Ofwat Service Delivery Report 2019

October 2019 Trust in water

Service delivery report 2018-19

www.ofwat.gov.uk Service delivery report 2018-19

Introduction

At the 2014 price review (PR14) we required water and wastewater companies (‘companies’) to develop plans based on engaging with their customers about the:

• services customers wanted their company to deliver over the long term (‘outcomes’); • specific levels of service they expected companies to deliver (‘performance commitments’); and • value of any outperformance payments and underperformance payments (‘outcome delivery incentives’ or ‘ODIs’) companies would incur for exceeding or failing them.

In PR14 final determinations, we set the price, investment (expenditure) and service package that companies deliver and customers receive between 2015 and 2020. Each company must report annually on their expenditure and outcome delivery in an annual performance report (APR).

The service delivery report provides comparative information on total expenditure and outcomes delivered to customers reported by the 17 largest companies within England and Wales. This report provides comparative information on important areas of performance and is intended to supplement the more detailed information in companies’ APRs. This information will help us – and stakeholders such as customer groups, environmental groups and investors – to hold companies to account.

We recently published ‘Time to act, together: Ofwat’s strategy’. One of the objectives of our new strategy is to turn the data we hold, along with information from other sources, into insight. For 2018-19, we have revised the approach to reporting on performance in the service delivery report to better illustrate the industry’s performance and trends over time.

Key changes that we have made are:

• providing comparative ranking of companies’ performance; • presenting overall performance on total expenditure and outcomes in a single, tabulated view; and • examining longer-term changes on key indicators since 2012-13.

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Key messages

Our analyses of companies’ relative performance in 2018-19 demonstrate that Anglian Water, Wessex Water and Portsmouth Water are the better performing companies within the sector. There are aspects of leading performance in most companies, as many companies rank in the top 25% in at least one key area. The delivery of services by Hafren Dyfrdwy and Thames Water is notably worse than the rest of the sector and requires improvement in multiple areas.

In summary:

The sector overspent against its total Twelve companies meet, or are on track Just over half of supply interruptions wholesale expenditure allowance by to meet, their leakage performance targets were achieved in 2018-19, despite 6% in 2018-19. Over the 2015-19 period, commitments in 2018-19. Eight companies more companies achieving their targets in 2018- there remains a cumulative underspend of 2%, have made modest reductions in leakage but 19 in comparison to 2017-18. Performance in although this has decreased over the four years these are more than offset by the increases 2017-18 was adversely impacted by the freeze- of the price control. made by the poorer performing companies. thaw event. Since 2012-13 the sector has However, the sector has made little reduced the total supply interruption progress on reducing leakage since minutes experienced by customers by 2012-13. 24%, or five minutes per property.

The sector has made some progress in Customers’ satisfaction has increased Performance of companies in Wales in reducing water quality contacts, sewer since 2015-16 but deteriorated in 2018-19 was similar to 2017-18. flooding and pollution incidents. However 2018-19. In 2018-19 the best performing Dŵr Cymru’s performance on leakage has improvements stagnated in 2017-18 and companies – Anglian Water, South West Water, improved but its performance on water quality 2018-19. For sewer flooding and pollution United Utilities and Portsmouth Water – further contacts has deteriorated. incidents, most companies achieve their improve or maintain their performance. However, performance commitment levels in 2018-19 and significant deterioration in the scores of Severn have done so for a consecutive year. However, Trent Water, Thames Water and Hafren Dyfrdwy most companies fail their water quality results in a deterioration of the sector’s contacts commitment for a second average performance in 2018-19 when consecutive year. compared to 2017-18.

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Our method of assessing companies’ performance

We have assessed and compared company performance across key service areas and total expenditure (wholesale and residential retail).

For total expenditure we use cumulative performance since 2015, given the movement of expenditure across years. For outcomes we examine performance in the most recent year, 2018-19. We also indicate the direction of change from 2017-18, for example whether outcomes performance has improved (p), for example a reduction in leakage between the years, an increase in the percentage of performance commitments achieved, or got worse (q), for example an increase in leakage or a reduction in the percentage of performance commitments achieved.

We have grouped companies into three categories (better performers, average performers, and poorer performers) based on their in the round performance in relative assessments:

• Anglian Water, Wessex Water and Portsmouth Water are better performers. These companies demonstrate top 25% or middle 50% performance across multiple areas. South West Water falls short on its performance on water quality contacts and significantly short on its performance on pollution incidents. As a result it sits between the better and average performer categories. • Thames Water and Hafren Dyfrdwy are poorer performers. The performance of these companies is in the bottom 25% in multiple areas. • The performance of the remaining companies is mixed and they are broadly in line with average performance of the sector overall.

Most companies currently have broadly comparable performance commitments from PR14 with similar, but not identical definitions. To allow an indicative comparison between companies of different size we have normalised performance across the PR14 performance commitments, for example by kilometre of water main or sewer. For the next price control, we are introducing common performance commitments with consistent definitions for all companies. This will increase comparability.

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Overall assessment of efficiency and effectiveness of service delivery

Total expenditure Outcomes Top 25%

Wholesale Retail Customer Meeting Earning Leakage Supply Water quality Internal Pollution Middle 50% service performance financial interruptions contacts sewer incidents commitments incentives flooding Bottom 25% Improved p performance Better performance Deteriorated q Anglian Water q q p q q q p p p performance

Wessex Water q q q p p p q q Portsmouth Water q p p p q p p p - - Marginal performance – better/average South West Water q p p p p p p Average performance Dŵr Cymru q q p q p p p q Northumbrian Water q q q q p q q p Severn Trent Water1 2

Southern Water q p p p q q p p p q United Utilities p q p p p p p q Yorkshire Water q q p q p q q q Affinity Water q p p q q p p - - Bristol Water q q p q p p q - - South East Water q p q p p p p - - South Staffs Water q p p p p p q - - SES Water q q p q q q q - - Poorer performance Hafren Dyfrdwy1 -2 Thames Water q q q q q p q p p

1. Severn Trent and Hafren Dyfrdwy were formed on 1 July 2019 following the realignment of the geographical boundaries of the legacy companies Dee Valley Water and Severn Trent Water. A comparison with 2017-18 performance is not provided for these companies. 2. The legacy company Dee Valley Water provided water services only and therefore the figures presented are representative of the legacy company Severn Trent Water.

