of the best in England and Wales and we are in the upper performance quartile – meaning that our leakage performance is better than that of 75 per cent of water companies. Furthermore our Infrastructure Leakage Index of 1.27 reinforces our performance and places it as being amongst the best in the world. Building on our strong performance in this area, we continue to look for opportunities to better understand customer consumption and leakage. Our continued improvements in leakage and the success of our water efficiency initiatives have led to a significant and welcome reduction in water use. However, increases in population will have an impact on the overall demand forecast. The population in our supply area is forecast to increase by 49 per cent from a starting position of 2.21 million in 2017/18, to 3.29 million people in 2079/80. There are uncertainties in forecasting the supply and demand for water in the future, especially when making predictions 60 years ahead. To take into account this uncertainty in forecasting both supply and demand, a planning allowance, or ‘target headroom’, is added to the demand forecast. Our calculations of supply and demand, and factoring in inherent uncertainties when looking 60 years ahead, show that, without action, we would have insufficient available water to maintain expected levels of service to customers.

Figure 1: Baseline forecasts for supply and demand and our supply demand balance

Dry year annual average (Ml/d) Summer peak period (Ml/d)

2019/20 2024/25 2044/45 2079/80 2019/20 2024/25 2044/45 2079/80

Supply forecast 629.2 615.8 560.5 557.3 756.2 739.1 683.2 679.5

Demand forecast 522.0 528.5 564.1 633.6 643.3 653.5 707.3 813.9

Target headroom 32.4 39.0 59.8 74.7 36.1 44.2 70.2 86.6

Demand + target 554.4 567.5 623.9 708.2 679.5 697.7 777.4 900.5 headroom Supply demand 74.8 48.3 -63.4 -150.9 76.7 41.4 -94.2 -221.0 balance WRMP14 30.3 13.0 - - -8.2 -37.3 - - supply demand balance

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Developing our plan to meet future water needs To meet that shortfall in water we have carried out a rigorous and transparent appraisal of all the options available. We have developed and integrated WRMP19 with the Strategic Environmental Assessment (SEA) process to provide the best overall outcomes. The range of options considered included ways of reducing and managing demand, alongside options that could increase supplies, and options to make our existing processes and systems more productive. These included options we received from third party organisations to our invitation for suggestions, plus the market-focused OJEU process, as well as new options from neighbouring water companies, our own employees and a renewed look at the options set we considered for WRMP14. Our approach to options appraisal has been collaborative. Our Environmental Scrutiny Group has been fully engaged in our options appraisal process. The group’s involvement started with an extensive list of 510 unconstrained options and, through a succession of screening processes, resulted in a final list of 172 feasible options. From that, we have selected what we believe to be the best value and most cost-effective set of options to meet the supply demand deficit. Between the 23 February 2018 and the 21 May 2018 we undertook an extensive public consultation on our dWRMP19 with customers and stakeholders. As a direct consequence of the representations and feedback we received on our dWRMP19, and supported by further customer research and stakeholder dialogue, we have amended our WRMP19. Our WRMP19 now includes far more ambitious and stretching levels of demand management than included in our WRMP19. It represents a truly twin tack and demand led plan, with over 50 per cent of future new water to be delivered by demand management and the remainder through a small number of key new water supply developments. We believe the WRMP19 will: • Provide us with improved resilience and security of supply, in the face of medium risk and uncertainty • ensure that we can continue to operate in an environmentally and socially sustainable manner • be affordable and that we will be able to achieve the outcomes at an acceptable pace Assessing the risk of our preferred plan has been a key factor in determining the optimum approach we should take, and so our WRMP19 sets out clearly how we have assessed the risk of each option and the overall risk of the plan as a whole to customers, the environment and stakeholders. We believe that has led to a plan that truly reflects a twin track approach – one that will both manage demand for water, while also delivering the new water resources that will still be needed to meet the predicted shortfall in water.

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Our preferred plan Several of the options within our preferred plan come directly from our engagement with third parties, for instance the use of the Aylesford Newsprint, and regional transfers that resulted from our participation in regional and national studies. Other options, such as catchment management rely upon our ability to work with stakeholders, our water efficiency options, reply upon our ability to engage and influence customers. Following the consultation and representations received on our dWRMP19 consultation, we revised our preferred plan to include a more ambitious and stretching programme to reduce per capita consumption, from current position of 150 l/h/d in 2017/18 to 139 l/h/d by 2025 and 118 l/h/d by 2045 and 90 l/h/d by 2080, as shown in Figure 2 below.

Figure 2: Preferred plan household per capita consumption

Litres per head per day (l/h/day) 2019/20 2024/25 2044/45 2079/80 Dry year annual average 148.6 138.6 119.0 90.1 Summer peak period 197.7 187.0 168.2 142.0

We have also updated our plan to reduce leakage by 15 per cent by 2025 and 50 per cent by 2050.

For the 2020 to 2025 period Demand management Our preferred plan for the period 2020 to 2025 includes a mix of demand management initiatives (leakage and water efficiency) that provides an additional 26.6 Ml/d above the assumptions already made in our baseline activities. Reducing demand by this amount requires the use of new approaches and technology and there is uncertainty on the level of savings that can be achieved. We have been discussing this with regulators and need to ensure that while we aim to meet these stretching targets, we do not risk levels of service. Helping our customers to reduce their per capita consumption in line with our projections Figure 3 below will be challenging, yet feasible. Our preferred plan includes a very ambitious water efficiency programme designed to help deliver these challenging per capita consumption reductions by our customers. The programme includes further integrating our award winning customer engagement approach developed using behavioural science. Through rolling this approach out our across the whole company we expect to achieve much lower customer demand for water than we see today.

Figure 3: WRMP19 preferred plan water efficiency options with savings

Water efficiency saving 2019/20 2024/25 2044/45 2079/80 Ml/d saving (cumulative) 0.0 14.0 56.1 151.6

Since 2010 we have set out to reduce leakage and we have met and beaten our targets each year, driving our total leakage down from 95.3 Ml/d in 2010/11 to 87.7 Ml/d in 2017/18 – a total reduction of over eight per cent, and representing upper quartile performance across the industry.

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This concerted effort to reduce leakage also supports the preferences of our customers who indicated that of all the options available, they would be most willing to pay for leakage reduction. Reducing leakage however is difficult as most of the leaks that occur are small and not visible, but our technological and system advances have allowed us to find more, smaller invisible leaks. That’s why for WRMP19 we continue to take a phased approach to reducing leakage that reflects our excellent starting position and allows for the timely identification, testing and development of more new technology and innovative practices that will support these reductions. In our dWRMP19 we set out plans to reduce leakage by four per cent between 2020 and 2025, which was an economic optimal reduction. However we received representations from stakeholders and customers saying a four per cent reduction was not challenging enough, so we have reviewed our approach. The final selection of leakage reduction options has been guided by the expectation of our regulators and the government, the preferences and support of our customers, and further research of willingness to pay. On this basis, we have set ourselves a more challenging target of reducing leakage by 15 per cent in the same period. Beyond 2025 we have included additional reductions, so by 2050 we expect leakage to be halved from the current level.

Figure 4: WRMP19 preferred plan leakage options with savings

Leakage reductions 2019/20 2024/25 2044/45 2079/80

Ml/d Reduction cumulative 0.0 12.6 36.5 42.7

Ml/d Total leakage cumulative 87.7 75.1 51.1 45.0

On their own, our demand management initiatives will be insufficient to ensure supplies can meet our predictions for demand. Therefore our preferred plan for the period 2020 to 2025 also includes a new water supply option in our WRZ6 (Maidstone), to construct a new water treatment works at the former Aylesford Newsprint site via a new licence trade arrangement. This will provide an additional 18.2 Ml/d. This option has come from our successful engagement and licence trading with third parties.

For the 2025 to 2045 period During the period 2025 to 2045 we will continue delivery of our ambitious demand management programme to achieve further leakage and water efficiency savings of 66.7 Ml/d. However, by this stage we will need the following additional water supply options to meet the increase in shortfall of our supply demand balance and continue to deliver good performance in terms of resilience: • Developing and improving an existing water treatment works at Bewl WTW Kent, with transfer to our WRZ3 (8 Ml/d) • developing regional water transfer schemes: importing water from SES Water to WRZ2 (Haywards Heath) (9 Ml/d) and exporting water from WRZ8 (Ashford) to Southern Water (2 Ml/d)

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• carrying out a targeted catchment management programme at Woodgarston (3.0 Ml/d) and Pembury (0.3 Ml/d) • building a new reservoir at Broad Oak, Kent (19.6 Ml/d) • building a new reservoir adjacent to our existing Arlington Reservoir, East Sussex, (16.1 Ml/d) • developing two new company transfers between our water resource zones, and three improvement schemes to our pipe network to improve the connectivity within our supply area For the 2045 to 2080 period For the 2045 to 2080 period During the period 2045 to 2080 we will continue delivery of our ambitious demand management programme to achieve further leakage and water efficiency savings of 101.5 Ml/d. During this time we will also develop a new company transfer between our water resource zones.

Addressing resilience in our preferred plan In this plan we propose further measures to enhance the level of resilience to ensure our supplies are capable of meeting Defra’s proposed one in 200 year reference level of resilience. Our assessments show we can achieve this at no additional cost to our customers.

Figure 5: Preferred plan by option type

(Ml/d) Summer peak / one in 200 drought Option type by 2025 by 2030 by 2045 by 2080

Leakage reductions 12.6 17.9 36.5 42.7

Water efficiency 14.0 24.2 56.1 151.6

Groundwater 18.2 18.2 21.5 21.5

Surface water 0.0 0.0 35.7 35.7

Water treatment 0.0 8.0 8.0 8.0

Effluent re-use 0.0 0.0 0.0 0.0

Desalination 0.0 0.0 0.0 0.0

Regional transfers 0.0 -2.0 7.0 7.0

Totals 44.8 66.3 164.8 266.5

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In line with the guidelines we have made an estimate of the cost attached to our preferred plan. Over the 60 year planning period we estimate that the current cost of our plan will be £986.2m in net present value (NPV) terms and will increase the supply of water by 266.5 Ml/d.

Innovation Planning for a 60 year time horizon allows us sufficient time to look at the challenges that lie ahead and drive more innovative solutions to meet these challenges. Some of these challenges we have developed sufficient knowledge about to have confidence that we can include them within the WRMP19; while others need more time to be developed. Examples of innovation already included within this plan, as approaches or selected options include: • Demand management, where we have used behavioural science techniques to encourage customers to reduce demand following comparisons with their neighbours • smart network technology as part of our plan to reduce leakage both on the customers and company pipework • catchment management techniques to restore or avoid lost deployable output caused by pollution • development of third party options via a thorough licence holder engagement approach • use of the industry-leading Environmental Scrutiny Group to provide challenge to both the creation and delivery of the WRMP via an expert group of informed stakeholders • taken a regional approach to agree outcomes from the WRSE and Water UK National Water Resources Long Term Planning Framework • new schemes that arise from the market mechanisms and Bid Assessment Framework approach • integrated planning with other companies

Innovative techniques we are planning to develop between now and 2025: • Collaborating with the University of Antwerp, South East Rivers Trust, South West Rivers Trust, Environment Agency, Natural England and Affinity Water for a study to alter ecosystems to prevent groundwater flooding and improve groundwater recharge • using artificial intelligence to understand more about customer consumption, in particular during the hot dry summer of 2018 • extending the behavioural science approach to engage with customers to reduce groundwater contamination, reduce internal leakage and improve the uptake of water efficiency devices – a concept we describe as the `resilient customer’ approach • using tariffs combined with both behavioural science and smart networks to drive further demand reductions, following on from our successful metering programme • collaborating with the supply chain and research establishments to provide improvements to, or alternatives for, the less environmentally-friendly desalination and effluent reuse options • interacting with the market mechanisms that we help design to promote more efficient water sharing between licence holders • investigating and participating in the Direct Procurement approach to produce better market- driven solutions to balance supply and demand • using analytics forums such as the hAQUAthon we sponsored in 2017 where we seek to bring together experts in leakage, process and analytics to derive new solutions to old problems using big data

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Figure 6: Preferred plan supply demand balance

Dry year annual average (Ml/d) Summer peak period (Ml/d)

2019/20 2024/25 2044/45 2079/80 2019/20 2024/25 2044/45 2079/80

Baseline supply 629.2 615.8 560.5 537.3 756.2 739.1 683.2 679.5 forecast Baseline demand 522.0 528.5 564.1 633.6 643.3 653.5 707.3 813.9 forecast Baseline target 32.4 39.0 59.8 74.7 36.1 44.2 70.2 86.6 headroom Demand + target 554.4 567.5 623.9 708.2 679.5 697.7 777.4 900.5 headroom Baseline supply 74.8 48.3 -63.4 -150.9 76.7 41.4 -94.2 -221.0 demand balance Preferred plan 0.0 44.0 143.0 244.6 0.0 44.8 164.8 266.5 schemes Final supply 74.8 92.3 79.6 93.7 76.7 86.2 70.6 45.5 demand balance

Links to our business plan and company assurance plan Water Resources elements of our business plan are informed by the 2020 to 2025 period within our WRMP19. We have managed both the WRMP19 and business plan as one integrated programme to ensure that key elements are consistent. For example we want to make sure that the resilient approach we have adopted in our WRMP19 feeds into our next business plan. For WRMP19 we have adopted a comprehensive quality assurance process consistent with our company monitoring framework which we follow for all of our regulatory reporting. Our company monitoring framework is assessed by Ofwat and we are one of just three companies who are self-assured. Our assurance process has been tailored to meet the requirements in Section 3 of the water resources management plan (England) Direction 2017 (with reference to the relevant sections of the Water Industry Act 1991) with a particular focus on the challenges the WRMP19 is addressing.

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The objective of the SEA process is to provide a high level of protection for the environment

SARAH FROM BUGLIFE THE ENDANGERED WART-BITER CRICKET HAS BEEN REINTRODUCED AT DEEP DEAN IN EAST SUSSEX WHERE WE OWN 63 HECTARES OF LAND, CAREFULLY MANAGED TO IMPROVE THE BIODIVERSITY AND PROTECT THE WATER QUALITY IN THE AQUIFERS BELOW

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1. Overview

1.1 Introduction In this section we set out the background to the water resources management plan (WRMP19), how it links to other plans, and explain where the technical information can be found to support the decisions we have made when preparing our WRMP19. This WRMP19 updates and, in its final form, will replace our current water resources management plan (WRMP14), which was approved in June 2014. The WRMP19 has been prepared to meet the statutory requirements of section 37A to 37D of the Water Industry Act 1991 (as amended by the Water Act 2003) and the Water Resources Management Plan Direction 2016; which require each water company to prepare a water resources management plan showing how it intends to manage and develop water resources to “maintain an efficient and economical system of water supply within its area”. The WRMP19 sets out our estimate of the amount of water required and the measures we consider necessary to maintain the supply demand balance over the period covered by the plan, from 2020 to 2080. In so doing, it explains how we have taken into account the implications of climate change, sustainable abstractions, future population and housing growth, and other factors that affect long term future uncertainty. It shows how we have considered the cumulative impacts of our plan and other plans. It also shows how we have tested levels of resilience to a range of historical drought events and also those more extreme than seen in the historical record. In this context we considered the nature and frequency of measures such as water use restrictions that we would expect to impose during a drought situation. In preparing the WRMP19 we have followed the Guiding Principles for Water Resources Planning (Department for Environment, Food & Rural Affairs (Defra), May 2016) and Final Water Resources Planning Guideline (Environment Agency, and Natural Resources Wales, May 2016) and Water Industry Strategic Environmental Requirements (WISER, 2017), referred to as the ‘guidelines’. In that context we have ensured appropriate use was made of evaluating the role in the WRMP19 of third party options, the findings and recommendations from the Water Resources Long Term Planning Framework collaborative work, and the findings from the Water Resources in the South East (WRSE) Group regional modelling. Our WRMP19 includes changes to information that have occurred since our dWRMP19 was published. It also incorporates the views of customers, stakeholders and regulators, expressed before, during and following a formal 12 week consultation period. As is evident later in the plan, the views we received from our customers and stakeholders have been integral in shaping and influencing the decisions we have taken and the preferred plan we have adopted in this WRMP19. As well as listening to and considering the consultation feedback received, we will continue to work with customers, stakeholders and regulators to ensure the actions and options we implement as part of this WRMP19 take full account of their views.

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1.1.1 SEA and HRA We are required to undertake a strategic environmental assessment (SEA) for our WRMP19 as it falls within the scope of the Environmental Assessment of Plans and Programmes Regulations 2004. The objective of the SEA process is to provide a high level of protection for the environment and ensure that the environment is considered at all stages of the preparation of our WRMP19. To ensure that the environment is fully integrated into our dWRMP19 we have: • Assessed the effects of the plan on European and internationally protected nature conservation sites under the Habitats Regulations 2004 • sought to optimise our options to minimise the environmental impact and ensure our plan is achievable • embedded sustainable abstraction principles, the objectives of River Basin Management Plan and our biodiversity duties within the SEA process • considered the environmental and social costs and benefits of all the options, including regional options • integrated the SEA process throughout the plan development to achieve an environmentally resilient WRMP A resilient environment is one that is able to adapt to, absorb and recover from disturbance events by resisting damage and recovering quickly, and is able to adapt to long-term changes. Our aim, in relation to water abstraction from our sources, is to move away from maximum abstraction yield, to managing our abstractions so they are ecologically resilient and can recover quickly when faced with disturbance events such as drought and flood. Our WRMP19 has taken into account the sustainability of our abstractions now and in the future and considered the best options for improving resilience. The framework of our SEA has enabled us to consider how our WRMP19 improves the future environmental resilience of our water resources while also influencing the development of our WRMP19. It has achieved this by considering: • Current abstractions that are likely to be impacted by climate change • current abstractions with the potential to deteriorate the condition of water bodies (commonly known as Water Framework Directive deterioration) • deteriorating water quality trends of current sources and consideration of how we can work with land managers to halt these declines and, in the longer term, reverse them (commonly known as catchment management investigations and interventions) • long-term impact of climatic variation and its impact on source yields and future sustainability • how the decline in biodiversity can be halted and reversed to provide ecological resilience which is more adaptable to climatic variation • the cumulative impact of regional water resource development and how we can work and operate with our neighbouring water companies to ensure resilient future water resources Our SEA has helped us to consider these risks and impacts and has enabled us to influence the development of a more environmentally resilient preferred plan.

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The steps taken to do this are explained further in our SEA, and in Section 8 of this WRMP19. During May 2017 we consulted on the scope of the SEA to accompany our dWRMP19 and the feedback received at that time has been used since to help shape our WRMP19. The consultation aimed to provide stakeholders with an early opportunity to provide feedback on our approach to how we will assess the environmental impacts of our plan. Between February and May 2018 we consulted on our HRA and our SEA as part of the dWRMP19 public consultation. More recently, we have revised our HRA and our SEA to reflect comments received during the public consultation, and to ensure acceptance of the preferred plan options included in our WRMP19, from the environmental performance perspective. The approach proposed in the scoping report was positively received. Stakeholders emphasised the importance of assessing the WRMP’s contribution to environmental objectives, particularly for groundwater and surface water bodies, water-dependent habitats and species, and ensuring consideration of marine protected areas.

1.1.2 Consultation Following extensive pre-consultation and approval by Defra, our dWRMP19 was published on our website alongside all tables and appendices on 23 February 2018. This triggered the start of the statutory consultation which ran for a 12 week period, closing on 21 May 2018. As per the guidance produced by Defra on security-sensitive information we showed only the general location of individual sites and sources. We also respected the confidentiality of any commercially sensitive information that was provided. After the conclusion of the consultation period we prepared a statement of response (SoR) that has been published alongside the rWRMP19 explaining how we have taken account of the issues raised by consultees. Having published the rWRMP19, the next stage in the statutory process was for the Secretary of State to review the SoR and rWRMP19 and either: agree to the rWRMP19; direct us to make changes before it is published; or announce a public hearing or inquiry into any outstanding issues. On 23rd July 2019 we received a letter form the Secretary of State confirming that we have permission to publish our WRMP19.

1.1.3 Improving links with our drought plan We have a statutory duty to prepare and maintain a drought plan that follows Environment Agency’s guidelines. We published our drought plan in May 2019. It explains how we will manage water resources before, during and after a drought situation. In our drought plan we explain how we intend to manage supplies under drought conditions. We considered historical droughts and also more extreme but nonetheless plausible droughts. We worked with other water companies and considered measures to influence and restrict the demand for water, for example through water efficiency campaigns, reducing leakage further or imposing temporary restrictions on water use.

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The drought plan includes measures to temporarily increase supply during a drought under drought permits and orders. In developing this WRMP19 we have considered whether we would be over-reliant on these measures for more extreme droughts or whether the levels of resilience and preferred options included in our WRMP19 make us more resilient to more extreme droughts. Further detail is included in Sections 3, 4 and 8.

1.1.4 Water Industry National Environment Programme (WINEP) The Water Industry National Environment Programme (WINEP) is a statutory programme developed by the Environment Agency and Natural England. The programme is driven, in the main, by environmental legislation and guidance contained in Water Industry Strategic Environmental Requirements (WISER). WINEP3 was issued in March 2018. This is the final version and our WRMP19 is aligned to it. The WINEP consists of many different types of environmental improvement schemes. Those relevant to WRMP19 include: • Ground and surface water catchment management • work to ensure our abstractions are sustainable now and in the future (Restoring Sustainable Abstraction – RSA) • biodiversity (Natural Environment Rural Communities Act – NERC) and invasive non-native species (INNS) programmes The findings of the RSA programme have contributed to our understanding of the amount of water we can sustainably abstract and helped us to develop a more sustainable and resilient WRMP19.

1.1.5 Links with our business plan Although water resources management planning is a statutory process and an independent regulatory requirement from the business plan, outputs from it will form a key component of our business plan, published in September 2018. This is shown in Figure 11 in Section 2.2. We have managed the WRMP19 and business plan as one integrated programme to ensure that key elements of each these plans are consistent. For example, we wanted to make sure that the resilient approach to drought events adopted in our WRMP19 fed into our business plan and was integrated with business plan’s resilience strategy to improve resilience to other non-drought events. For WRMP19 we have adopted a comprehensive quality assurance process consistent with that applied to the business plan and our wider company monitoring framework that we follow for all of our statutory reporting.

1.1.6 Drinking water quality We confirm that our WRMP19 is compliant with the drinking water quality requirements as set out by the Drinking Water Inspectorate (DWI) and that all future schemes will be delivered in a manner to meet existing and any future requirements. In addition our WINEP3 programme aims to improve raw water quality in key catchments.

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1.1.7 Baseline carbon During the development of our business plan, we have undertaken a review of the greenhouse gas emissions from our current operations. Details of our emissions for the period 2015/16 to 2019/20 are provided below. Section 9 provides details of greenhouse gas emissions from our future water operations. This is in compliance with WRMP Direction 3(d).

Units 2015/16 2016/17 2017/18 2018/19 2019/20

Greenhouse gas emissions ktCO2e 68 63 54 43 35 from water operations

1.2 Introduction to South East Water Our water supply area covers an area of some 5,657 km2 across parts of Kent, Sussex, Surrey, Berkshire and Hampshire. Within this area we provide high quality drinking water to a population of around 2.2 million customers. In 2019/20, we forecast that we will supply approximately 522 million litres of water every day (Ml/d) to meet demand, increasing rapidly to 643 million litres a day during the hotter and drier periods. Within our supply area, Southern Water and Thames Water provide a separate service for the removal and treatment of wastewater.

Figure 7: Map of our supply area

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Our water comes from: • 73 per cent from groundwater sourced from more than 250 boreholes and wells • 19 per cent from surface water including six river intakes and three surface water reservoirs • eight per cent from neighbouring water companies; through our regional water grid we receive water from sources owned and operated by Affinity Water and Southern Water Water is pumped from these sources, treated and distributed to our customers through more than 14,780 km of water mains.

1.2.1 History of being separate water companies The South East Water company that exists today has formed through time by the amalgamation of numerous smaller local water companies, each with its own local water supply networks. As a consequence, our long-term planning continues to support schemes that improve interconnectivity between these different water supply areas and networks, so that we make best use of existing and new water resources and improve our levels of resilience.

1.2.2 Our eight water resource zones Our supply area is divided into eight water resource zones (WRZ), with two zones making up our western region and six zones in the eastern region.

Figure 8: Map of our water resource zones

Maidenhead Greater London Reading Herne Bay Bracknell Newbury Wokingham

Snodland Canterbury WRZ4 Frimley Sevenoaks WRZ6 H.O Reigate Aldershot Maidstone WRZ8 Basingstoke Guildford WRZ1 Farnham Ashford Tunbridge Wells Dover WRZ5 WRZ7 Folkestone Horsham Cranbrook Winchester WRZ2 Haywards Heath Petersfield Heathfield Burgess Hill WRZ3

Lewes Hastings Chichester Bexhill Brighton Eastbourne Portsmouth

Our water resource zones are arranged in three areas: • Sussex: WRZs 1 (Tunbridge Wells), 2 (Haywards Heath) and 3 (Eastbourne) • West: WRZs 4 (Bracknell) and 5 (Farnham) • Kent: WRZs 6 (Maidstone), 7 (Cranbrook) and 8 (Ashford)

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These zones are the basic framework we use for planning water resources, managing supply and demand, and identifying investment priorities. The boundary of each zone describes an area within which the supply and demand for water is largely self-contained. All our customers within a single zone – while not necessarily directly connected to all the sources available – share the same level of service and experience the same risk of a water supply failure in the event of a drought. We have undertaken separate assessments of the integrity of each zone in line with guidance from the Environment Agency1. We reached the overall conclusion that the approach we have taken is appropriate; that the zones defined within the WRMP19 are fit for purpose; and that each zone functions in compliance with the guidance. Appendix 1A provides the detailed evidence that supports our conclusion.

1.2.3 Flood Risk Management Plan A national flood risk resilience (NFRR) review was carried out by the UK Government in 2016 to assess the resilience of local critical infrastructure to flood events. Within the water sector the initial focus of the NFRR review was on clean water assets serving more than 25,000 people, however this has since been extended to cover all relevant water assets (clean and waste) serving more than 10,000 people. Following the outcomes from the NFRR review, we will complete further flood prevention work at 92 of our production sites and pumping stations during the period 2020 to 2025. This work will ensure our water assets are resilient to one in 1,000 year flood events, reducing the risk of loss of supply by our customers during such extreme floods events. All work carried out as a result of this WRMP19 will be in line with our flood risk management plan.

1.3 Challenges and opportunities Achieving our objectives requires us to acknowledge opportunities and address significant challenges including those that are unique to our supply area. As well as the challenges and opportunities we understand, there are also some factors that we know are likely to have an impact but we are unable to currently quantify the extent of that impact, such as abstraction reform and Brexit.

1.3.1 Area of water stress We operate in an area of serious water stress. This was designated by Defra in 2007 and is defined by the Environment Agency as an area where current (or future) household demand for water is a high proportion of the current effective rainfall that is available to meet that demand. The serious water stress designation allowed us to implement a compulsory metering programme that commenced in 2011. As a result of that programme it is expected that circa 90 per cent of households that we serve will be metered by 2019/20.

1 Water Resource Zone Integrity. Supporting document for the Water Resource Management Plan Guidelines. Environment Agency, July 2016

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1.3.2 High reliance on groundwater Around 73 per cent of our supplies come from underground aquifers, primarily the chalk and greensand. Our reliance on the regular replenishment of groundwater presents us with challenges during extended periods of low rainfall. The Environment Agency has identified that some of these aquifers are over-abstracted and failing to meet the requirements of the Water Framework Directive. This in turn means that the sustainability of some of these abstractions is uncertain. The dry weather during 2010 through to early 2012 saw some of our groundwater resources recording new historical low levels. This improved our understanding of how our resources behave under consecutive dry winter conditions. It also underlined for us the importance of improving the levels of resilience in this WRMP19 through: • Better assessment of extreme drought events (in particular those more severe than observed in the historical record) • improving our network connectivity to make best use of our most resilient sources of supply • developing a more diverse mix of sources of supply to reduce any over-reliance on one particular type of source

1.3.3 Biological diversity, cultural heritage and protected landscapes As shown in Figure 9, our supply area is unusually rich in biological diversity, cultural heritage and protected landscapes: • One world heritage site (Canterbury Cathedral) • 44 per cent of our supply area lies within a landscape designation (the national average is 24 per cent) • 196 sites of special scientific interest (SSSI) • 17 special areas of conservation • two marine special areas of conservation • nine special protection areas • six Ramsar sites as classified under the convention on wetlands of international importance • 11 national nature reserves • four marine conservation zones • 593 scheduled monuments • 111 registered parks and gardens • four marine special protection areas The south east is also the most wooded area in England, with large swathes of it designated as ancient woodland. This, and the warmer climate we experience, enables many rare and protected habitats and species to flourish, resulting in a complex ecological mosaic. Our WRMP19 takes into account the impact of our current and future abstractions and planned schemes to ensure that new projects do not have unacceptable environmental impacts.

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Figure 9: Map of environmental designations

The condition of the water environment is key to the maintenance and improvement of the nature conservation value of most European sites and SSSIs, and it also makes a highly important contribution to the landscape of the area. The existence of so many nationally significant designations presents us with challenges, but there are also opportunities to contribute to a better environment. National policies for development in or close to national parks, areas of outstanding natural beauty (AONBs) and SSSIs, allow major infrastructure development only where it can be demonstrated that there is a lack of alternatives. This is particularly relevant in our area given the high level of landscape and nature conservation designations in our supply area. The nature of the natural water environment in our supply area is such that adverse effects may result from works or operations that take place some distance away. This means the implications for us, as a result of the many designations within our area, should not be taken as being only restricted to those areas identified in Figure 9. We have ensured that our SEA process has influenced and is fully integrated with the WRMP19 process and plan. In January 2018, Defra published its 25 Year Environment Plan which sets out its ambition for clean plentiful water, using and managing land sustainably, and focusing on woodland to maximise its many benefits. This plan lays out the principle of environmental net gain. The net gain of each of the schemes is provided in the option dossiers. We have also set out our approach to environmental net gain in Appendix 10 of our business plan. Working with other organisations across the water sector, we are supporting discussions around the development of a mechanism to apply this principle. Once this mechanism has been agreed, we will look at how most appropriately to embed this principle of environmental net gain into our water resources planning process going forward i.e. to support the next round of plan updates, expected to be dWRMP24.

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1.3.4 Location within the south east of England – an area with a growing population and housing needs The environmental challenge is compounded by the fact that the south east of England as a whole is officially identified as an area of significant population and economic growth. The population and the number of properties are set to increase during the lifetime of this WRMP19, and we need to take account of this growth. To assist with the drafting of our WRMP19, we engaged independent experts to collate information on population changes, house building and to provide a range of future growth forecasts. This work, done jointly with other water companies in the south east, gave us up-to-date estimates for our WRMP19 that are consistent across the region. We describe this further in Section 5.3. We have also engaged pro-actively with the local planning authorities in our supply area to better understand their own growth forecasts. We received information from 94 per cent of planning departments in our area for this WRMP19 compared to just under 60 per cent in WRMP14. Using the data supplied by the local planning authorities across our region, we have developed plan-based estimates of household and population projections to assist with our demand forecasting work. We have used both high and low forecasts to undertake scenario analysis to test our WRMP19 against a range of uncertain futures. The studies described above confirm that around 26,000 more people now live in our supply area than we had forecast at the time of WRMP14. This trend of accelerated population growth is likely to increase, which will drive demand for additional water. Section 5 includes an explanation of how we have used the independent experts’ reports and data from other sources to produce a robust range of demand forecasts.

1.3.5 Working with other water companies We are unique by having the highest number of neighbouring water companies of any UK water company, and we have the highest percentage of imports of treated water. Collaborative working through WRSE and the Water UK Water Resources Long Term Planning Framework continues to inform and support our long-term planning and management of water resources, and helps us to achieve the most sustainable and cost efficient water resources strategy. We have sought to closely align this WRMP19 with the WRSE regional strategy and the outcomes of the national study. Section 8 provides further details of this work.

1.4 What we have achieved since our last plan In our WRMP14 we committed to a range of activities during the period 2015 to 2020 to maintain the supply demand balance. We summarise the progress made below in the following sections.

