PR19: Smart water companies need to re-think delivery to outperform

The future for water companies and their customers will be one of innovation, incentivised by a sharper reward and penalty regime.

pr19

What does PR19 mean for water companies? 

UK water companies are under pressure to become more customer-focused and deliver better value for customers. Under the new price review - PR19 - water companies will need to demonstrate more than ever before that water bills are underpinned by a strong understanding of lifetime costs and of their customer expectations. They will need to obtain a strong mandate for expenditure from their customers to back their asset management and capital delivery programmes.

PR19 requires a step-change in efficiency, bringing in more competition and lowering returns. Achieving efficiency, productivity and customer service targets will become even more demanding. Population growth and climate change-driven weather patterns will be putting increasing pressure on an ageing asset base. Political capital has been on the wane with concerns about bills, transparency and corporate behaviours and the threat of nationalisation becoming more widespread.

At the same time, digital and new business models have opened up new avenues for water companies to rise to the efficiency challenge and put customers at the centre of their operations while boosting returns on investment.

Step-up efficiency with smart and digital technologies

Digital and smart technologies support the data value chain from data capture, establishing asset knowledge and insight through to making optimal decisions from the operational through to strategic level. They also allow the sharing of this knowledge to influence behaviours in the supply chain and the customer base.

  • Descriptive and predictive analytics

More information than ever before flows from smart meters and other sensors alongside traditional sources of data about their operations. This creates immense potential to mine data for invaluable insights. Arcadis SEAMS’ forward-planning software focuses on descriptive, predictive and prescriptive analysis – all designed to help clients better allocate investments to maximise returns.

  • Robust Decision Support

Ofwat requires the use of tools that allow the long term best value decision under the uncertainties of climate change and population growth. Arcadis SEAMS’ forward-planning software focuses on prescriptive analysis around uncertain decisions. This scenario modelling capability is designed to help clients make the right decisions on their assets, informing customers and their stakeholders why the decision is optimal given the operational environment.

Armed with better cost assessment tools and additional insight around which to make informed decisions, companies can build innovation into their plans for PR19 that meet customer demands, overcome environmental challenges and satisfy regulators. Investing in new technologies and embracing disruption will be key factors driving companies’ business plans for AMP7.

Water companies and their industry partners will need to pay particular attention to:

  • Ramping up technology to enhance their communication strategy, engage effectively with customers and incentivise demand management
  • Balancing asset and network optimisation while at the same time maintaining excellent quality levels in their service provision
  • Increasing resilience by delivering the most resource efficient options to balance water availability and consumption, now and in the future
  • Addressing longer timescales for planning and decision-making looking to AMP 8 and beyond to plan large scale investment in asset data, analytics and interconnection
  • Assuring investability by working across the full portfolio of regulated and non-regulated activities to prioritise activities which deliver the best performance improvement, or which minimise risk
  • Putting in place the right operating model to get the best out of the delivery supply chain as well as the best balance of risk
  • Building business capabilities in areas with potential for future performance. Clients are likely to have a more direct role in programme delivery to bring the most impactful, best-value investments.

Elisabeth Selk

Strategic Research Consultant Ask me a question