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Water and wastewater Abbreviation Better performance

companies Marginal performance – better/average

Average performance Anglian Water ANH Poorer performance Dŵr Cymru WSH Hafren Dyfrdwy HDD Northumbrian Water NES Severn Trent Water SVE South West Water SWB Southern Water SRN Thames Water TMS United Utilities Water UUW Wessex Water WSX Yorkshire Water YKY

Water only companies Abbreviation Wastewater provider/s

Affinity Water AFW ANH/TMS/SRN Bournemouth Water SWB WSX/SRN Bristol Water BRL WSX Portsmouth Water PRT NES South East Water SEW TMS/SRN South Staffs Water SSC SVE SES Water SES TMS/SRN

1. Water services provided under the Hartlepool Water name. 2. Water services provided under the Cambridge Water name. 3. Water services provided under the Essex & Suffolk Water name. 4. Water services provided under the Bournemouth Water name. 5. Hafren Dyfrdwy provides water services only in this area. 6. Hafren Dyfrdwy provides water and wastewater services in this area. 7. Severn Trent Water provides water services only in the area.

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Underspend and overspend: cumulative wholesale expenditure performance

Cumulative Cumulative Cumulative Companies are responsible for their actual spend and may either outperform or spend less than the actual wholesale performance allowed amount or under-perform and spend more than the allowed amount. wholesale totex 2015-19 totex (£m) allowance (£m) The table shows company performance against PR14 cost allowances. If companies underspend Anglian Water 3,044 3,368 q -9.6% (negative figures) their expenditure is less than the allowance we determined at PR14 and when they Dŵr Cymru 2,148 2,060 q 4.3% overspend (positive figures) it is greater. Hafren Dyfrdwy1 86 88 -3.0% Northumbrian Water 1,717 1,888 q -9.0% We have calculated cumulative out- or under-performance for the wholesale water and wastewater Severn Trent Water1 4,225 4,439 -4.8% controls combined for 2015-16 to 2018-19. This compares companies’ expenditure in these controls South West Water 1,157 1,383 q -16.4% against their total allowance in the price control to date. Southern Water 1,999 2,165 q -7.7% Thames Water 6,507 6,119 q 6.3% Most companies are underspending against their allowances. Four companies – South Staffs Water, United Utilities 4,593 4,280 p 7.3% Dŵr Cymru, United Utilities and Thames Water – are overspending. According to company annual Wessex Water 1,283 1,426 q -10.0% Yorkshire Water 2,749 2,750 q -0.0% performance reports, this is driven by additional or accelerated investments on improvements to Affinity Water 886 888 q -0.3% resilience, water quality and leakage. The sector has overspent against cumulative allowances in Bristol Water 323 338 q -4.2% 2018-19 by 6.2% but underspent in previous years so overall the sector has underspent its allowances Portsmouth Water 107 112 q -3.8% by 1.6% over 2015-19. The sector’s expenditure has increased in each year of the price control. South East Water 589 628 q -6.3% South Staffs Water 311 310 q 0.4% While this table shows out- and under-performance against allowances, it does not show which SES Water 171 178 q -3.9% companies have the most or least efficient wholesale costs as underspend could result from reprofiling of expenditure rather than efficiency gains. Although the impact of reprofiling investment on cumulative performance against allowance is limited in the latter years of a price control. Based on assessment of efficiency of historical base costs for PR19, Portsmouth Water, Wessex Water and South East Water have the most efficient wholesale costs, while Dŵr Cymru, Bristol Water and United Utilities have the least efficient. 2018-19 performance Relative compared to 2017-18 performance Improved p Top 25% Stable tu Middle 50% 1. A comparison with 2017-18 performance is not provided for Severn Trent Water and Hafren Dyfrdwy. These companies were formed on 1 July Deteriorated q Bottom 25% 2019 following the realignment of the boundaries between the legacy companies Severn Trent Water and Dee Valley Water.

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Long-term trends in wholesale expenditure performance

Annual outperformance as % of annual allowed wholesale totex At PR14 we set each company an allowance for each year of the five- 25% year price control period. At the end of the price control period we assess 20% each company’s total over- or underspend against the total allowance. 15% A proportion of any underspend is returned to customers while a 10% proportion of any overspend is recovered from customers. 5% 0% The sector as a whole has underspent early in the price control and -5% expenditure has increased over time. All but two companies – United -10% -15% Utilities and Thames Water – underspent considerably in the first year -20% of the price control. The profile of companies’ expenditure in the -25% remainder of the price control is variable.

The companies that are achieving the greatest cumulative underspends 2015-16 2016-17 2017-18 2018-19 typically reduce their underspending as the price control proceeds.

Cumulative outperformance as % of cumulative allowed wholesale totex Most companies have underspent during the first two years of the price 25% control and overspent in subsequent years. However, in previous 20% price controls companies expenditure has typically fallen to align with 15% cumulative allowances in the final year. We may see a similar decrease 10% in expenditure in 2019-20. 5% 0% -5% -10% -15% -20% -25%

2015-16 2016-17 2017-18 2018-19

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Underspend and overspend: cumulative residential retail expenditure performance

Cumulative Cumulative Cumulative To improve visibility of performance in the residential retail control, we have calculated an approximate actual residential performance cumulative retail expenditure out- or under-performance2. This compares companies’ residential retail residential retail totex 2015-19 retail totex allowance operating costs with an estimate of allowed retail costs. (£m) (£m) Anglian Water 296 296 q -0% The sector has overspent against estimated cumulative allowances for 2014-15 to 2018-19 by around Dŵr Cymru 235 209 q 12% 4%, although there is a large spread in performance across the sector. Some companies – South East Hafren Dyfrdwy1 10 11 -3% Water, Severn Trent Water and South Staffs Water – have underspent by more than 10%. SES Water Northumbrian Water 195 211 q -8% and Southern Water have overspent by more than 20%. Severn Trent Water1 365 446 -18% South West Water 126 136 p -7% Company annual performance reports explain that overspends are typically the result of managing the Southern Water 306 233 p 31% cost of bad debt and prioritising attempts to improve customer satisfaction; the latter is achieved by Thames Water 676 612 q 11% Dŵr Cymru, Affinity Water, SES Waterand Southern Water (see page 10). Underspends are typically United Utilities 459 467 q -2% the result of managing bad debt effectively, efficiency gains due to increased metering and better online Wessex Water 118 127 q -7% services which serve customers at a lower cost. Yorkshire Water 229 228 q 0% Affinity Water 122 108 p 13% Based on an assessment of efficiency of historical base costs for PR19, Yorkshire Water, Anglian Bristol Water 37 41 q -10% Water and Bristol Water have the most efficient residential retail costs, while Southern Water, South Portsmouth Water 18 18 p 3% West Water and Dŵr Cymru have the least efficient. In their PR19 business plans both Southern Water South East Water 64 80 p -20% and South West Water are proposing to reduce their costs by over 40% during 2020-25 compared to South Staffs Water 52 62 p -16% historical levels. SES Water 28 22 q 28%

