UnitedUnited Utilities Utilities 2020/21 AnnualGroup Performance PLC Report Annual Report and Financial Statements for the year ended 31 March 2021 CONTENTS Introduction 4 2020/21 United Utilities Water Board statement 8 Executive summary and overview 15 Our expenditure and revenues 17 Risk and compliance statement 27 1.0 Year one performance 34 CONTENTS 1.1 Outcome delivery Your drinking water is safe and clean 36 You have a reliable supply of water now and in the future 42 The natural environment is protected and improved in the way we deliver our services 55 You’re highly satisfied with our service and find it easy to do business with us 63 We will improve the way we work to keep bills down and improve services 69 Collect and recycle wastewater 78 The risk of sewer flooding for homes and businesses is reduced 81 Delivering our commitments 88 1.2 Greenhouse gas emissions 92 1.3 COVID-19 96 1.4 Wholesale totex 97 1.5 Wholesale revenue 100 1.6 Retail expenditure and revenues 101 Annual Performance Report 2020/21 2 CONTENTS CONTINUED 2.0 Regulatory Accounts for the 12 months ended 31 March 2021 104 2.1 Introduction 104 2.2 Independent Auditors’ report to the Water Services Regulation Authority (the ‘WRSA’) and United Utilities Water Limited 10 6 2.3 Pro forma tables subject to CONTENTS audit opinion Section 1 Regulatory financial reporting 111 Section 2 Price review and other segmental reporting 117 2.4 Accounting policies 129 2.5 Additional unaudited regulatory information 135 Pro forma tables not subject to KPMG audit opinion 166 Section 3 Performance Summary 167 Section 4 Additional regulatory information 176 Section 9 Additional regulatory information - Innovation Competition 195 2.6 Appendix 1: UUW I17 certificate 196 Appendix 1 – Assurance summary and findings 198 A) Overview and assurance framework 198 B) 2020/21 Annual Performance Report assurance plan 199 C) Deviation from methodology – statement of additional clarity 204 D) Summary of the findings of the assurance 205 Appendix 1 – Jacobs audit report 209 Appendix 1 – Corporate audit report 218 Appendix 2 – Outcome Delivery Incentive Calculations 222 Appendix 3 – Non-standard ODI pro-forma 224 Annual Performance Report 2020/21 3 Introduction A regulated water and wastewater company United Utilities Water Limited (UUW) provides regulated water and wastewater services in the North West of England, serving around seven million people and 200,000 businesses. Its ultimate parent company is owned by United Utilities Group PLC, a publicly listed company on the London Stock Exchange. We are regulated by Ofwat, the economic regulator of the water sector in England and Wales, the Drinking Water Inspectorate (DWI) and Consumer Council for Water (CCW) the quality regulators and the Environment Agency (EA) the environmental regulator. INTRODUCTION Our purpose We are a purpose-driven organisation. Our purpose is to provide great water and more for the North West. This is the reason we exist, and is what drives us to continually improve our performance. Our vision Our vision is to be the best UK water and wastewater company. We will deliver this by providing the best service to customers at the lowest sustainable cost and in a responsible manner. Our strategic themes Our strategy is broken down into three strategic themes, which form the framework for what we do: • The best service to customers • At the lowest sustainable cost • In a responsible manner. Our core values Our core values provide the cultural framework within which we operate. • Customer focused – customers are at the heart of everything we do, and we aim to provide a great and resilient service at the most efficient cost. • Innovative – we continually look for new ways to make our services better, safer, faster and cheaper. • Trustworthy – we make promises knowingly and keep them, behaving responsibly towards all of our stakeholders. Performance reporting This is year one of AMP7 (our five year business plan period running from April 2020 to March 2025). Throughout AMP7 we will be delivering against a stretching plan that was developed through the price review process. This plan was subject to scrutiny, changes and approval following an extensive review by Ofwat and outlines the price and service package that we aim to deliver for customers and the environment in the North West. The Annual Performance Report This Annual Performance Report (APR) tracks performance against our AMP7 plan. It provides an update on the delivery of our performance commitments at the end of year one and a forward looking view of performance anticipated for future years. It also includes information about our financial performance, our assurance approach and the board’s approach to leadership, transparency and governance. Annual Performance Report 2020/21 4 Introduction We publish a suite of documents which support the APR. This We also publish other key performance information on our corporate helps to provide a wide range of information to a variety of responsibility website which can be found at: www.unitedutilities.com/ different stakeholders, regulators and customers in formats corporate/responsibility that help them access the data they want. We actively seek This website is designed to describe the way that the group and act on feedback we receive on our publications and this has fulfilled its purpose and demonstrate the extent to which helps us to support engagement with our reporting. Any we have upheld the highest standards of performance with comments about this or any other of our publications can be respect to the way we work. sent to: [email protected]. Together, the reports and our website provide a clear and The summary below outlines the key information that we comprehensive view of our purpose, performance, delivery publish; and governance which is reliable, accurate and transparent. INTRODUCTION Annual Performance Report – A comprehensive, detailed Transparent reporting and assured account of our performance (this document) The provision of reliable, accurate and transparent information and data is an essential part of building and maintaining Customer summary guide – An overview of our trust with customers and other stakeholders who rely on performance structured around the seven outcomes. the services we provide. This customer friendly document achieves a Crystal Mark for plain English Given our position as a provider of essential public services, we have a responsibility to provide accurate and easily Performance infographic – This graphic highlights our key accessible information about performance. We pride ourselves deliverables and is published on our website and on social on publishing trusted information and have a proven track media platforms record of providing open, transparent and high quality information about our performance to customers, stakeholders Summary animation – Short narrated animation describing and regulators. our performance highlights Throughout AMP6 we developed a sound approach to Accounting methodology statement – An overview of the assurance which is a key enabler to providing high quality process used to prepare the upstream services tables in the data. We intend to build on this approach to assurance and APR, with commentary on significant movements reporting during AMP7 to reinforce the trust we have earned, make improvements where shortcomings are identified and YourVoice customer panel reflections – Independent to enhance the confidence that customers, regulators and reflections and feedback on UUW’s performance during other stakeholders can have in United Utilities’ performance year one reporting. We have applied our assurance approach to the data and United Utilities Water’s ultimate parent company is United information that is within this document and the supporting Utilities Group PLC, a company listed on the London Stock APR publications. This helps to ensure that the information we Exchange. Additional information about UUW and the group and provide receives the appropriate level of challenge, review and how we deliver water and more for the North West can be found approvals. in the United Utilities Group PLC Annual Report and Financial Statements. This is an integrated strategic, governance and We have published details of our final assurance plan for year one of financial report which is available as an interactive website at: AMP7 and a description of our assurance framework which can be found on our website at: www.unitedutilities.com/corporate/about-us/ www.unitedutilities.com/corporate/investors/results-and- performance/Assuring-our-performance-2020–25 presentations/annual-reports The report is designed to provide detailed information on the strategy, performance and governance of the group from a financial and non-financial position. It provides extensive disclosure on the performance metrics we use to measure how we are creating value for communities, customers, employees, the environment, investors and suppliers. Annual Performance Report 2020/21 5 Introduction YourVoice expertise, YourVoice looks at how the company can continue The YourVoice panel plays an important role in monitoring, to capture and strengthen the views and engagement of challenging and reporting on the delivery of our AMP7 customers in our activities. business plan commitments. You can read more about the work of the panel on our website at: www. As an independent body of individuals from different sectors unitedutilities.com/corporate/about-us/performance/yourvoice and backgrounds and with a variety