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1.4.1 Metering and water efficiency We will have installed water meters to circa 90 per cent of our household customers by 2019/20. Since the customer metering programme started in 2011 we have installed over 298,000 meters. During the rollout of our metering programme we have provided customers with water use information, demand management advice, and offered free water saving devices. We have also repaired customers’ supply pipes and replaced or repaired plumbing in more than 18,000 properties. Our experience during the metering programme has shown that customers have diverse attitudes to water and varying drivers that prompt them to save water. We have carried out a mixture of innovative segmentation research, qualitative and quantitative, to understand what those different attitudes and drivers are. Understanding the differing attitudes and views of our customers will allow us to improve the effectiveness of the information we provide them. We have partnered with Advizzo, an innovative behavioural economics company, to pilot a new approach to demand management based on ‘nudge theory’. This enables customers to compare their water use with similar households and motivate them to reduce their water use and, therefore, their bills. As a result of this, we have run behavioural training for frontline employees focused on how to understand the emotional state of a customer and how best to communicate with them. We have also formed a “My Water Use Report” team who use information from customer meter reads, third-party data, customer metering surveys and micro component analysis to create an individual water report for customers that presents their consumption in comparison to similar homes. This aims to help customers understand their water consumption within the wider context of their neighbourhood or community and what steps they can take to reduce it further, if necessary. It helps us to engage in a more informed and targeted way with our customers, with the added benefit of decreasing our operating costs. Ultimately, this initiative aims to provide customers with the knowledge and insights needed to become more efficient (and satisfied) water users. We have recently piloted this approach with 22,000 of our customers and early indications suggest reduction in consumption of at least two per cent were achievable in a relatively short period of time, and with further development and refinement, greater levels of savings ought to be possible too. This approach and similar activities contribute to achieving the long term reductions in water use seen in our baseline demand forecast. This is just one element of our plan to support our developing concept which is to make our customers part of the resilience answer too; by making better use of our improving data and understanding more about customer attitudes allows us to develop innovative activities and more targeted, effective, messaging. That said, the benefits of our metering and water efficiency programme are already significant. Between 2011/12 and 2016/17 we saw 47,000 new homes constructed and connected to our supply system, yet over the same period total household demand has declined by 21 Ml/d. Furthermore, metering of unmeasured households, and the reductions in supply pipe leakage and plumbing leaks has resulted in household water demand savings of 18 per cent.

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1.4.2 Per capita consumption We have made good progress in reducing the average household per capita consumption (PCC) from 172 litres per head per day (l/h/d) in 2011/12 to 150 l/h/d in 2017/18. While this represents a positive change, the level of PCC in our region remains higher than national average reported in 2017/18 of 141 l/h/d. The reasons why our PCC currently starts from a higher position than other companies is explained further in Section 5.3.5. The variations are largely due to the climate influences and the socio-economic make up of our customers compared with other water companies. For example, reported PCCs tend to be higher in areas of higher affluence and which experience warmer/drier summers – both of which are key factors in the south east of England. We have reflected on both our starting position for per capita consumption, and what further reductions in per capita consumption we should include in the future as part of our WRMP19 preferred plan.

1.4.3 Leakage reductions We recognise the importance customers place on us dealing with leakage, so in WRMP14 we committed to reducing leakage to 90.9 Ml/d by 2016/17, the base year for WRMP19. In the last two years we have invested in new technology, and our reported leakage figure for 2016/17 was 88.6 Ml/d; in 2017/18 it 87.7 Ml/d. This has allowed us to defer two groundwater schemes and still maintain levels of service. As a result, we have used 87.7 Ml/d in our baseline demand forecast. Most of the leaks are very small, often no greater than a dripping tap, and are underground, so finding them is difficult. Between 2014 and 2019 we will have invested an additional £7 million in the very latest technology to help us find more of these invisible smaller leaks. We have updated our assessment of our sustainable economic level of leakage (SELL) (Appendix 5D) and our performance remains considerably below the SELL. We will continue to update the SELL, especially as we reduce leakage and better understand the costs of further leakage reduction. We have reduced the time it takes us to repair leaks, so that 90 per cent of reported leaks are now fixed within 48 hours. Customers can also now report leaks through our digital “in your area” map on our website and are kept informed with text messages or emails about the progress we are making on fixing the problem. The leakage figure we report includes leaks on those pipes within the boundary of customers’ properties. We are looking to pilot projects that reduce leakage on customers’ pipes by providing advice on finding and fixing leaks in the home.

1.4.4 New resource developments We included a number of new resource schemes for completion between 2015 and 2020 to maintain a positive balance between supply and demand. The schemes included a mix of improvements in supply from existing surface water and groundwater sources, and a new regional transfer. In summary we will have completed: • Improvements to a treatment works in WRZ2 (Haywards Heath) to gain an additional 2 Ml/d • a new treatment scheme in WRZ4 (Bracknell) to provide an additional 29 Ml/d • the redevelopment of a treatment works at Forest Row in Sussex • work at Coggins Mill in Sussex southeastwater.co.uk 37

Our WRMP14 originally included a new bulk supply import from SES Water to our Whitely Hill Reservoir in Water Resource Zone 2 (Haywards Heath). This has since been removed as the scheme is no longer justified, or necessary to maintain levels of service.

1.4.5 Long-term planning We identified four long-lead schemes for investigation in WRMP14, with good progress made against each: • Arlington Reservoir extension – we have completed site investigations and survey work and held preliminary discussions with the landowner • Aylesford water re-use scheme – we have retained this long-lead scheme in our feasible option list, but deferred further work because an existing large third party groundwater licence became available more recently • Broad Oak Reservoir – we have undertaken substantive further detailed work that has been shared and discussed with the local community, the Environment Agency and Natural England • Peacehaven water re-use scheme – we have partnered with the University of Brighton to complete modelling studies and planned feasibility work. More recently, we have been discussing the scope for a joint promotion of a larger water re-use scheme with Southern Water

1.4.6 Water Industry National Environment Programme We are on course to deliver our Water Industry National Environment Programme (WINEP) by the agreed dates: • 10 MCERTs (Environment Agency’s monitoring certification scheme) standard flow meters by March 2020 • six eel regulation compliant abstraction screens by March 2020 • one eel regulation compliant eel pass by March 2020 • 72 biodiversity reports completed in March 2017 • 10 pilot biodiversity plans completed by March 2018 • six surface water catchment investigations completed in March 2017 • six surface water catchment pilot projects by March 2020 • eight statutory groundwater catchment management investigations by March 2020 • 10 restoring sustainable abstraction investigations and options appraisals Further detail on the progress of these schemes is reported annually in our Performance, People and Planet report. Two schemes which are of particular relevance to this WRMP19 are those associated with our abstractions at Darwell and Greywell.

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Darwell raw water transfer As part of our WINEP for this planning period (2020 to 2025), we have undertaken an investigation into the risk of the spread of Invasive Non Native Species (INNS) related to our raw water transfer in East Sussex. This risk results from an existing raw water bulk supply at Darwell Reservoir from the river Medway. This scheme is known as the Bewl- Darwell transfer scheme and is operated by Southern Water which we have consulted with throughout our investigation and WRMP19 process. The raw water crosses a number of catchments and provides a potential pathway for INNS to the European protected site at Pevensey Levels in East Sussex. Our investigation has found that existing and future INNS pose a significant risk to the features of the European protected site. Our investigation examined a number of options to reduce this risk and find the most environmentally resilient, economic method of replacing this bulk supply. We found that the preferred solution was the treatment of the raw water to drinking water standards. As a result of this study, our preferred replacement option involves an upgrade to our water treatment works at Bewl together with improvements to the water distribution network. Water will be treated at Bewl WTW and transferred to our WRZ3 (Darwell supply area) where it will be used in place of the existing bulk supply arrangement when this terminates in 2025. We have agreed with Southern Water that, from 2026 onwards, Darwell will not be refilled via the Bewl-Darwell raw water transfer. The outputs of our WINEP investigation for Darwell have been included in this WRMP19 and the conclusion of this work is discussed in Sections 8 and 9.

Groundwater abstraction at Greywell We investigated the sustainability of our Greywell abstraction through our 2010 to 2015 WINEP. The abstraction was demonstrated to be unsustainable as it was causing deterioration to the SSSI features of Greywell Fen. Therefore, in our WRMP14, we made a commitment to cease abstraction at Greywell in 2020 subject to being able to replace the water source and upgrade our distribution network. During this planning period (2020 to 2025) we are developing a surface water source in the Thames area to replace Greywell. However, improvements to our distribution network have been problematic as we have to upsize mains in two areas that are particularly environmentally sensitive and constricted. To secure development consent for these mains we have investigated a number of alternative route options and concluded that the only option available to us is via a wetland SSSI. We are conducting detailed scientific studies to agree the best pipeline route to minimise the impact on this SSSI. Because of the uncertainty around this, we will not be able to close the Greywell source by 2020 and for this reason the zonal strategy associated with it is included within WRMP19. We have consulted Natural England and the Environment Agency and have agreed to continue to abstract at Greywell until 2023.

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1.4.7 Other commitments In our WRMP14 we committed to a range of further studies, supported by representations we received, to enhance our long term planning. These studies have contributed to the development of this WRMP19. Appendix 1C lists these commitments and signposts to where in this plan they are addressed.

1.5 Changes to how we prepare a water resources management plan Since WRMP14 there have been several changes to the guidelines that affect the way we plan future water resources; the most significant of these is a more flexible risk-based approach to planning. This change is important because it allows water companies to develop plans that better reflect the circumstances and challenges of their own supply area. The key changes are: • The Water Act 2014 places a duty on the Secretary of State and Ofwat to further the resilience objective in the water sector and therefore to require water companies to include appropriate resilience measures in their strategic and regulatory planning • new methods allow us to better understand the resilience of our water resources under a wider range of situations such as more severe, but still plausible, droughts than we have experienced before; different population or property growth scenarios; and different climate change impacts • to embrace these new methods, we have adopted a longer planning horizon of 60 years. We have also developed more sophisticated supply and demand forecasting tools. For example, we have worked with the Met Office to develop and apply an advanced weather model for forecasting changes in water use under different weather scenarios • we have developed a best-value modelling and decision making process that assesses wider future uncertainty to inform our best adaptive strategy over the long term • engagement and collaboration is central to our plan. We have built on our WRMP14 engagement approach, adopting a greater level of engagement and collaboration with our regulators and stakeholders and incorporating the views and preferences of our customers • we have invited third parties to suggest options to improve water resources by either increasing water supply or reducing demand. This has been successful and resulted in a third of our feasible options originating from third parties • in April 2017 the non-household retail market opened, with non-household customers now able to choose their water retailer. The water they receive will still be supplied by us but the market opening has altered the business to customer relationships. We have shared our non-household demand forecast with retailers in our pre-consultation phase to obtain their views and feedback • a new requirement is to produce a problem characterisation assessment (described in Section 1.6). It considers the challenges we face and allows us to tailor our approach and methods to most appropriately address these challenges • a new requirement to include sustainability changes identified in the WINEP in our supply demand baseline

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1.6 Problem characterisation Problem characterisation is a framework for the review of risks and uncertainties in our supply demand balance, which allows us to develop a justifiable and proportional approach to WRMP. We worked with the Environment Agency to identify the most appropriate methods for use in developing this WRMP19. We derived a risk score for each water resource zone by answering a series of questions about the scale and complexity of risk in supply, demand and options. Our assessment is described in detail in Appendix 1B. Figure 10 plots the perceived level of risk against the complexity metrics. It shows that the risks and uncertainties we face vary depending on a specific set of regional or zonal circumstances. A high score pushes the company assessment towards the bottom right of the chart, indicating increasing levels of risk and uncertainty. Our WRZs 4 (Bracknell), 2 (Haywards Heath), 3 (Eastbourne) and 8 (Ashford) received the highest complexity scores.

Figure 10: Risk score for each of our water resources zones

Strategic needs score (How big is the problem?) Risk score 0-1 2-3 4-5 6 (updated January 2017) (none) (small) (medium) (large) Complexity Low (<7) factors score (How difficult Medium (7-11) WRZ1 is it to solve?) Tunbridge Wells WRZ5 Farnham WRZ6 Maidstone WRZ7 Cranbrook High (11+) WRZ4 WRZ2 Haywards Heath Bracknell WRZ3 Eastbourne WRZ8 Ashford

We have determined that at a company level our overall level of risk is medium. Although we operate in a region of high forecast population growth and significantly restricted supply availability, we understand the risks and uncertainties and consider we can manage them effectively. On the basis of this assessment it was appropriate for us to use new techniques for modelling and decision making. These have allowed us to consider a wider range of future uncertainties and a broader range of droughts and outages. For example, for the first time we are considering how resilient our water supply is to droughts that are more extreme than previously experienced. Our approach to modelling includes EBSD (economics of balancing supply and demand) least cost modelling (as used in our last plan), but with the addition of Info-Gap, one of the advanced decision making methods recommended in the guidelines. We discuss the decision making methods in more detail in Section 8.

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1.7 Levels of service Levels of service are a contract between a water company and its customers; it sets out the standard of service that customers can expect to receive in terms of the reliability of their supply. This service is expressed in terms of the frequency of restrictions (temporary use bans imposed by us, such as hosepipe bans) which customers are willing to accept. It also determines which levels of demand we need to plan to meet. Our current quoted level of service for temporary use ban restrictions is one year in 10. The adoption of more frequent levels of service restrictions (for example, one year in five) would result in lower demand forecasts for water, because the demand would be more frequently restricted and consequently there would be less need for new water supplies. Conversely, less frequent restrictions (for example, one year in 20) would result in a higher demand forecast and a greater need for new water supplies. During the preparation of this WRMP19 we have consulted with customers on the levels of service they wish us to plan for. We have tested customers’ acceptance of current planned levels of service compared with alternatives, such as more frequent (one in five year restrictions and lower cost to customers) and less frequent (one in 20 year restrictions, but higher cost to customers). Our research confirmed that customers support the existing levels of service (see Section 2.4.3). Therefore our WRMP19 continues to be based upon: • Temporary water use restrictions: no more than one year in 10 (10 per cent annual probability of occurrence) • non-essential water use restrictions (ordinary drought orders): no more than one year in 40 (2.5 per cent annual probability) • severe restrictions, i.e. standpipes and rota cuts (emergency drought orders): no more than one year in 40 (2.5 per cent annual probability) In practice, we have found it necessary to impose temporary restrictions on customers’ water use once during the last 10 years, during April 2012. Prior to that, there were similar restrictions in July 2005. In WRMP19 we propose further measures to enhance the levels of resilience, so that we can more reliably operate to our planned level of service in all water resources zones. To support our assessment of resilience required to meet our levels of service we have reviewed the worst droughts on record (one in 100 year probability of occurring) as well as more severe drought events not previously experienced. They include a one in 200 year drought (reference scenario specifically requested by Defra) and a very extreme one in 500 year drought event. We have used these drought scenarios to develop and stress-test future solutions included in our preferred plan. We have complied with the WRMP Directions 3(b) and 3(c) which relate to the description of the annual average risk as a percentage throughout the planning period and the assumptions behind determining these figure in Table 10 and also in Appendix 4A Section 7. A one in 100 year event is equivalent to the 2010 to 2012 drought where we experienced two consecutive dry winters. Had that drought not been followed by the heavy rain we experienced during summer 2012, it may have been equivalent to a one in 200 year drought. We have also modelled a one in 500 year drought to understand the vulnerabilities of our supply system during a very rare but high-impact event. Water Resources Management Plan 2020 to 2080 42

1.8 A summary of our overall approach The central purpose of this WRMP19 is to explain to our customers, our regulators and a wide range of stakeholders how we intend to manage the supply demand balance of water in the future. The strategy in this WRMP19 is based on a ‘twin track’ approach that identifies measures needed to manage and reduce demand for water, as well as additional resources needed to maintain the supply demand balance in the future. In our WRMP we set out options that: • Provide the best balance of cost, environmental resilience and deliverability • were underpinned by the preferences expressed by customers through research and the views of our regulators and stakeholders • had been subject to a thorough environmental assessment through the SEA and HRA; • incorporate the requirements of WISER as we recognise we have a significant role to play in achieving River Basin Management Plan objectives via the development of WRMP19 As evidenced in later sections, following the representations received on our dWRMP19, we revised the preferred plan in this WRMP19 to ensure it is a more twin track and demand led plan. Our WRMP19 proposes more ambitious targets to reduce leakage and per capita consumption. It also includes setting out what we would need to do to improve our current levels of resilience to achieve a new reference level of resilience equivalent to one in 200 years. The overall process we followed is described in the following sections.

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YOUR VIEWS MATTER THIS PLAN TAKES INTO ACCOUNT THE COMMENTS AND VIEWS EXPRESSED DURING THE CONSULTATION PERIOD

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We also fully tested elements of our draft plan with customers and the overall package of demand and supply options

STAKEHOLDER ENGAGEMENT WE’VE WORKED WITH A WIDE RANGE OF CUSTOMERS, STAKEHOLDERS AND GOVERNMENT BODIES TO SHAPE THIS PLAN

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2. Collaboration and engagement

2.1 Introduction Collaboration and engagement has played a crucial role during the preparation of this WRMP19 and inspires us as a business to keep improving. This section sets out the engagement activities carried out before, during and after our 12 week statutory public consultation and how this informed our WRMP19. More detailed information about our engagement strategy and the activities carried out is available in Appendix 2A, and the results of customer research we carried out is available in Appendix 2B and 2E. We have learned a lot over the last three water resource management planning cycles and through all our business as usual activities. We believe that closer engagement with communities and customers helps us develop plans that are grounded in strong customer support and therefore are more likely to be successful. We believe that by developing a collaborative and participatory approach to our engagement we have developed positive relationships that will ensure our plans are supported by the communities we aim to serve; and that we can continue to work together with our customers, stakeholders and communities as we begin to put the plans into action. Throughout this document you will find many references to how WRMP19 (and the process we have followed to create it) was directly influenced by listening to our customers, regulators and other stakeholders. We would like to thank the people who contributed their time to this process. We wish to extend particular thanks to those participating in the Environmental Scrutiny Group (ESG), Customer Challenge Group (CCG) and Water Resources in the South East Group (WRSE) for their valued input into our process.

2.2 Our approach to engagement Our over-arching principles for WRMP19 and 2019 Periodic Review (PR19) has been to develop two-way engagement and ensure customers and stakeholders have a voice in the development of our plans. Collaboration is especially important in areas where water resources are challenged as the best solution needs to be one that also works for customers, the environment and the wider region. Over three phases, our WRMP19 engagement has included a range of activities to inform, revise and improve the building blocks and preferred plan detailed within this WRMP19: • Phase 1: Pre-consultation and development of the dWRMP19 – January 2016 to February 2018 • Phase 2: Formal 12 week consultation of the dWRMP19, the SEA and HRA – 23 February 2018 to 21 May 2018 • Phase 3: Post-consultation and the statement of response – May 2018 to August 2018 Figure 11 shows how the WRMP19 engagement process flows through and influences our business plan.

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Figure 11: WRMP19 engagement process

Complete preparation of draft plan – November 2017

Customer Customer 3rd party CCG survey research options Water WRSE LPAs Regulations ESG companies

The objective to engagement at this stage is to obtain data to inform our decision making for our draft plan

Submit draft plan to Defra – December 2017

Draft Plan (Submitted to Defra for security checks)

Publish draft plan – January 2018 to March 2018

Public Customer Letter to Stakeholder 12 week meeting/drop research on 1,500 events consultation sessions draft plan stakeholders

We must engage with anyone who may be affected by the plan – publication of draft plan and further customer research will feed into feedback on the draft plan

Anyone can make a representation on our draft plan to Defra

Prepare statement of response and revised plan – June 2017

We must consider all the representations made on our draft plan explaining whether or not the representation has caused us to amend our plan with justification made either way

Publish statement of response and revised plan

Revised plan feeds into Business Plan

Supply-demand Business Plan balance Submit Business Plan to Ofwat – September 2018

Defra approve final WRMP for publication in July 2019

Final WRMP published in August 2019

We believe this approach has enabled us to reflect the views of our regulators, key stakeholders and customers, and allowed us to work successfully with other water companies in the south east, including the WRSE, to explore and include opportunities to share water and resources. southeastwater.co.uk 47

2.3 Phase 1: Pre-consultation engagement activities to develop the dWRMP19 A pre-consultation letter was sent in August 2017 to regulators, neighbouring water companies, our Environmental Scrutiny Group and the Customer Challenge Group. This letter set out our approach to the development of our dWRMP19 at a high level and invite comments and feedback. We considered all responses received and took them into account in preparing our dWRMP. These comments were broadly supportive of our approach. Although this letter was the formalisation of our pre-consultation process, our pre- consultation engagement was far more wide-ranging and was tailored to each of our key stakeholders. Full details, including a list of who we consulted when developing our dWRMP19, and the methodology and approach we adopted to do this are included in Appendix 2A. This appendix also contains a more comprehensive explanation of our work on engagement with key audiences, regulators, stakeholders and other water companies, including the role of the WRSE, the ESG and CCG, and our intentions to continue our engagement through the water planning process to the final WRMP19 and beyond as we begin to put the plan into action. Appendix 2C has details of the meetings held.

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2.3.1 Pre-consultation engagement with key stakeholders

Figure 12: Our stakeholders

Regulators Ofwat, Environment Agency, Defra, Natural Customer Challenge England, Drinking Group Water Inspectorate CCWater

Our customers domestic & commercial Environmental Scrutiny Group

Stakeholders Local Planning Authorities, Politicians, Water resources NGOs, Interest groups in the Key South East Group audiences

Water resources Other water long term planning companies framework

Water retailers

Third parties

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Pre-consultation engagement with our regulators:

Defra Pre-consultation response and subsequent dialogue A representative joined one of our ESG meetings Represented on the WRSE group Ofwat Face to face briefings held in May 2017 and twice in October 2017 Environment Represented on the ESG and CCG Agency Regular meetings to discuss method statements that clearly documented our proposed approach to each of the building blocks of our plan, the assumptions applied to emerging data, and the optioneering process Consumer Two representatives participated in our ESG and CCG Council for Water Natural Represented on the ESG and CCG England Face to face technical meetings to discuss the options appraisal process, including options in our supply area that emerged from the WRSE regional modelling work. We also engaged with Natural England on the scope of our SEA and the range of issues that report should cover

Our Environmental Scrutiny Group For our previous plan (WRMP14) we recognised the value of environmental stakeholders by establishing our Environmental Focus Group (EFG - since renamed Environmental Scrutiny Group, ESG, to better reflect its role in development of the WRMP). The ESG membership includes environmental stakeholders who have expressed a view or interest during previous WRMP processes about our long term plans to maintain water supplies. The group includes representation from our regulators, representative of local councils, NGOs active in our area, and local interest groups. Details of the membership organisations and terms of reference of the ESG can be found in Appendices 2A and 2D. The ESG has met regularly from January 2016. The ESG was given full opportunity to challenge and provide feedback on each of the components of the dWRMP19 during its preparation. The group has significantly influenced the process in many ways, for example, helping to shape the criteria used to filter and appraise potential future options. The value of the ESG during the development of our WRMP19 cannot be underestimated and we are very grateful to its members for the time and effort they have given to our plan. As we did following WRMP14, the group continued to meet during the dWRMP19 consultation process to oversee the completion of our WRMP19. We do not intend our work with the ESG to end there: the group will continue to work with us during the implementation, monitoring and review of our final WRMP19. Recognising that not all stakeholders were able to commit to the ESG process, we met separately with MPs, key stakeholders and other organisations during Phase one. More details are included in Appendix 2A. Pre-consultation engagement with Local Planning Authorities Since WRMP14, we have been actively reviewing and inputting into individual Local Plan processes, sharing information with local planning authorities to understand where we need to supply additional water to support growth, and promoting demand management measures through planning policies.

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Our consultation with Local Planning Authorities (LPAs) was supported by Experian and has helped us to use the most appropriate and up to date population and property forecasts described in Section 5.3.

Figure 13: Supply area map showing Local Planning Authority areas

We have also considered other infrastructure such as new roads, railways, airport expansion and housing development to ensure our plan does not conflict with projects being undertaken by other sectors. Targeted briefings for those potentially affected by future resources schemes Where we identified preferred water resource options that involved the development of significant new resources, we considered that those directly affected should be consulted. We sought to speak to local planning authorities, landowners, parish councils and elected politicians along with other potentially affected groups and individuals in the relevant local areas. Further information on the stakeholder engagement undertaken as part of the statutory consultation process can be found in Appendix 2A.

2.3.2 Engagement with our CCG and customers The Customer Challenge Group: The CCG reports to Ofwat on the adequacy of our consumer engagement and how well it is reflected in our business plan; this includes scrutinising and challenging the strategic direction we take in our long term plans, such as WRMP19. The CCG was briefed at key stages of dWRMP19 and on the development of this WRMP19 and commented at a number of points in the process. In particular, one of the CCG’s key remits is to inform our policies and decision making on key issues that affect customers’ water bills or services, and on important issues such as metering and social tariffs. southeastwater.co.uk 51

The CCG provided input into the development of targeted research to determine customers’ views and preferences on the range of water resource options that could balance supply and demand. In addition, we have sought more detailed input from the CCG’s engagement sub-group prior to undertaking each stage of customer research. Customer research: We undertook targeted and far reaching customer research to ensure that customers’ priorities are built into our dWRMP19, for both our household customers and the non- household businesses we still supply water to (although they are now the customers of business retail water companies).

Customer Using qualitative and quantitative methods, we asked customers for their priorities priorities for water, their preferences for the range of options that could secure future water supplies, and their willingness to pay for either enhanced levels of service, or a deterioration in service in return for reduced bills Our customers showed support for demand reductions before implementing new resource options. Their feedback reflected the point that they want to look after the world around them for future generations (80 per cent agree or strongly agree) and so we have put a particular focus on ensuring the options we have chosen to minimise risk to long-term sustainability This understanding of customer preferences was built into our plan and we increased our focus on leakage and water efficiency options following this engagement Baseline During the development of our demand forecast we received nearly 14,374 responses demand to a survey of our household customers which helped us to understand our customers’ survey occupancy, ownership of water using appliances and water use in their homes. This has formed an important part of our demand forecast assumptions Specific We used qualitative and quantitative methods to understand our customers’ views on resilience the resilience of current and future water supplies, and the level of service customers and expect and are willing to pay for willingness These are complex topics to explore with customers. We therefore commenced with to pay comprehension sessions to find out what customers understand by resilience, how research best to define it, and how best to have an informed discussion with customers about how it should be addressed in WRMP19. The comprehension sessions helped shape later stages of the research, especially the language and visual materials designed to help customers understand the resilience concept and potential solutions Qualitative research was then undertaken with six community groups to explore and understand their views, attitudes and beliefs around the resilience of their water supplies and the varying risks of restrictions occurring The final quantitative phase (designed using the findings from the qualitative research) helped us gather views that are more statistically valid and which shaped our decisions on our preferred plan for our dWRMP19

The detailed results of this research are described in Appendices 2A and 2B and a description of how it has been used to influence our assessment of options is discussed in Section 8.

2.3.3 Engagement with other water companies Since 1997 the region’s six water companies (South East Water, Southern Water, Portsmouth Water, Affinity Water, Thames Water, and SES Water (formerly Sutton and East Surrey Water)) have worked together to identify opportunities to share resources to benefit customers and the environment via the WRSE.

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The objective of the WRSE is to develop a strategy to share water resources within the region. Sharing of resources is a government aspiration and is expected by the national water resource planning guidelines. The minutes, reports and other outputs of WRSE are available at wrse.org.uk As well as identifying regional opportunities, sharing best practice and exploring regional levels of resilience, the group’s work has highlighted the fact that most other water companies across our region face similar challenges to us; though they may differ in scale and intensity, the pressures of rising population, changing climate and environmental sensitivity are common concerns. Figure 14 shows the WRSE study area and member water companies.

Figure 14: Regional map of the WRSE group

WRSE supply area Southern Water Affinity Water SES Water Portsmouth Water Thames Water South East Water

Since 2016 we have also participated in the Water Resources Long Term Planning Framework which investigated new opportunities to share water resources at a national scale. The results of this study, considering key national options and drought scenarios, fed into the WRSE’s work which in turn informed this WRMP19. We took into account the recommendations of this study, and used scenarios within our decision making process to ensure that all ‘enabling’ works for transferring water from one area to another are included in our environmental impact assessment process. Our options for sharing water with other companies are described in Section 7.

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2.3.4 Engagement with third parties One advancement in this WRMP19 is a more proactive approach to engaging third parties to suggest options for the future, both ideas to increase water supply and to manage demand. In addition to engagement in the WRSE process, we issued a public invitation for third parties to suggest options that could reduce demand or increase supply. We also developed a trading and procurement code to ensure we treat third parties fairly. We issued this invitation through a wide range of routes including our website, social media, a formal OJEU procurement process, specialist industry publication and a letter directly contacting abstraction license holders in our region. Responses to these invitations resulted in 99 unconstrained options, subsequently filtered to 74 constrained, then 22 feasible options that fed into our final modelling of solutions. More details about this can be found in Sections 7.2.1 and 8.

2.4 Phase 2: Public consultation For us, the pre-consultation activities were just the start of our conversations about securing future water supplies in the south east and our draft plan invited everyone to provide feedback which helped us ensure this final plan considered everyone’s views. Following approval by Defra, our dWRMP19 was published on our website alongside all tables and appendices on 23 February 2018. This triggered the start of the statutory consultation which ran for a 12 week period, closing on 21 May 2018. The SEA Environmental Report, which included the Habitats Regulations Assessment, was published at the same time. Details of the engagement activities carried out during and after the consultation period are in Appendix 2A and the Statement of Response. During the 12 week consultation period we held additional focus groups which tested customers’ views and the options included within the draft plan even further. We were mindful that views of those customers in the most severe vulnerable circumstances (e.g. complex health issues or in significant financial need) may not have been captured in our previous research for dWRMP19. We also recognise these customers will require a different approach – both in terms of recruitment specification and the research method required. To ensure a thorough, meaningful and measurable consultation a series of engagement objectives were devised to monitor its success, such as producing clear, well presented materials, understanding surrounding the options being considered and engagement reach. These were measured through customer and stakeholder feedback statistics.

2.4.1 New sources of information At the time, and shortly after publishing our dWRMP19 for consultation a number of new sources of information emerged that were relevant to our consultation process. We subsequently modified our consultation approach to suitably capture and take account of these. These were: • Ofwat’s direct requirement for water companies to consider and consult with its customers on a 15 per cent reduction in leakage by 2025 from current levels

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• Artesia’s report for Ofwat supporting and presenting a stronger case for water companies to adopt more ambitious long term per capita consumption reductions from current levels, covering a range of scenarios, and resulting in per capita consumption figures in the south east of between 110 l/h/d and 76 l/h/d by 2065 • The National Infrastructure Commissions’ report recommending Defra set water companies a target to halve leakage from current levels by 2050; and reduce per capita from current national average of 141 l/h/d, to 118 l/h/d by 2050

2.4.2 Our household and vulnerable customers Website: All dWRMP19 consultation materials and supporting documents were placed on a dedicated page on our website. Details of the web page were published on all materials associated with the consultation such as posters, social media posts, newsletters, press releases and emails to direct as much traffic to the page as possible. Public exhibitions: We held bespoke public exhibitions to visit the specific communities potentially affected by the large scale infrastructure proposals within the dWRMP19. We discussed these options in detail directly and built their feedback into our future work. While the exhibitions displayed the dWRMP19 proposals, we also used the events to showcase other elements of the business. Technicians from our leakage department displayed the state-of-the-art technology used to find and fix leaks while our Customer Care Team was also present to discuss the assistance we provide to vulnerable customers or those who need extra assistance with their bills. These were well received and of interest to those who attended. Open days and community talks: To complement the public exhibitions, we held a series of open days at our Bewl Bridge, Arlington and Bray Keleher Water Treatment Works. Customer magazine: As part of a trial 10,714 copies of the customer magazine were distributed direct to residential properties in Basingstoke. While the magazine contained information on various aspects of the company, a full page was dedicated to the dWRMP19. Social media: To increase engagement levels photos were posted and videos created to promote the exhibitions and proposals. To target specific communities where exhibitions were being held posts were published on Twitter, LinkedIn, popular community Facebook groups and paid for social media was utilised. The use of social media allowed for two- way communication as we could respond to customers while also gain an understanding of public feeling surrounding the proposals which largely reflected the official representations submitted. southeastwater.co.uk 55

2.4.3 Customer research During the 12 week consultation period we undertook a series of eight focus group sessions and individual interviews with 616 household customers which were tasked at reviewing a number of areas, including the acceptability of the key aspects of our plan, such as resilience and the ranking of options, along with more ambitious demand management. Overall 83 per cent of household customers interviewed supported our published dWRMP19 with associated bill impacts, although this dropped slightly to 79 per cent among lower income householders.

Figure 15: Acceptability of plan excluding inflation

Very supportive 27% Supportive 56% Unsupportive 8% Completely unsupportive 3% Prefer not to answer, Don’t know 6% 0% 10% 20% 30% 50% 60% Details of the findings of these pieces of research are contained in Appendix 2A, and the final results of the household customer interviews are in Appendix 2E.

2.4.4 Our stakeholders Upon publication of the dWRMP19 consultation documentation formal notifications were issued to our statutory consultees including Defra, Ofwat, Natural England and The Environment Agency. A further 1,973 non-statutory consultees were written to via email and all 36 MPs within our supply area were sent copies of the non-technical summary. Throughout the 12 week consultation more than 80 non-statutory consultees were specifically briefed including; High Weald Area Of Outstanding Natural Beauty, Kent County Council Flood Risk Management Group, South Downs National Park Authority, Tracey Crouch MP, Sir Roger Gale MP, Damian Green MP, Rosie Duffield MP, Nus Ghani MP and local parish councils amongst others. Joint stakeholder event: In addition to the activities above, on 18 April 2018 we held a joint stakeholder event in partnership with Southern Water, Affinity Water, SES Water and Portsmouth Water after it was recognised that all five water companies were seeking briefings with the same stakeholders during the same time period. It was the first time an event of this nature was held with 44 statutory and non- statutory stakeholders attending on the day. The event was well received with a number of stakeholders commenting that further joint events of this nature should be held in the future.