2018-19 performance Relative compared to 2017-18 performance 1. A comparison with 2017-18 performance is not provided for Severn Trent Water and Hafren Dyfrdwy. These companies were formed on 1 July 2019 following the realignment of the boundaries between the legacy companies Severn Trent Water and Dee Valley Water. Improved p Top 25% 2. The numbers presented in this table are indicative of company performance. For example, the expenditure reported in annual performance Stable tu Middle 50% reports includes depreciation on pre-2015 assets and we have included an allowance for this in our analysis. There are further differences between the build-up of allowed costs and actual costs as reported in annual performance reports. We have assessed the materiality of these Deteriorated q Bottom 25% differences and accounting for them does not impact the assignment of companies to categories in our relative assessment.

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Customer satisfaction – service incentive mechanism performance in 2018-19

Performance Customer satisfaction, as measured by the service incentive mechanism (SIM), is an important measure In 2018-19 compared 2018-19 of how customers feel about the services companies provide. to 2017-18 (score out of 100) Anglian Water p 90.0 Our analysis shows whether each company has achieved a higher or lower SIM score in 2018-19 in Dŵr Cymru p 86.9 comparison to 2017-18 and a relative assessment of the scores achieved in 2018-19. Hafren Dyfrdwy1 - 78.4 Northumbrian Water tu 85.9 Between 2017-18 and 2018-19 the best performing companies – Anglian Water, South West Water, 1 Severn Trent Water - 81.4 United Utilities, and Portsmouth Water – either improve or maintain their performance. South West Water2 p 87.6 Southern Water p 80.1 The SIM scores of SES Water, Affinity Water, Thames Water, Southern Waterand Hafren Dyfrdwy Thames Water q 75.0 rank in the bottom 25%. Of these companies, only SES Water has improved its score in 2018-19 in United Utilities tu 87.6 comparison to 2017-18. Thames Water’s score deteriorated and is the lowest in the sector. Wessex Water tu 87.2 Yorkshire Water tu 84.0 Affinity Water tu 81.2 Bristol Water p 84.7 Portsmouth Water p 89.1 South East Water tu 85.4 South Staffs Water tu 86.4 SES Water p 80.5

2018-19 performance Relative compared to 2017-18 performance 1. A comparison with 2017-18 performance is not provided for Severn Trent Water and Hafren Dyfrdwy. These companies were formed on 1 July 2019 following realignment of the geographical boundaries of the legacy companies Dee Valley Water and Severn Trent Water. The Improved p Top 25% performance figures for Severn Trent Water and Hafren Dyfrdwy respectively are composed of three years of the legacy company and one year Stable tu Middle 50% of the new company. 2. South West Water reports a separate SIM scores for its Bournemouth and South West regions. In 2018-19 these SIM scores are the same Deteriorated q Bottom 25% when rounded to two decimal places.

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Customer satisfaction – long-term trend

SIM scores 2015-16 to 2018-19 The sector has delivered an increase in customer satisfaction since 2015.

90 Satisfaction increased in consecutive years from 82.7 in 2015-16 to 84.5 in 2017-18. However performance deteriorated to 84.0 in 2018-19. 85 Most companies have achieved improvements in their scores since 2015-16 80 and the sector’s average score increased continuously up to and including 2017-18. However the sector’s average deteriorated marginally in 75 2018-19, as the improvements made by many companies were offset by severe deteriorations in the scores of a small number of companies. 70

The companies who lead the sector on customer satisfaction performance – 65 Anglian Water, Portsmouth Water, United Utilities and South West Water – have achieved predominantly continuous improvements in each year of the

2015-16 2016-17 2017-18 2018-19 price control to date.

Absolute change in SIM score by company between 2015-16 and 2018-19 Thames Water, Hafren Dyfrdwy and Severn Trent Water demonstrate

10 considerable deteriorations in customer satisfaction since 2012-13, with severe deterioration in 2018-19. 8

6 Severn Trent Water and Hafren Dyfrdwy (who are owned by the same parent

4 company) state that they experienced increases in the escalation of customer SIM complainants in 2018-19 as both companies diverted resources away from in 2 day-to-day operations to focus on securing supply to customers who were 0 Change experiencing, or at risk of, supply interruptions during the dry summer spell.

-2 Thames Water advises that it prioritised clearing a backlog of work after the -4 2017-18 freeze-thaw event. Subsequently, it took longer to respond to other -6 enquiries, this was further compounded by prolonged warm weather in summer 2018.

