As an essential service provider, a FTSE 100 company and a major regional employer, our work has a ripple effect on the economic and environmental health of the region, and the quality of life of our customers.
In turn, our business is affected by a wide range of external factors – regulatory, environmental and economic.
This section looks at the big issues we have faced over the past year, and those we need to be prepared for in the coming years. This section was extensively updated in our 2013 CR Report and many of the issues we commented upon back then remain relevant.
Tax, reputation and transparency
Public trust in big UK business remained at a low ebb in 2013/14, fuelled by coverage of the tax arrangements of some large organisations and scandals in sectors such as banking.
We remain committed to acting in a responsible and transparent manner when managing our tax affairs. Further details of our tax related policies, objectives and results can be found in our 2014 Annual Report.
More about our robust approach to corporate governance can be found here.
Giving customers value for money – the debate about utility bills
In the past 12 months, there has been considerable political focus on utility bills and affordability. This has undoubtedly influenced the water sector at a time when price setting for the 2015 to 2020 period has been in full swing.
Customers have persistently told us that affordable bills, and value for money through focused investment on the things that matter, are what they want to see. Our new business plan reflects these priorities and we explain what the average bill pays for. Over the next five years we will aim to make our business significantly more efficient by reducing our operating costs and being more innovative in the way we work, spending money only where it’s really needed. We’ll help customers save money by fitting around 271,000 free water meters and provide water saving advice through educational support and campaigns. We’ll also keep working closely with our business customers to help them make efficiency savings.
As we reach the close of our current five year investment cycle, we were delighted to be able to hand back some money to customers, after receiving a one-off tax rebate from HMRC. This means 2014/15 bills will be lower than originally forecast.
We have also reinvested £200m saved through the efficient delivery of our £3.6 billion capital programme back into customer service and environmental improvements.
To help our customers better appreciate what their water bills pay for, we were once again out and about across the region in 2013/14, speaking to customers about their bills, and the service we provide. More information on just what customers get for £1.11 a day (the regional average bill spend) can be found here.
The six part BBC2 documentary “The Watermen: A Dirty Business”, which aired in spring 2014, was also invaluable in helping our customers better understand what their bills pay for – by showing our colleagues as they performed their day jobs with pride and passion.
Supporting customers in financial need
The UK economy is still in recovery mode, and a sizeable number of our regional customers find paying their bills a real struggle. We don’t want to leave these customers struggling and in 2013/14 we expanded our range of financial support to help those struggling to pay their water bills.
Typically, we invest £5m per year into our charitable trust to help the neediest customers. Thanks to the one-off HMRC tax rebate, we were able to add a further £2m to the fund in 2013/14.
Through the charitable trust, and other forms of support, we can contain levels of bad debt and decrease the cost burden on our wider customer base – while helping those in greatest need.
We are equally mindful of the need to support our supply chain, through prompt payments and forging lasting partnerships, as the business sector continues its recovery.
Fracking, the process by which gas is extracted from shale rock, continues to generate considerable debate. The North West potentially holds vast quantities of shale gas, and we have been investigating what extraction might mean for water quality, and water resources, in our region.
Our view on fracking remains unchanged – public health is our top priority and we expect that Government support for shale gas exploration will result in a robust regulatory regime that will ensure public water supplies are protected.
Fracking also generates wastewater and there has been much debate about how this should be handled. These waste streams are subject to robust environmental regulation, and we are working with the Water Industry, via Water UK, as well as the fracking companies themselves, to understand more about these wastes, and how they can be treated effectively.
Climate change and extremes of weather
Although the North West was largely unaffected in 2013/14, other parts of the UK once again saw the kind of extreme rainfall which is becoming an increasingly common weather feature. Residents of the Somerset Levels will never forget the winter of last year.
Responding to climate change, and especially its implications for flood risk and drought, remains a key strand of our long-term business strategy.
Partnerships are key to achieving results. While we can invest in bigger sewers to hold more rainwater, for example, we also need building developers to use permeable surfaces for new developments and local authorities to work with us on holistic drainage solutions. We all have a part to play.
You can read more about our environmental partnerships here.
This year the Water Act, which contains an ambitious programme of sector reform, gained Royal Assent.
This legislation represents the most significant change to the sector since privatisation, enabling competition in non-domestic retail by 2017, and a gradual transition in the following years to competition in some aspects of the delivery of wholesale services such as wastewater treatment.
There are a host of other regulatory changes in the legislation, such as the removal of the cost principle (ensures no new entrant can enter a market if its costs are higher than the incumbent), which will also help create competitive markets, where customers come first.
The Act creates opportunities for us to become a leader in new markets where we can apply our corporate responsibility principles to support business customers and in our dealings with developers. We have the potential to take the water resilience agenda further, plan more sustainably and use innovative water management solutions to reduce high impact flooding.
Market competition can present a risk to United Utilities if we don’t get our business offer right so we have been planning for these changes for some time. For example, we recently launched United Utilities Scotland, a ‘challenger’ brand north of the border and our first step into the competitive marketplace. In just 12 months of operation, United Utilities Scotland has become the second biggest water provider in Scotland, with more than 5% of the market.
If you would like to send us a comment about this report, please email our Head of Sustainability, Chris Matthews