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2.4.5 Environmental Scrutiny Group (ESG) and Customer Challenge Group (CCG) Both our ESG and CCG were engaged during the consultation period with updates given to the ESG on 21 March 2018 and the CCG on 02 May 2018. Members of our CCG attended other consultation events such as the joint stakeholder event and one of our public exhibitions.

2.4.6 Our colleagues While all our public facing materials and events were relevant to, and could be attended by colleagues, we also encouraged our staff directly to take part in the consultation. During the consultation period a series of articles were published on our company intranet, Gurgle, inviting colleagues to read the consultation documentation, attend our staff exhibitions and comment on the proposals. In total 55 colleagues and contractors attended employee focussed exhibitions held at our offices where they could speak directly to the water resources team and submit their feedback. All feedback from employees was treated in the same way as feedback from the public and stakeholders, with comments addressed in our statement of response.

2.4.7 Media relations The media relations activity was coordinated with the publication of the dWRMP19. In total nine press releases were issued resulting in 48 articles printed online or in local, regional and trade print media, including seven broadcast interviews.

2.4.8 Our non-household customers Shortly after the launch of the consultation, letters were issued to all non-household (NHH) retailers to notify them of the consultation launch and provide information which could be passed onto their customers. All NHH retailers were invited to meet us face-to-face and also to attend the joint stakeholder event that was held on 18 April, of which five attended.

2.5 Phase 3: Post-consultation and the statement of response Following the completion the 12 week consultation period on our dWRMP19, we reviewed each of the representations received alongside other updates and new information. We listened and considered the feedback we had received and continued to work with stakeholders, regulators, our ESG and CCG to ensure changes to the plan appropriately reflected and took account of views received.

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2.5.1 Representations received on our dWRMP19 In total, 149 official representations were submitted by customers, community organisations and stakeholders which we have subsequently broken down into 614 individual comments. Each of which has been responded to within our Statement of Response, with an explanation of whether this has resulted in a change to our dWRMP19 or not, and the reasons why either way. Additionally, we treated the National Infrastructure Commission’s report as an ‘indirect’ response to be addressed as part of our own Statement of Response. We were pleased to see a good spread of consultation responses, especially is those areas near to longer-term, large new proposals in our preferred plan. Figure 16 highlights where engagement events were held, and where representations on our dWRMP19 were received from.

Figure 16: dWRMP19 engagement activities and responses

4 3 Western regon Maenea reater onon Reang Herne Bay Newbury Wongam Bracknell astern regon 6 Snodland 3 Frimley Head Office Canterbury54 3 eenoas 34 asngstoe Regate Mastone Aldershot Guildford arnam Ashford Tunbridge Wells oer Folkestone ranroo Wncester orsam

Haywards Heath Petersfield Heathfield Burgess Hill

ees astngs cester 27 Bexhill rgton astourne Portsmout

Public exhibition locations Public exhibition locations following customer/stakeholder feedback Joint stakeholder event location Stakeholder engagement Staff exhibition locations Location of consultation responses (website and feedback forms) – where more than one response received from an area the circle is enlarged and the number included

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In comparison to WRMP14, we improved the reach and level of engagement achieved during our consultation on the dWRMP19. We more than doubled the number of people attending public and staff exhibitions, more than tripled the number of interest groups with whom we directly engaged, effectively employed social media and resulted in more than double the total number of representations received in response to our draft plan compared with five years previously. See Figure 17 below.

Figure 17: Comparison of engagement figures for dWRMP14 and dWRMP19

dWRMP14 benchmark dWRMP19 results 232 people attended the dWRMP exhibitions 485 people attended the public and staff 14 public exhibitions exhibitions, WTW Open Day tours and community events 15 exhibition feedback forms completed 93 exhibition feedback forms completed 45 press articles were published as part of Coverage in 48 public and trade press outlets dWRMP14 consultation across our supply area 4 broadcast interviews took place 4 broadcast interviews 18 stakeholder and community interest 62 stakeholders and community interest groups attended meetings and workshops as groups spoken to directly though face-to- part of dWRMP14 face meetings, phone calls and the joint stakeholder event Website hits: No benchmark (we can’t 1,946 website hits compare as previous website no longer exists) Social media reach: None 307,100 reach on social media 66 representations made to Defra during 56 representations made to Defra during dWRMP14 dWRMP19 66 total representations 149 total representations (no feedback from public exhibitions as the (56 to Defra and 93 feedback forms from feedback forms related to the event and exhibitions about the plan) venue, not the plan itself)

In comparison with dWRMP14, we also undertook far more customer research to assess the acceptability of our dWRMP19 and bill impacts; and to test more ambitious levels of leakage reduction and per capita consumption reductions. Of the 56 representations received by Defra, eight were from organisations that are members of our ESG group. Overall, the representations we received from Defra provided a good level of support and feedback on our dWRMP19. The vast majority of the representations have resulted in largely minor updates and clarifications as part of our statement of response, but not in themselves required material changes to be made to our plan.

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But there were two areas of feedback that have required us to revisit the preferred plan to be included as part of our WRMP19, these were: • Adopting more ambitious leakage reductions i.e. meet Ofwat’s target for 15 per cent leakage reductions by 2025; and consider the National Infrastructure Commission’s recommendation to reduce leakage by half by 2050 • adopting more ambitious per capita consumption throughout the 60 year planning period. Giving due consideration to target figures proposed by some of the representations we received, and consideration of longer term projections included in the National Infrastructure Commission Report (i.e. achieve per capita consumption of 118 l/h/d by 2050) and the Artesia report prepared on behalf of Ofwat (i.e. consider a range of scenarios leading to per capita consumption of between 110 l/h/d and 76 l/h/d by 2065) Further customer research we undertook during the consultation period confirmed customers were willing to support more ambitious per capita consumption and leakage reduction figures. As a further assurance step, we asked our ESG to comment on whether our revised leakage reductions and per capita consumption reductions tested with customers, were sufficiently stretching. We achieved a strong consensus from ESG members who responded, that reducing leakage by 15 per cent in 2025 represented a sufficiently stretching target. The feedback from ESG members who responded on our more ambitious per capita consumption figures was mixed. The majority of the group considered it to be a sufficiently stretching target both in the short and longer term. We have written to all those who made comments and/or a representation on our dWRMP19 to thank them for their comments and advise them how they can view the Statement of Response and revised plan.

2.6 Conclusion Before, during and following the formal 12 week consultation on the dWRMP19, the views of customers, stakeholders and regulators have been integral in shaping and influencing the decisions we have taken to update and revise our dWRMP19 in this WRMP19, as submitted to Defra in August 2018. The statement of response and this WRMP19 are both available to download from our website and clearly set out the changes made to our dWRMP19 as a result of including updated information, conducting further customer research by interviewing 600 household customers, technical discussions with key stakeholders and the consultation responses we received.

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The main changes subsequently applied in WRMP19 compared to dWRMP19 are as follows: • We updated the baseline forecast to take account of 2017/18 outturn data • we adjusted downwards population and property figures in our baseline demand forecast for the period 2045 to 2080 to be better aligned with the first 25 year forecast • we have made some minor updates to our baseline supply forecast deployable output figures for our surface water sources; and removed the planned Outwood to Whitely Hill bulk supply import from SES Water to our supply area during AMP6, as it is no longer required • we have made some minor changes to our target headroom figures to ensure we have represented climate change impacts appropriately • we have confirmed final bulk supply figures for existing and new bulk supplies to neighbouring water companies • we have included much more ambitious levels of demand management in our preferred plan • we have included 131 Ml/d more savings by adopting more ambitious long term per capita consumption reductions by 2080 • we have included 9 Ml/d of additional leakage reductions above our dWRMP19 to achieve Ofwat’s 15 per cent reduction in leakage by 2025 • we have halved leakage from our current position by 2050, reducing overall leakage to 44 Ml/d • we have reduced the number of new reservoirs required from three to two • we have removed the need for all effluent re-use and desalination schemes

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MOLLY – OUR TUNNEL BORING MACHINE TRANSFERRING ALL THE WATER WE PRODUCE TAKES 9,000 MILES OF PIPE. AT BURHAM IN KENT WE USED THE LATEST TUNNEL BORING TECHNIQUES TO DRILL UNDER THE RIVER MEDWAY, A RAILWAY AND THE M20 TO MINIMISE DISRUPTION DURING OUR WORK

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This definition is broader than only considering the impacts of drought

ARDINGLY RESERVOIR DEVELOPING RESILIENT WATER SUPPLIES AND RESILIENT CUSTOMERS ARE KEY ELEMENTS OF OUR PLAN

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3. How our plan has considered resilience

3.1 Defining resilience There are a number of definitions of resilience, but we consider resilience is the ability to cope with, and recover from, disruption and variability in order to maintain services for people and protect the natural environment, now and in the future. This definition is broader than only considering the impacts of drought; for instance, it also covers the potential impacts that can occur from flooding, cyber-security breaches and terrorism events. In our evaluation of resilience, we have considered a range of hazards listed in UKWIR good practice guide2. We have considered these more fully, including levels of resilience to non-drought events, in Section 6 and Appendix 9 of our business plan, but drought resilience is clearly an important metric for consideration of resilience in the context of our WRMP19. For water resource planning, the level of resilience is primarily governed by the reliability of our source outputs under different drought conditions; and the ability we have in our network to adapt and manage how we use our supplies to meet demand under a range of droughts with differing durations and severity. Following the two consecutive dry winters of 2010 to 2012, updated WRMP guidelines require: • Stronger links to be made between the WRMP with drought plans • an assessment of more extreme but nevertheless plausible droughts than seen in the historical record • companies to set out what is required to achieve a reference level of resilience to drought events of one in 200 years The ability to move water from areas of surplus to those in deficit helps cope with drought, but is also helpful during non-drought periods; for example, during source outage events when shortfalls of supply need to be made up at other sources.

3.2 Measuring resilience Our understanding of how resilient our supply demand balance is to future drought events started with the recent update of our drought plan. We undertook assessments that looked at a range of historical droughts and used advanced statistical techniques to generate more severe, but plausible, droughts than we have seen in the historical record. In Chapter 8 of our drought plan published in May 2019 we presented the finding of how our base year supply demand balance for WRMP19 performs under a range of droughts including historical as well as more extreme than seen in the historical record, both with and without imposing drought measures (such as temporary water use restrictions or drought permits).

2 Resilience Planning: Good Practice Guide. Report 13/RG/06/2. UKWIR, 2013

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This work highlighted any vulnerabilities and shortfalls of our current systems to manage these types of events; this has been helpful in our assessment of how the options we have included in this WRMP19 provide sufficient levels of resilience to enable us to manage such events. The assessment of these events has ensured we understand what is required to meet our levels of service under a wider range of droughts. We further tested our resilience by modelling our ability to supply in increasingly severe droughts. In addition, we further tested our WRMP19 by modelling against a range of scenarios with varying degrees of climate change impacts, population growth and sustainability reductions. As a further step to improve resilience we have looked outside our boundaries through our work with WRSE and through inviting third parties to offer other options. Taking a regional view is important because it is recognised that sharing resources will play a key role in managing water resources in the future. We have also considered how future options impact on our resilience, ensuring that we have selected options in our preferred plan which are resilient and low risk. Some schemes, in particular leakage options which rely on new technology, are inherently risky. Sections 8 and 9 show how we plan to ensure that these inherently risky schemes do not reduce overall resilience.

3.3 Customers’ views of resilience The WRMP19 sets out the level of service we intend to operate. Any change in these levels of service needs to be informed by customers’ views, which we assessed using customer research. The key findings of this research (described in Appendix 2B) informed the decision making process for our preferred plan, outlined in Section 8. The views from our customers echoed the findings of the 2013 YouGov research commissioned by CCWater following the 2010 to 2012 drought. In that research not a single participant linked water restrictions with lower bills; instead, people viewed water restrictions as an inconvenience in service. Customers perceive drought as something that rarely impacts their lives. However, there is a broad consensus that less extreme drought restrictions are acceptable if customers understand why they are introduced. The 2013 YouGov research found that there was some willingness to pay between five and 10 per cent more to ensure that water companies were able to make investments to reduce drought disruptions. Some customers were open to the idea of pricing increases to support investment if they believed the increases were justified and provided the costs were transparent and communicated to customers. The research found that those with little experience of drought were less open to increases in their water bill to cover water company investments that avoided water use restrictions in the future.

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3.3.1 Developing a resilient customer approach Customers can have an enormous part to play in the provision of a resilient service via a win/win approach. For our future plans – including WRMP19 – we are developing our concept of a “resilient customer” to move beyond a discussion that is only about new assets and processes. In essence, we are approaching the resilience debate from the other end of the spectrum and involving customers, not only in the choices around resilience but getting them to be part of the solution. For example, we are identifying a wide ranging set of resilient customer attributes – such as customers taking action in their own home to use water responsibly by being aware and in control of their own water use; responding intuitively to the weather; and deploying water efficient products etc. We can then target our messaging and use behavioural science techniques to achieve many of the outcomes of WRMP19 such as lower PCC and leakage. Within Section 6 of our business plan we detail how we have used behavioural science and segmentation to better understand our customers’ values, attitudes and beliefs, so that we can engage with them in the most effective way so that they also become resilient beyond just drought metrics.

3.4 Level of service statement As explored further in Section 8, Decision making, Defra requires water companies in England and Wales to set out plans for how to achieve a reference level of resilience to a drought of one in 200 year severity (0.5 per cent risk of annual occurrence) while meeting their standard level of service. We explain how we have reviewed our levels of service with customers in Section 3.3. We have also used our EBSD model to determine the costs and benefits of different levels of service. We present these for consultation in this WRMP19. This approach is consistent with Ofwat’s resilience principles. Section 9 demonstrates how our proposed measures increase the resilience and states the associated cost. Our current levels of service are: • Temporary water use restrictions: no more than once in 10 years (10 per cent annual probability of occurrence) • non-essential water use restrictions (ordinary drought orders): no more than once in 40 years (2.5 per cent annual probability)

3.5 Drought resilience statement In our baseline supply forecast our levels of resilience are based on worst historical drought on record with one in 100 year severity (one per cent risk of annual reoccurrence). Through scenario modelling and more detailed customer research, we have demonstrated our customers support our proposal to move from current one in 100 year (1 per cent probability of occurrence each year) levels of resilience, to meeting Defra’s one in 200 year (a 0.5 per cent probability of occurrence each year) reference levels of service. In Section 8 and in Appendix 2A we provide further evidence to support this statement.

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The forecast considers how much water is available for use and how this may change over the next 60 years

INVESTMENT NEW PIPELINES HELP MOVE WATER AROUND OUR SUPPLY AREA

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4. Baseline supply forecast

4.1 Introduction to supply forecast In this section we consider the volumes of water currently available to us; how these volumes are distributed; and how they might change during the course of the planning period from 2020 to 2080 before any new resource options are included. This is known as our baseline supply forecast. The detailed calculations can be found in Appendices 4A to 4D. Although 2016/17 has been used as the base year for other areas of our WRMP19, such as our demand forecast, we have used 2019/20 as the starting point for our WRMP19 supply forecast. This is because there are WRMP14 schemes still in construction which we need to take account of and which will be completed by 2019/20. Since the last plan, we have made improvements to the way we model our supply forecast. This has improved our understanding of how our supplies (including any we rely on from other water companies) perform under a range of different drought conditions and informed our assessment of resilience in this plan.

4.2 Our baseline supply forecast We derive our baseline supply forecast (2020 to 2080) by first calculating the amount of water available for use (WAFU) and then making allowances for the impact of climate change and potential sustainability reductions included in the Water Industry National Environment Programme (WINEP).

Figure 18: Components of supply forecast

Water Sustainability Climate Our supply available _ _ reductions change = forecast for use

The contributing components of WAFU are discussed in this section, including the amount of water from our own sources, bulk supplies, process losses, outage and water quality impacts. Figure 19 shows our supply forecast at different stages over the planning period, and compares this at 2020/21 and 2025/26 with the previous WRMP14 plan. The changes from WRMP14 to WRMP19 include a deeper understanding of the water we can rely upon from our existing sources, as well as revisions to our assessments of outage, process losses and bulk supplies (set out in 4.6 to 4.7.4); and, of course, the new schemes in WRMP14 that will have been completed by 2020. It also includes an assessment of the impact of climate change and the reductions that will be required to ensure we have an environmentally resilient water supply.

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For dWRMP19 we forecast future sustainability reductions at our Cramptons Road, Kemsing and Oak Lane sources of 6.2 Ml/d based on WINEP1, and these reductions were included and modelled when determining our dWRMP19 preferred plan. Post the publication of our dWRMP19, the outcomes of AMP6 investigation and options appraisal studies was published in February 2018. The studies confirmed that river restoration, rather than making sustainability reductions to our existing groundwater source outputs. The preferred option to mitigate the impacts of our abstractions on the River Darent. This outcome has been agreed with the Environment Agency and the latest WINEP3 forecast has been updated to reflect this change. This has meant that we have removed the 6.2 Ml/d of sustainability reductions for those sources from our WRMP19 baseline supply forecast.

Figure 19: Baseline supply forecast

Baseline supply Dry year annual average (Ml/d) Summer peak period (Ml/d)

2019/20 2024/25 2044/45 2079/80 2019/20 2024/25 2044/45 2079/80 Baseline 602.7 602.7 602.7 602.7 730.3 730.3 730.3 730.3 deployable output (own sources)

Bulk transfers 54.3 54.3 46.3 46.3 55.3 55.3 47.3 47.3 (net)

Process loss -5.4 -5.4 -5.4 -5.4 -4.7 -4.7 -4.7 -4.7

Outage -18.4 -18.4 -18.4 -18.4 -20.1 -20.1 -20.1 -20.1

Climate change -4.0 -4.5 -6.3 -9.5 -4.7 -5.2 -7.3 -11.0

Sustainability 0.0 -15.1 -49.0 -49.0 0.0 -15.1 -49.3 -49.3 reductions

DO Changes 0.0 -6.2 -9.5 -9.5 0.0 -9.7 -13.0 -13.0 e.g. move to one in 200 drought and nitrates

Total WAFU 629.2 607.5 560.5 557.3 756.2 730.9 683.2 679.5

WRMP14 total 629.3 620.7 - - 726.5 718.4 - - WAFU

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4.3 Our supply area The figures below provide an overview of resources for each water resource zone and set out their key characteristics. At a company level, average daily demand in 2019/20 is forecast to be approximately 522 Ml/d. This comes from a range of sources: • Surface water – 19 per cent of baseline supply is from surface water supplies • Groundwater – 73 per cent of baseline supply is from groundwater supplies • Inter-company transfers – eight per cent of baseline supply is from bulk water imports

Figure 20: Map of Water Resource Zone 1, Tunbridge Wells

South East Water regional zone Inter-zonal transfer Other water company areas Inter-company bulk transfer Key urban areas – Sevenoaks, Groundwater – 100 per cent Tonbridge and Tunbridge Wells of water is supplied by seven groundwater sources Average daily demand in 2019/20 is forecast to be Inter-zonal transfers – Transfer approximately 32.4 Ml/d capability from WRZ7 and WRZ2 Surface water – No surface Inter-company transfers – none water supplies Water Resources Management Plan 2020 to 2080 70

Figure 21: Map of Water Resource Zone 2, Haywards Heath

South East Water regional zone Inter-zonal transfer Other water company areas Inter-company bulk transfer

Key urban areas Groundwater – Haywards Heath, East – 39 per cent of water is supplied Grinstead, Uckfield and the by 14 groundwater sources coastal town of Newhaven from the Ashdown Beds and chalk aquifers Average daily demand in 2019/20 is forecast to be Inter-zonal transfers approximately 66.6 Ml/d – Transfer capability with WRZ1 and WRZ3 Surface water – 54 per cent of water is supplied Inter-company transfers by two surface water sources – seven per cent of water is supplied by inter-company transfer from Southern Water. Contract is due to be next reviewed in 2021 southeastwater.co.uk 71

Figure 22: Map of Water Resource Zone 3, Eastbourne

South East Water regional zone Inter-zonal transfer Other water company areas Inter-company bulk transfer

Key urban areas Groundwater – include Heathfield, and the coastal – 59 per cent of water is supplied by towns of Eastbourne and Bexhill 10 groundwater sources from the Ashdown Beds and Eastbourne and Average daily demand in 2019/20 is Seaford chalk aquifers forecast to be approximately 55.5 Ml/d Inter-zonal transfers Surface water – Transfer capability with WRZ2 – 30 per cent of water is supplied by three surface water sources Inter-company transfers – 11 per cent of water is supplied by inter-company transfer from Southern Water. Contract is due to be next reviewed in 2023

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Figure 23: Map of Water Resource Zone 4, Bracknell

South East Water regional zone Inter-zonal transfer Other water company areas Inter-company bulk transfer

Key urban areas Groundwater – Bracknell, Maidenhead, Farnborough – 63 per cent of water is supplied by and Basingstoke 12 groundwater sources from the Chalk, Greensand and Hythe aquifers Average daily demand in 2019/20 is forecast to be approximately Inter-zonal transfers 159.9Ml/d – Transfer capability with WRZ5 Surface water Inter-company transfers – 21 per cent of water is supplied by – 17 per cent of water is supplied one surface water source by inter-company transfer from Affinity Water

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Figure 24: Map of Water Resource Zone 5, Farnham

South East Water regional zone Inter-zonal transfer Other water company areas Inter-company bulk transfer

Key urban areas Groundwater – Farnham, Petersfield and Borden – 100 per cent of water is supplied by 12 groundwater sources Average daily demand in 2019/20 is forecast to be approximately 37.2 Ml/d Inter-zonal transfers – Transfer capability with WRZ4 Surface water – no surface water supplies Inter-company transfers – none

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Figure 25: Map of Water Resource Zone 6, Maidstone

South East Water regional zone Inter-zonal transfer Other water company areas Inter-company bulk transfer

Key urban areas Groundwater – Maidstone and West Malling – 80 per cent of water is supplied by nine groundwater sources Average daily demand in 2019/20 is forecast to be approximately Inter-zonal transfers 62.2 Ml/d. – Transfer capability with WRZ7 and WRZ8 Surface water – nine per cent of water is supplied Inter-company transfers by one surface water source, shared – 11 per cent of water is supplied with Southern Water by inter-company transfer from Southern Water

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Figure 26: Map of Water Resource Zone 7, Cranbrook

South East Water regional zone Inter-zonal transfer Other water company areas Inter-company bulk transfer

Key urban areas Groundwater – Paddock Wood, Staplehurst, – 53 per cent of water is supplied by Cranbrook and Tenterden three groundwater sources Average daily demand Inter-zonal transfers in 2019/20 is forecast to be – Transfer capability with WRZ1, WRZ6 approximately 21.7 Ml/d and WRZ8 Surface water Inter-company transfers – 47 per cent of water is supplied by – none one surface water source, shared with Southern Water

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Figure 27: Map of Water Resource Zone 8, Ashford

South East Water regional zone Inter-zonal transfer Other water company areas Inter-company bulk transfer

Key urban areas Surface water – Ashford, Canterbury, Faversham, and – no surface water supplies the coastal towns of Whitstable and Groundwater Herne Bay – 100 per cent of water is supplied WRZ8 by 16 groundwater sources – has the highest proportion of Inter-zonal transfers agricultural volume of all our – Transfer capability with WRZ6 resource zones (26.5 per cent of the and WRZ7 agricultural water use from our water supply is in this zone) Inter-company transfers – Import arrangement with Southern Average daily demand Water to balance with our output at in 2019/20 is forecast to be one groundwater source approximately 86.3 Ml/d

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4.4 Changes since WRMP14 Following our problem characterisation approach for WRMP19 we have progressed from the more conventional deterministic methods we applied for WRMP14 to a more risk-based approach that incorporates greater drought resilience. In agreement with the Environment Agency, we adopted a probabilistic approach to calculating our deployable output figures. We have looked at how our supplies would perform during a one in 100 year drought and also during more severe but plausible droughts than those seen in the historical records. To understand the impact of a worse drought than previously experienced, we have modelled progressively severe droughts using statistically generated drought events that were developed for the Water Resources Long Term Planning Framework study. This study generated a ‘drought library’ of feasible but synthetic droughts, and these events were also developed in more detail by the WRSE. As set out in Figure 28, changing the baseline drought event to reflect our ability to supply during a one in 100 year drought has resulted in a more resilient water supply forecast with a three per cent reduction under annual average conditions and a two per cent reduction under dry year summer peak period conditions. This supply forecast includes both the water from our own sources and bulk supplies.

Figure 28: Our supply forecast under increasingly severe drought conditions

Annual WRMP14 DO Worst historic Severe Three dry Extreme average Based on 1 in drought drought event winters drought event 50 year event 1 in 100 year 1 in 200 year drought event 1 in 500 year

Company total 680 659 651 644 629

Difference to – -3% -4% -5% -7% WRMP14 as %

Summer peak WRMP14 DO Worst historic Severe Three dry Extreme period Based on 1 in drought drought event winters drought event 50 year event 1 in 100 year 1 in 200 year drought event 1 in 500 year

Company total 802 788 776 767 748

Difference to – -2% -3% -4% -7% WRMP14 as %

Adopted Adopted DO DO for testing Adopted in scenario testing to WRMP14 for WRMP19 Defra's 1 in 200 assess resilience and improved year levels of linkage to Drought Plan service

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Our analysis of more severe but plausible droughts has been used in our scenario testing described in Sections 8.3.1 and 8.4.2. This includes testing to more severe scenarios, beyond the 2 dry winters, which were also included in our drought plan published in May 2019.

4.5 Water available for use The supply of water that is available at any one time, before sustainability reductions and climate change are taken into account, is called the water available for use (WAFU), the key components of which are set out in Figure 29.

Figure 29: Calculation of WAFU

Water Deployable Bulk Process _ _ _ Outage available output supplies losses = for use

The starting point for determining the WAFU is how much water is available from our own sources, known as the deployable output. We then account for bulk supplies, process losses and outage. The table below summarises the WAFU in 2020 within this WRMP19 and in comparison to the forecast for the same year within our previous plan, WRMP14. The figures for 2020 are the base year for our plan and are an important starting point.

Figure 30: Changes in WAFU in 2020 between WRMP14 and dWRMP19

Baseline supply Dry year annual average (Ml/d) Summer peak period (Ml/d) WRMP14 WRMP19 WRMP19 WRMP14 WRMP19 WRMP19 2019/20 2019/20 2079/80 2019/20 2019/20 2079/80 Base deployable 622.7 602.7 602.7 727.2 730.3 730.3 output Bulk transfers (net) 56.4 54.3 46.3 57.3 55.3 47.3 Process loss -12.3 -5.4 -5.4 -12.3 -4.7 -4.7 Outage -27.4 -18.4 -18.4 -36.7 -20.1 -20.1 Climate change -3.2 -4.0 -9.5 -2.1 -4.7 -11.0 Sustainability -6.8 0.0 -49.0 -6.8 0.0 -49.3 reductions DO Changes 0.0 -6.2 -9.5 0.0 -9.7 -13.0 e.g. move to one in 200 drought and nitrates Total WAFU 629.4 629.2 557.3 726.6 756.2 679.5

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The following sections discuss each of the above WAFU elements in turn.

4.6 Baseline deployable output Baseline deployable output is the amount of water we expect to reliably supply from our surface or groundwater sources. This includes sources we own a share of, such as the River Medway Scheme that we share with Southern Water. We have assumed that our deployable outputs reflect actual abstraction. Before the deployable output of a source can be increased, an investigation linked to our WINEP obligations is undertaken to ensure any growth of the source is sustainable. Deployable output can be constrained by several factors such as the specifications within our abstraction licence, the amount of water physically available, the quality of the water, the size of water pipes or the capacity of treatment. The deployable output changes depending on the severity of drought we plan for. So, the more severe the drought we plan for, the lower the deployable output. We plan to meet a drought severity of one in 100 years and plan to meet two conditions in every year of the forecast: • Annual average conditions over a dry year (dry year annual average, DYAA) • summer peak week conditions in a dry year (dry year critical period, DYCP) Our deployable output calculations include the use of both historical information from droughts since the 1920s and artificial drought data on more severe but plausible droughts. Since our WRMP14 assessment there has been no new real time drought data because there has not been a drought in our area between 2012 and 2018. We have seven licences which are in part or fully affected by time-limited conditions. They amount to 2.3 per cent of baseline deployable output (or 2.1 per cent if net transfers are included). At present we have not assumed any reductions to those licences would occur in the future except where already highlighted by sustainability reductions. Details of our deployable output assessment are contained in Appendix 4A and we have included more information about our time limited licences (TLLs) in Appendix 6A.

4.7 Process losses, outage, bulk supplies and other changes We know that deployable output alone is not a true reflection of the water we have available for three reasons: • We have complex treatment processes and some of the water we abstract cannot be put into supply – we call these process losses • our water sources are subject to outages (both planned and unplanned), for instance due to maintenance or power failures • we have transfers with neighbouring water companies that allow us to import and export water

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4.7.1 Process losses Some water treatment works processes produce a waste stream, which means that not all the water we abstract can be put into supply. However, where process water is returned into the treatment process, it does not count as a process loss. During WRMP14 we recognised that we could improve our understanding in this area. Since then we have commissioned a detailed review of process losses at our treatment works to improve our estimates. Our improved figures are now based on the treatment processes at each of our sites and reflect the difference between losses on annual average and during a peak summer period. In total, the process losses from our water treatment works amount to 5.4 Ml/d. This is a decrease from the 12.3 Ml/d estimated for WRMP14. The effect of this change is an increase in WAFU. The details of our process losses assessment are included in Appendix 4D.

4.7.2 Outage The definition of outage – unchanged since the publication of the 1995 UKWIR methodology – is a planned or unplanned temporary loss of deployable output, typically lasting no more than three months. An outage can affect any part of the supply or distribution system. An unplanned outage occurs due to a variety of reasons, such as power failure. For WRMP19, we improved the quality of our outage data by working closely with our operations teams to generate a more complete and comprehensive record of actual outage events that have occurred over recent years. This has allowed us to successfully reduce the number and duration of operational outages that have been managed since WRMP14 through better targeted maintenance strategies, and improved response and decision making. Our improved performance on outages, combined with our improvement to outage data and modelling, has resulted in reduced outage allowances compared to WRMP14. The outage allowance for WRMP19 is 18.4 Ml/d on annual average and 20.1 Ml/d on summer peak, compared to 27.4 Ml/d on average and 36.7 Ml/d on summer peak for WRMP14. The details of our outage assessment are included in Appendix 4C.

4.7.3 Bulk supplies We are the highest net importer of drinking water of any water company in England and Wales. Eight per cent of our supplies come from water transferred from sources owned and operated by other companies (Affinity Water and Southern Water), under joint rights or bulk supply agreements. We also export two Ml/d to Affinity Water. As with our own deployable output, we have confirmed the availability of bulk supplies output under different drought severity events. This has fed into our assessment of droughts in our drought plan and been used in scenario testing described in Section 6.4. Bulk supplies are summarised in Figure 31.

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Figure 31: Company bulk supplies at 2020 under baseline and increasingly severe drought conditions

Water Company Dry year annual average (Ml/d) Resource Zone Bulk supplies Bulk supplies Bulk supplies Bulk supplies at 2020 (1 in 100 years) (1 in 200 years) (1 in 500 years) Severe Extreme WRZ2 Southern Water Average: 5.4 Average: 5.4 Average: 5.4 Average: 4.3 Haywards (Weir Wood) Peak: 5.4 Peak: 5.4 Peak: 5.4 Peak: 4.3 Heath

WRZ3 Southern Water Average: 8.0 Average: 8.0 Average: 8.0 Average: 4.0 Eastbourne (Darwell) Peak: 8.0 Peak: 8.0 Peak: 8.0 Peak: 4.0

WRZ4 Affinity Water Average: 36.0 Average: 36.0 Average: 36.0 Average: 36.0 Bracknell (Egham) Peak: 36.0 Peak: 36.0 Peak: 36.0 Peak: 36.0

WRZ6 Southern Water Average: 6.8 Average: 6.8 Average: 6.8 Average: 5.1 Maidstone (RMS Belmont) Peak: 7.4 Peak: 7.4 Peak: 7.4 Peak: 5.5

WRZ6 Southern Water Average: 0.1 Average: 0.1 Average: 0.1 Average: 0.1 Maidstone (Pitfield Booster) Peak: 0.5 Peak: 0.5 Peak: 0.5 Peak: 0.5

WRZ8 Affinity Water Average: -2.0 Average: -2.0 Average: -2.0 Average: -2.0 Ashford (Kingston Export) Peak: -2.0 Peak: -2.0 Peak: -2.0 Peak: -2.0

Total (Net) Average: 54.3 Average: 54.3 Average: 54.3 Average: 47.5 Peak: 55.3 Peak: 55.3 Peak: 55.3 Peak: 48.3

To avoid the risk of the spread of invasive non-native species (INNS) to the European protected site at Pevensey Levels, the existing bulk supply from Darwell Reservoir will cease from 2025. We have described why in Section 1.4.6. We have reviewed options for the best possible way of replacing this reduction in supply and this has fed into our options appraisal and decision making process for this WRMP19. This is described in Section 8.