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Meeting performance commitment levels in 2018-19

Performance Performance commitments measure the specific levels of service companies promised customers In 2018-19 compared 2018-19 would be achieved. Each performance commitment has a performance commitment level. The service to 2017-18 (% achieved) each company provides to its customers must meet or exceed this level in order for the performance Anglian Water tu 93 commitment to be achieved. Dŵr Cymru q 63

1 Hafren Dyfrdwy - 51 The table shows whether each company has achieved a higher or lower percentage of its performance Northumbrian Water q 59 commitments in 2018-19 in comparison to 2017-18 and the percentage each achieved in 2018-19. Severn Trent Water1 - 62 South West Water tu 71 Since 2014-15, the sector has achieved 67% of performance commitments. However, the percentage Southern Water p 64 achieved in each year has deteriorated consecutively from 69% in 2014-15 to 63% in 2018-192. Thames Water q 55 United Utilities p 74 Performance commitment levels have become more stretching as the price control proceeds. Wessex Water tu 77 Consequently, companies must improve and deliver more to ensure they meet their performance Yorkshire Water p 77 commitment levels. Affinity Water p 90 Bristol Water tu 43 Most companies achieve the same or a higher percentage of performance commitments in 2018-19 Portsmouth Water p 80 compared to 2017-18. Anglian Water, Wessex Water, Affinity Waterand Portsmouth Water all South East Water q 32 improve or maintain their performance, and their performance is in the top 25% on the percentage of South Staffs Water p 67 commitments met in 2018-19. SES Water q 71

Northumbrian Water, Thames Water, Dŵr Cymru, South East Water and SES Water’s performance 2018-19 performance Relative compared to 2017-18 performance deteriorated in 2018-19 in comparison to 2017-18. South East Water’s performance on the percentage Improved p Top 25% of performance commitments it has achieved in the price control to date is in the bottom 25%. The Stable tu Middle 50% company has multiple customer satisfaction performance commitments with stretching targets; if these Deteriorated q Bottom 25% are excluded from our relative assessment it achieves 38% of its commitments. Bristol Water makes no improvement on its achievement of performance commitments between 2017-18 and 2018-19 and also remains in the bottom 25%.

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Earning financial incentives – ODI returns in 2018-19

Performance Some performance commitments, typically those of high value to customers, have associated financial In 2018-19 compared Actual return as outcome delivery incentives (ODIs). Companies that deliver above and beyond for customers can earn to 2017-18 % of notional outperformance payments, which are recovered from customers. Companies that do not meet their regulated equity Anglian Water q 0.48 commitment levels can incur underperformance payments which are returned to customers. The size Dŵr Cymru p -0.02 of the payment depends on the size of the company as well as the level of performance. Hafren Dyfrdwy1 - -1.82 Northumbrian Water q -0.23 We have normalised each company’s ODI outperformance by its regulated equity to allow comparison Severn Trent Water1 - -0.11 between companies. Our analysis shows whether each company has achieved a higher or lower return South West Water p 0.37 in 2018-19 in comparison to 2017-18 and the return each achieved in 2018-19. Southern Water q -0.02 Thames Water q -1.13 Anglian Water, South West Water, United Utilities, Wessex Water, Yorkshire Water and South United Utilities p 0.53 Staffs Water achieved net outperformance payments in 2018-19. South West Water earned net Wessex Water q 0.24 outperformance in 2017-18 and has increased its return in 2018-19. Yorkshire Water q 0.41 Affinity Water q -1.76 Proportionate to their size, Hafren Dyfrdwy, Northumbrian Water, Thames Water, Affinity Waterand Bristol Water q -2.01 Bristol Water have the largest financial penalties in 2018-19. Financial penalties have increased for Portsmouth Water q -0.77 Northumbrian Water, Thames Water, Affinity Water, Bristol Waterand Portsmouth Water in South East Water p -0.01 2018-19 due to a lack of improvement or deterioration in the services delivered for customers. South Staffs Water p 0.19 SES Water q -0.18 In 2017-18 Severn Trent Water achieved large outperformance payments (£86 million) from strong outperformance on sewer flooding. The company was close to exceeding its cap on wastewater ODIs

2018-19 performance Relative and requested that the cap be lifted. We lifted the company’s outperformance cap and, to encourage compared to 2017-18 performance continuous improvement, also amended its performance targets and financial incentives3. In 2018- Improved p Top 25% 19 the company achieved outperformance payments on external sewer flooding but incurred larger Stable tu Middle 50% underperformance payments for internal sewer flooding2, supply interruptions and pollution incidents. Deteriorated q Bottom 25% This results in a net underperformance payment of £3.3 million.

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Earning financial incentives – long-term trends in ODI returns

2018-19 incentive payments (£ million) During 2018-19 the sector incurred £108 million of underperformance payments,

60 of which £69 million was incurred for underperformance on leakage; supply interruptions; internal sewer flooding; and pollution incidents. This money will be 40 returned to customers as they have not received the services promised. The sector 20 earned £85 million in outperformance payments for delivering above and beyond on 0

million performance commitments.

£ -20

-40 2018-19 was the first year of the current price control in which the sector overall

-60 incurred net underperformance payments. The greatest underperformance payments were accrued by Thames Water for its performance on leakage. Following our enforcement action in 2017-18, unlike other companies, when Thames Water underperforms on leakage its underperformance payments will not be limited to within

Leakage Supply interruptions Internal sewer flooding a determined range. Pollution incidents Others Net payment

2018-19 RoRE performance on outcomes

0.6% 0.4% 0.2% 0.0% -0.2% -0.4% -0.6% -0.8% -1.0% -1.2% -1.4% -1.6% -1.8% -2.0% -2.2%

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Leakage performance in 2018-19

Performance against targets Relative Every company has a leakage performance commitment across 2015-20 although not all have performance a target in each year. Our analysis demonstrates whether each company has achieved its target (2018-19) in 2017-18 and 2018-19, and its performance and associated target in 2018-19. To allow better In 2018-19 2018-19 2018-19 Total litres & compared performance target (ml/d) per km of comparison of performance between companies we have conducted our relative assessment to 2017-18 (ml/d) main of performance using leakage normalised by length of water main. Anglian Water tu 186.00 192.00 4.96 Dŵr Cymru tu 170.00 171.00 6.13 Most companies achieve their leakage performance commitment levels in 2018-19 and three Hafren Dyfrdwy1 15.27 11.72 5.86 more companies – Northumbrian Water, Yorkshire Water and South Staffs Water – achieve Northumbrian Water2 p 200.44 203.00 7.70 their targets in comparison to 2017-18. Anglian Water, South West Water and South East Severn Trent Water1 424.37 428.02 9.06 Water each achieve their leakage performance commitment targets in 2017-18 and 2018-19 South West Water3 tu 84.00 84.00 5.66 while achieving performance in the top 25% of companies. Southern Water - 101.80 - 7.31 Thames Water tu 690.00 612.00 21.88 United Utilities4 tu 455.95 462.65 10.81 Thames Water and Affinity Water fail to achieve their leakage target for a second consecutive Wessex Water tu 66.40 67.20 5.54 year. Both companies’ performance is ranked in the bottom 25%. Yorkshire Water p 289.80 292.10 9.12 Affinity Water tu 196.10 167.70 11.72 The performance commitment levels of Bristol Water and Portsmouth Water consider each Bristol Water - 45.83 44.00 6.09 company’s average performance during the price control and are assessed at the end of the Portsmouth Water - 28.12 29.85 8.40 period, in 2019-20. Southern Water’s performance is only assessed in 2019-20. Southern South East Water tu 86.88 89.10 5.93 Water and Bristol Water do not achieve annualised milestones in 2018-19. South Staffs Water2 p 83.70 84.00 9.82 SES Water tu 24.10 24.10 6.90