4.7.4 Other changes As also detailed in Section 1.4.6, two schemes which are of particular relevance to WRMP19 are associated with our abstractions at Darwell and Greywell. Both options involve reductions to baseline deployable output which will occur from 2025.

4.8 Using our sources in combination (conjunctive use) In WRMP14 we made a commitment to consider using our surface and groundwater sources in a more integrated manner for WRMP19. We achieved this by extending our modelling to include groundwater, surface water, our reservoirs and bulk supplies. In east Kent, in a joint project with Southern Water and specialist consultant, Atkins, we explored the seasonal water resources availability from (and relationship between) existing and proposed surface water and groundwater sources. By reviewing how our sources operate in combination we have improved our supply forecast to better reflect the reality of how we operate these sources. We will review our approach and options to further develop our current conjunctive use modelling to inform our next plan, dWRMP24.

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4.9 An environmentally resilient water supply In Section 1 we explained that one of the objectives is to develop an environmentally resilient WRMP and to make the correct investment decisions to develop a sustainable water supply for both current and future customers. We also address resilience in the round – and the part our customers can play – in Section 3. In relation to environmental resilience, we need to consider how our plan can influence the sustainability of the ecosystems that exist in our supply area. Resilient ecosystems are those that are more able to adapt to, absorb and recover from disturbance events by resisting damage and recovering quickly; and are able to adapt to long-term changes. This capacity for adaptation and recovery makes these ecosystems more sustainable. In relation to our operations, the damage to ecosystems can come from a number of impacts, for example: • Point-source and diffuse pollution • over-exploitation of natural resources including unsustainable abstraction • human-influenced and natural climate change • altered land management practices • decline in biodiversity • the cumulative impact of our and other water companies’ WRMPs The SEA that accompanies this plan has given us a framework to evaluate and understand the environmental sustainability of our current abstractions and their impact on ecosystems. This framework has also enabled us to consider how this sustainability might change over time (due to various disturbance factors). As a result we have been able to better understand and assess the impact of disturbance factors on future availability of water resources. Our SEA has utilised this improved knowledge in our decision making (Section 8 ) and preferred plan (Section 9) to create a WRMP that we believe improves environmental resilience of our ecosystems. We have assessed how resilient our current abstractions are by analysing: • Their vulnerability to climate change • sustainability of our current abstractions • the vulnerability to the effects of pollution, land use change and a decline in biodiversity We discuss each of these areas below.

4.9.1 Climate change The most likely climate change scenario is that there will be less rainfall in summer and increased rainfall in winter, together with greater variability of weather events. This could adversely impact our current levels of water available in our surface and groundwater sources.

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Through detailed modelling carried out with the Met Office and HR Wallingford, we assessed and quantified the impact of climate change on future water availability. Our eight water resource zones have different characteristics and therefore will respond differently to climate change. Our WRMP14 vulnerability assessments found five were high risk, two medium risk and one low risk. In response to this, for this WRMP19, we decided it was prudent to adopt a methodology for assessing climate change impact that was appropriate for all vulnerability classifications. Our methodology followed the Environment Agency’s 2017 guidance and modelled the impact of climate change on our sources up to 2080. Compared with WRMP14 over the first 25 years of the plan, the effect has been a halving of our assumption of the climate change impacts on annual average conditions (6.3 Ml/d compared with 12.7 Ml/d), but a small increase in climate change impact during summer peak period conditions (7.3 Ml/d compared with 6.8 Ml/d).

Figure 32: Climate change impacts on our sources under annual average and peak conditions

Climate Dry year annual average (Ml/d) Summer peak period (Ml/d) change reductions 2019/20 2024/25 2044/45 2079/80 2019/20 2024/25 2044/45 2079/80 WRZ1 -0.1 -0.1 -0.1 -0.2 -0.1 -0.1 -0.2 -0.3 Tunbridge Wells

WRZ2 -3.2 -3.6 -5.0 -7.6 -4.0 -4.4 -6.2 -9.3 Haywards Heath

WRZ3 -0.4 -0.4 -0.6 -0.9 -0.7 -0.8 -1.2 -1.7 Eastbourne

WRZ4 0.1 0.1 0.1 0.2 0.1 0.1 0.2 0.2 Bracknell

WRZ5 0.0 0.0 0.1 0.1 0.0 0.0 0.0 0.0 Farnham

WRZ6 -0.5 -0.5 -0.7 -1.1 0.0 0.0 0.0 0.0 Maidstone

WRZ7 0.0 0.0 0.0 0.0 -0.1 -0.1 -0.0 -0.2 Cranbrook

WRZ8 0.0 0.0 0.0 0.0 0.1 0.1 0.2 0.3 Ashford

Company -4.0 -4.5 -6.2 -9.5 -4.7 -5.2 -7.3 -11.0 Total

For the majority of the company’s supply area, the medium climate change impacts are modest. The exception is WRZ2, Haywards Heath, where the yield of Ardingly Reservoir has been found to be more sensitive to climate change. As shown in Figure 32, Ardingly Reservoir makes up a significant proportion of the total climate change impact for the company.

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Our climate change modelling produced three scenarios: a low impact (or wet scenario), a mid-range impact (or central case scenario), and a high impact (or dry scenario). This gives us estimates of the most likely impacts of climate change and also a range of more extreme possible changes for our sources. We used our medium climate change scenario in our baseline supply forecast, and the dry and wet scenarios to test our plan against uncertainty, as described in Sections 6.4 and 8.4.1. This has ensured we account for the impacts of climate change, understand the sensitivity to potential variations in magnitude and are able to mitigate accordingly. The detailed methodology and results of the climate change assessment are included in Appendix 4A.

4.9.2 Sustainability of current abstractions As a company we operate within the limits of our abstraction licences. These licences – set at levels once deemed sustainable – may not always be compliant with the current and forthcoming legislation. The Water Framework Directive (WFD) is one example of legislative requirement that triggers a need to investigate the sustainability of current abstractions. Through our WINEP the Environment Agency has highlighted a number of water bodies at risk of deterioration in WFD terms. In October 2016, the Environment Agency released a list of sustainable catchments; it also listed abstractions either thought to be causing serious damage under existing abstraction rates, or likely to cause deterioration if abstraction were increased to fully licensed volumes. We were asked to ensure that any new or planned increases to abstraction did not cause a deterioration in the environment from which we were abstracting water. The Environment Agency developed this list using their modelling tools for reviewing the sustainability of current abstractions. Although the outputs of this modelling are not fully confirmed, they provide a good first step in understanding the current and future sustainability of our sources. It is important that we consider this now as it can take a long time to develop new resources to replace any lost through sustainability reductions. We also need to understand how the environmental impact of the new replacement resources compare with the impacts of current licensed abstractions. It is important to note that the information provided by the Environment Agency is ‘modelled data’. The true sustainability of our sources can only be established through detailed on-site investigations. These investigations take a number of years to complete using live on-site data and abstraction pump tests and are completed as part of our WINEP. Where abstractions are found to be unsustainable we undertake an exercise to establish what levels of abstraction are sustainable. Once the investigation is complete, the deployable output of the source is reduced to the sustainable level. This is known as a sustainability reduction to deployable output. Sustainability reductions continue to pose a risk to the security of future supplies and we have to consider them when developing our supply forecast. To do so, we base our sustainability reductions upon the Environment Agency’s Abstraction Data Query Tool modelling. Please see Appendix 4A for details of source changes from sustainability reductions.

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Mindful of our desire to produce an environmentally resilient plan, we will not increase deployable output from the majority of sources in WRMP19. Where an increase is necessary, it will only be implemented once we have demonstrated (by means of on-site investigations) that the abstraction is sustainable. For this reason, we have used recent actual abstraction (rather than fully licensed abstraction) when modelling the potential impact of sustainability reductions. The impact of sustainability reductions on baseline supply is shown in Figure 33. We have used full sustainability reductions for 2025 as they are based on detailed site investigations. Further sustainability reductions (to 2030) are based only on modelling data; using expert judgement and previous experience we think it is likely that at least half of our abstractions will be sustainable and environmental impacts are likely to be attributed to other non-abstraction related impacts. For this reason we have used assumed 50 per cent of modelled sustainability reductions impacting on our baseline supply up to 2030.

Figure 33: Assessed sustainability reductions to our deployable output

Sustainability Reductions

(DO Loss – Ml/d) Wells Tunbridge – WRZ1 Heath Haywards – WRZ2 Eastbourne – WRZ3 Bracknell – WRZ4 Farnham – WRZ5 Maidstone – WRZ6 Cranbrook – WRZ7 Ashford – WRZ8 Total 100% 2025 Scenario 1 -15.1 Ml/d 100% of future 0.0 -0.6 -11.2 -23.5 -4.1 -4.9 -1.8 -37.4 100% 2030 potential sustainability -68.4 Ml/d reductions to 2030 -83.5 Ml/d Scenario 2 100% 2025 100% of future -15.1 Ml/d potential sustainability reductions to 2025 0.0 -0.3 -5.6 -18.7 -2.1 -2.4 -0.9 -19.4 50% 2030 plus 50% of future -34.2 Ml/d potential sustainability -49.3 Ml/d reductions by 2030 Scenario 3 100% 2025 100% of future -15.1 Ml/d potential sustainability 0.0 -0.6 -11.2 -23.5 -4.1 -4.9 -1.8 -37.4 100% 2035 reductions to 2035 -68.4 Ml/d -83.5 Ml/d Scenario 4 100% 2025 100% of future -15.1 Ml/d potential sustainability reductions to 2025 0.0 -0.3 -5.6 -18.7 -2.1 -2.4 -0.9 -19.4 50% 2035 plus 50% of future -34.2 Ml/d potential sustainability -49.3 Ml/d reductions by 2035

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4.9.3 Water quality We carefully monitor underlying water quality trends through our drinking water safety plans and catchment management programmes (which also form part of our WINEP). The impacts of land use change, declines in biodiversity and pollution all have the potential to affect raw water quality and can result in a less environmentally resilient abstraction source. In WRMP19 we have not made any reductions to deployable output due to deteriorating water quality trends. In our current WINEP (2015 to 2020) we are investigating a number of deteriorating water quality trends primarily through our catchment management programme. We address deteriorating water quality trends in a number of ways: • By managing and owning the catchment responsibly to ensure that water quality is maintained • by working with landowners to maintain water quality and improve it over time • payments to landowners to seek improvements to water quality • improvements to the water treatment process As a company we utilise our WINEP to investigate future causes of water quality deterioration. This is a proactive approach that helps us to understand the underlining causes of water quality deterioration and develop the best methods for reversing these trends. We are currently seeing declining trends in nitrate levels within key parts of our supply area. Investigations into nitrate will form a key cornerstone of our WINEP in future years.

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COORDINATED ENGAGEMENT WE TEAMED UP WITH OUR NEIGHBOURING WATER COMPANIES TO HOLD A JOINT EVENT WHERE 44 STAKEHOLDERS FROM ACROSS THE SOUTH EAST CAME TO HEAR OUR PLANS 88

There are many components and data sources used to calculate and forecast demand

A COLLABORATIVE PLAN OUR WORK WITH CUSTOMERS HELPED INFORM OUR FUTURE DEMAND FORECAST

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5. Baseline demand forecast

In this section we describe the baseline demand for water and how we have forecast what future demand will be from 2020 to 2080. More detailed information can be found in WRMP19 Appendices 5 to 5D. There are many components and data sources used to calculate and forecast demand, as shown in Figure 34. Figure 35 then shows how these components are combined to create a total demand forecast.

Figure 34: Components of demand

Company Non-service Service reporting

Agriculture Consistency Non-household Leakage and reporting demand horticulture

Demand forecast factors

Unmeasured Unbilled use Household Minor (fire-fighting, domestic demand components illegal customers connections)

Measured Operational domestic use customers

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Figure 35: Equation for calculation of total demand

Distribution Input =

( X ) +( X ) Unmeasured household Unmeasured household Measured household Measured household population PCC population PCC

+ + + +

Non-household Water taken Operational use Total leakage consumption unbilled

For this WRMP19 we have made a number of improvements to our demand forecasting: • Revised and improved forecasting models based on industry best practice and feedback since WRMP14 We have continued our collaboration with other water companies on research studies to develop and promote best practice across the industry. For our forecasting, we have adopted the 10 steps and good practice guidance in the UKWIR/Environment Agency‘s Household Consumption Forecasting Manual to guide our approach and calculations. Throughout the process, we have consulted our stakeholders, worked with industry experts and improved the way we incorporate the impact of weather into our forecasts with input from the Met Office. Our new model and resulting forecast has been independently peer reviewed. We have improved our methodologies for forecasting non-household demand and revised our assessment in line with Ofwat’s guidance on categorising non- household properties. • Improved information compared with WRMP14 We have used online as well as postal surveys to gather more representative information on how our customers use water (we received 14,374 customer returns in 2016 compared with 10,700 postal only returns in WRMP14, with an improved demographic representation). We have also used our experience of universal metering to inform the future demand forecast. We have improved the use of third party information (for example, forecasts from local authorities), and have updated information from industry experts Experian on population and properties within our supply area. • Improved information compared with dWRMP19 Compared to dWRMP19, changes have been made to the baseline demand forecast in the WRMP19 to update the baseline forecast data to take account of 2017/18 outturn data and also to adjust downwards the population and property figures in our baseline demand forecast for the period 2045 to 2080 to be better aligned with the first 25 year forecast. southeastwater.co.uk 91

These updates resulted in a lower baseline demand forecast in the WRMP19 compared with the dWRMP19.

5.1 Baseline demand forecast In this section we explain our forecasts for household and non-household customers, leakage and minor components of demand.

Figure 36: Baseline demand forecast

Dry year annual average (Ml/d) Summer peak period (Ml/d)

2019/20 2024/25 2044/45 2079/80 2019/20 2024/25 2044/45 2079/80 WRMP19 329.1 335.6 370.8 439.9 438.0 447.9 501.0 606.4 Household

WRMP19 94.8 94.8 95.1 95.6 107.3 107.4 108.1 109.4 Non-household

WRMP19 10.4 10.4 10.4 10.4 10.4 10.4 10.4 10.4 Minor components

WRMP19 87.7 87.7 87.7 87.7 87.7 87.7 87.7 87.7 Total leakage

WRMP19 Total 522.0 528.5 564.1 633.6 643.3 653.5 707.3 813.9

WRMP14 572.2 573.6 - - 701.4 712.1 - -

A main component of the baseline demand forecast relates to the continuation of our current demand reduction initiatives: metering and water efficiency.

5.1.1 Metering impacts During previous plans we assumed that metering our household customers would lead to 15 per cent reductions in their water use. In fact, our compulsory metering programme has been more successful than we expected and has resulted in reductions in water use at property level of 18 per cent compared with unmeasured property level water use. We have had our analysis verified by leading industry consultants, Artesia, and it is comparable to the findings of other regional metering programmes by Southern Water and Affinity Water. Figure 37 shows how demand for water has changed since we started our metering programme in 2011. As the proportion of metered household customers has increased, overall demand for water has reduced. During this period, the population within our supply area has increased from 2.09 million to 2.21 million.

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Figure 37: Components of demand in 2011/12 and 2017/18

2011/12 2017/18 Difference Actual (Ml/d) Actual (Ml/d) Measured household 121.0 251.9 130.9 consumption Unmeasured household 230.8 82.5 -148.3 consumption Non-household consumption 127.6 94.7 -32.9

Leakage 94.5 87.7 -6.8 Minor uses (e.g. operational use, 9.3 10.4 1.1 firefighting, road washing Distribution Input Total 583.2 527.3 -55.9

During 2015/16 we carried out 2,200 detailed postal and online questionnaires and over 3,500 face-to-face surveys to explore how people’s views and habits change as they move onto a water meter. Of the customers who said they used less water since having a water meter installed, more than 80 per cent stated that this was due to a conscious decision to change their behaviour. Altruism and protecting the environment were key drivers in behaviour change for many participants, along with financial reasons. Around 10 per cent of households will remain unmeasured following the conclusion of our metering programme in 2019. The main reason for this is that it is technically complex and/or uneconomic to install a meter, for instance in homes that share a supply pipe with another property. Despite a comprehensive engagement approach to try and make the metering process easy, we struggled to get in touch with a number of customers and so were unable to meter their homes. We have assessed the cost- effectiveness of metering these remaining properties as part of our WRMP19 options appraisal; those options to further increase metering are included in our feasible options set for the period 2020 to 2080. We also expect that around one per cent of customers of the remaining unmetered customer base will opt to go onto a meter each year in the future up to 2024/25, as people move homes; and those who are used to having a meter move into the homes of those who did not respond during the customer metering programme. These assumptions are included in our baseline demand forecast.

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5.1.2 Using water wisely: water efficiency Our baseline demand forecast assumes a continuation of our varied and ongoing programme to encourage our customers to use water carefully through our website, local press, and attending community and education events. This programme has included the following: • “World of Water” school talks were given to 1,883 pupils across 32 schools during 2016/17 alone • our water efficiency trailer attended community fairs and events across the region • during the 2016/17 year alone our partnership with Save Water Save Money lead to more than 38,000 customer orders for a range of water saving products • partnerships with other like-minded organisations such as the University of Kent to support MSc students working with our data to explore the most effective and efficient ways we can encourage our customers to save water

5.2 Base year starting position Like our supply forecast, our starting position to forecasting future demand is to first define current demand. This is known as the ‘base year’ of the plan. The base year demand is adjusted to a theoretical average ‘normal’ and ‘dry’ year to account for the influence of weather. We then look forward from this base year to understand how and why the forecast for future demand will change. The WRMP19 uses 2017/18 as the base year for demand forecasts. Average household consumptions (i.e. average measured household per capita consumption (PCC) and average unmeasured household PCC) in the base year were derived for each water resource zone in our area. The base year PCCs for measured households were estimated from the metered volume records from the company’s billing system, after adjusting for meter under-registration and supply pipe leakage, and applying the estimated average occupancy of measured homes in each water resource zone. The base year PCCs at unmeasured households were estimated from our analysis of a set of unmeasured homes we have metered, typically in cul de sacs where we know the total water use.

5.3 Forecasting household demand

5.3.1 Population, property and occupancy numbers We worked collaboratively with four of our neighbouring water companies to jointly commission expert demographic consultants, Experian, to forecast future population and property numbers. The outputs from the study include population, household and property forecasts for each year along with estimated uncertainty ranges. Experian engaged directly with all 36 Local Planning Authorities (LPAs) served by our supply area to ask for the latest information on the number of dwellings they were planning for in their local plans. We received information from 34 of the 36 LPAs (an excellent 94.4 per cent response rate).

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The high level of local authority engagement in the development of our forecasts allowed us to use a plan-based forecast (one based on local plans, rather than trends) as a central case scenario and extrapolated this until 2080. Across our area, actual total population growth was higher than forecast for WRMP14 (5.7 per cent between 2011 and 2017 compared with the WRMP forecast of 4.2 per cent). At company level, the plan-based property forecasts for WRMP19 follow similar trajectories to the forecasts developed for WRMP14, but are almost five per cent higher in 2040 compared to previous forecasts. This may be due to a range of factors, including, for example, meeting previous unmet housing demand (as reflected by high house prices and stagnating occupancy rates). There are two new appointments and variations (NAV’s) operating in our area serving 8 sites in 2018/19 and expect to have more connecting to our network in the future. We propose to track and report on NAVs as part of the annual review of our WRMP. The demand for water from these new entrants to the water market has been accounted for in our WRMP19 via the demand forecasting model which has taken into account the demand growth from new developments. These developments don’t in themselves generate new demand for water, they are a delivery mechanism for delivering the properties and development already included in our demand forecast. Appendix 5A explains the methodology used by Experian to prepare the growth forecasts for WRMP19, and their more detailed findings.

5.3.2 Weather modelling for dry year and peak period Weather has a strong influence on customer demand, especially at home. For example, during periods of wet weather in summer months, customers tend to do little garden watering and so consumption may be similar to winter levels. In contrast, dry conditions accompanied by high temperature in spring or summer can increase customer garden watering and other external water use. Household demand is especially sensitive to weather when the maximum daily temperature is higher than 20 degrees, and the relationship between household water use and temperature is strongest for customers who do not live in flats. The average increase in water demand is approximately 0.96 per cent for every degree Celsius change in temperature. It is typically the demand during the hotter dry year periods that leads to the need to invest in new water resources and/or demand management options. We therefore look to meet demand for two key scenarios – the ‘dry year annual average’ daily demand, and also the maximum critical usage over a seven day period, referred to as the ‘critical period’ or ‘summer peak demand’. The latter typically occurs between May and August. In addition, we have produced a normal year forecast and a weighted average year forecast. To forecast demand for a range of normal, dry and critical conditions, a weather- demand modelling study has been undertaken for us by the Met Office and HR Wallingford. They developed statistical models of how fluctuations in weather affect household water demand. The results were used to convert actual measured base year demand levels into a normal and dry year and to then move from this to a forecast of household water consumption under a theoretical normal year, dry year and what demand could be under critical period conditions.

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The ratio of demand in a normal (average) year and dry year is known as a dry year (or DYAA – dry year annual average) factor, while a ratio of dry year average demand and demand in a summer peak period is referred to as a peak (or dry year critical period – DYCP) factor. The DYAA factor for the whole company (1.018), for example, suggests that household water consumption averaged across the year is 1.8 per cent higher in a dry year than in a normal weather year. Likewise the DYCP factor for the whole company (1.294) indicates that household water consumption in the peak week of a dry year is 29.4 per cent higher than average household consumption in a dry year. Our metering programme has successfully suppressed peak summer water use. As the latest dry year uplift factors are significantly lower than assessed for the WRMP14, an alternative assessment of the dry year uplift factor has been completed to verify the results from the weather-demand modelling approach that the Met Office used. The alternative approach works by comparing summer demand with winter demand in each year. It is based on the expectation that years with hotter, drier weather should have bigger differences between summer and winter demand. This analysis verified that actual uplift factors observed in recent years have been low. This reflects the new reality due to the success of our metering programme suppressing some summer use. It means that the higher uplift factors from earlier years may not represent the current water use patterns. Peak factors apply to measured and unmeasured demand, and both households and some categories of non-households (see also Section 5.4.3). The description of the peak factors and the analysis behind them is included in Appendix 5C.

5.3.3 Micro-components of water use To understand in more detail how our customers currently use water in their homes we contacted 20,000 customers by post and 85,000 by email to ask them about water use and appliance ownership in their home – including personal washing, clothes washing, toilet flushing, kitchen use and outdoor use. We used demographic data to ensure the sample was representative of our wider customer base and then applied the following segmentation for the survey: • By our eight water resource zones • among metered and unmetered customers We received 14,374 responses (an excellent 14 per cent response rate) from metered and unmetered customers across our supply area (11,165 metered homes and 3,209 unmetered homes). By analysing the survey responses we were able to understand how people use water now. We then used this as a foundation to build a forecast of water use by our household customers in the future. Household demand for water is calculated by a series of assumptions about the devices that use water, for example, how many people own each of these, and how often they use them. These assumptions fall into six categories of water using activities (or micro- components). These are shown in Figure 38. The results from the survey were validated by comparing them with the results of our previous surveys, and then benchmarked against and supplemented with published research data.

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Figure 38: Baseline household micro-components

Component PCC (l/h/d) at PCC (l/h/d) at Change (l/h/d) between 2017/18 2044/45 2017/18 and 2044/45 Toilet flushing 27.4 19.5 -7.9 Personal washing 60.5 56.2 -4.3

Clothes washing 22.9 19.7 -3.2 Dish washing 9.1 8.9 -0.3 Miscellaneous internal use 15.7 15.7 0.0 External use 18.6 20.2 1.6 Total DYAA PCC 154.2 140.2 -14.1

5.3.4 Trends in water use Average PCC, under dry weather year conditions, is forecast to reduce from 154 l/h/d at 2017/18 to 140 l/h/d at 2044/45. This reduction occurs for two main reasons: • The metering programme is expected to increase the proportion of measured households from 83 per cent in 2017/18 to almost 90 per cent by 2018/19. Meter penetration will continue to increase to about 91 per cent at 2044/45 as a result of all future new homes being metered and some further voluntary opting for meters • the take-up of more water efficient household appliances and changes in water use behaviour in the future driven in part by initiatives we are planning in this area Based on eight years’ of data we have observed no signs of ‘bounce back’ in demand – where customers save a lot at first and then demand starts to return to previous levels. The main trends in PCC from the base year in 2017/18 up until 2044/45 are: • Water use for toilet flushing is reducing as more homes install and use low flush toilets • water for showering is expected to increase as people shower more frequently, and use showers instead of baths • bath water use is reducing as fewer people take baths for personal washing • water use for washing clothes and dishes is expected to decrease as new washing machines and dishwashers continue to become more water efficient • a reduction in future average household occupancy

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Figure 39: Baseline per capita consumption

Company Per capita Occupancy Per property level consumption rate consumption (l/h/d) (h/prop) (l/prop/day) Dry year annual average (Ml/d) 2017/18 154 2.54 391 2019/20 147 2.49 366 2024/25 145 2.46 357 2044/45 140 2.34 327 2079/80 137 2.17 297 Summer peak period (Ml/d) 2017/18 207 2.53 524 2019/20 195 2.50 488 2024/25 193 2.47 476 2044/45 189 2.33 441 2079/80 189 2.17 410

5.3.5 Household demand compared nationally Household demand varies across the UK and our customers have historically used more water than the national average. Several recent studies have looked at reasons behind this and have identified relationships between water consumption and household occupancy, property type, the age of occupants, socio-demographic factors (including affluence), metering and weather. Households that typically use more water have lower occupancy, higher affluence and are in areas with warmer/drier summers. This applies to the south east of England and includes our supply area.

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Figure 40: Geographical PCC and social grade variation in England

All Households – PCC – 2015/16 Proportion in Social Grades ABC1 by 2001 Census Output Area

PCC (l/head/day Social Grade from Census Proportion ABC1

74 - 74 0.775 to 0.978 (12111) 74 - 124 0.692 to 0.775 (17677) 0.622 to 0.692 (20376) 124 - 135 0.58 to 0.622 (20629) 135 - 147 0.501 to 0.58 (20455) 0.444 to 0.501 (19718) 147 - 178 0.384 to 0.444 (18729) 0.318 to 0.384 (17663) 0.244 to 0.318 (16735) 0.024 to 0.244 (11641)

Source: Artesia Consulting (2017). Planning for the future: a review of our understanding of household consumption. Report AR 1170 and Tynemarch (2007) Leakage Methodology review variation in per capita consumption estimates

5.4 Forecasting non-household consumption Non-household (NHH) demand is the second largest component of demand. The retail market opened in April 2017 and non-household customers are now able to choose their water retailer. The longer-term impact of market opening on how we prepare our demand forecast will only be known as the market matures and develops. We explored several approaches to forecasting non-household demand for water and found the most appropriate for our supply area has been to separately analyse base year non-household demand in four groups: the service sector (45 per cent of demand), non-service sector (46 per cent of demand), agriculture and horticulture (eight per cent of demand) and a small remaining group of ‘other’ (one per cent of demand). We then considered trend-based regression to draw upon the past 10 years of actual water demand to forecast the future demand for these groups. As part of preparing for this WRMP19, we wrote directly to all retailers within our supply area outlining the demand forecast and asking for their comments and inputs, including on retail services which may change that forecast.

5.4.1 Approach to forecasting non-household demand To assess the base year non-household demand, we analysed the make-up and water use of our non-household (NHH) customer base during the 2016/17 reporting year. From this base, we then forecast how this may change over the planning horizon to 2079/80. southeastwater.co.uk 99

The definition of non-household was stated by Ofwat in 2016 as premises which pay business rates tax and are not eligible to pay council tax. We used this guidance to ensure that the classification of customers as either household or non-household was correct on the company’s billing system prior to retail separation in April 2017. As a result of this reclassification and data review more than 10,000 properties were reclassified as being households rather than non-households. Since 2013 we have participated in the Kent Water Task Group. Over this time we have presented several times to the group and participated in several joint pieces of work and specific work streams which have come from discussions in the group. For example we’ve contributed financially towards the set-up of the East Malling Research NIAB Water Efficient Technologies Centre (WET Centre) which we have since actively promoted. We have contributed information towards a regional study about the most sustainable locations for development in Kent and also investigated potential opportunities for raw water trading with farmers. During the development of the dWRMP19 we presented to the group about the trends we had observed in water use in the sector and our approach to forecasting this within our plan. The experiences during 2018 of both the freeze-thaw and heatwave events have given us a better understanding of the needs and requirements of agricultural and livestock farmers. Their need for a resilient water supply should benefit from the work detailed in our Business Plan to reduce single sources of supply in our network. We understand that there is significant uncertainty around the future of farming and some big policy decisions currently being discussed that have the potential to impact the way the industry uses water. Our WRMP is reviewed annually and revised every five years. In addition to this, we will continue to work to understand the demand for water in the farming sector and how this changes over time to ensure we provide a resilient and secure water supply. We are committed to continuing to support the ongoing development of the WET centre, and discussions of water trading opportunities. We are also looking at how best to promote efficient water management in poly tunnel systems. We will continue to actively participate in the Kent Water Task Group, to listen and understand the needs of the growers in our supply area. We will also build on the strong working relationships we have developed, with Kent County Council, the Kent farming community, the Environment Agency and the National Farmers Union. Overall, demand has been relatively flat over the past 10 years excluding years affected by drought and customer restrictions. Farmers are embracing water efficiency and also moving towards self-sufficiency to reduce the cost of using mains water. This includes building on-farm winter storage reservoirs, precision irrigation and rainwater harvesting (particularly in cattle farming). However, the potential for Brexit to potentially affect agricultural and horticultural output means that it is difficult to predict future consumption. On balance, we therefore expect non-household consumption to remain similar to current levels in the future, but consumption by agriculture and horticulture is expected to increase as a result of climate change impacts.

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5.4.2 Non-household property numbers Standard Industry Classification (SIC) codes were used in WRMP14 to classify and segment non-household customers. However, for WRMP19 a mix of Basic Land and Property Unit (BLPU) and SIC codes have been used. Between 2015 and 2016 we re-allocated household and non-household properties based on principal use and according to Ofwat definition of property types. This contributed to a reduction in non-household volume and properties in 2016/17 compared to 2011/12. From 2011/12 to 2015/16 there has been a decline in non-household properties of around 2,000 properties per year (excluding the reduction in properties due to the reclassification of household and non-household properties prior to the retail separation). At the same time volumes have increased slightly in the service and non- service sectors. Our analysis shows that this is because of changes in the make-up of the non-household properties: the number of small properties that use small water volumes decreased while at the same time there has been an increase in the numbers of larger users.

5.4.3 Non-household peak factors Peak factors and climate change are applied to the agricultural and horticultural non-household sector only, as this is the only sector sensitive to weather; service and non-service are less sensitive. For a more detailed description of peak factors please see Section 5.3.2.

5.4.4 Our non-household demand forecast Overall, we forecast a dry year annual average (DYAA) increase in non-household demand of 1.0 per cent by 2039/40 (compared to an 11 per cent increase that was forecast for WRMP14).

5.5 Forecasting leakage

5.5.1 Current leakage performance In its Guiding Principles, the government requires companies to take a long-term, strategic approach to water resource planning that represents best value to customers. Water companies must fully consider and appraise leakage management as an option to balance supply and demand alongside other options. The government wants to see a continuing downward trend for leakage during the period covered by WRMP19. Companies are expected to set challenging leakage objectives informed by the views of customers and based on the potential for innovation in future. The approach to water resources planning should represent best value to customers over the long term. Our leakage strategy, which we revised in 2014, embraces those expectations, and we explain it in detail in WRMP19 Appendix 5D. We have met our leakage target for 15 consecutive years and our performance in reducing leakage is among the best in England and Wales and is in the upper quartile level of industry performance.

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Since the publication of WRMP14, we have implemented a leakage strategy focused on improving our understanding of the network, data, leakage monitoring systems and operational management, as well as finding and fixing leaks on our pipe network and continuing with the replacement of the oldest parts of our pipe network. These improvements have allowed us to reduce leakage levels to 2.3 Ml/d below our performance target. Leakage level in our base year 2017/18 is 87.7 Ml/d compared the performance target of 90.0 Ml/d for the same year. So far, the water saved from this activity has allowed us to defer two groundwater schemes proposed in WRMP14, which we know would have had environmental impacts. This actual performance is 23.5 Ml/d below our calculated sustainable economic level of leakage of 112.2 Ml/d. However, our experience shows that our customers expect to see us prioritising fixing leaks to support our ongoing water efficiency messages – particularly at times of drought – which is why we are working to continue to drive leakage down further. Figure 41 shows our leakage performance and compares it with regulatory targets since the merger of South East Water and Mid Kent Water in 2009.

Figure 41: Historical leakage levels

110

105

100

95 Total leakage (MI/d) leakage Total

90

85

2000/1 2001/2 2002/3 2003/4 2004/5 2005/6 2006/7 2007/8 2008/9 2009/102010/112011/122012/132013/142014/152015/16 2016/172017/18 Year Total leakage Annual leakage target

5.5.2 Baseline leakage forecast Without a concerted and ongoing effort to find and fix leaks, the leakage level would gradually increase as new leaks occur in the pipework – this is known as the natural rate of rise of leakage. We currently spend £16.9 million/year just to prevent leakage from rising beyond the current level of 87.7 Ml/d. In line with the government’s policy on no increases in leakage, we are planning for our baseline leakage level to remain at the base year level – that is, at 87.7 Ml/d.

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We have assumed that our baseline leakage will remain at this level over the entire period of the WRMP19 planning horizon; however our plan is to continue to outperform this target using the latest innovation to prevent leaks occurring and find even smaller leaks that we can repair more quickly. We expand on this in more detail in Section 9. The industry guidance for consistency of regulatory reporting of leakage3 recommends a consistent approach to the assessment of data and the estimation of leakage. Its key aim is to provide a level playing field for regulatory comparison of leakage levels between companies. During 2017, we carried out a considerable amount of work towards achieving compliance with the requirements of the methodology. We describe this in more detail in WRMP19 Appendix 5D. Of the 16 components required to be compliant with the new methodology, there are five components where changes would have a material impact on our leakage reporting. These are complex elements, many of which require collection of data over an extended period before the new method can be applied to leakage estimations. Therefore, instant compliance with the new methodology is not straightforward. Our position is similar to many other companies and we plan to achieve full compliance by the start of the next planning period in 2020. We have tested the sensitivity of changes to leakage as a result of the consistency project. The table below shows that changes to leakage have little impact on total demand. Appendix 5D explains why changes in leakage are not matched by changes in total demand.

Figure 42: Effect of changing leakage levels on distribution input

Total demand (Ml/d)

Leakage

scenario Leakage WRZ1 Wells Tunbridge WRZ2 Heath Haywards WRZ3 Eastbourne WRZ4 Bracknell WRZ5 Farnham WRZ6 Maidstone WRZ7 Cranbrook WRZ8 Ashford Total Base 87.7 34.5 64.2 56.3 158.2 37.7 61.0 21.6 84.6 518.1

Reduced by 77.7 34.6 64.3 56.5 158.7 37.0 61.4 21.8 85.2 519.5 10 Ml/d Increased by 97.7 34.3 64.2 56.1 157.8 36.4 60.6 21.5 84.1 515.0 10 Ml/d

The key issue for the WRMP19 is the impact of these changes on the supply demand balance and the selection of options in our preferred plan. Our assessment shows that because the total demand figures are not significantly impacted by the changes, there will be no material impact on our demand forecast of adopting the revised approach.

3 Consistency of Reporting Performance Measures, UKWIR 2017

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5.6 Impacts of climate change It is predicted that climate change will increase the demand for water over the course of the planning period, as shown in Figure 43.

Figure 43: Estimated percentage of consumption driven by climate change

Dry year annual average (Ml/d) climate change factor at: Water Resource Zone 2019/20 2024/25 2044/45 2079/80 WRZ1 Tunbridge Wells 1.06% 1.18% 1.69% 2.57% WRZ2 Haywards Heath 2.08% 2.32% 3.25% 4.89% WRZ3 Eastbourne 1.84% 2.05% 2.89% 4.38% WRZ4 Bracknell 1.17% 1.30% 1.84% 2.81% WRZ5 Farnham 1.54% 1.71% 2.40% 3.63% WRZ6 Maidstone 1.65% 1.85% 2.62% 3.98% WRZ7 Cranbrook 2.36% 2.62% 3.70% 5.55% WRZ8 Ashford 1.49% 1.66% 2.35% 3.55% Whole Company 1.52% 1.70% 2.40% 3.64%

More details of the way the impacts of climate change have been quantified are in Appendix 5C.

5.7 Other components of demand A small proportion of the water we supply is used but unbilled. This includes the water used from standpipes by the fire service; and water taken through illegal connections. It also includes our own operational use. The assumptions for these components remain consistent with WRMP14.

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We designed a multiple set of future scenarios by adjusting supply demand balance components

ANDY – LEAKAGE TEAM WE’RE EXCEEDING OUR LEAKAGE TARGET BY USING STATE-OF-THE-ART TECHNOLOGY AND REDUCING REPAIR TIMES

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6. Supply demand balance

In this section we explain our baseline predictions for water available for use (WAFU) and demand for water from 2020 to 2080, and also why we have chosen the 60 year planning horizon. We then explain how we have considered uncertainty within this forecast. As described in Sections 4 and 5, there are uncertainties in forecasting the supply and demand for water in the future, especially when making predictions 60 years ahead. To take into account this uncertainty in forecasting both supply and demand, a planning allowance, or ‘target headroom’, is added to the demand forecast. We provide a brief explanation of how we have assessed baseline target headroom in this section, and the technical data is included in Appendix 6A. In addition to including target headroom in our projections of baseline supply demand, we have explored a wider range of risk in this WRMP19 than in previous plans by also considering how different our supply demand balance calculation could look under a range of different future scenarios. We describe this in Section 6.4. In line with the recommended risk-based methods, we designed a multiple set of future scenarios by adjusting supply demand balance components. These scenarios test future uncertainty and inform the final decision making for our preferred plan.

6.1 Our supply demand balance Our best estimates of demand forecast (Section 5), target headroom (Section 6.3) and WAFU (Section 4) result in deficits in the baseline supply demand balance. These are shown for the area as a whole in Figure 44 and also for each of our three regions in Figure 45, Figure 46, and Figure 47. A positive supply demand balance indicates an overall surplus of water, although it is important to note there might still be deficits at the zonal level which need to be addressed. These ‘company versus zonal’ differences can be seen more clearly in the regional maps and graphs shown later in this section. A negative supply demand balance indicates a deficit and a need for additional resources, and/or demand management measures to reduce demand, to ensure sufficient water is available to our customers.

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Figure 44: Baseline supply demand forecast and our supply demand balance

Dry year annual average (Ml/d) Summer peak period (Ml/d)

2019/20 2024/25 2044/45 2079/80 2019/20 2024/25 2044/45 2079/80

Supply forecast 629.2 615.8 560.5 557.3 756.2 739.1 683.2 679.5 Demand forecast 522.0 528.5 564.1 633.6 643.3 653.5 707.3 813.9 Target headroom 32.4 39.0 59.8 74.7 36.1 44.2 70.2 86.6 Demand + target 554.4 567.5 623.9 708.2 679.5 697.7 777.4 900.5 headroom Supply demand 74.8 48.3 -63.4 -150.9 76.7 41.4 -94.2 -221.0 balance WRMP14 30.3 13.0 - - -8.2 -37.3 - - supply demand balance

In summary, the table shows that by 2025, at a company level, our baseline supply demand balance is in a better position than it was at WRMP14. There is no comparison with WRMP14 in the table beyond 2025; which reflects that the WRMP14 planning period ends in 2040. At a company level we reach a deficit at 2044/45 for both dry year annual average (-63.1 Ml/d) and summer peak period (-93.9 Ml/d). At a zonal level we reach deficits in some areas much earlier – as early as 2024/25. The company-level position is a reflection of the fact that both the supply and demand forecasts have reduced since WRMP14 because: • The supply forecast is more resilient than previously because it reflects the amount of water we can reliably supply during a one in 200 year drought event and it includes sustainability reductions • the demand forecast now includes a lower forecast for non-household customers and also reflects the demand reductions from our successful metering and leakage programmes that achieved greater savings than forecast in our last plan That said, the allowance for uncertainty in our plan, target headroom, is slightly higher in WRMP19 than in WRMP14, reflecting the views of our regulators, but then reduces to be broadly in line with our previous plan. The most significant driver of the deficits between 2025 and 2045 are sustainability reductions, while the impacts of population growth and climate change influence our longer-term forecast to 2079/80.

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Figure 45: Supply demand balances for Sussex (WRZs 1-3) for average and peak conditions

Greater London

Gillingham

Maidstone

Tunbridge Wells

Cawley

Horsham Haywards Heath

Haywards Heath Eastbourne

Brighton and Hove Hastings

Eastbourne

Sussex 2020/21 2024/25 2029/30 2033/34 2039/40 2044/45 2049/50 2054/55 2059/60 2064/65 2069/70 2074/75 2079/80

Average 11.1 7.8 -3.9 -8.1 -21.1 -26.8 -31.3 -35.5 -39.5 -43.0 -47.3 -52.8 -57.2 Summer 11.3 6.5 -6.9 -12.7 -29.1 -37.3 -43.9 -49.0 -54.5 -60.3 -65.4 -72.4 -81.3

20.0

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Figure 46: Supply demand balances for Western (WRZs 4-5) for average and peak conditions

Maidenhead

Reading Backnell Gillingham

Maidstone Maidstone

Aldershot Basingstoke Guildford Backnell Ashford Tunbridge Wells

Cawley Canbrook Farnham Winchester Haywards Heath

Petersfield Haywards Heath Eastbourne Hastings Southampton

Chichester Brighton and Hove

Eastbourne Potsmouth

Western 2020/21 2024/25 2029/30 2033/34 2039/40 2044/45 2049/50 2054/55 2059/60 2064/65 2069/70 2074/75 2079/80

Average 53.2 43.3 33.3 29.9 14.1 9.0 4.6 1.2 -1.3 -4.5 -9.2 -15.8 -22.5

Summer 46.5 34.7 22.6 17.5 -0.5 -8.1 -15.2 -21.3 -26.8 -32.8 -38.9 -46.6 -55.7

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Figure 47: Supply demand balances for Kent (WRZs 6-8) for average and peak conditions

Maidenhead

Reading Backnell Gillingham

Canterbuy Sevenoaks Maidstone Maidstone

Aldershot Basingstoke Guildford Backnell Ashford Tonbridge Tunbridge Wells Ashford Cawley Canbrook Folkestone Farnham Winchester

Petersfield Haywards Heath

Southampton

Chichester Brighton and Hove Hastings

Eastbourne Potsmouth

Kent 2020/21 2024/25 2029/30 2033/34 2039/40 2044/45 2049/50 2054/55 2059/60 2064/65 2069/70 2074/75 2079/80

Average 0.5 -2.8 -8.2 -11.8 -39.8 -45.4 -48.9 -51.6 -54.9 -58.5 -62.6 -67.3 -71.1

Summer 4.2 0.1 -6.6 -11.3 -41.3 -48.7 -54.0 -58.1 -62.6 -67.3 -72.1 -78.0 -83.9

0.0

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6.2 Planning horizon There is an expectation that our plans will look 25 years ahead, which is the statutory minimum requirement. However, with our business operating in a water-stressed area and this being a strategic plan, we have looked much further ahead to identify and test the strategic sets of future schemes against a wider range of possible futures and their inherent uncertainties. Our approach has seen us look 60 years ahead to allow us to properly investigate, scrutinise and plan future water resource needs – not least because many future options have long lead times and asset lives. A longer WRMP decision making appraisal horizon allows us to more robustly rule in or rule out these options; and crucially, ensure we have enough time to course-correct and find alternative solutions to meet any deficit if that becomes necessary. That logic of taking a longer term view has also been reflected in the work undertaken by the WRSE modelling group. This has identified substantial deficits in a number of our water resource zones emerging over the same 60 year period. We consider that a WRMP decision making horizon substantially longer than 25 years will be needed for a robust examination of how any deficits should be addressed. For these reasons, and to ensure consistency with the WRSE group modelling work, we are comfortable that selecting a planning horizon of 60 years for the decision making associated with each of our eight water resource zones is a robust approach.

6.3 Headroom assessment Target headroom provides a legitimate planning buffer for the uncertainty and risk included within the main building blocks of WRMP. Our assessment of target headroom takes account of unforeseen events and uncertainty. The components we have individually and collectively considered in our headroom calculations are based on a best practice approach and include: • Bulk imports • gradual pollution • accuracy of supply side data • climate change impact on supply uncertainty • accuracy of sub-component data • demand forecast uncertainty • climate change impact on demand uncertainty The impact of target headroom on the supply demand balance is as follows: • Higher target headroom can lead to a larger supply demand balance deficit – meaning more investment is required during the planning period • conversely, lower target headroom can mean a smaller supply demand deficit and requires less investment – but also increases risk, particularly if our assumptions about the future supply or demand forecasts are wrong Determining the right target headroom as the buffer we should adopt in our plan is a balancing act – one that balances risk to supplies with the cost of securing supplies for existing and future customers. southeastwater.co.uk 111

To determine this, we have reviewed and updated the target headroom model which was developed for WRMP14 and had already been fully tested and audited. We have adapted the model to look 60 years ahead and carefully reviewed our updated inputs into the model. This is to ensure we do not double-count uncertainties, which may impact on target headroom – for example, when we appraise new options for addressing the supply demand deficit. The level of target headroom adopted for this plan has also been influenced by our pre-consultation feedback, notably from the Environment Agency which considered our WRMP14 target headroom levels to be too low during the earliest years of the planning horizon i.e. the first five to 10 years. While uncertainty relating to non-renewal of time limited licenses (TLLs) is not adopted as an input component to target headroom (in accordance with the WRMP guidelines) we have, following interest from stakeholders, included further detail of the number of TLLs we possess and what proportion of our total deployable output they represent in Appendix 6A. For WRMP19, we reviewed target headroom outputs for climate change uncertainty. We identified that climate change uncertainty in some zones included very wet future scenarios. This had the effect of generating negative climate change impacts overall i.e. it reduced climate change uncertainty in our target headroom assessment. Consequently, we have constrained the climate change uncertainty distribution profiles included in target headroom for wet scenarios, to re-run the model and generate a new set of more reasonable values – these new values have been adopted in or WRMP19.

6.3.1 Calculating target headroom The technical output from the baseline target headroom model is a volume (in Ml/d) of target headroom every five years across the planning period, against a level of risk, which we refer to as the ‘percentile’. In effect, if we adopt the 100 percentile level of target headroom, we would plan to take a very risk-averse position and implement investment to cover all of the seven factors of risk modelled. This would be an expensive and not a reasonable approach to take. Conversely, a very low percentile level of target headroom would not take reasonable account of, or have any buffer for, the uncertainty and risks that exist in our supply demand forecasts when looking 60 years ahead. The percentile levels adopted by water companies vary and are typically in the 50 and 85 percentile range, depending on a number of factors. However, they always represent the overall level of risk that can reasonably be shared between the company, its customers, and the environment.

6.3.2 WRMP19 target headroom In WRMP14 we adopted a flat risk profile, fixed at the 65 percentile from 2015 to the end of the planning period.

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For WRMP19, following the feedback from the Environment Agency, we have reviewed our risk profile. We have also explored a range of sensitivities on the various percentiles that could be applied and assessed the risk to the company and customers. Our plan now starts with an 80 percentile in 2020 and reduces through the planning period to the 40 percentile by the end of the planning period. This reflects improvements in the assessments of levels of supply, demand and feasible options. We consider that the target headroom profile adopted for WRMP19 is: • Broadly consistent with historical levels of target headroom • proportionate to the demands and resources of the company • a level of risk that is within the range of other companies estimates • a reasonable sharing of risk with customers and other stakeholders • a reasonable balance between near term and long term uncertainty • reflective of pre-consultation comments received We have also explored a broader range of greater uncertainty than that included in target headroom by modelling alternative scenarios of the future. This reflects the need for WRMP19 to be a resilient plan. For example, we have assessed the impact and uncertainty around sustainability reductions through scenario testing, which we detail in the next section.

6.4 Taking account of greater uncertainty After identifying the central most likely case supply demand balance, we explored a wide variety of possible alternative supply and demand scenarios representing the most likely futures the company may experience over the planning period to take account of uncertainty in population growth, leakage, drought, climate change and sustainability reductions. The supply demand balances for each scenario can be found in WRMP19 Appendix 6B. This approach enabled us to address long term risk and uncertainty, and to acknowledge and plan for the fundamental nature of many of the challenges we face.

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Figure 48: Combinations of possible scenarios

Component of our The range of variation within our core baseline assumptions over the course of baseline supply the planning period that were used in combination to generate scenarios of demand forecast possible future conditions (our central case assumptions are shown in yellow)

Demand – Low Medium High household growth Forecast reduction of 38 per cent Our central case Forecast increase of 38 per cent Demand – Low Medium High non-household Forecast reduction of 20 per cent Our central case Forecast increase growth of 38 per cent Demand – Medium High leakage levels Our central case Forecast increase of 5 per cent Deployable output – WRMP14 (1:50) Worst Historic Severe (1:200) Extreme (1:500) drought severity Deployable (1:100) Deployable output Deployable output increase Our central case decrease of output decrease of 3 per cent 1.5 per cent of 5 per cent Deployable output – Medium Dry climate change Our central case Deployable output decrease of 5 per cent Deployable output Low Medium High – sustainability Deployable output decrease of Our central case Deployable reductions 15.1 Ml/d deployable output output decrease decrease of of 83.5 Ml/d 49.3 Ml/d

Deployable output – Using drought permits, orders and options Without using drought permits Deployable output increase of 18 Ml/d drought permits, orders and options Our central case

Through WINEP we have a better understanding of declining water quality trends and the benefits of catchment management in avoiding the need to increase treatment by protecting current water quality. We did not identify any loss of deployable output due to water quality failure and therefore did not apply this uncertainty factor to generate scenarios. This approach helped us understand how sensitive our supply demand balance is to different influences. In our decision making (discussed in Section 8), we can see what a ‘no regrets’ plan would look like by looking for options that are selected repeatedly by the model under a variety of different scenarios. This method was a key innovation of the Water Resources Long Term Planning Framework and has also been used by the WRSE group.

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The options available to us need to be acceptable in terms of cost, environmental resilience and deliverability

NEW INVESTMENT DESPITE IMPROVEMENTS IN LEAKAGE AND WATER EFFICIENCY, NEW RESERVOIRS, WATER REUSE SCHEMES AND PIPELINES WILL BE NEEDED IN THE FUTURE TO MEET EXPECTED INCREASED DEMAND

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7. Options

Section 6 shows that we forecast a deficit of water in the future. This means we will be unable to meet the levels of service our customers expect unless we invest in new schemes to increase supply or reduce demand. This section sets out our approach to identifying all possible options for addressing the future deficit. The options available to us need to be acceptable in terms of cost, environmental resilience and deliverability. They must be informed by customer views and customer challenge, and subject to a thorough environmental assessment through the SEA and HRA. Section 8 then explains how we have selected the options which feature in our preferred plan which is presented in Section 9.

7.1 The options appraisal process in principle When assessing what options could meet any deficit, we follow a multi-stage approach that screens every option against a pre-defined set of criteria. In essence, the screening process (shown in Figure 49) applies ever-finer filters to all the options so that we can determine the optimum set of options over the lifetime of the plan which can meet the deficit. Our options appraisal process started with a long list of options – from considering those feasible options in our WRMP14, exploring opportunities with third parties and looking at ways of further reducing operational outage and process losses. We explore this in later sections. In line with the WRMP guidelines, we have integrated our extensive list of unconstrained options with the SEA process and screened the options at multiple stages to arrive at a feasible option list from which we have later determined our preferred plan. We also recognise we have a significant role to play in achieving sustainable abstraction. When formulating our options we have taken this into account along with our duties to have regard of the objectives of the River Basin Management Plans, protected area requirements and general biodiversity duties.

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Figure 49: Options appraisal process

Unconstrained Starting list of all possible options options list

Identifying environmental and social, Coarse resilience, promotability and deliverability screening 'show stoppers'

Options for taking forward for the fine Constrained screening process; further option definition options list and data collection

Multi-criteria analysis; assessment of Fine technical, environmental, resilience, economic screening and deliverability issues; further removal of unacceptable

Options used as basis for modelling/decision- Feasible making selection including costing and MCA options list informed by SEA qualitative assessment

7.1.1 Strategic Environmental Assessment (SEA) for options appraisal Our approach to incorporating the SEA into our options appraisal process was set out in the SEA Scoping Report which we published in May 2017. The aim of this report was to give stakeholders an early opportunity to comment on our approach for integrating SEA into the options appraisal process for assessing the environmental impacts of the plan. The approach we proposed in the scoping report was positively received by stakeholders with no substantive comments that required a change. Our approach emphasised the importance of assessing the plan’s contribution to environmental objectives; in particular, for groundwater and surface water bodies, water-dependent habitats and species, and for ensuring consideration of marine protected areas. Environmental costs and benefits, and potential options identified during our consultation were included in the options screening and scenario testing of the set of preferred options.

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7.2 Option types The range of options considered included: • Ways of reducing and managing demand • new supply options • improving current supplies (making our existing processes and systems more productive) Figure 50 lists the types of options considered. More information about our option types and how they were identified is in Appendix 7B. The strategic schemes that were in our WRMP14 preferred plan have been reappraised to ensure the costs and technologies were up-to-date. For other option types for which we had less first-hand experience (such as effluent re-use) we have had support from international experts with experience in Singapore and Australia. These further investigations have given us a greater degree of certainty on costs, technologies and implementation. Our unconstrained options list was made up of all plausible options (including drought measures), suggestions from third parties, catchment management options resulting from our WINEP investigations, feasible options from WRMP14 and options suggested by our own operations staff.

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Figure 50: Option types

Main option group Option type Further breakdown of option types and description Demand Leakage reduction Assessment and repair of pipelines to reduce management leakage from existing network Pressure management Pressure reduction programmes Metering Installation of water meters Recycling and re-use Recycling and re-use of grey water Water efficiency Methods of reducing water wastage Drought measures Drought permit Use of permits or orders during drought conditions to provide additional sources of Drought order water or increase above existing abstraction licences Groundwater Aquifer storage recharge Storing of water in groundwater aquifers for extraction during increased demand periods Groundwater ‘Closing the gap’ – Increasing abstraction enhancement within licence by addressing an existing constraint New groundwater ‘Beyond the licence’ – extend an existing licence to allow for further abstraction (new licence required) New groundwater source (new licence required) Groundwater catchment New catchment management measures to management prevent outages and reduction in DO Licensing Licence trading Underused licences or licences no longer required by licensee – potentially available Water treatment WTW expansion Improving the water treatment works works capacity to remove constraint on abstraction within licence WTW process losses Improving the water treatment works efficiency to reduce water losses Water transfer Inter-company / regional Transfers of water from/to outside the transfers company on an inter-company or regional scale Company transfers Transfers of water within the South East Water company area National transfers National bulk transfers International import International importing of water

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Figure 50: Option types continued

Main option group Option type Further breakdown of option types and description Effluent re-use Effluent re-use Reverse osmosis (treatment technology) Conventional (treatment technology) Conjunctive use Conjunctive use Combining surface water abstraction and groundwater abstraction to allow periods for aquifer recovery and avoid surface water abstraction in low flow periods Desalination Desalination Estuarine – taking estuary water Coastal – taking coastal water Brackish abstraction – Boreholes near the coast or estuaries Reservoirs Reservoirs Bunded – man made banks all round Bankside – partially bunded with natural topography Impoundment – dam and natural topography Existing reservoir – reservoir extension or raising Surface water New surface water New locations for surface water abstractions Surface water Increasing abstraction within licence limits by enhancement removal of constraints Surface water New catchment management measures to catchment management prevent outages and reduction in DO

7.2.1 Third party options As the water company that takes more bulk supplies than any other, we advocate greater collaboration and sharing of water. We believe that there are opportunities for sharing and co-delivery of supply and demand options with a range of third parties in the future. To support this view, we authored a report with Frontier Economics4 to explore mechanisms for increasing water trading and we were pleased that in their Water 2020 report5 and the Price Review methodology, Ofwat adopted many aspects of our proposal. The recommendations adopted in the Water 2020 summarised a number of practical steps for addressing the main barriers to the sharing of water resources. These were changes to regulations and guidelines, as well as the creation of a national-level information exchange/marketplace. Understanding what the long-term recommendations are likely to be has helped in developing the methods and approach for third party engagement for our WRMP19 to ensure alignment and “future proofing” for Water 2020.

4 corporate.southeastwater.co.uk/media/1880/a-water-resource-discussion-document-third- party-options-in-conjunction-with-frontier-economics-july-2015.pdf

5 Water 2020: our regulatory approach for water and wastewater services in England and Wales. Ofwat 2016 Water Resources Management Plan 2020 to 2080 120

We used the following methods to reach as wide an audience of third parties as possible: • Publication of a notice in the Official Journal of the European Union (OJEU) to reveal new supply and transfer opportunities • publication in trade press of statement of need regarding our future water needs and inviting third parties to contribute demand and supply solutions • direct contact with all abstraction licence holders in and near our supply area • press release in industry publications and on industry websites and social media • our work with the WRSE Group not only meets the requirement to advertise our need for water (via our approaches to and engagement with third parties) but also explores opportunities to share water resources further These invitations for third party options resulted in 99 unconstrained options that were in turn filtered to become 74 constrained options, and then 25 feasible options. These fed into the decision making process further discussed in Section 8. Third party options were subjected to the same screening and scrutiny as all other options.

7.3 The screening process The screening process was undertaken in stages, with an initial coarse screening followed by fine screening to identify feasible options that were taken forward for further consideration. The stages were: • The unconstrained options list: identify an extensive list of all potential options that either increase available supplies, reduce demand or increase the efficiency and productivity of existing systems • coarse screening: screen the unconstrained options against a number of criteria to refine the options down to a constrained options list • fine screening: further screen the constrained options to produce a feasible options list Figure 49 on page 118 illustrates this process. Further details of the options appraisal process are in Appendix 7A. Section 8 explains how we have optimised this set of feasible options from which the preferred options list and preferred plan has been developed.

7.3.1 Unconstrained options list Our unconstrained options list was made up of all plausible options (including drought measures), suggestions from third parties, catchment management options resulting from our WINEP investigations, feasible options from WRMP14 and options suggested by our own employees, including where we could reduce operational outages and process losses.

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The strategic schemes that were in the WRMP14 preferred plan have been reappraised to ensure the costs and technologies were up to date. For other option types, of which we have less first-hand experience (such as effluent re-use) we have had support from international experts in Singapore and Australia. These further investigations have given us a greater degree of certainty on costs, technologies and implementation. After a review to remove options already delivered and duplicates, our final unconstrained list contained 510 options. More information about our unconstrained option list and how these options were identified is in Appendix 7B.

7.3.2 Coarse screening of unconstrained options The next stage involved coarse screening the unconstrained options to a manageable set of the more promising options for further consideration (the constrained option list). We applied a simple pass/fail method to remove options; and retained options that were considered marginal so they could be assessed in greater detail at the next stage. • Resilience • promotability • deliverability • environmental and social acceptability For the environmental and social acceptability criteria, we screened out options that were likely to have unacceptable environmental impacts that could not be mitigated or avoided (for example, by reducing a strategic option’s size or making detailed adjustments). Cost considerations were not applied at the coarse screening stage. Where an option was considered feasible, or there was insufficient information available to answer the evaluation criteria at the coarse screening stage, the option was taken forward to the next screening stage. The yield of each option was considered for both dry year annual average and dry year summer peak period for each year of the planning period. We estimated the amount of time needed to investigate and implement each option. After coarse screening and with inclusion of feasible options from the WRMP14, the constrained options set comprised 416 options for further assessment during the fine screening stage. More information about how our unconstrained list was filtered during the coarse screening process is in Appendix 7C.

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Figure 51: Coarse screening criteria

Criteria Main assessment questions Points to consider Resilience 1 Does the option • Delivers no benefit at critical period? fail to address the • No added resilience against water supply-demand availability issues in the zone? problem? • Vulnerable to hazards, drought, climate change? Deliverability 2 Are any of the risks • Unknown or unreliable technologies? and uncertainties • Land availability, ownership unacceptable and likely and tenure? to result in failure of • Is the land contaminated? the option? • Dependencies on other assets or 3 Is the option technically third parties? unfeasible?

Promotability 4 Is the option likely to • Customer acceptability? result in overwhelming • Social benefits vs risk? public and/or planning • Could planning issues jeopardise the resistance? delivery of the option? 5 Does the option • Regulatory acceptability, new contravene national consents? policy objectives? • Other interested parties that could influence outcome? • Conflicts with other water resource zones? Environmental and 6 Is the option • Is water available for abstraction? social acceptability incompatible with high • Impact on European sites? level environmental • Impact on SSSIs? constraints? • Impact on priority habitats? 7 Are there unacceptable • Archaeological impact? impacts on internationally/ • Landscape impact? nationally designated • Can the environmental impact be sites, irreplaceable mitigated or offset? habitats and/or WFD • If impacts are not acceptable, can objectives? they be agreed with key stakeholders (EA, NE, ESG, etc.) as justifiable for screening out?

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7.3.3 Fine screening of constrained options This stage involved further data collection for the options remaining on the constrained list and further refinement to reduce the list to a shorter feasible list of options. Using multi-criteria analysis (MCA), options were assessed against the same set of over- arching principles (see Figure 52) as used for coarse screening but using quantitative and qualitative assessments. The qualitative assessment involved assessing the impact or risk level of each option against each objective and recording the decisions in a performance matrix along with a narrative explaining the decision. Discussions with our stakeholders has helped ensure that options have been rigorously and transparently tested against a range of challenges, including to ensure we meet the requirements of SEA, HRA and WFD. Regulators and stakeholder groups told us they found our use of multi-criteria analysis easy to understand. Discussions with these groups have helped us derive a rounded set of deliverable options. We have tested the range of options with our customers (including via willingness to pay research) to better understand customers’ preferences for different option types.

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Figure 52: Fine screening criteria

Topic Sub topic Objectives Biodiversity Protect and enhance aquatic and terrestrial biodiversity and fisheries including statutory, and non-statutory sites, protected species and fisheries and priority habitats No loss of ancient woodland Landscape and Protect and enhance valued landscapes and visual amenity visual amenity Materials Contribute to improved sustainable energy use and reduced assets and carbon emissions and sustainable use of materials resource use Protect property, agricultural land and strategic assets The water Protect and improve surface and groundwater body status environment Minimise the risk of flooding Geology Protect and enhance geology and soils and soils Air quality Protect air quality and minimise greenhouse gas emissions

Strategic environmental assessment environmental Strategic Cultural Protect and enhance cultural heritage and archaeological heritage and interests archaeology Human health Protect public health and promote well being and Environmental and social acceptability Environmental Protect and enhance recreational amenity and public access. wellbeing Contribute to raising awareness of water conservation Water framework Avoid conflict with and contribute to meeting Water directive Framework Directive objectives Habitat regulations Potential for “Likely Significant Effects” assessment Cumulative effects Potential incompatibility and unacceptable environmental impacts if developed and operated in-combination with other options Customer preference Deliver outcomes that are acceptable to the customer and gain support of challenge groups Acceptability No major local planning issues that could change the scope or put at risk the successful delivery of the option No major issues with regulatory consents or permissions that could change the scope or put at risk the successful

Promotability delivery of the option Synergies Synergies with other WRZ’s, other water companies in the south east or third parties

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Figure 52: Fine screening criteria continued

Topic Sub topic Objectives Flexibility Benefits due to short lead time to deliver option Phased or incremental delivery of the option Possible to adapt the option once delivered to meet any future changes Benefits due to a short ramp-up time for the option to deliver potable water into supply Feasibility Experience in delivering similar solutions (technology or construction methodology known to South East Water) Construction uncertainty due to land availability or

Deliverability Deliverability contamination risk Dependency on existing assets for successful delivery No major issues with CDM that could change the scope or put at risk the successful delivery of the option Technology tried and tested with operations department Quality and confidence of design information Outages Vulnerability due to failure/outages caused by flooding, pollution, damage, loss of power supply, etc. Provision of additional resilience (from new option) to outage events at existing sources Financial uncertainty Vulnerability due to increasing energy or commodity prices such as power and chemical costs

Resilience Regulatory changes Vulnerability to future regulatory and legislation changes such as uncertainty around abstraction reform and changes to water quality standards Climate change Improve resilience of South East Water due to climate change and / or drought conditions

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7.3.4 Environmental and social acceptability of constrained options We used an objectives-led approach for a qualitative assessment of the constrained options list. All screening criteria were based on the principles of the SEA (which also cover WFD and HRA). This identified options likely to be detrimental to environmental resilience. We removed: • Options considered to have high impacts on designated sites that would be difficult to mitigate • options that relied on sources already in WINEP for investigation based on current levels of abstraction • options likely to cause deterioration if the abstraction increased

7.3.5 Promotability of constrained options An option could be rejected for a number of reasons, for example if it’s not acceptable to customers or local planning policies and/or regulations. Our community engagement sessions (discussed in Section 2) tested customers’ views on the range of options. We presented each option with their potential financial, environmental and resilience impact in visually-engaging graphic form so the participants could discuss and weigh up the pros and cons of each option. The sessions revealed: • When it comes to managing and/or preventing droughts, there is no ‘silver bullet’ resilience option that is low cost, low environmental impact and high resilience • the most appealing solutions were mainly those with lower environmental impact • participants were least accepting of options with high cost, possible environmental harm and an uncertain resilience outcome Figure 53 summarises how participants rated the range of options considered for our WRMP19. This qualitative work was supplemented later with quantitative willingness to pay research shown in Figure 56 in Section 8.3.3.

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Figure 53: Customer order of preference of resilience options

Most favoured options driven by positive environmental impact and extension of current South East Water activity.