1. A comparison with 2017-18 performance is not provided for Severn Trent Water and Hafren Dyfrdwy. These companies were formed on 1 July 2019 following realignment of the geographical boundaries of the legacy companies Dee Valley Water and Severn Relative Trent Water. Performance against targets performance 2. Northumbrian Water, South Staffs Water, Severn Trent Water and Hafren Dyfrdwy each have two leakage performance commitments, one for each of their operating regions. The figures presented and used in our assessment of performance for each Target met Improved p Top 25% company are for their respective regions combined. Target failed Stable tu Middle 50% 3. South West Water’s performance is assessed against its target for the South West operating area only. The company has a target for leakage in the Bournemouth area against which performance is assessed in 2019-20 only. No target in 2018-19 - Deteriorated q Bottom 25% 4. United Utilities’ leakage performance commitment is assessed as the variance from this target.

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Long-term trends in leakage performance

Total industry leakage (megalitres per day (thousands)) We have examined the sector’s leakage performance in each year of 3.5 the current price control and each company’s contribution to long-term trends1. 3.0

2.5 Net total leakage has stayed about the same since 2012-13. The sector

2.0 lost 3,097 Ml/d of water in 2012-13 and 3,170 Ml/d in 2018-19. (thousands)

1.5 Eight companies have made modest reductions in leakage since 2012-13.

Ml/day 1.0 However these are more than offset by the performance of the remaining companies, particularly Thames Water, Yorkshire Water and Southern 0.5 Water. 0.0 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 Relative to their performance in 2012-13, Portsmouth Water has ANH WSH HDD NES SVE SWB SRN TMS UU reduced leakage by 17.5%, equivalent to 6 Ml/d while Dŵr Cymru and WSX YKY AFW BRL PRT SEW SSC SES South East Water have reduced leakage by 9% and 7%, equivalent to Net change in company leakage as % of total industry performance in 2012-13 6 Ml/d and 7 Ml/d, respectively. Southern Water has increased leakage

1.6% by 25%, equivalent to 21 Ml/d; Hafren Dyfrdwy has increased leakage by 18%, equivalent to 2.3 Ml/d, and Thames Water has increased 1.4% leakage by 7%, equivalent to 45 Ml/d. 1.2%

1.0% Companies will have new leakage performance commitments as part 0.8% of our 2019 price review. Our draft determinations require companies to 0.6% reduce leakage by 15% to 25% by 2025. 0.4%

0.2%

0.0%

-0.2% 1. Severn Trent Water and Hafren Dyfrdwy were formed on 1 July 2019 following realignment of the geographical boundaries of the legacy companies Dee Valley Water and Severn Trent Water. For our -0.4% analysis in 2015-16 to 2017-18 inclusive we use counterfactual figures equivalent to those in APR table -0.6% 4P in these company’s respective September 2018 business plans. Prior to 2015-16 we apportion the WSH SVE SEW PRT WSX SWB UU BRL SES HDD ANH SSC AFW NES SRN YKY TMS companies combined leakage based on proportions in subsequent years. 16 Service delivery report 2018-19

Supply interruptions performance

Performance against targets Relative All companies have a performance commitment on supply interruptions for 2015-20. The performance commitments of all companies, except Affinity Water, Bristol Waterand Thames Water are (2018-19) for interruptions that exceed three hours3. Our analysis shows whether each company has In 2018-19 2018-19 2018-19 Minutes per & compared performance target property achieved its target in 2017-18 and 2018-19 and its performance and associated target in 2018- to 2017-18 (mins/ (mins/ property) property) 19. We have also conducted a relative assessment of company performance, this analysis uses Anglian Water tu 8.73 12.00 8.73 data for all companies that is representative of supply interruptions greater than 3 hours. Dŵr Cymru tu 16.00 12.00 16.00 Hafren Dyfrdwy1 7.20 (93.74) 12.00 (7.10) 29.17 Most companies achieve their supply interruptions performance commitment in 2018-19. Northumbrian Water q 9.20 5.48 9.20 Portsmouth Water and South Staffs Water achieved their supply interruptions performance Severn Trent Water1 19.06 (1.80) 9.40 (12.00) 18.88 commitment targets in both 2017-18 and 2018-19 and are in the top 25% of companies in South West Water2 p 9.66 (0.66) 12.84 (4.40) 7.88 our assessment of relative performance. Anglian Water and Yorkshire Water also achieved Southern Water p 7.38 9.00 7.38 their targets in consecutive years. Southern Water, South West Water, United Utilities and Thames Water tu 15.60 7.80 22.05 Wessex Water all met their targets in 2018-19, having failed to achieve their targets in 2017-18. United Utilities p 9.17 12.00 9.17 These companies contribute to the sector achieving a greater number of supply interruptions Wessex Water p 5.85 12.00 5.85 performance commitment targets in 2018-19. Yorkshire Water tu 10.46 12.00 10.46 Affinity Water3 - - - 12.70 Thames Water, Dŵr Cymru, Bristol Water and South East Water fail to achieve their supply Bristol Water tu 14.67 12.50 15.02 interruptions target for a second consecutive year. The performance of Thames Water and Portsmouth Water tu 3.90 5.00 3.90 Bristol Water is also relatively poor compared to other companies. South East Water tu 14.20 12.00 14.20 South Staffs Water tu 7.15 10.00 7.15 SES Water q 16.20 12.00 16.20

1. A comparison with 2017-18 performance is not provided for Severn Trent Water and Hafren Dyfrdwy. These companies were formed on 1 July 2019 following realignment of the geographical boundaries of the legacy companies Dee Valley Water and Severn Trent Water. Figures for, and performance against, multiple targets are presented because following the boundary realignment each Relative company adopted the performance commitments of the legacy companies. Performance against targets performance 2. South West Water has supply interruptions targets for each of its operating regions – the South West area and the Bournemouth area. The performance and target figures for each area are presented and the Bournemouth figures are in brackets. In 2017-18 Target met Improved p Top 25% targets were achieved in the Bournemouth region only whereas targets were met in both regions in 2018-19. Targets met and failed Stable tu Middle 50% 3. Affinity Water’s supply interruptions performance commitment definition is for interruptions greater than 12 hours; Bristol Water’s definition includes all supply interruptions; and Thames Water’s definition includes interruptions greater than four hours. For these Target failed Deteriorated q Bottom 25% companies we have obtained figures for interruptions greater than three hours from Discover Water.