High appeal

Catchment Surface water/ Water management storage reservoir treatment works

Leakage reduction Water efficiency Licence trading

Desalination Groundwater

Effluent re-use Water transfers Underground storage

Low appeal

7.3.6 Deliverability of constrained options Deliverability covers issues and risks associated with the delivery of the option from design through to construction, commissioning and operation. It also covers any adaptability of use and resilience once the option has been implemented. This assessment has been informed by our experience with similar solutions, constructability, operability, dependency on existing assets and the quality of available data. Resilience covers the likelihood of the option to provide the stated deployable output at the required water quality throughout its operational life. We considered the vulnerability of options due to outages, increasingly severe droughts, financial uncertainty, regulatory changes and climate change. The approach we took to meet the requirement of Direction 3(e)(i) for assessing the impact of drought and climate change on our feasible options is outlined in Appendix 7I and Appendix 8A (Section 3.1.1.2 of Sub-Appendix C). For potential reservoir and surface water options, we used our existing water resources models to assess the likely deployable output under a series of increasingly severe drought and climate change scenarios. This assessment helped us to understand the wider benefits of each option and their interaction with existing sources. The report of this assessment can be found in Appendix 7E. For other options types, the assessment work carried out to develop existing source deployable outputs under varying drought impacts, and also climate change conditions, was used as a basis for assessing the likely deployable output for new options.

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7.3.7 Cost of constrained options For each option, we calculated a whole life cost over a period of 80 years split into capital expenditure (capex), operational expenditure (opex) and carbon cost and emissions (embodied and operational costs). We accounted for social and environmental costs by applying an ecosystems services approach. An ecosystem services approach considers a whole system impact. It takes into consideration the benefits that contribute to a resilient environment, which in turn contributes to sustaining and enhancing human life. These considerations are based on the provisioning, regulating, supporting and cultural services provided by an ecosystem. This approach analyses the environment from a systems-based perspective. It also considers and values the many interconnections within an ecosystem and the services. Our approach for WRMP19 aimed to provide a good basis for valuing environmental and social costs of the plan as well as good basis for improving the methodology in the future. We have adopted a totex (i.e. total expenditure – a sum of capex and opex) approach to avoid capex bias and the favouring of “build” over “buy” decisions.

7.4 Feasible options Following our fine screening process, 175 feasible options were then taken forward for inclusion in our decision making process. More information about how our constrained list was filtered during the fine screening process is in Appendix 7D. Details of the development of our leakage options are in Appendix 7H. We undertook further assessment and definition of the feasible options to develop detailed costings and establish whether options were realistic – that is, capable of being included in our preferred plan in order to meet our objectives. A dossier was prepared for each feasible option. Within each dossier links were made to wider work required to ensure that the new water sources reach their target area, for example, upsizing of pipes and extensions to water treatment works. This ensured that wider environmental, deliverability and promotability impacts could be more fully understood and accounted for. Typical designs were prepared to ensure consistency across options types and to establish scope and costs. The detailed dossiers were available to view at our offices throughout the WRMP19 consultation period. The feasible option list was reviewed by the Environment Agency, Natural England and the Environmental Scrutiny Group (ESG) during August 2017 and also as part of the public consultation process in 2018. Feedback received helped us further refine the feasible options list to ensure that only realistic options were taken forward. Reasons for exclusion from the list included insufficient yield, rejection by the ESG, environmental sensitivities and conflicts with other options..

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Figure 54: Feasible options by type

WRMP category WRMP Unconstrained Constrained Feasible Sub-category (for modelling) South 3rd South 3rd South 3rd East party East party East party Water Water Water Surface water Surface water 2 0 2 0 0 0 enhancement New surface water 14 3 14 3 1 3 Surface water 2 0 2 0 0 0 catchment management Reservoirs Storage reservoirs 27 1 16 1 10 0 Groundwater Aquifer storage 4 0 3 0 2 0 recovery Groundwater 53 1 41 0 0 0 enhancement New groundwater 37 2 23 2 1 1 Groundwater 4 0 4 0 2 0 catchment management Effluent re-use Effluent re-use 37 2 20 1 10 1 Desalination Desalination 18 1 16 0 15 0 Water transfers Intra-company 34 0 30 0 20 0 transfer Inter-company / 0 51 0 51 0 12 regional transfer Intra-zonal transfers 51 0 51 0 51 0 International import 0 2 0 1 0 0 Demand Water efficiency 20 7 20 7 12 4 management (each option Metering 6 1 6 1 2 0 could be applied to each WRZ) Leakage reduction 52 1 52 1 10 0 Conjunctive use Conjunctive use 13 0 6 0 4 0 Water treatment WTW expansion 13 0 13 0 6 0 works WTW process losses 14 1 13 1 0 0 Licensing License trading 0 26 0 5 0 1 Drought Drought permit 5 0 5 0 2 0 measures Drought options 5 0 5 0 5 0 Sub-totals 411 99 342 74 153 22 Totals 510 416 175

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A decision making process that provides greater insight into how our preferred plan will perform

WATER TREATMENT UPGRADES WE’LL INVEST IN THE LATEST STATE-OF-THE-ART TECHNOLOGY AT A NUMBER OF OUR OLDER SITES

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8. Decision making

8.1 Introduction This section explains the decision making process we took to develop our preferred plan described in Section 9. It describes the scenario modelling undertaken to ensure our preferred plan fulfils the key policy priorities of government and regulators, the SEA process, and ensures customers’ priorities and stakeholder feedback have been fully integrated into this process. It also explains how we have balanced the risk of delivering very ambitious levels of demand management, with the need to guarantee levels of service and maintain security of supply. One of the objectives of our WRMP19 is to develop an environmentally resilient plan that allows us to make the correct investment decisions – one that is the most sustainable for both existing and future customers. As shown in Figure 55, and described in greater detail in Appendix 8A, our decision making process followed six key steps summarised below and discussed in the following sections. Results from each step are provided in Appendix 8B. Guided by the problem characterisation of risks and uncertainties in our supply demand balance (Section 1.6 and Appendix 1B), we chose (in addition to a more conventional least-cost modelling) a decision making process that provides greater insight into how our preferred plan will perform and adapt under a range of future uncertainties and risks. To do this we used a bespoke optimisation modelling tool.

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Figure 55: Decision making process

Supply-demand balance (Section 6) + Feasible options (Section 7)

Shared library 1:200 1:100 of artificial but Reference level Worst historic plausible droughts drought drought x

SEA Modelling variations of sustainability reductions

Combined Scenarios 1-4 environmental assessment 1 2 3 4 x x x Step 1 Applying more ambitious Conventional behaviour science led approach to approach to water efficiency water efficiency Checking plan against x customer preferences and willingness to pay Conventional EBSD-led approach

Optimum 15% leakage modelled reduction leakage by 2025 x

Shared use 108 scenarios of the future – recognising uncertainty

Water resourcesWater South the in East Group of scenarios

Analysis of how many times options are chosen to ensure an adaptable plan

Multi-criteria analysis used to select the best performing six portfolios Step 2

Stress test

of uncertainty and by problem characterisation extreme events Advanced decision making determined

Comparison of our preferred options with those selected

by WRSE modelling Step 3

Preferred plan (Detailed in Section 9) southeastwater.co.uk 133

Figure 55: Decision making process continued

Draft WRMP19 + SEA+HRA preferred plan

CONSULTATION Feb-May 2018 Step 4

Updating Demand Forecast with 2017/18 Actuals to update the past 2045 population + property forecast

SEA Update Sustainability Reductions from revised WINEP This step meant that these schemes Improved ambition around were no longer PCC reductions required in our preferred plan Combined + re-use + environmental desalination

assessments Step 5 15% leakage 15% reduction by leakage Optimised Engagement 2025 and 50% reduction leakage throughout the reduction by Developing revised our plan by 2025 development 2050 of the revised

Water resourcesWater South the in East Group plan with ESG, x CCG, Customer Supply side Research, Leakage and water dedicated options efficiency stakeholder options meetings with Environment Agency and Natural England

Comparison of our preferred plan options with those selected by re-run WRSE modelling (repeat of

Step 3 with updated information) Step 6

Revised WRMP preferred plan accompanied by Statement of Response and updated SEA and HRA

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8.2 Constructing an enhanced optimisation model We commissioned decisionLab, a specialist consultancy, to construct a bespoke modelling tool based on EBSD. This modelling enabled our decision making and helped us to confidently optimise the timing and combination of options that formed our eventual preferred plan for WRMP19. Our model: • Ran multiple and wide-ranging future scenarios over a 60 year period and generated a least cost plan to resolve each scenario The term ‘least cost’ in this context includes financial, environmental, social and carbon costs. • Included multi-criteria analysis (MCA) for all feasible options The criteria scoring included total net present value cost (NPV), positive and negative SEA score, promotability, deliverability and option level resilience so that we could identify the best value plan that performed well under a range of scenarios. • Ran the advanced decision making method, known as Info-Gap analysis We used this to stress-test potential plans to a range of increasing and plausible future uncertainties. This enhanced our decision making, especially around the balance between cost, levels of resilience and adaptability.

8.3 Developing our dWRMP19 The first stage of developing our preferred plan was to develop a best value plan which we consulted on in our dWRMP19. This section explains how we developed that best value plan. Step one – conventional EBSD approach: We first developed a conventional least cost plan; we then used the EBSD (Economics of Balancing Supply Demand) model to consider the least cost as well as the best value plan. Step two – advanced decision making: We than used a new extended decision making method recommended by the guidelines to stress-test a range of potential plans and determine which would prove most adaptable to a wider range of possible futures, be acceptable to customers, and be most sustainable. Step three – comparison with WRSE: We participated in the WRSE group throughout our planning process and finalised our decision making process by comparing our plan to the regional plan generated by WRSE modelling work.

8.3.1 Step one: Developing a ‘conventional’ best value plan for dWRMP19 In the first stage of our decision making, we made a series of significant decisions that defined our best value plan: • Which level of drought resilience to plan for • how our SEA affects our plan and, within this assessment, how to best account for sustainability reductions • how to ensure our plan aligns with customer preference and willingness to pay, including revisions to how we plan to engage customers about their water use • which level of leakage to include in our preferred plan southeastwater.co.uk 135

Our work with WRSE was valuable during this first step as it enabled us to participate in a regional combined environmental assessment. We also aligned with the group’s work through a shared drought library. Figure 57 gives a summary of the costs of all eight model runs described in this section and used in developing our dWRMP19. A more detailed breakdown of the results is provided in WRMP19 Appendix 8B.

8.3.1.1 Planning for drought resilience The first stage of our modelling was to identify a plan that meets the regulatory minimum requirement to plan for a worst historical drought (a one in 100 year event). This formed a benchmark for a least-cost plan against which to compare other model runs. To comply with the guidelines we also ran the model to establish any resilience options required to meet a one in 200 reference level of resilience. We then compared the results of these two levels of resilience. The model results showed that, for all regions, planning to a more resilient scenario of one in 200 drought (compared with a one in 100 worst historical drought) had only marginal cost increases over the 60 year planning period and little effect on the type of schemes selected. Given the relatively minor adjustments to increase resilience we decided to use this one in 200 year reference level as a basis for developing our further model runs to support our dWRMP19.

8.3.1.2 Strategic Environmental Assessment (SEA) – modelling to create a more environmentally resilient preferred plan The objective of the SEA process is to provide a high level of protection for the environment and ensure that the environment is considered at all stages of the preparation of our dWRMP19 (our final WRMP19). Our SEA: • Is seeking to optimise our preferred options set to minimise its environmental impact and ensure our plan is achievable • embeds sustainable abstraction principles, so the objectives of the River Basin Management Plans and our biodiversity obligations are achieved • optimises the preferred options set to deliver a WRMP that provides long term environmental resilience We used the MCA scoring of options within the model to support the SEA. It also allowed us to track how moving from the least cost plans to a best value plan could improve the overall MCA score in the most cost-efficient way (including carbon costs). The best value plan that meets our SEA objectives only slightly increases the cost of the emerging preferred plan by 2025. This is a regulatory requirement, therefore we used this optimised SEA result as a basis for developing our further model runs. A key question within the SEA process was how best to model the impact of sustainability reductions while minimising inclusion of options with higher environmental risk.

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8.3.1.3 Sustainability reductions Sustainability reductions to our existing sources proposed by the Environment Agency are a key driver for future investment in the short (2020 to 2025) to medium (2025 to 2045) term. We used the data provided by the Environment Agency in WINEP1 to understand both the current and future sustainability of our sources by undertaking a number of modelling scenarios; these determined the investment required and clarified the scale and timing of the sustainability reductions. We modelled four scenarios for sustainability reductions and then tested the least cost plans from each of these against the principles of the SEA. We did this because of the uncertainty around what the final scale of the sustainability reductions might be. This modelling helped us to understand how best to achieve an environmentally resilient plan whilst minimising costs to customers, using the following scenarios: Scenario 1: 100 per cent sustainability reductions by 2030 (reference level) Scenario 2: 50 per cent sustainability reductions by 2030 Scenario 3: 100 per cent sustainability reductions by 2035 Scenario 4: 50 per cent sustainability reductions by 2035 Achieving 100 per cent of sustainability reductions by 2030 (Scenario 1) and 2035 (Scenario 3) brings forward several new water resource developments. A number of these, for example desalination plans, are not supported by the principles of our SEA as they have high environmental impacts and low cost-benefit. Scenarios 2 and 4 (achieving 50 per cent sustainability reductions by 2030 and 2035 respectively) were more advantageous in both SEA and cost terms (50 per cent cheaper). However, Scenario 4 where sustainability reductions are achieved in 2035 is better aligned with SEA principles; it develops, overall, a more resilient option set. Furthermore, as explained in Section 4.9.2, it is likely that investigations will confirm that many of our sources are sustainable, therefore this scenario could avoid the unnecessary investment in new, less sustainable sources. On the basis of this assessment, we have decided to further develop a best value plan that supports Scenario 4 of sustainability reductions. We consider this to be a best performing plan in SEA and cost-benefit terms, while being the most flexible given the current uncertainty around the final required level of sustainability reductions. These reductions will become more certain following investigations planned for between 2020 and 2025. We believe this provides the right balance between costs, risk and improving environmental resilience.

8.3.1.4 Customer preference and willingness to pay We compared the best value preferred plan developed in earlier steps with our customers’ preferences for options, levels of service and resilience and willingness to pay obtained through qualitative and quantitative research. Our customer research helped us understand customers’ preferences for how we manage our water resources. These preferences are shown in Figure 56 below. This research was more targeted and specifically quantitative, compared with the qualitative focus group findings shown in Figure 53. southeastwater.co.uk 137

Figure 56: Supply and demand measures preferred by our customers

Reduce leakage rate

Higher water efficiency

Underground storage

More water gained from water treatment works

New surface water reservoirs

Increase groundwater use

New water transfers from neighbouring companies

Catchment management

More effluent re-use

Desalination

£ £5.00 £10.00 £15.00 £20.00

Willingness to pay research in this context gives us greater insight on how customers rank options – it did not necessarily translate the cost of dWRMP19 into the impact on customers’ bills. Nevertheless, it provided useful intelligence on where customers’ priorities and preferences lie when it comes to managing water supplies. The results indicated that customers are most willing to pay extra on their water bills to reduce leakage further and promote greater water efficiency. These findings supported the adoption of further leakage reductions and promotion of greater water efficiency savings in our dWRMP19 over the longer term. Effluent re-use and desalination were least supported; customers would prefer not to see these options implemented, but without strong willingness to pay to avoid them outright. The results from our customer research supported our own SEA findings for the dWRMP19 which resulted in effluent reuse and desalination being moved to the latter part of the planning period. The relatively low ranking of water transfers for other companies reflects the conclusion customers reached in our qualitative focus groups that they considered shared water supplies to be less reliable or resilient. While this is our customers’ perception we were also mindful of the wider benefits that arise from sharing water, and government’s expectations around water trading. We therefore did not exclude transfers from our final set of schemes due to customer preferences.

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8.3.1.5 Reducing leakage by 15 per cent by 2025 In its draft methodology for PR19 price review6, Ofwat included an expectation for companies to either include a reduction in leakage by 15 per cent by 2025 or performance to be within the upper quartile ranking of the industry, using the industry comparator of litres per property per day. The analysis of our leakage performance shows that relative to the rest of the industry, we are already within the upper quartile, and our leakage level is 22.6 Ml/d below our SELL (sustainable level of leakage). We describe this in more detail in Appendix 5D, Leakage). For our dWRMP19 we tested the 15 per cent leakage reduction (from our current baseline level) by including it in our modelling to consider the impacts on our best value central case preferred plan. The modelling work identified that, based on the current levels of leakage in each of our water resource zones, higher levels of leakage reductions over a short period of time would be expensive to achieve, and would represent a higher level of delivery risk. For this reason we chose not include the outputs of this modelling in our dWRMP19 preferred plan but, instead, to test customer and stakeholder acceptability of both: our preferred plan with four per cent leakage reductions by 2025; and the 15 per cent leakage reductions by 2025, as part of the further customer research we undertook during the public consultation on our dWRMP19 (see section 8.4.1).

8.3.1.6 Summary of findings from step one A summary of the eight model runs carried out during step one, used in developing our dWRMP19, and described above are provided in Figure 57.

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Figure 57: Summary of dWRMP model runs to develop best value preferred plan

Drought EA Sustainability PCC Leakage Target Cumulative Total Expenditure Reductions Target NPV (£M)

Model run

reference 100 in one Historic Worst 200 in one Level Reference Enhanced SEA 1 Scenario 2 Scenario 3 Scenario 4 Scenario AMP7 in 144l/h/day AMP7 in 139l/h/day Level Optimal AMP7 in 4Ml/d 15% AMP7 in 2050 50% by AMP7 AMP8 25 Years 60 Years Worst historical drought ✔ ✔ ✔ ✔ £89.8 £357.0 £740.9 £1,240.6 (one in 100) One in 200 reference ✔ ✔ ✔ ✔ £111.3 £397.2 £700.5 £1,271.0 level of resilience Including ✔ ✔ ✔ ✔ ✔ SEA and £115.5 £450.6 £858.3 £1,560.6 sustainability reduction ✔ ✔ ✔ ✔ ✔ £105.6 £319.8 £589.6 £1,013.6 modelling of each of 4 scenarios ✔ ✔ ✔ ✔ ✔ £102.8 £251.4 £789.2 £1,491.2

✔ ✔ ✔ ✔ ✔ £105.6 £246.3 £594.0 £1,009.2

Best value plan from Step 1 of ✔ ✔ ✔ ✔ ✔ ✔ £111.7 £281.1 £581.0 £1,053.9 decision making 15% AMP7 ✔ ✔ ✔ ✔ ✔ £121.5 £298.1 £654.8 £1,162.1 leakage target

8.3.2 Step two: Advanced decision making, consideration of a wider range of future uncertainty At the second step of our decision making for our dWRMP19, we applied a new extended method to stress-test the best value plan (developed in step one) against a range of potential plans. This would prove which was the most adaptable to a wider range of possible futures, be acceptable to customers and most sustainable.

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8.3.2.1 Recognising uncertainty and ensuring an adaptable plan We elected to test a wider range of future scenarios through our EBSD model for our dWRMP19. This approach generated least cost plans for 108 different future scenarios (detail of the scenarios runs are described in Section 6.4). The variety of supply demand balances resulting from each of these 108 model runs is illustrated in Figure 58 below. The supply demand balance across each of the 108 scenarios by 2080 ranged from a surplus of 144 Ml/d (in our most optimistic low demand case) to a deficit of 785 Ml/d (in our most severe high demand case). By comparison, our baseline supply demand scenario had a deficit of 272 Ml/d by 2080. The result was most sensitive to the assumptions used around the demand forecast. Figure 58 clearly illustrates the supply demand balances diverging in three distinct groups towards the end of the planning period. The higher group contains the assumption that demand grows more slowly than our central case. The central grouping contains the central case demand forecast. The lowest group with the most severe deficit contains the assumption that demand for water increases more than in our central case.

Figure 58: Range of summer peak company-level supply demand balances for generated scenarios

Supply-demand balances for generated scenarios (DYCP) Range of Company Level Supply-Demand Balances for Generated Scenarios (DYCP) 200.0

0.0 2020 2024 2029 2044 2079 d) -200.0 e (Ml/

-400.0 -Demand Balanc

-600.0 Supply

-800.0 Year

The purpose of modelling each of these scenarios was to understand how, and to what extent, the composition and timing of options selected differed from those included in our emerging best value preferred plan from step one above. Options that were selected regularly in the majority of the scenarios were considered to have high certainty and no or little regret. Conversely, options that were less regularly selected, or if they are interchangeable with better options, were considered not to be so adaptable to future scenarios. We compared the options that were most often selected with those from the best value plan that emerged during step one.

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Figure 59: Selection of supply-side schemes

Scheme title Times selected Included in across scenarios our dWRMP19 preferred plan? Aylesford Newsprint 96% Y

WRZ7 to WRZ1 company transfer 95% Y SES Water transfer to WRZ1 87% Y

WRZ7 to WRZ2 company transfer 84% Y Desalination of River Medway tidal water at 82% Y Aylesford/Snodland Bewl WTW expansion – Darwell replacement 82% Y WRZ2 to WRZ7 company transfer 77% Y Desalination at Eastbourne coupled 75% Y to biomass – fuelled power plant Increase yield at Ford WTW 73% Y WRZ6 to WRZ1 company transfer 72% Y Cemex Halling licence trade 72% Y Aylesford effluent re-use 68% Y Thames Water transfer to WRZ4 67% Y Broad Oak Reservoir 66% Y Catchment management – Woodgarston 66% Y WRZ6 to WRZ7 company transfer (Burham – Bewl) 65% Y Confined chalk – Farnborough 65% Y Coors Brewery Alton licence trade* 65% N Effluent re-use to River Ouse: source – Peacehaven 64% Y Catchment management – Pembury 63% Y Increased abstraction from River Thames 63% Y Desalination at Newhaven (WRZ2) – Mid Sussex 62% Y Reculver RO desalination of brackish groundwater 58% Y Portsmouth Water transfer to WRZ5 53% Y WRZ6 to WRZ8 company transfer** 53% N Indirect use of effluent from Weatherlees WwTW 52% Y – into Great Stour WRZ3 to WRZ2 company transfer 52% Y

*This option was not included in our preferred plan because it scored poorly when we looked at its environmental impact through our SEA **Our modelling did not select this scheme as there were other more cost effective solutions

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There was a high level of consistency between the above frequently selected schemes and those in our best value plans from step one, and therefore a low level of regret, as only two schemes in the above table do not feature in our dWRMP19 preferred plan: • All demand management schemes within our best value plan were selected at least 50 per cent of the time • in low demand scenarios, desalination and effluent re-use schemes are rarely selected. The number of these types of schemes increases as the scenario severity worsens. For high demand conditions, all available desalination and effluent re-use schemes are generally selected with the timing of delivery advancing as the scenario severity worsens • the number of company transfers and other supply-side schemes increases as the scenario severity worsens. For high demand conditions, all available schemes are generally always selected with the timing of delivery advancing as the scenario severity worsens. Across all scenarios, both the Aylesford Newsprint and Bewl WTW expansion (Darwell replacement schemes) were selected on a consistent basis at the same dates of 2023 and 2025 respectively This step of our modelling contributed to ensuring our plan is adaptable in case the future does not turn out to be as forecast in our most likely central case.

8.3.2.2 Links to drought plan and more extreme drought events In December 2017 we published our revised drought plan. For that we considered different levels of drought severity for that plan including: • One in 100 year drought • one in 200 year drought • three consecutive dry winters • one in 500 year drought These are consistent with the range of drought events we have also tested in our dWRMP19. This testing was carried out as part of step one and would allow us to see what options, or combination of options, were commonly selected. For clarity, we considered that the third dry winter event sits in between the drought events of one in 200 year and one in 500 year drought severity. For each of the different drought severity runs, a supply demand scenario was included with and without the benefits of drought permits and orders. This helped to understand the role of resilience options in mitigating the impacts of drought under plausible more extreme drought events. The model runs indicated that the best value plan from step one achieves: • Defra’s one in 200 year reference levels of resilience without relying on drought plan measures • a good degree of resilience to three dry winter events with drought plan measures • reduction in the need to adopt level four restrictions (emergency drought orders, i.e., standpipes and rota cuts) Planning to this level also provides a reasonable level of resilience towards managing a one in 500 year drought, although the risk of level four restrictions could not be ruled out.

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8.3.2.3 Impact of high range climate change scenarios Our best value plan from step one already incorporates a central assumption of the impacts of climate change on water resources. To understand the sensitivity and highlight areas of vulnerability of our plan to this assumption of climate change, we tested our plan against a range of alternative higher and lower climate forecasts. The selection and timing of schemes needed to meet the high climate change scenarios tended to follow the same trends and patterns as already seen with the high demand scenarios in Section 8.3.2.1, but with climate change being a slightly less severe factor than demand. Desalination and effluent re-use schemes are selected more frequently in high climate change conditions than for a medium climate change condition, with the timing of delivery of these schemes advancing as the scenario severity worsens. Drought permits and options are generally always required in high climate change conditions. But, when high climate change conditions are combined with a high demand and extreme drought, even the use of this additional water is insufficient to resolve the supply demand deficit over the full 60 year planning period. This is important as it exposes the areas of greatest vulnerability which we will explore further ahead of dWRMP24.

8.3.2.4 Stress-testing of solutions To understand which assumptions and factors had greatest influence on our dWRMP19, and provide confidence that it was robust under a wide range of uncertainties, we stress-tested six of the plans chosen from the advanced decision making scenarios, against extreme storm events, contamination spills and a wider range of future uncertainties. We measured how robust each plan was by testing its performance against increasing challenging supply demand deficits, such as sudden outages. We chose two plans with high demand assumptions, two with central case demand assumptions (including our best value plan from step one), and two plans with low future demand. The two plans with the least challenging demand forecast scenarios were significantly less resilient to uncertainty and/or extreme events compared to our central case, while those generated from the high demand scenario were significantly higher in cost. The best value plan from step one performed well across all stress-testing and also in terms of the MCA promotability and deliverability criteria. We were reassured that our preferred plan achieves a good balance between cost and risk. The full results of this process in modelling output scenario sheets are given in Appendix 8B.

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8.3.3 Step three: Comparison of our dWRMP19 with WRSE regional strategy The aim of WRSE is to identify how best to share the water resources at a regional level. It also looks further afield, working with neighbouring regions of the UK and their water companies to explore inter-regional water transfers. The regional modelling was very similar to our own decision making approach. It was first based on the EBSD methodology used for WRMP14, and then supplemented by the same Info-Gap advanced risk-based decision making method introduced for WRMP19. The regional modelling also generated a wide range of future supply demand balance scenarios. For the modelling, nine of these were selected. Because of the close alignment between our own and WRSE’s approaches the comparison of the results of the each model (ours and WRSE) was straightforward. We compared our plan against the planning scenario that was most like our own central case and it confirmed a good level of alignment between the two. A summary of the comparison of our dWRMP19 against the WRSE modelling results is provided in Appendix 8B.

8.4 Developing our WRMP19 This section explains how we took account of customer and stakeholder feedback on our dWRMP19 preferred plan, and how that feedback has been used to influence and shape our decision making and preparation of our revised WRMP19 (rWRMP19) preferred plan. Step four – consultation on our dWRMP19: We used the representations received and feedback from customers and stakeholders to influence and shape our rWRMP19 preferred plan. We undertook further customer research to test the acceptability of the dWRMP19 and changes made in our WRMP19. Step five – developing a preferred plan for WRMP19: Following the feedback we received, we updated our preferred plan for WRMP19 to include far more ambitious levels of leakage reduction and per capita consumption reductions. Step six – review against updated WRSE modelling: We provided outputs from our WRMP19 to the WRSE regional model, and that model has been re-run taking account of other water company WRMP19 updates. We compared our WRMP19 preferred plan to the regional plan generated by the updated WRSE modelling work.

8.4.1 Step four: Consultation on our dWRMP19 – our approach to incorporating representations The findings from our extensive public consultation, customer research and further stakeholder engagement on our dWRMP19 are summarised in Section 2, and have not been repeated here. Overall the representations and feedback we received on our dWRMP19 were positive. This was mirrored by the findings from our customer research with 83 per cent of customers either supportive, or very supportive of our plan.

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But there were two areas of feedback that have required us to revisit the preferred plan included as part of our WRMP19, which were: • Adopting more ambitious leakage reductions i.e. meet Ofwat’s target for 15 per cent leakage reductions by 2025; and consider the National Infrastructure Commission’s recommendation to reduce leakage by half by 2050 • adopting more ambitious per capita consumption throughout the 60 year planning period. Giving due consideration to target figures proposed by some of the representations we received, and consideration of longer term projections included in the National Infrastructure Commission Report (i.e. achieve per capita consumption of 118 l/h/d by 2050) and the Artesia report prepared on behalf of Ofwat (i.e. consider a range of scenarios leading to per capita consumption of between 110 l/h/d and 76 l/h/d by 2065) We undertook further customer research that confirmed customers were willing to support the more ambitious per capita consumption and leakage reduction figures now proposed for our WRMP19 (see Sections 8.4.2.1 and 8.4.2.2). As a further assurance step, we engaged with our ESG to ensure the revised leakage reductions and per capita consumption reductions tested with customers were sufficiently stretching.

8.4.2 Step five: Developing a preferred plan for WRMP19 In developing our WRMP19, we updated our supply demand forecasts to take account of our updated understanding of sustainability reductions (WINEP3) and our revised demand forecast. We then followed the process outlined below to arrive at our revised best value preferred plan.

8.4.2.1 Per capita consumption reductions During the consultation for our dWRMP19 we were challenged on the level of ambition around our approach to reducing per capita consumption over the period of our plan. As a result, and following recent guidance and reinforcement from regulators, we reviewed the options which we included in our economic optimisation model. Our WRMP19 includes much more ambitious targets to reduce consumption over both the short and longer term. Figure 60 below summarises the targets in the dWRMP19 and WRMP19 along with figures included in recent Ofwat and National Infrastructure Commission reports.

Figure 60: Summary of per capita consumption targets

Per capita consumption (l/h/d) 2025 2040 2050 2065 2080

South East Water dWRMP19 144 141 140 139 138

South East Water WRMP19 139 123 115 103 90

National Infrastructure Commission Report - - 118 - -

Ofwat (Artesia) Report (South East region) - - - 110 to 76 -

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8.4.2.2 Leakage During the decision making process for our dWRMP19 we identified an optimal level of leakage reduction of four per cent (3.8 Ml/d) by 2025. The final selection of leakage reduction options for our WRMP19 is guided by the expectation of our regulators and the government, and the preferences and support of our customers (via our research on their priorities and willingness to pay for investment). It was also informed by the comparative cost-effectiveness of leakage reductions versus other modelled options that can manage the supply demand balance. This also took account of the SEA and HRA, with leakage reduction options providing long term environmental benefits. We have therefore set ourselves a more challenging target of reducing leakage by 15 per cent in the same period. Beyond 2025 we have included additional reductions, so by 2050 we expect leakage to be half of the current level. We updated our EBSD model to allow the model to select leakage reductions which were not part of an economic solution. Essentially the model was updated to have two optimisation functions – solving the supply demand balance at least cost while at the same time reducing leakage by a fixed amount at least cost. Reducing leakage by this level will require new technology and approaches and later it will require extensive replacement of our oldest water mains. To ensure we meet levels of service we have included four per cent leakage reductions in our final planning demand forecast but have included additional reductions as a surplus in the supply demand balance. This means that the supply demand surplus is greater than it was in our dWRMP19. We have discussed this proposed approach with Defra, the EA and Ofwat, and received their support in principle. We are aware that other water companies have taken a similar approach (see Section 9.3.1).

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8.4.2.3 SEA/HRA The dWRMP19 included options identified as higher risk for the environment and requiring down the line appropriate assessment particularly desalination and effluent reuse options. The majority of these options had been limited to the later part of the plan period reflecting the need for further study on the environmental effects and potential for mitigation. However, the additional demand management reductions have allowed the higher risk options to be removed in the WRMP19 and this has also provided scope to respond to stakeholder concerns regarding dWRMP19 options. As a result the WRMP19 aligns better with the objectives of the SEA, and HRA stage 1 screening has determined that a level stage 2 appropriate assessment is not required.

8.4.2.4 Summary of findings from step five The impact of including a much more ambitious levels of per capita consumption reductions, alongside the changes that we have made to our revised demand forecast (as explained in Section 5) has had a significant impact on the selection of supply side schemes within our WRMP19 preferred plan, particularly so post 2045. Where we had previously required the need for desalination schemes at River Medway, Reculver and Bexhill, along with effluent re-use schemes at Aylesford, Peacehaven and Weatherlees, these schemes are no longer being selected within the step five modelling. Other schemes no longer being selected are ASR (Beenhams), Farnborough groundwater scheme, Goose Green Reservoir, Halling licence trade, Ford WTW upgrade and the conjunctive use scheme on the River Ouse. The impact on the selection of regional schemes is that the share of the raw water abstraction from Thames Water’s major resource scheme and the Kennet transfer along with the Clanfield transfer from Portsmouth Water are no longer selected. A summary of the seven model runs carried out during step five, used in developing our WRMP, are provided in Figure 61.