17 Service delivery report 2018-19

Long-term trends in supply interruptions performance

Total industry supply interruption minutes (millions) We have examined the sector’s supply interruptions performance since 2014-15, and 600 each company’s net improvement or deterioration during this period. We use supply

500 interruptions minutes per property reported in each company’s annual performance report or Discover Water1 (Affinity Water, Thames Waterand Bristol Water) which 400 we have converted to minutes using associated customer numbers.

300 Since 2012-13 the sector has reduced the total supply interruption minutes

200 experienced by customers by 114 million minutes, or 5.2 minutes per property in England and Wales. However the sector achieved its lowest minutes of interruptions Property minutes (millions) 100 in 2016-17. This is equivalent to a reduction of 183 million minutes in comparison to 2012-13 and demonstrates that more can be done to deliver this service for 0 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 customers.

ANH WSH HDD NES SVE SWB SRN TMS UU WSX YKY AFW BRL PRT SEW SSC SES Despite the sector’s performance, a number of companies have delivered substantial reductions since 2012-13. Wessex Water and Dŵr Cymru have reduced supply % change in supply interruption minutes per property since 2012-13 interruption minutes per property by 76% and 70% respectively and Southern Water,

100% United Utilities and South West Water by more than 40%.

80% Customers of Hafren Dyfrdwy and Thames Water have experienced a considerable 60% increase in supply interruptions minutes per property, 87% and 64% respectively 40% in comparison to 2012-13. Northumbrian Water’s customers also experienced 20% an increase in supply interruptions minutes per property, equivalent to 32% in

0% comparison to 2012-13. The considerable increases in Thames Water’s deterioration is equivalent to 36 million minutes or 1.4 minutes per property in England and Wales. -20%

-40% Our PR19 draft determinations challenge the sector to reduce supply interruptions by -60% 64% in the next price control period. -80%

1. Figures for Affinity Water, Thames Water and Bristol Water have been obtained from Discover Water.

18 Service delivery report 2018-19 Customer contacts measure the acceptability of water to Water quality contacts performance customers. Compliance with legal requirements (the EU Drinking Water Directive) Performance against targets Relative Water quality is a top customer priority. Most companies performance have a performance commitment on the number of times is measured separately. (2018-19) customers have contacted them (complained) about water Compliance was greater In 2018-19 2018-19 2018-19 Rate per than 99.95% in 2018, and & compared performance target 1,000 quality. Complaints are categorised as being about either to 2017-18 (per 1,000 (per 1,000 population discolouration (appearance), or taste and odour1. Our has been at this high level population) population) since 20042. Anglian Water tu 1.18 1.23 1.18 analysis shows whether each company has achieved its Dŵr Cymru tu 3.28 1.23 3.42 water quality contacts performance commitment target in Hafren Dyfrdwy 1.02 (1.22) 1.01 (0.69) 2.87 2017-18 and 2018-19, its performance and associated Northumbrian Water q 0.23 (0.59) 0.22 (0.69) 1.34 target in 2018-19 and – using the number of customer contacts reported by the Drinking Water Severn Trent Water - 1.54 (0.45) 1.30 (1.01) 1.64 Inspectorate in its annual report – its performance relative to other companies. South West Water tu 2.13 (0.71) 3.30 (1.23) 2.42 Southern Water tu 0.68 0.82 1.26 Anglian Water, Southern Water, South West Water, Affinity Waterand Bristol Water Thames Water - - - 0.61 achieve their performance commitments in 2018-19 for a second consecutive year. Anglian United Utilities tu 1.51 0.96 2.06 Water and Affinity Water also achieve performance in the top 25% of companies in our relative Wessex Water tu 1.54 1.23 1.54 assessment. However, most companies fail their performance commitment levels in 2018-19 Yorkshire Water tu 1.57 1.21 1.64 and do so for a second consecutive year. United Utilities, Dŵr Cymru and Hafren Dyfrdwy Affinity Water tu 0.23 0.66 0.82 fail and have relatively poor performance compared to other companies. As we concluded in Bristol Water tu 1.62 1.90 1.69 the 2017-18 service delivery report, there is still work for companies to do to reduce customer Portsmouth Water tu 0.44 0.42 0.44 contacts. South East Water tu 0.59 0.58 1.52 South Staffs Water tu 1.51 1.23 1.51 SES Water tu 0.54 0.49 0.59

1. Affinity Water and South East Water, Southern Water have performance commitments on appearance only. Northumbrian Water has separate performance commitments for discolouration and taste and odour. Hafren Dyfrdwy and Severn Trent Water have performance commitments on appearance for complaints from customers in the areas of their regions previously served Relative by Dee Valley Water and legacy Severn Trent Water, respectively. Thames Water does not have a performance commitment on Performance against targets performance water quality, it reports complaints about discolouration, chlorine and hardness. Complaints from all remaining Hafren Dyfrdwy and Seven Trent Water are assessed against single performance commitments for appearance, taste and odour. United Utilities p Target met Improved Top 25% include complaints about appearance, taste, odour and colour as one of six sub-measures within a bespoke water quality index Targets met and failed Stable tu Middle 50% performance commitment. The remaining companies each have one performance commitment for appearance, taste and odour. 2. Summary of the Chief Inspector’s report for drinking water in England and Summary of the Chief Inspector’s report for drinking Target failed Deteriorated q Bottom 25% water in Wales.