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Figure 61: Summary of WRMP model runs to develop best value preferred plan

Drought EA Sustainability PCC Leakage Target Cumulative Total Expenditure Reductions Target NPV (£M)

Model run

description 100 in one Historic Worst 200 in one Level Reference Enhanced SEA 1 Scenario 2 Scenario 3 Scenario 4 Scenario AMP7 in 144l/h/day AMP7 in 139l/h/day Level Optimal AMP7 in 4Ml/d 15% AMP7 in 2050 50% by AMP7 AMP8 25 Years 60 Years Revised best value dWRMP from Step 1 ✔ ✔ ✔ ✔ ✔ £84.50 £216.60 £495.00 £821.00 of decision making1 dWRMP including more ambitious PCC ✔ ✔ ✔ ✔ £73.90 £123.30 £301.80 £348.20 targets and optimal leakage dWRMP including more ambitious PCC ✔ ✔ ✔ ✔ ✔ £79.00 £132.50 £309.70 £363.30 targets and 4Ml/d leakage dWRMP including more ambitious PCC ✔ ✔ ✔ ✔ ✔ £97.80 £150.10 £330.00 £384.90 targets and 15% leakage in AMP7 dWRMP including more ambitious PCC ✔ ✔ ✔ ✔ ✔ ✔ £97.80 £164.70 £770.20 £993.60 targets and 50% leakage by 2050 Best value WRMP from Step 5 of ✔ ✔ ✔ ✔ ✔ ✔ £98.60 £166.70 £757.00 £986.20 decision making2 1 in 100 drought version of our WRMP ✔ ✔ ✔ ✔ ✔ ✔ £97.50 £161.40 £748.60 £988.20 from Step 5 of decision making2

Note 1: Revised costs for the dWRMP best value plan has been provided in this table to allow comparison against the revised plan costs. The revised costs take account of changes made in the modelling methodology for the optimisation and calculation of leakage costs which have occurred post draft plan. Note 2: Model run includes the leakage options selected by our 50 per cent model run added on top of the supply side and water efficiency options selected by our four Ml/d level of leakage.

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The best value plan that has emerged from completing step five is: • Supported by the findings from our customer research • capable of meeting the minimum requirement of managing worst historic droughts on record • enables us to take the necessary steps to meet Defra’s one in 200 year reference levels of resilience between 2020 and 2025 • provides drought resilience without bringing in higher risk options and provides a balance of water saving options and options with opportunities for wider environmental benefits, avoids the options identified as a risk for the coastal and estuarine environments and therefore the plan is much better aligned with SEA objectives and removes the requirement for HRA appropriate assessment •  adaptable to a range of likely sustainability reduction scenarios that we expect will become more certain following further investigations planned for completion between 2020 and 2025 • supportive of our ambition to more widely roll out innovative behavioural methods and deliver ambitious levels of future demand management savings and per capita consumption (PCC) reductions • aligned with regulatory requirement/guidance to achieve higher levels of leakage reduction by 2025 and increasing through to 2050 • resilient to the risk associated with challenges to achieve ambitious consumption and leakage reductions The new water from each type of option within our WRMP19 best value plan at the end of step five is shown in Figure 62 below:

Figure 62: The yield by option type of our WRMP best value plan

(Ml/d) Summer peak / one in 200 drought Option type 2020/25 2025/30 by 2045 by 2080 Leakage reduction 12.6 17.9 36.5 42.7

Metering 0.0 0.0 0.0 0.0

Water efficiency 14.0 24.2 56.1 151.6

Groundwater 18.2 18.2 21.5 21.5 Surface water 0.0 0.0 35.7 35.7 Water treatment 0.0 8.0 8.0 8.0 Effluent re-use 0.0 0.0 0.0 0.0 Desalination 0.0 0.0 0.0 0.0 Company transfers 0.0 [9.0] [9.0] [19.0] Regional transfers 0.0 -2.0 7.0 7.0 Totals 44.8 66.3 164.8 266.5

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8.4.3 Step six: Comparison of our WRMP19 with the WRSE regional strategy Following the close of the public consultations’ by water companies on their dWRMP19s, further regional modelling has been undertaken exploring more scenarios to assess the feedback from customers. In addition, the scenarios being explored include a range of regional targets to assess the effect of meeting the recommendations from the National Infrastructure Commission and Defra on leakage and per capita consumption in terms of option selection. For this phase of modelling, a wider range of 16 future supply demand balance planning scenarios were generated and analysed. We compared our WRMP19 preferred plan against the planning scenario that was most like our own central case. A summary of the comparison of our WRMP19 against the latest WRSE modelling results is provided in the sub-sections below:

8.4.3.1 Supply-side options There were many schemes selected consistently across both the WRSE regional outputs and our preferred plan. Please see Appendix 8B for a table showing a direct comparison of the options within each of the plans. Although we identified a good level of alignment between our own WRMP19 and the WRSE scenario, there were some differences in the longer term, from 2045 onwards. This is due to the demand forecasts used by WRSE modelling being higher that our WRMP19 and the resulting deficit being higher too. This resulted in three desalination schemes and one effluent re-use scheme that do not feature in our preferred plan being selected by the WRSE modelling by the end of the planning period. Two of these additional schemes include a desalination scheme in WRZ3 and an effluent re-use scheme in WRZ8. Our own investigations identified that for customer preference and environmental reasons (SEA), these two schemes are not included in our WRMP19. We consider that the selection of these schemes by WRSE has resulted in the following preferred schemes being selected much later by the WRSE modelling than in our own WRMP19: • New Arlington Reservoir, River Ouse • Broad Oak Reservoir It has also resulted in the following scheme not being selected at all in the WRSE modelling: • Bewl-Darwell Option: Bewl WTW expansion and transfer to Hazards Green (although this scheme is still required in our WRMP19 as it is part of WINEP3 solution to remove INNS risk)

8.4.3.2 Regional transfers The WRSE regional modelling selected the same inter-company import and three inter- company exports that we have included in our preferred plan. The above summary demonstrates that we are adopting a plan that aligns with the regional WRSE approach and enhances our resilience through the sharing of resources to and from neighbouring companies.

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8.4.3.3 Company transfers Two intra-company transfers were selected consistently across both the WRSE modelling and our preferred plan. Although the third intra-company transfer was not selected by the WRSE modelling in the scenario most like our own central case, we have confidence in its selection within our preferred plan as it was selected in multiple other WRSE scenarios.

8.4.3.4 Demand-side options The WRSE modelling was run to look into the options and costs required to meet the targets of achieving more ambitious reduction for leakage and per capita consumption. Scenarios to reduce leakage by 15 per cent, 30 per cent and 50 per cent in various time periods up to 2080 were considered alongside the challenge of reducing per capita consumption to 118 l/h/d by 2050. To align with our own WRMP19 preferred plan modelling we have compared our demand management savings and options against those of the WRSE most like our own central case. This scenario achieves a 15 per cent leakage reduction by 2025, increasing to 50 per cent by 2050, alongside a target to reduce PCC to 118 l/h/d by 2050. Over the 60 year planning period, the total level of savings selected across leakage and water efficiency initiatives was similar, 198.1 Ml/d for the WRSE modelling compared with 194.2 Ml/d for our preferred plan. Participating in the WRSE has contributed significantly to the strength of our WRMP19 preferred plan. It has led to greater regional resilience, better sharing of water and coordinated planning through common definitions, methodologies and understanding of drought.

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We also explain how we have managed risk and uncertainty

ARDINGLY RESERVOIR NEW RESERVOIRS AT ARLINGTON, SUSSEX AND BROAD OAK, KENT COULD BE BUILT TO HELP MEET THE EXPECTED INCREASE IN DEMAND

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9. Our preferred plan 9.1 Introduction This section sets out our preferred plan for the period 2020 to 2080 to ensure a reliable and environmentally-resilient water supply for our customers. We present the preferred plan by resource zone, and then by costed component before then discussing each component of the preferred plan in turn. We explained our approach to developing this preferred plan in Section 8, including how we have tested our plan to confirm that the measures we are proposing offer resilience and are appropriate for our customers, the environment and our own needs as well the wider south east region. We also explain how we have managed risk and uncertainty. The table below shows how our preferred plan resolves the deficits within our baseline supply demand balance to result in a final plan supply demand balance.

Figure 63: Preferred plan supply demand balance

Dry year annual average (Ml/d) Summer peak period (Ml/d)

2019/20 2024/25 2044/45 2079/80 2019/20 2024/25 2044/45 2079/80

Baseline supply 629.2 615.8 560.5 557.3 756.2 739.1 683.2 679.5 forecast Baseline demand 522.0 528.5 564.1 633.6 643.3 653.5 707.3 813.9 forecast Baseline target 32.4 39.0 59.8 74.7 36.1 44.2 70.2 86.6 headroom Demand + target 554.4 567.5 623.9 708.2 679.5 697.7 777.4 900.5 headroom Baseline supply 74.8 48.3 -63.4 -150.9 76.7 41.4 -94.2 -221.0 demand balance Preferred plan 0.0 44.0 143.0 244.6 0.0 44.8 164.8 266.5 schemes Final supply 74.8 92.3 79.6 93.7 76.7 86.2 70.6 45.5 demand balance

9.2 Our preferred plan In this section we set out our preferred plan to address the shortfall in water available. Our plan: • Takes into account the representations and feedback received on our dWRMP19 • follows a more balanced twin-track approach with more demand management, and fewer supply options than the dWRMP19 • addresses deficits in both dry year annual average and summer peak period for all water resource zones across the planning period • is in agreement with the WRSE and Water Resources Long Term Planning Framework • is supported by the SEA process and is consistent with the WINEP3 programme • is supported by our customers and stakeholders • includes ambitious and stretching water efficiency and leakage reductions

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Figure 64: A map showing our preferred plan

Affinity Water Cental

Affinity Water Cental Nothumbrian Water Group Thames Water

Southern Water Thames Water

Southern Water

Maidstone Southern Water

SES Backnell Ashford Tunbridge Wells Thames Water Affinity Water Canbrook Southend Southern Water Farnham Haywards Heath

Southern Southern Water Eastbourne Water Potsmouth Water

Southern Water

˜ Groundwater (3) ¢ Reservoirs (2) ¢ Water Treatment Works (1) — Company transfer (3) — Regional transfer (1)

Through the testing of our plan we found that our ability to supply is already resilient to a wider range of droughts than we had previously modelled, although our deployable output reduces under increasingly serious drought situations. Several of the options within our preferred plan come directly from our engagement with third parties, for instance the use of the Aylesford Newsprint groundwater sources and regional transfers that resulted from our participation in WRSE. Other options, such as catchment management, rely upon our ability to work with stakeholders, or as with our water efficiency option, we rely on our ability to engage and influence customers’ water use behaviour. Following the consultation and representations received on our dWRMP19, we have revised our preferred plan to include a more ambitious and stretching water efficiency programme to reduce per capita consumption, from current position of 150 l/h/d in 2017/18 to 139 l/h/d by 2025 and 118 l/h/d by 2045 and 90 l/h/d by 2080. We have also updated our plan to reduce leakage by 15 per cent by 2025 and 50 per cent by 2050. The change to our approach, to include much more extensive demand management, combined with a reduction to our baseline demand forecast, means that there are some more notable changes in supply options selected between our dWRMP19 and WRMP19. These predominantly occur in the post-2045 period and are summarised in Section 9.4. southeastwater.co.uk 155

LISTENING TO COMMUNITIES OUR CONSULTATION ROADSHOW TOOK US TO THE HEART OF THOSE COMMUNITIES AFFECTED BY OUR PROPOSALS

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Figure 65: Our preferred plan by water resource zone

Water Resource Zone Year Preferred plan Tunbridge Wells 2020-2025 Leakage reductions WRZ1 Water efficiency 2025-2045 Leakage reductions Water efficiency Catchment management in the Pembury area Regional transfer from SES Water 2045-2080 Leakage reductions Water efficiency Haywards Heath 2020-2025 Leakage reductions WRZ2 Water efficiency 2025-2045 Leakage reductions Water efficiency Increased connectivity between WRZ2 and WRZ7 2045-2080 Leakage reductions Water efficiency Increased connectivity between WRZ3 and WRZ2 Eastbourne 2020-2025 Leakage reductions WRZ3 Water efficiency 2025-2045 Leakage reductions Water efficiency Expansion of Bewl water treatment works with improved transfer links to WRZ3 New Arlington Reservoir Improved connectivity within the zone 2045-2080 Leakage reductions Water efficiency Bracknell 2020-2025 Leakage reductions WRZ4 Water efficiency 2025-2045 Leakage reductions Water efficiency Catchment Management at Woodgarston WRZ4 to Affinity Water – Egham to Surrey Hills (Temporary Reduction) 2045-2080 Leakage reductions Water efficiency

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Figure 65: Our preferred plan by water resource zone continued

Water Resource Zone Year Preferred plan

Farnham 2020-2025 Leakage reductions WRZ5 Water efficiency 2025-2045 Leakage reductions Water efficiency 2045-2080 Leakage reductions Water efficiency Maidstone 2020-2025 Leakage reductions WRZ6 Water efficiency Aylesford Newsprint – use of existing groundwater sources 2025-2045 Leakage reductions Water efficiency Improved connectivity within the zone 2045-2080 Leakage reductions Water efficiency Cranbrook 2020-2025 Leakage reductions WRZ7 Water efficiency 2025-2045 Leakage reductions Water efficiency Increased connectivity between WRZ1 and WRZ7 2045-2080 Leakage reductions Water efficiency Ashford 2020-2025 Leakage reductions WRZ8 Water efficiency WRZ8 to Affinity Water – Kingston to Barham (Continuation) 2025-2045 Leakage reductions Water efficiency Broad Oak Reservoir Improved connectivity within the zone WRZ8 to SWS – Kingston to Wingham (New Export) 2045-2080 Leakage reductions Water efficiency

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2020 to 2025 Our preferred plan for the period 2020 to 2025 includes a mix of demand management initiatives (leakage reductions and water efficiency) that provide an additional 26.6 Ml/d above the assumptions already made in our baseline activities. Reducing demand by this amount requires the use of new approaches and technology and there is uncertainty on the level of savings that can be achieved. We have been discussing this with regulators and need to ensure that while we aim to meet these stretching targets, we do not put unnecessary risk on our levels of service or security of supply. Our approach to manage these risks is set out in section 9.3.1. On their own, these types of initiatives would simply not be enough to meet the deficits and given the uncertainty in the yields of these demand management options, we cannot rely on them entirely, therefore our preferred plan for the period 2020 to 2025 also includes a new water supply option in WRZ6 to construct a new water treatment works at the former Aylesford Newsprint site. This will provide an additional 18.2 Ml/d.

2025 to 2045 During the period 2025 to 2045 we will continue our demand management initiatives to achieve further leakage and water efficiency savings. However, by this stage we will need the following additional water supply options to meet the increase in shortfall of our supply demand balance: • Developing regional water transfer schemes: importing water from SES Water to WRZ2 (Haywards Heath) (9 Ml/d) and exporting water from WRZ8 (Ashford) to Southern Water (2 Ml/d) • developing and improving an existing water treatment works at Bewl WTW Kent, with transfer to our WRZ3 (Eastbourne) (8 Ml/d) • carrying out a targeted catchment management programme at Pembury in WRZ1 Tunbridge Wells) and at Woodgarston in WRZ4 (Bracknell) areas, Kent (3.3 Ml/d) • building a new reservoir at Broad Oak in WRZ8 (Ashford) (19.6 Ml/d) • building a new reservoir adjacent to our existing Arlington Reservoir in WRZ3 (Eastbourne) (16.1 Ml/d) • developing two new company transfers between our water resource zones, and three improvement schemes to our pipe network to improve the connectivity within our supply area

2045 to 2080 During the period 2045 to 2080: • Developing a new company transfer between our water resource zones

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Figure 66: WRMP19 preferred plan supply side schemes with costs

Option type Option name Receiving Year Option Capex Fixed Variable WRZ activated yield for (£M) opex opex one in (£k/ (£k/Ml) 200 year year) event (Ml/d) Catchment Targeted catchment WRZ1 2034 0.3 £0.5 £54.40 £0.00 management management interventions in the Pembury area

Catchment WRZ4 2035 3.0 £1.4 £76.80 £0.00 management interventions at Woodgarston

Company WRZ7 to WRZ2 transfer WRZ2 2029 [5.0] £11.6 £29.77 £203.91 transfers – Bewl to Cottage Hill

WRZ1 to WRZ7 transfer WRZ7 2028 [5.0] £8.6 £13.23 £0.00 – Blackhurst to Bewl

WRZ3 to WRZ2 transfer WRZ2 2070 [10.0] £12.5 £36.39 £21.28 – Arlington to Barcombe

Groundwater Aylesford Newsprint WRZ6 2023 18.2 £25.4 £185.74 £150.68 – use of existing groundwater sources

Regional SESW to South East WRZ1 2042 9.0 £10.9 £35.65 £291.61 transfers Water WRZ1 – Bough (Imports) Beech to River Hill SR

Regional South East Water WRZ4 Affinity 2025 [-10.0] Reduction in existing bulk import transfers to Affinity Water – Egham Water (to 2030) (Exports) to Surrey Hills Temporary Reduction

South East Water WRZ8 Affinity 2020 [-2.0] Continuation of existing bulk to Affinity Water – Water export Barham Continuation

South East Water WRZ8 SWS 2025 [-2.0] New bulk export to SWS – Kingston to Wingham

Reservoir Broad Oak Reservoir WRZ8 2033 19.6 £104.0 £226.82 £217.07

New Arlington Reservoir, WRZ3 2035 16.1 £129.5 £211.00 £175.81 River Ouse

Treatment Bewl-Darwell Option: WRZ3 2025 8.0 £33.6 £349.27 £581.52 Bewl WTW expansion and transfer to Hazards Green

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Figure 66: WRMP19 preferred plan supply side schemes with costs continued

Option type Option name Receiving Year Option Capex Fixed Variable WRZ activated yield (£M) opex opex for one (£k/ (£k/Ml) in 200 year) year event (Ml/d) Zonal WRZ8 Zonal Scheme – WRZ8 2033 [22.0] £28.2 £45.18 £14.87 transfers Distribution of water from Broad Oak

WRZ3 Zonal Scheme – WRZ3 2035 [18.0] £3.1 £3.96 £0.00 Arlington to Folkington Transfer

WRZ6 Zonal Scheme – WRZ6 2025 [20.0] £5.2 £7.41 £0.00 Mains from Aylesford to Beech

The schemes that have brackets around the yield do not contribute additional yield during peak summer periods. They are a combination of transfer schemes which move water to where it is needed, exports to other water companies or schemes which only contribute yield on average, but not on peak.

9.3 Components of our preferred plan This section considers the components of our preferred plan by each of the option types.

9.3.1 Leakage Since 2010 we have set out to reduce leakage and we have met or beaten our target each year, driving our total leakage down from 95.3 Ml/d to 87.7 Ml/d in 2017/18 – a total reduction of eight per cent which represents upper quartile performance across the industry. This concerted effort to reduce leakage is consistent with the preferences of our customers who indicated that of all the options available, they would be most willing to pay for leakage reduction. Reducing leakage however is challenging, as most of the leaks that occur are small and not visible, but our technological and system advances have allowed us to find more, smaller invisible leaks. That’s why for WRMP19 we continue to take a phased approach to reducing leakage that reflects our excellent starting position and allows for the timely identification, testing and development of more new technology and innovative practices that will support these reductions. In our dWRMP19 we set out plans to reduce leakage by four per cent between 2020 and 2025, which represented the economic optimal level of reduction. However, we received a number of representations during the public consultation stating that this reduction was not challenging enough, so we have reviewed our approach.

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The final selection of leakage reduction options in our WRMP19 is guided by the expectation of our regulators and the government, and the preferences and support of our customers and stakeholders – we have completed further research that confirmed our customers’ willingness to pay for higher levels of leakage reductions. We have therefore set ourselves a more challenging target of reducing leakage by 15 per cent by 2025. Beyond 2025 we have included additional reductions, so by 2050 we expect leakage to be half of the current level. Reducing leakage by this level will require new technology and approaches, and later on it will require extensive replacement of our oldest water mains. To ensure we still meet our levels of service and maintain security of supply for our customers, we have only included the economic optimal level of four per cent leakage reductions to support meeting the supply demand deficit, and included additional reductions to achieve 15 per cent reductions by 2025 and 50 per cent reductions by 2050 ‘on top’ i.e. in addition to the set of preferred schemes required to meet future forecast deficits and maintain a positive supply demand balance position. This has resulted in our overall supply demand surplus being greater than it was in our dWRMP19, although over time the actual levels of leakage reductions we achieve will be adopted into the baseline demand forecast of future WRMPs. Allowing other options in our preferred plan to be deferred or removed accordingly. We have discussed this proposed approach with Defra, the Environment Agency and Ofwat, and received their support in principle. We are aware that other water companies will have taken a similar view, especially where they seek to deliver Ofwat’s 15 per cent leakage reductions by 2025, but do not have a supply demand balance deficit.

Figure 67: WRMP19 preferred plan leakage options with savings

Leakage option name Cumulative savings Peak Summer Period (Ml/d) 2020-25 2025-30 by 2045 by 2080 Boosters for customers 0.11 0.27 0.36 0.36

Calm networks programme 1.96 4.36 4.70 4.70 Communication pipe replacement 1.66 1.66 1.66 1.66 DMA Integrity 0.77 1.10 1.25 1.25 DMA remainder improvement 0.11 0.12 0.35 0.35 New technology implementation 0.60 0.69 0.69 0.69 Smart networks programme 6.33 7.84 7.84 7.84 Trunk main metering improvements 1.07 1.88 1.88 1.88 Mains replacement 0.00 0.00 17.81 24.00 Totals 12.61 17.92 36.54 42.73

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9.3.2 Water efficiency Following further consultation with our regulators, stakeholders and supported by our customers, we have adopted more ambitious targets to reduce per capita consumption over both the short and longer term. From our current position of 150 l/h/d in 2017/18 we plan to reduce per capita consumption to 139 l/h/d by 2025 i.e. seven per cent. The savings we are proposing in Figure 68 are feasible but will be sufficiently stretching and challenging to deliver especially given the impacts affluence, temperature and rainfall have on our regional water use. As recognised by both the National Infrastructure Commission’s report and Artesia’s report on behalf of Ofwat, working in isolation it is unlikely we will be able to achieve the levels of per capita consumption included in our forecast. We are confident that our water efficiency strategy will achieve the forecast per capita consumption reductions required in the shorter term i.e. 2024/25. Longer term we have made assumptions that wider initiatives have the potential to drive water efficiency, and examples include mandated water labelling, stricter mandated building codes, design and regulations as well as national water efficiency messaging, policies and targets. Our ambition is to play a leading role during AMP7 (as we have done with the behavioural science work in this period) within the water industry and with other parties in collaboration, to scope and start to implement the changes that will be needed in the medium to long term to ensure the water industry is well placed to deliver more ambitious per capita consumption figures in line with expectations. During AMP6 we partnered with Advizzo, an innovative behavioural economics company, to pilot a new approach to demand management based on nudge theory and social norming. We piloted this approach with 22,000 of our customers to influence water use based on behavioural economics. Customers receive a six monthly report that compares their water use with that of their neighbourhood and offers tips on how to save water. Customers can also receive email updates and register for access to an online personalised portal. Encouraging early indications suggested reductions in consumption of at least two per cent (equivalent to a reduction in per capita consumption of 3 l/h/d) were readily achievable, With further development and refinement, including: more tailored advice; higher uptake of devices; use of customer segmentation to support more targeted messaging; and combining reports with community level incentive schemes – we believe greater savings at property level of between three and five per cent can be achieved. Our planned water efficiency programme for 2020 to 2025 involves the full rollout of behavioural economic techniques and the water use report to all of our customers. The water use report will enable us to start and then sustain a more meaningful conversation with customers, groups and communities about their water use patterns and help pinpoint areas of their use where savings may be possible.

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We envisage the water use report being used by schools where our future customers will be able to track and discuss their households’ water use, understand the value of water and compare water use between schools in different areas and towns. This approach is an industry first on this scale and through further refinement and better integration with other initiatives such as more targeted and cost effective home visits and retrofit programmes, improved identification of need and distribution of free water saving devices and through the provision of water saving tips to households, we expect to achieve reductions of per capita consumption of between 5.7 l/h/d and 8.6 l/h/d. We believe that, in time, different tariff structures, alongside improving levels of data and technological advances, will play an increasing role in supporting and sustaining reductions in per capita consumption. We will continue to test customers’ appetite for different approaches to tariffs, as to date they remain an unpopular option. Our AMP7 programme will involve further work to understand and evaluate the future role of tariffs for water efficiency. Internal plumbing losses are estimated to account for between four and 12 l/property/ day; it is estimated that four per cent of toilets in the UK leak wasting on average 215 l/property/d; and appropriately targeted home water audits that lead to retrofitting can typically lead to water savings of 40-50 l/property/day. The water use report will help us to work with customers to identify high usage, supply pipe leakage and internal plumbing losses. This approach will be complemented and enhanced by the roll out of our smart metering programme – initially to 100,000 households between 2020 to 2025 with the potential to start a wider scale roll out from 2025 onwards. We have a current joint project with Centrica to evaluate the benefits of their Hive home leak detector that provides real time data and a WiFi connected application to identify irregular water use events and internal plumbing losses. These approaches and tools will help us assist in the repair of over 30,000 leaking toilets and rectify plumbing losses in homes across our supply area. We estimate that a further potential reduction in per capita consumption of three to five l/h/d is possible through the targeting of plumbing losses. Our water efficiency programme includes initiatives that target and address all of these areas, to help meet our overall per capita consumption reduction of 10 l/h/day 2025, to achieve a PCC of 139 l/h/d.

Figure 68: WRMP19 preferred plan water efficiency options with savings

Water efficiency option name Cumulative savings DYCP (Ml/d) AMP7 AMP8 by 2045 by 2080 Household Behavioural change water efficiency savings 14.00 24.22 56.09 151.00

Non-household Water efficiency audits 0.00 0.00 0.00 0.30 Water leak detection sensor 0.00 0.00 0.00 0.03 Online WEFF audit tool 0.00 0.00 0.00 0.17 Leaking toilets 0.00 0.00 0.00 0.05 Totals 14.00 24.22 56.09 151.55

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The scale of ambition included in the roll out of our programme are summarised by Figure 69 below. This has been based on the experience gained from our Advizzo pilot and will be further refined and regularly reviewed. We will report activity and savings each year via the existing Annual Review process.

Figure 69: Details of water use report, devices and home audit programme during 2020 to 2025 period

REPORTS 133,000 water use reports sent per month (Total of 800,000 households receive a water use report by email (small number by post) twice a year)

PROCESS 53,000 reports opened per month 12,000 online surveys completed per month

RESULTS 6,250 devices distributed per month 700 home visits per month (fix plumbing losses)

Figure 70 summarises our ambitious programme for the 2020 to 2025 period that will involve the roll out of some industry-leading approaches.

Figure 70: Summary of our water efficiency programme for the period 2020 to 2025.

Initiative Activity Estimated take up Estimated savings Water use report 133,000 reports sent 53,000 reports read; per month 12,000 online surveys completed per 4-6% reduction in per month capita consumption i.e. 5.7 – 8.6 l/h/d Devices – 6,250 devices requested / month Plumbing losses 2,600 leaking toilets 700 home visits 2.1 to 3.7% reduction fixed per month in per capita 1,900 repaired by consumption i.e. 3 to customers 4 l/h/d Total assumed savings 6.1% to 9.7% reduction in per capita consumption i.e. 7.8 to 12.6 l/h/d

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Our more ambitious demand management programme in our final plan, compared to our draft WRMP, has resulted in the exclusion of a preferred scheme that was included in our draft WRMP. Peacehaven Effluent Reuse scheme was primarily serving resource zones 2 and 3 and was originally required to maintain the supply demand balance from 2028/29 by utilisation of half of the 25 Ml/d yield by 2030 to 2035. Whilst we have confidence in our water efficiency strategy to deliver in the short term, there is greater uncertainty in the longer term. The Peacehaven Effluent Reuse scheme is an adequate alternative option and we plan to continue to investigate this alternative option during the period 2020 to 2025.

9.3.3 Groundwater Using our experience of the most recent drought period and susceptibility of groundwater to low levels of recharge, our aim has been to develop a WRMP19 that provides more resilience and less dependency on groundwater. Given the Environment Agency’s guidelines to ensure sustainability of existing and future abstractions, many groundwater development options have been considered too risky in terms of deliverability and sustainability to be included in our preferred plan. Our preferred plan therefore includes one groundwater scheme. In 2023 we plan to complete a major new groundwater scheme on the former Aylesford Newsprint site, near Maidstone. This scheme involves the purchase of existing abstraction licences for the boreholes and stream and the construction of a new water treatment works, and infrastructure to deliver a yield of 18.2 Ml/d into our WRZ6 (Maidstone).

9.3.4 Catchment management Our preferred plan includes two catchment management schemes to provide 3.3 Ml/d of existing groundwater sources by the end of the planning period. These schemes are required as part of the WINEP3 programme and the dates have been agreed with the Environment Agency. The preferred option for targeted catchment management in the Woodgarston area, WRZ4 (Bracknell), in 2035 would educate land owners about their septic tank / cess pit discharges to groundwater, and educate farmers and land managers about Nitrate Vulnerable Zone Regulations and best practice nutrient management. This scheme will help reduce nitrate seasonal peaks and improve raw water quality in the longer term, allowing us to retain our current yield of three Ml/d without the need for the future renewal of our new nitrate removal plant at Woodgarston WTW when it reaches the end of its life in around 2035. We have not included an option to increase the deployable output from Woodgarston above its current three Ml/d in our preferred plan. In the Pembury area, in 2034 we plan to carry out targeted catchment management to remediate areas of contaminated land impacting on water quality, educate farmers and land managers about pesticide management best practice and storage of chemicals, and implement measures to deter fly-tipping. This scheme will help to prevent a water quality failure and potential loss of up to 0.3 Ml/d from an existing groundwater source at Pembury WTW.

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9.3.5 Regional transfers Imports Our preferred plan includes a new regional transfer import scheme with nine Ml/d transfer capacity by the end of the planning period. This is in addition to the continuation of existing agreements with Affinity Water and Southern Water as set out in Section 4.7.3. In 2042 a new transfer from SES Water will provide the following yield in our WRZ1 (Tunbridge Wells):

Planning Scenario Yield Yield Yield (1 in 100 drought) (1 in 200 drought) (1 in 500 drought) NYAA 2.5 Ml/d 2.25 Ml/d 2.25 Ml/d DYAA 2.5 Ml/d 2.25 Ml/d 2.25 Ml/d DYCP 10 Ml/d 9 Ml/d 9 Ml/d

This scheme will use water from SES Water’s Bough Beech Reservoir source and transfer to our existing service reservoir at Riverhill. Exports Our preferred plan includes three regional transfer export schemes to provide surplus water to neighbouring water companies. From 2020 onwards we will continue our existing agreement to make available a yield of two Ml/d from our Kingston WTW in WRZ8 (Ashford) to Affinity Water. This yield will be provided under all planning scenarios and conditions up to a one in 500 year drought. During the period 2025 to 2029, a short term available surplus in our WRZ4 (Bracknell) will allow us to temporarily reduce our existing Egham to Surrey Hills import agreement to 26 Ml/d, this will allow Affinity Water to forecast an increase of 10 Ml/d to their supply demand balance during this period. This reduction will be provided under all planning scenarios and conditions up to a one in 500 year drought. A joint study with Southern Water in our WRZ8 (Ashford) has identified a need for water in their Wingham area in the next five years. As part of our plan, we will develop an agreement with Southern Water to make available a yield of two Ml/d from our Kingston WTW to Southern Water’s Wingham area from 2025 onwards. This yield will be provided under all planning scenarios and conditions up to a one in 500 year drought. Initial discussions have taken place with our neighbouring water companies to reach a level of understanding about the availability of these transfers during the planning period and copies of this correspondence can be found in Appendix 9A. We recognise that there is a degree of flexibility in the precise route of these transfer options and further work is required to ensure environmental impacts are avoided or minimised; and ensure that these schemes are deliverable to meet the objectives of both water companies.

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9.3.6 Reservoirs Our preferred plan includes two reservoirs providing 35.7 Ml/d of new surface water sources by the end of the planning period. Firstly, the development of a reservoir at Broad Oak, near Canterbury, with an intake on the Great Stour, yielding 19.6 Ml/d by 2033. Secondly, an extension to our existing reservoir at Arlington, East Sussex with an intake on the River Ouse yielding 16.1 Ml/d by 2035. The inclusion of the Broad Oak Reservoir (WRZ8, Ashford) in our preferred plan is a long- standing option for which we own the necessary land. This WRMP19 includes a larger size reservoir than previously proposed in WRMP14 (5,126 Ml capacity compared to 2,815 Ml in WRMP14). During the period 2015 to 2020 we have undertaken further work to carefully assess the extent of a proposed new larger reservoir including the need to avoid any inundation of the SSSI and areas of adjacent ancient woodland, the presence of protected species and visual impact. We consider that the preferred option to extend our existing reservoir at Arlington, WRZ3 (Eastbourne) through the creation of a bunded reservoir north of the existing site is a more acceptable option than other options considered. We consider that there could be significant benefits associated with this reservoir option to create new habitats and recreational opportunities, building on the experience and local knowledge gained from managing our existing reservoir which has been designated a SSSI since its construction. During the period 2015 to 2020 we have undertaken further work to develop our understanding of the issues involved with this scheme including reducing impact on the designated sites nearby, the presence of protected species and the need to move overhead power lines. Given the long lead time for the development of reservoir options, we consider it vital to progress our survey and assessment work for Broad Oak and Arlington towards the next stage, which is to prepare for the necessary planning consent process.