19 Service delivery report 2018-19

Long-term trends in water quality contacts performance

Total industry water quality contacts (thousands) (Data from DWI) The number of water quality contacts made to water companies are reported by the 120 Drinking Water Inspectorate in its annual report on a calendar year basis back to 2012. 100

80 We have examined the sector’s water quality contacts performance since (thousands)

2014-15, and each company’s net improvement or deterioration during this period. 60 contacts

40 Since 2012 the sector has made some progress in reducing water quality contacts, quality by around 18,000 contacts per year, a 17% reduction. However, progress has often 20 stalled, and this has been the case between 2017 and 2018. Water

0 1 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 Hafren Dyfrdwy and South West Water have made the greatest progress in reducing the number of contacts they receive, by 54% and 47% respectively. Wessex ANH WSH HDD NES SVE SWB SRN TMS UU WSX YKY AFW BRL PRT SEW SSC SES Water, South East Water, Northumbrian Water, Yorkshire Water, Anglian Water and Bristol Water have reduced contacts by between more than 20%. % change in water quality contacts since 2012

10% The performance of SES Water, Dŵr Cymru and Thames Water has deteriorated. Dŵr Cymru’s deterioration is greatest at 8.5% and is equivalent to 829 extra 0% contacts.

-10%

-20%

-30%

-40%

-50%

-60% 1. Severn Trent Water and Hafren Dyfdrwy were formed on 1 July 2019 following realignment of the geographical boundaries of the legacy companies Dee Valley Water and Severn Trent Water. The figures presented for these companies are representative of the legacy companies Dee Valley Water and Severn Trent Water.

20 Service delivery report 2018-19

Internal sewer flooding performance

Performance against targets Relative Sewer flooding is one of the most unpleasant and distressing service failures for customers and performance reducing it is a high priority. Customers are now eight times less likely to suffer sewer flooding (2018-19) than they were in the 1990s. Each company providing wastewater services has an internal sewer In 2018-19 2018-19 2018-19 Incidents & compared performance target per 10,000 flooding performance commitment during the 2015-20 price control. to 2017-18 (incidents) (incidents) properties Anglian Water1 - - - 1.23 Our analysis shows whether each company has achieved its target in 2017-18 and 2018-19, its Dŵr Cymru tu 221 282 1.52 performance and associated target in 2018-19 and relative performance per 10,000 properties Hafren Dyfrdwy2 4 5 1.90 served. Northumbrian Water3 q 124 (246) 186 (228) 2.91 Severn Trent Water2 7254 868 1.75 Most companies meet their internal sewer flooding performance commitment target in 2018-19 South West Water tu 93 139 1.23 Southern Water tu 389 392 1.96 and do so for a second consecutive year. However, there is considerable spread in performance. Thames Water tu 1,032 1,085 1.75 The performance of Southern Water, Thames Water and Yorkshire Water is in the bottom 25% United Utilities5 p 551 (15) 375 (55) 1.69 of companies in our relative assessment. There are considerable differences in the ways that Wessex Water tu 179 210 1.43 companies have defined sewer flooding for inclusion in their current performance commitments. Yorkshire Water tu 1,692 1,919 7.36 For example, Yorkshire Water counts the number of times a property is flooded, as opposed to the number of properties flooded, and it does not exclude incidents caused by sewers overloaded with rainfall. From 2020-21 we are introducing a performance commitment on internal sewer flooding that has a common definition for all companies. A comparison of our relative assessment with performance reported using the common definition results in minor revisions to the categorisation of companies’ relative performance – Southern Water’s performance moves to the middle 50% and United Utilities’ performance moves to the bottom 25%.

1. Anglian Water’s performance against its target is assessed in 2019-20 only. 2. A comparison with 2017-18 performance is not provided for Severn Trent Water and Hafren Dyfrdwy. These companies were formed on July 1 2019 following realignment of the geographical boundaries of the legacy companies Dee Valley Water and Severn Trent Water. Relative 3. Northumbrian water has two internal sewer flooding performance commitments. The company reports incidents caused by Performance against targets performance transferred (adopted) sewers separately, this figure is presented in brackets. 4. Although Severn Trent Water achieves its performance commitment level for 2018-19 it accrues an underperformance payments Target met Improved p Top 25% as a result of performance against its commitment agreed for the first quarter of this financial year, during which the geographical Targets met and failed Stable tu Middle 50% realignment of the boundary with Hafren Dyfrdwy was not in effect. 5. United Utilities’ sewer flooding commitments are sub-measures of its asset health performance. Incidents due to hydraulic Target failed Deteriorated q Bottom 25% overload are reported separately to other causes, the former is presented in brackets.

21 Service delivery report 2018-19

Long-term trends in internal sewer flooding performance

Total number of sewer flooding incidents (thousands) We have examined the sector’s sewer flooding incidents performance since 2014-15, 1 8 and each company’s net improvement or deterioration during this period . There are considerable differences in the ways that companies have defined sewer flooding for 7 inclusion in their current performance commitments (see page 21) and so the total 6 numbers of incidents reported by each company should not be compared directly. 5

4 The sector has achieved a 26% reduction in sewer flooding incidents in comparison to 2014-15, equivalent to 1,930 fewer incidents. Although some reductions have been 3 made in each year to date, there has been little improvement between 2017-18 and Incidents (thousands) 2 2018-19. 1

0 Since 2014-15 some companies have made significant reductions in internal sewer 2014-15 2015-16 2016-17 2017-18 2018-19 flooding. South West Water, Severn Trent Water and Thames Water have reduced ANH WSH NES SVE + HDD SWB SRN TMS UU WSX YKY sewer flooding incidents by 49% and 38% respectively. United Utilities, Anglian Water, Southern Water, Dŵr Cymru, Yorkshire Water and Northumbrian Water all % change in sewer flooding incidents since 2014-15 made reductions of more than 10%.

30% Wessex Water customers experienced a 28% increase in sewer flooding incidents in 20% 2018-19 in comparison to 2014-15, equivalent to 39 more incidents, but it remains in 10% the top 25% of performers. 0% Our PR19 draft determinations include stretching performance commitments on -10% sewer flooding. They challenge the industry to deliver a 40% reduction by 2024-25. -20%

-30%

-40%

-50% 1. Severn Trent Water and Hafren Dyfdrwy were formed on 1 July 2019 following realignment of the geographical boundaries of the legacy companies Dee Valley Water and Severn Trent Water. The legacy company Dee Valley Water only provided water services. To allow for consistent comparison throughout the time series of data, figures presented are representative of the legacy company Severn Trent Water.

22 Service delivery report 2018-19

2018-19 pollution incidents performance against targets

Performance against targets Relative Customers and other stakeholders expect companies to prevent serious pollution incidents. performance Incidents lead to the release of harmful substances into air, land or water, and some can cause (2018-19) significant harm to the environment. The Environment Agency categorises incidents based on In 2018-19 2018-19 2018-19 Category & compared performance target 1-3 pollution their impact. A category 1 incident has a serious, extensive or persistent impact. Category 2 to 2017-18 (incidents) (incidents) incidents per 10,000 incidents have a lesser, yet significant impact. Category 3 incidents have a minor or minimal km of sewer impact. Anglian Water tu 185 298 25 Dŵr Cymru tu 118 131 28 Our analysis shows whether each company has achieved its pollution incident performance Northumbrian Water tu 73 115 12 commitment target in 2017-18 and 2018-19, its performance and associated target in 2018-19 2, 1 Severn Trent Water 328 (7) 369 (2) 31 and – using the number of category 1-3 pollution incidents per 10,000 km of sewer as reported 4 tu South West Water 248 (2) 208 (0) 98 by the Environment Agency in its annual Environmental Performance Report – its normalised 1 Southern Water q 144 (7) 158 (2) 39 performance relative to other companies. Thames Water tu 295 340 27 United Utilities1 tu 143 (1) 195 (3) 24 Most companies achieve their pollution incident targets in 2018-19 and do so for a second Wessex Water3 - - - 24 consecutive year. Northumbrian Water and United Utilities achieve this and, along with Yorkshire Water4 q 188 (11) 211 (2) 44 Wessex Water, performance in the top 25% of companies in our relative assessment.

South West Water failed to achieve its pollution incidents performance commitment target for a second consecutive year and demonstrates poor performance relative to other companies. Southern Water and Yorkshire Water also failed performance commitment targets in 2018-19.

1. Southern Water, Severn Trent Water, United Utilities and Yorkshire Water each have two performance commitments on pollution incidents, on for category 3 incidents and another for category 1 and 2 incidents. The figures relating to category 1 and 2 incidents are presented in brackets. 2. Severn Trent Water and Hafren Dyfdrwy were formed on 1 July 2019 following realignment of the geographical boundaries of the Relative legacy companies Dee Valley Water and Severn Trent Water. The legacy company Dee Valley Water only provided water services Performance against targets performance and therefore the figures presented are representative of the legacy company Severn Trent Water. 3. Wessex Water does not have a performance commitment based solely on pollution incidents. Its commitment is to achieve Target met Improved p Top 25% industry leading status in the Environment Agency’s environmental performance assessment, a component of which is based on Targets met and failed Stable tu Middle 50% pollution incidents. 4. South West Water has two performance commitments on pollution incidents, one for category 3 and 4 incidents and another for Target failed Deteriorated q Bottom 25% category 1 and 2 incidents. The figures relating to category 1 and 2 incidents are presented in brackets.

23 Service delivery report 2018-19

Long-term pollution incidents trend

Total number of category 1-3 pollution incidents (000s) (Data from EA) The Environment Agency set the expectation that the nine wastewater companies

3.0 operating in England would reduce total pollution incidents (including clean water incidents) caused by water and wastewater assets by at least a third in comparison to 2.5 2012. They did not quite achieve this expectation (32.9%) and the Environment Agency advises that significant improvements are required1. 2.0

1.5 Our analysis considers the number of category 1-3 pollution incidents caused by wastewater assets per 10,000 km of sewer (incidents caused by water assets and 1.0 adopted sewers are excluded) in England and Wales. The Environment Agency1 and Incidents (thousands) Natural Resources Wales2 provide these data for companies operating in England and 0.5 Wales respectively. Data are available on a calendar year basis back to 2013.

0.0 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 Companies providing wastewater services have delivered a 41% reduction in pollution

ANH WSH NES SVE + HDD SWB SRN TMS UU WSX YKY incidents since 2012 (unlike the Environment Agency’s assessment, we only include incidents caused by wastewater assets). There were 2,924 pollution incidents in % change in total pollution incidents since 2012 2012 compared to 1,720 in 2018. The greatest reductions were delivered in 2013 and

40% 2014, and there has been no material overall improvement since 2015. Since 2012 Northumbrian Water, Southern Water and Anglian Water have each reduced pollution 20% incidents by 81%, 63% and 57% respectively.

0% Wessex Water caused 38% more pollution incidents in 2018 in comparison to 2012,

-20% equivalent to 23 more incidents, but it remains in the top 25% of performers.

-40% Our PR19 draft determinations include a 34% reduction in pollution incidents by 2020-25.

1. Water and sewerage companies in England: environmental performance report. -60% 2. Annual performance report for Welsh Water (Dŵr Cymru) and Annual performance report for Hafren Dyfrdwy. We combine Hafren Dyfrdwy and Severn Trent Water in our analysis of long-term trends. These companies were formed on 1 July 2019 after the geographical realignment of the boundary between the legacy companies Dee Valley Water -80% and Severn Trent Water. Dee Valley Water provided water services only. The figures presented for Severn Trent Water in 2018 include incidents caused by Hafren Dyfrdwy assets in the final six months of the 2018 calendar year. There -100% were nine, eight, six and four category 1-3 pollution incidents in 2018, 2017, 2016 and 2015 respectively in the area in NES SRN ANH WSH UU TMS SVE SWB YKY WSX Industry which wastewater services are now provided by Hafren Dyfrdwy.

24 Ofwat (The Water Services Regulation Authority) is a non-ministerial government department. We regulate the water sector in England and Wales. Our vision is to be a trusted and respected regulator, working at the leading edge, challenging ourselves and others to build trust and confidence in water.

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Phone: 0121 644 7500 Fax: 0121 644 7533 Website: www.ofwat.gov.uk Email: [email protected]

October 2019

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