9.3.7 Water treatment works Our preferred plan includes improvements to one of our existing water treatment works at Bewl delivering eight Ml/d of new water by 2025. This will allow an increase in abstraction from Bewl Reservoir. This additional water will be transferred to our WRZ3 (Eastbourne) where it will be used in place of the existing Southern Water Bewl-Darwell bulk supply when this terminates in 2025.

9.3.8 Inter-zonal transfers To resolve WRZ2 deficits we will also develop additional water transfers between our water resource zones based on the total water which will be available for use during the planning period. Our preferred strategy includes three intra-zonal transfers providing an additional inter-zonal transfer capacity of 19 Ml/d by the end of the planning period. As with the preferred regional transfer options, the precise route of these inter-zonal transfers requires further work to take account of environmental constraints.

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9.3.9 Zonal transfers In addition to inter-zonal transfers, we will also look to improve our water network within each WRZ to ensure the additional water from the source of each option is able to be transferred to the location within the WRZ that it is needed. Our preferred strategy includes three zonal transfers by the end of the planning period. In addition, there is an inter-zonal transfer which relates to the replacement of deployable output at our Greywell source and a raw water bulk supply at Darwell. For Darwell, the raw water transfer will be replaced with an upgrade to our water treatment works at Bewl (described in section 9.3.7), together with improvements to the local distribution network. Essentially, this replaces an existing raw water bulk supply with a new, treated water supply. Our new solution will prevent the spread of invasive non-native species to the European protected site at Pevensey Levels in East Sussex. In WRMP14 we made a commitment to cease abstraction at Greywell in 2020 and so during the 2015 to 2020 planning period we have started to develop a replacement source for this abstraction. Moving water from this new source to where it is needed however has been more problematic; we have investigated a number of alternative water transfers and the only water available is via a wetland SSSI. We are currently conducting detailed scientific studies to agree the best pipeline route to ensure no deterioration to this SSSI. While there is uncertainty around the delivery of a pipeline via a wetland SSSI, we have included this in the zonal strategy for WRMP19; while the environmental effects are described in more detail in the accompanying SEA. More generally, the improvements to both our inter-zonal and zonal transfers significantly augment the existing capacity within our supply area, supplementing our water network by increasing the capability to transfer large quantities of water when required. This provides significant benefits to our customers and improves the resilience of our supply network.

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9.4 Differences between our dWRMP19 and WRMP19 The changes to the baseline demand forecast and the increased demand management mean that there are significant changes between dWRMP19 and WRMP19. These predominantly occur in the post-2045 period, as shown in the figure below.

Figure 71: Key changes between options in the dWRMP19 and WRMP19

Option dWRMP19 WRMP19 Leakage reduction 4 Ml/d reduction in total leakage 12.6 Ml/d reduction by 2025 by 2025 and 14 Ml/d reduction and 42.7 Ml/d reduction by by the end of the planning 2050 period Water efficiency 21 Ml/d over the planning 14.0 Ml/d by 2025 and period 151.6 Ml/d over the planning period Catchment management Pembury included at 2034 and No change Woodgarston 2035 Company transfers Kippings to Pembury 2025 Not required Bewl to Best Beech 2026 Bewl to Cottage Hill required in 2029 Aylesford to Blackhurst 2026 Not required Best Beech to Bewl 2032 Not required Arlington to Barcombe 2051 Required at 2070 Burham to Bewl 2058 Not required Not required Blackhurst to Bewl 2028 Conjunctive use Conjunctive use of surface water Not required and groundwater – River Ouse 2075 Desalination Desalination of River Medway Not required tidal water at Aylesford/ Snodland 2054 Eastbourne desalination with Not required biomass plant 2049 Reculver desalination of brackish Not required water 2071 Effluent re-use Effluent re-use to River Ouse: Alternative option to Arlington Peacehaven 2028 Reservoir Aylesford effluent re-use Bulk supply from Southern Water is an alternative to Broad Oak Reservoir Indirect use of effluent from Not required Weatherlees WwTW into the Great Stour

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Option dWRMP19 WRMP19 Groundwater Aylesford Newsprint 2023 No change Groundwater licence trade: Not required Halling 2035 Confined chalk around Not required Farnborough 2057 ASR chalk confined aquifer Not required (Beenhams Heath/White Waltham) 2067 Regional transfers SESW to South East Water Now required 2042 (imports) transfer – Bough Beech to River Hill 2036 PRT to WRZ5 transfer 2058 Not required TWU to WRZ4 2045 Not required Regional transfers Egham to Surrey Hills temporary Now required 2025 (exports) reduction 2020 WRZ8 to Affinity Water (Barham) No change 2020 WRZ8 Kingston to Wingham Now required 2025 2029 Reservoir Broad Oak Reservoir 2033 No change New Arlington Reservoir 2032 Now required 2035 Goose Green Reservoir 2060 Now an alternative scheme for Arlington Reservoir Surface water New raw water abstraction from Not required the River Thames upstream of Maidenhead 2069 Treatment Bewl-Darwell option Bewl No change expansion and transfer to Hazards Green 2025 Release surplus yield at Ford Not required through treatment works upgrade 2027 Bewl Bridge WTW expansion Not required 2058

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9.5 Alternative schemes In the early years of the planning period our plan is built around the Aylesford Newsprint scheme and combined leakage reduction and water efficiency. We have been working on the Aylesford Newsprint Scheme for some years and believe it is low- risk. Similarly, we are confident we can achieve the four per cent leakage reduction in our final planning demand forecast and our work with Advizzo suggests that the PCC reductions in the first five years of our WRMP19 are very challenging, but realistic. There is uncertainty beyond then and we have considered the alternative schemes that are available to us to demonstrate the flexibility and robustness of our preferred plan to changing circumstances. The options described in the sections below were previously included in our dWRMP19 and as such were part of the consultation process.

Preferred Plan Scheme Alternative Scheme Broad Oak Reservoir Bulk supply from Southern Water at Aylesford Arlington Reservoir Goose Green Reservoir Water Efficiency in WRZ2 Effluent re-use to River Ouse at Peacehaven & WRZ3

Given the long lead on the two preferred strategic schemes there will be an opportunity to re-consult on these options as part of our dWRMP24.

9.5.1 Water re-use The Aylesford water re-use option involves the development of a new effluent treatment plant at Southern Water’s wastewater treatment works (WwTW) that would upgrade the wastewater effluent to a suitable standard for transfer and release to Eccles Lake bankside storage. The scheme will be delivered by Southern Water to provide them with a yield of 18 Ml/d by 2027. Our need for water in WRZ 6 (Maidstone) no longer requires this scheme, however, we could take a bulk supply from Southern Water if the Broad Oak scheme is delayed. The Peacehaven preferred water re-use option is able to provide a yield of 25 Ml/d in to WRZ 2 (Haywards Heath). This option comprises a transfer pipeline from Southern Water’s Peacehaven WwTW to Newhaven WwTW, where new effluent treatment plant would be required. The combined treated effluent would then be transferred inland for release into the River Ouse and abstraction at Barcombe Water Treatment Works. As with Aylesford re-use, we have worked closely with Southern Water to understand their need and timescales for the possible shared use of this scheme. Southern Water has confirmed that, like South East Water, it does not have a need for this scheme for WRMP19. However, we have decided to include it as an alternative scheme and will continue to engage with Southern Water to ensure the best approach for both parties continues to be considered for future plans.

9.5.2 Reservoirs Goose Green reservoir was a preferred option in the dWRMP19 but, given the increased demand management and revised demand forecast, it was not selected in the preferred plan for WRMP19. However, its location it makes a suitable alternative for the Arlington reservoir scheme.

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9.6 Building innovation into our preferred plan Planning for a 60 year time horizon allows us time to look at the challenges that lay ahead and to drive more innovative solutions to meet these challenges. Some of these solutions we have developed sufficiently to have included within the WRMP19, others are to be developed in time to meet these future challenges. Included within this plan as selected options are innovations in the following areas: • Demand management, where we have used behavioural science techniques to encourage customers to reduce demand following comparisons with their neighbour • smart network technology as part of our plan to reduce leakage both on the customers and company pipework • catchment management techniques to restore lost deployable output caused by pollution • development of third party options via a thorough licence holder engagement approach • use of the industry-leading leading Environmental Scrutiny Group to provide challenge to both the creation and delivery of the WRMP via an expert group of informed stakeholders • a regional approach to agree outcomes from the WRSE and Water UK National Water Resources Long Term Planning Framework • new schemes that arise from the market mechanisms and Bid Assessment Framework approach • more integrated planning with other water companies Innovation we are planning to further develop includes: • Collaborating with the University of Antwerp, South East Rivers Trust, South West Rivers Trust, EA, NE and Affinity Water in a study to alter ecosystems to prevent groundwater water flooding and improve groundwater recharge • using artificial intelligence to understand more about customer consumption, in particular during the hot dry summer of 2018 • extending the behavioural science approach to engage with customers to reduce groundwater contamination, reduce internal leakage and improve the uptake of water efficiency devices – a concept we describe as the `resilient customer’ approach • using tariffs combined with both behavioural science and smart networks to drive further demand reductions, following on from our successful customer metering programme • collaborating with the supply chain and research establishments to provide improvements to our alternative, less environmentally-friendly desalination and effluent re-use options • interaction with the market mechanisms that we help design to promote more efficient water sharing between licence holders • investigation and participation in the direct procurement approach to produce better market-driven solutions to balance supply and demand • the use of analytics forums such as the hAQUAthon we sponsored in 2017 where we seek to bring together experts in leakage, process and analytics to derive new solutions to old problems using big data

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YOU SAID, WE LISTENED THE REVISED PLAN FEATURES A MORE AMBITIOUS TARGET TO REDUCE THE AMOUNT OF WATER LOST THROUGH LEAKS, SOMETHING MANY RESPONDERS WERE KEEN TO SEE

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This framework captures how we collate, scrutinise and assure all publicly published data

QUALITY ASSURANCE OUR WATER RESOURCES PLAN IS INTEGRATED INTO OUR 2019 PRICE REVIEW BUSINESS PLAN

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10. Board assurance and governance

In this section we describe the quality assurance process we have followed in producing this plan.

10.1 Introduction For WRMP19 we have adopted a comprehensive quality assurance process consistent with our company monitoring framework which we follow for all of our statutory reporting. This framework captures how we collate, scrutinise and assure all publicly published data. It has been tailored to meet the requirements in Section 3 of the Water Resources Management Plan (England) Direction 2017 (with reference to the relevant sections of the Water Industry Act 1991) with particular focus on the challenges the WRMP19 is addressing. We have assessed that there is no impact of the WRMP19 on our requirement with regard to the reform relating to the competitive services for supply to, or removal from, our network following the Water Act 2014.

10.2 Overall plan assurance and governance As in WRMP14, our WRMP19 has a clear ownership structure and every component of the plan has a technical lead accountable to the Head of Water Resources. We have further improved how we manage the WRMP development by integrating it within our 2019 Price Review 2019 (PR19) business programme. Our WRMP and Price Review programmes are overseen by a joint WRMP-PR19 Steering Group and the responsibility for the overall strategy rests with the Asset and Regulation Director. The WRMP-PR19 Steering Group is accountable to the Regulatory Strategy Group (RSG), which is chaired by the Managing Director. To ensure full Board influence and oversight the WRMP19 has been discussed with the Board on six separate occasions. In addition, an Independent Non-Executive Director has had separate ‘deep dive’ one-to-one sessions with the team as the plan has developed.

10.3 WRMP19 programme quality assurance plan A key part of our assurance process has involved considerable time with our Environmental Scrutiny Group (ESG), allowing independent challenge and feedback on all of the key building blocks of our plan and opportunity to input to our decision making process and the selection of a preferred plan. We have also worked closely with the Environment Agency and Natural England throughout the development of WRMP19, in the form of a programme of regular review and update meetings.

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As described in Section 2, we have taken the ESG through the building blocks of WRMP19 from the start of the plan development, throughout and after the consultation period to its completion and they have been given the opportunity to challenge and provide input to the baseline data and to the assumptions we have made. In particular, the ESG has spent considerable time commenting on the options appraisal process, and determining that the levels of demand management in WRMP19 are ambitious enough and sufficiently stretching. Through their considered challenge this group has not only helped shape our plan, but has also given us a level of stakeholder buy-in and assurance of the technical content on which we have built our WRMP19. During and shortly after the 12 week public consultation on the dWRMP19, we carried out further customer research to test customers’ acceptability of our dWRMP19, and to test customers’ support and willingness to pay for the adoption of more ambitious levels of demand management subsequently contained within the WRMP19 preferred plan. Our quality assurance strategy is explained in the WRMP19 Programme Quality Assurance Plan (the QA plan) to ensure that the WRMP19 programme is completed on time, to budget and quality. The QA plan (see Appendix 11A) describes the programme controls, programme plan, its quality management strategy and how we manage risk. The WRMP19 Programme Manager is responsible for the implementation and adherence to the QA plan. The technical leads are responsible for the preparation and reporting of the baseline data and key assumptions. All outputs are subject to stringent quality assurance described in detail in the QA plan and include check, review and approval, followed by acceptance by the WRMP-PR19 Steering Group and Regulatory Steering Group. All key assumptions made when compiling the baseline data are described within the associated technical reports that underpin the WRMP19 and are included in appendices. As described in our Company Monitoring Framework and the QA plan (see Appendix 11A), the level of assurance required is determined by the risk associated with the activity and the importance to stakeholders or customers. As part of our quality assurance process, we have assessed the risk associated with every element of WRMP and each has been assigned a risk rating of low, medium or high. The level of risk dictated the level of assurance undertaken. The elements assessed as high risk elements (supply forecast, demand forecast and decision making) were subject to an additional level of scrutiny through a peer review by an external expert, whose reports can be found in WRMP19 Appendices 11B to 11D.

10.4 Specific assurance In addition to the extensive internal assurance processes described above, we have commissioned independent audits of the key outputs of WRMP19. Our independent assurance partners, Jacobs, have assured both the investment options costs and the water resources planning tables. Together with the internal quality assurance processes described above, this provided the Board with confidence of the robustness of WRMP19. The scope of these audits is described in more detail below.

10.4.1 Investment option costs The costs of investment options were largely based on data contained in our Unit Cost Database. Jacobs’ audit concentrated on assuring the integrity of the processes and southeastwater.co.uk 177

information used to compile the database and included data spot checks (this review was later followed by a further assurance of the unit costs as part of PR19 business plan). Jacobs were satisfied that the processes we followed to develop the database and the cost of schemes were reasonable for the purposes of our WRMP.

10.4.2 Water resources planning (WRP) tables The WRP tables contain all key numerical outputs of WRMP19 and are very extensive in nature. Jacobs have undertaken the specific assurance of these tables to give us the confidence that the processes used for their completion were stringent and that all the data in the tables was correct and consistent with other WRMP19 documents. The audit focused on the robustness of the processes used to compile the tables and included data spot checks to ensure consistency. Jacobs confirmed the integrity of the processes used and were satisfied that the tables were compiled correctly.

10.4.3 Concluding statement As directors of South East Water Ltd, we have relied on the established systems of internal control described in this statement to ensure the robustness, accuracy and completeness of the data reported. This information and data has also been externally reviewed by technical auditors. Based on these well-established and thorough processes, which we operate within the wider framework of assurance and transparency of our company monitoring framework, we have a high degree of confidence in the information presented in the WRMP19 and the supporting data and are satisfied that the WRMP19 has been compiled in accordance with the statutory requirements of Section 37A to 37D of the Water Industry Act 1991 and the Water Resources Management Plan (England) Direction 2017. We are also satisfied that our WRMP19 identifies the challenges faced by the environment, customers and the company and that it has incorporated the feedback received from customers and stakeholders. To the best of our knowledge our WRMP19 will enable the company to face medium term challenges and to prepare for longer term future challenges. Signed on behalf of the South East Water Ltd Board

Paul Butler Managing Director

John Barnes Independent Non-Executive Director

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Glossary

Abstraction The removal of water from a source. Abstraction licence Authorisation granted by the Environment Agency to allow the removal of water from a source. ADD – Average day demand Total demand over a year divided by the number of days in a year. ADO – Average deployable output The annual average daily deployable output of a source/treatment works or a group of sources/ treatment works (the average daily DO, in million litres a day, or Ml/d, over a year). ADPW - Average day demand in peak week One seventh of total demand in the peak week of any 12 month period (ADPW). Also known as summer peak period. AH – Available headroom The difference between water available for use (including water imported into the supply area) and demand at any given point in time. AIC – Average incremental cost The unit cost of the water supply or water savings of a particular option. Calculated as the net present value of the capital and operating costs of the option, divided by the net present value of the water produced by it. AISC – Average incremental social cost The unit cost of the water supply or savings of a particular option. Calculated as the net present value of the scheme’s financial, environmental and social costs divided by the net present value of the water produced by it. AIM – Abstraction incentive mechanism A programme to reduce abstraction from the most environmentally sensitive abstraction sources at times of greatest water stress. AMP A five-year asset management period. For example, AMP7 is an asset management period 7, from 2015 to 2020. Annual average The total demand for water in a year, divided by the number of days in the year. AR – Annual Return The annual return of data submitted to the Environment Agency by all water companies in England. ASR – Aquifer storage recovery Injection, storage and subsequent use of water held in groundwater sources. Aquifer A body of permeable rock which can contain or transmit groundwater. southeastwater.co.uk 179

Glossary continued

Baseline Describes the continuation of existing and already planned policies and practise, but without any new ones coming into force. Used to establish what the situation would be if no new policies or measures were adopted. Baseline demand forecast A demand forecast which reflects our current policies around managing demand for water, and assumes the quickest achievement of current, agreed leakage targets, as well as implementation of the company’s water efficiency programme, irrespective of any surplus in water supplies. Baseline supply forecast A forecast of the water supplies that are achievable from existing and already planned and approved sources, using existing licence limits and conditions and existing infrastructure (and any constraints of that infrastructure). Best value The UK Government expects water companies to provide reliable, sustainable supplies at best value to customers while protecting the environment. See Guiding Principles for Water Resources Planning (Defra, 2016). Borehole A deep, narrow shaft made in the ground for the purpose of extracting water. Business plan Water companies produce a business plan that covers a five-year period. This shows how we will manage our water supply service and where we will invest the money we raise from customers’ bills. If it is a water and sewerage company, it will contain details of how that company plans to manage wastewater as well as water supplies. This plan is used by Ofwat to set water bills for a five-year period. CAMS – Catchment Abstraction The Environment Agency’s programme Management Strategy of assessing and classifying the abstraction status of surface water catchments and groundwater sources across England and Wales. CAPEX – Capital expenditure Spending on capital equipment, also known as capital investment. This includes spending on new or improved machinery, equipment and buildings. Capital expenditure is not used for maintenance and repair of existing assets.

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Glossary continued

Carbon costs The calculated cost associated with the carbon generated during the construction and operation of a scheme. Conjunctive use This phrase describes the practise of using both surface water and groundwater supplies in ways that maximise their combined outputs. For example, in wet years surface water sources would be used for storage and supply of water, while during dry years the supply from surface water sources would be supplemented with water from groundwater sources. Consumer Council for Water (CCWater) The Consumer Council for Water is the independent representative of household and business water consumers in England and Wales. Consumption The particular element of water demand that is used by household and non-household (commercial, industrial, retail, institutional and agricultural) users – but excluding losses of water in the distribution system and underground supply pipes. COO – Change of occupancy Change of occupancy of a household property. CCG – Customer Challenge Group The CCG is a key stakeholder in the development of our business plan. CP – Critical period The time period in which the balance between supply and demand is at its most critical over the course of a year. This may be a week, a month or a longer period up to a maximum of three months. Our critical period is the average day peak week (ADPW: see definition), also known as summer peak week. Customer metering programme (CMP) Our programme to meter the majority of household properties across our supply area. Defra – Department for the Environment, An assessment process which determines the Food & Rural Affairs likely environmental impact of a given action or intervention; and assesses how effective any mitigation measures are in reducing the impact on the environment. Demand management The implementation of policies or measures which help control or influence the consumption or waste of water.

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DI – distribution input The amount of water entering the distribution system at the point we produce it. DL – distribution losses Made up of losses on large water mains, service reservoirs, and smaller distribution mains and communication pipes. DO – deployable output The reliable output of an active source, or group of sources, or of a bulk supply of water, which is constrained by: environment; licence, if applicable; pumping plant and/or well/aquifer properties; raw water mains and/or aquifers; transfer and/or output main; treatment; water quality. Drought order An authorisation granted by the Secretary of State under drought conditions, which imposes temporary restrictions upon the use of water and/or allows for abstraction/impounding of water beyond the normal licences. Drought permit An authorisation granted by the Environment Agency under drought conditions, which allows for temporary abstraction / impounding of water beyond the normal licences. DWI (Drinking Water Inspectorate) The government body that regulates the quality of drinking water. dWRMP Draft water resources management plan. DY – dry year The year in which unrestricted demand for water can only just be met by available supplies. DYAA – dry year annual average The annual average value of water demand, deployable output or some other quantity over the course of a dry year. DYCP – dry year critical period The time in a dry year when demand is greatest, often termed the peak week. Also commonly known as the summer peak period. EA – Environment Agency The government-appointed environmental regulator for the water industry. EBSD – economics of balancing A method which economically assesses the supply & demand balance of supply and demand-side options. Any imbalance between supply and demand can be met either by demand side options, such as metering, water efficiency and leakage, or by providing additional water resources – supply side options.

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Glossary continued

EIA – environmental impact assessment An assessment process which determines the likely environmental impact of a given action or intervention; and assesses how effective any mitigation measures are in reducing the impact on the environment. Environmental and social costs Environmental and social impacts can be valued in monetary terms so that they can be added to, or subtracted from, other items with monetary value applied to them – such as capital and operating costs. A number of techniques exist for estimating the value that society has placed on the environment. ESG – Environmental Scrutiny Group A group of key stakeholders that has advised and challenged us throughout the preparation of WRMP19. This group includes representatives from our regulators, local and national interest groups and local planning authorities. European site European sites are those classified under Directive 2009/147/EC on the Conservation of Wild Birds (Birds Directive) or designated under Directive 92/43/EEC on the conservation of natural habitats and of wild fauna and flora (Habitats Directive). Final planning demand forecast A demand forecast which reflects our preferred policy for managing demand for water throughout the lifetime of the water resources management plan, and after analysing all the options to balance supply and demand. Final planning scenario The water available for use and final planning demand forecast we set out in our plan, and on which basis we provide data to our regulator Ofwat. Forecast/plan horizon The end date of the demand forecast or our water resources management plan (in this case 2020 to 2045). Preferred final plan The preferred final plan of our WRMP which sets out how we intend to balance the supply and demand for water at least total cost to customers, society and the environment, and having regard to the plan’s practicability, flexibility and impact. fWRMP – final WRMP The final WRMP approved by the Secretary of State for Defra.

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Glossary continued

Groundwater The water held in voids in the rock and soil found in an underground aquifer. HH – household A domestic property occupied by householders. These are properties used as single dwellings (normally occupied), receiving water for domestic purposes which are not factories, offices or commercial premises. Household size Number of people living in a household. HRA – Habitats Regulations Assessment An assessment of the potential impacts on designated sites of the measures or interventions we are proposing in our plan; it also assesses how effective any mitigation measures are in reducing the impact on designated sites. INNS Invasive non-native species. l/h/d – litres per head per day The average amount of water used per person each day. l/prop/d – litres per property per day The average amount of water used per property each day. Leakage reduction Controlling the loss of treated water through leaks in the distribution system by actively finding and fixing leaks and/or by replacing whole sections of pipe or upgrading equipment. Least cost planning An approach that minimises all the costs of managing the supply and demand balance for the duration of the plan (See also EBSD). LoS – level of service The frequency with which we can impose different types of water restrictions during water shortages (and which are supported by our customers). MCA – multi-criteria analysis The multi-stage process which we use to screen supply and demand-side options using a wide range of different criteria. MCM – micro-component modelling The modelling process we use to predict future demand for water. This is based on understanding how water is used in homes now by people and appliances, and how this may change in the future. Meter optants Properties in which a meter is installed at the request of its occupants.

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Glossary continued mHH – measured household A household who has a water meter and therefore pays for water by measured volume. Ml/d Megalitres per day (a megalitre is a million litres). mNHH – measured non-household A non-household property which has a water meter and therefore pays for water by measured volume. MRF – minimum residual flow A pre-defined minimum rate of water flow that must be left in a watercourse to support abstraction of water – below this level abstraction must cease. Also known as a hands-off flow. NEP – National Environment Programme See WINEP – Water Industry National Environment Programme. NHH – non-households Properties that are not occupied as domestic premises – for example, factories, offices and commercial premises – but which receive drinking water supplies. Normal year annual average daily demand The total demand in a year with normal or average weather patterns, divided by the number of days in the year. NPC – net present cost The present day equivalent cost of an option or intervention in our plan. NPV – net present value The difference between all the benefits arising from a project and all the costs arising from the project. NY – normal year A year in which temperature and rainfall values are at or close to their long term average. NYAA – normal year annual average The annual average daily value of water demand, deployable output or some other quantity over the course of a normal year. Ofwat – Office of Water Services The independent economic regulator for the water industry. OPEX – operating expenditure Our day-to-day operating costs. OR – occupancy rate The number of occupants in a household. Outage The temporary loss of reliable water (see deployable output) due to planned or unplanned events. An example of planned events is where we need to carry out maintenance of our water sources; an example of unplanned events are where there are power cuts or failures in our treatment processes. southeastwater.co.uk 185

Glossary continued

PCC – per capita consumption The average amount of water used by one person per day. PD – peak demand The highest occurring demand, measured either hourly, daily, weekly, monthly or yearly over a specified period of time. PDO – peak deployable output The average daily deployable output, measured in million litres per day (Ml/d), at the time of peak demand, whether over a period of a week (the peak week), a month (the peak month) or some longer period. Peak factor The difference between annual average demand for water and summer peak day demand for water. PPC – per property consumption The water used by a measured or unmeasured property over a given period (litres per property per day, l/prop/d). PR – Price Review The five-yearly review by Ofwat of business plans which set out the services and investment water companies need to deliver, and the level of customers’ water bills for the same five-year period. See also AMP. PR19 The 2019 price review process that determined the services and investment water companies would deliver during 2020 to 2025, and the level of customers’ water bills for the same period. Problem characterisation A framework that guides water company’s choice of methods and decisions for its water resources management plan. The more complex the planning problem to be addressed, the more detailed the methods are. Risk A measure of the probability and magnitude of an event and the consequences of it happening. RP – return period The average frequency of something occurring over a period of time. rWRMP – revised WRMP The revised WRMP produced by (some) water companies following public consultation on their draft WRMPs. SAC – Special Area of Conservation A site designated as being of special conservation value under the European Habitats Directive. SEA – Strategic Environmental Assessment An SEA is the process by which we demonstrate how we have incorporated environmental considerations into our policies, plans and programmes of work.

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Glossary continued

Security of supply The confidence with which we can meet our agreed levels of service (see Level of Service). Supplies are considered secure if our resources are sufficient to meet demand for water, and allowing for an additional buffer (see target headroom). SELL – Sustainable Economic The point at which the cost of reducing leakage to Level of Leakage save water becomes the same cost as developing new water resources to produce more water. SIC – Standard Industrial Classification The classification system used for grouping commercial and industrial properties into similar categories. SoR – Statement of Response The statement which water companies prepare and publish to show how they have addressed representations made on their draft water resources management plan. Source A defined place where water is abstracted from a well, spring or borehole, or from a river or reservoir. SPA – Special Protection Area A designated site of value for wild birds under the European Habitats Directive. SR – Sustainability reduction The reductions in water abstraction which are required by the Environment Agency to meet statutory and/or environmental requirements. Supply demand balance The difference between the water that is available for use and the demand for water. Tariffs The pricing mechanism by which a water company could charge for water at different rates – for example a higher rate in the summer and a lower rate in the winter (seasonal tariff). TH – target headroom The buffer which we add to our demand forecast so that we have some allowance built in to our WRMP. This covers the uncertainties that exist in our estimates of the supply demand balance when looking 25 years ahead. TL – total leakage / losses The total sum of losses of water from distribution mains and supply pipes. Total water management All water management activities from source to tap, this includes resource management, production management, distribution management and customer-side demand management. southeastwater.co.uk 187

Glossary continued

UKCIP – United Kingdom The Government-funded body responsible for Climate Impacts Programme disseminating climate change and climate change impacts projections to stakeholders, including water companies. UKCP09 UK Climate Projections 2009, as published by Defra (2009). UKWIR – United Kingdom The collaborative research body of the water Water Industry Research companies of England & Wales. umHH – unmeasured household A household without a water meter paying for water through some other measure, such as rateable value or assessed charge. umNH – unmeasured non-household A non-household without a water meter paying for water through some other measure such as rateable value. Universal metering A universal (and in the context of a WRMP also compulsory) programme of installing water meters to households throughout a company’s supply area. Unrestricted demand The level of demand for water right up to the point when water use restrictions are in place. USPL – underground supply pipe losses Losses on the section of pipework between our distribution system and where water enters a customer’s property. Void property An empty property connected to our distribution system but not charged for water because it has no occupants. WAFU – water available for use The overall amount of water that is available to use. This takes account of the water we lose through planned and unplanned events (see outage) sustainability reductions (see sustainability reduction); but also water we transfer out of our supply area to other companies (exports) and water we receive from other companies (imports). Water efficiency The initiatives that are designed to help or support customers to save water. WRMP – water resources management plan The statutory 25 year plans that all water companies in England & Wales are required to update, publish and consult on every five years. The plans show how companies intend to secure water supplies for current and future customers, at least cost to customers, society and the environment, while meeting all other environmental obligations.

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Glossary continued

WRMP14 The WRMP for the period 2015 to 2040 which was formally approved by the Secretary of State for Defra in 2014. WRMP19 The WRMP for the period 2020 to 2045 which will be consulted on before being formally approved by the Secretary of State for Defra in 2019. WRP tables – water resources Tables used for presenting key data associated planning tables with a water resources management plan. WRPG – Water Resources Planning The guidance document published by the Guideline and Guiding Principles Environment Agency, Ofwat, Defra and the Welsh Government to provide advice to water companies on what they should include in their WRMPs. WRSE – Water Resources in the South East A collaborative group made up of water companies across the south east, the Environment Agency, Defra and Ofwat. Established in 1997 to examine the potential for sharing water resources across the region. WRZ – water resource zone The largest possible area in which all water resources can be shared so that all customers in that area experience the same level of service. Water resource zone integrity A formal assessment process to demonstrate that our water resource zones meet the regulatory definition of a WRZ and are therefore fit for purpose when preparing our WRMP. WINEP – Water Industry National The programme of environmental Environment Programme measures agreed for action between Government, the Environment Agency, Natural England, Ofwat and the water companies. WISER – Water Industry Strategic WISER provides a joint strategic steer for water Environmental Requirements companies from Environment Agency and Natural England on the environment, resilience and flood risk for business planning purposes.

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RICHARD – BIODIVERSITY LEAD WE CAREFULLY MONITOR THE LAND WE OWN TO HELP IMPROVE THE QUALITY OF HABITATS AND ENCOURAGE BIODIVERSITY

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Technical appendices

WRMP19 section and appendix number Title Section 1 Overview 1A WRMP19 WRZ integrity analysis 1B WRMP19 – Problem characterisation 1C AMP6 commitments Section 2 Collaboration and engagement 2A Engagement 2B Customer quantitative research 2C Regulator meetings 2D EFG Terms of reference 2E Post-consultation household research findings Section 3 How our plan has considered resilience No appendices Section 4 Baseline supply forecast 4A Deployable output and bulk supplies 4B Deployable output assessment (HRW Modelling Report) 4C Outage allowance 4D Process losses review 4E Surrey Hills to Fleet reinforcement mains (confidential – limited distribution) Section 5 Baseline demand forecast 5 Demand forecast 5A Property and population report (Experian) 5B Derivation of micro-component values 5C Household consumption forecasting 5D Leakage Section 6 Supply demand balance 6A Headroom 6B Supply demand balances for generated scenarios

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Technical appendices continued

WRMP19 section and appendix number Title

Section 7 Options 7A Options appraisal methodology 7B Unconstrained options report 7C Feasible option list 7D Constrained list with screening decisions 7E Options DO assessments 7F Water efficiency options 7G E&S cost methodology 7H Leakage options 7I WRMP Direction Compliance Section 8 Decision 8A Decision making methodology 8B Decision making results report 8C Model run outputs 8D Summary of Steps 1 and 5 model runs 8E Info-Gap runs Section 9 Our preferred plan 9A Water company agreements Section 10 Board assurance and governance 10A WRMP19 Quality Assurance Plan 10B Peer review of supply 10C Peer review of demand 10D Peer review of decision making

Water Resources Management Plan 2020 to 2080