Sutton and East Surrey Water has applied for a licence to extend its service offering in Scotland to gain experience in the existing competitive market before the market opens in England, according to its interim results for the six months ended 30th Spetember 2015.

Sister company Sutton and East Surrey Water Services already holds a licence from Ofwat to enable it to compete beyond its existing licence area for business customers who are already able to choose their supplier - one small hotel chain has already decided to switch from its existing supplier to SES.

The firm is now considering entry to the Scottish retail market, commenting:

“We have also applied for a licence to extend our service offering to Scotland and look forward to gaining invaluable experience in developing our capabilities in this existing competitive market before the market opens in England.“

SES said it has invested in its relationship with its largest customers and secured long-term commitments 
and has started to win customers outside our existing supply area under the new Licence held
by the sister company, commenting:

"We regard the deregulation of the market to enable all business customers to choose their supplier as an opportunity and look forward to being able to offer our specialised and individual level of service and customer focus to an ever widening group of new customers."

However, while the water company is pleased with the progress it has made over recent months in preparing for a competitive market for business customers after April 2017, it added that uncertainties remain around the
scope and cost of the work needed, "let alone the response of business customers to the new opportunities open to them."

ODIs now "central focus" of monthly performance reporting

These are the first results the Sutton and East Surrey (SES) has published under the new accounting standards applicable from 1 April 2015. Turnover during the period rose 0.7% (£0.3m) to £31.6m (2014 - £31.3m), while water supply income was unchanged at £29.5m, reflecting the real price reductions from Ofwat’s Final Determination for the PR14 Price Review. Other income rose by £0.6m, largely reflecting an increase in developers’ contributions to the infrastructure necessary to support new build property.

Operating costs increased by £0.8m (4.1%) to £21.1m (2014 - £20.3m), largely due to higher manpower costs and the costs associated with the Open Water programme for the opening of a competitive market for business customers from April 2017. Operating profits fell by £0.6m to £10.4m.

The report says the measures reflected in Ofwat’s Final Determination’s Outcome Delivery Incentives (ODIs) have become the central focus of the Company’s monthly performance reporting to the Board, and have been shared with every employee in the Company in a booklet “Our shared targets”focusing on what every individual can do to help.

“disappointing overall 14th ranking”  in Ofwat Service Incentive Mechanism surveys

Commenting on performance, the report says the new incentive target for customer contacts in relation to the taste, odour or discolouration of water has proved much more difficult to achieve. In the nine months to the end of September Sutton and East Surrey had already received 343 such contacts, compared to the maximum of 350 it is targeting for the full year.

Analysis of the contacts received to date has not identified any dominant overall cause of contacts - the water company said this “requires action across many activities to reduce the need for customers to contact us for this reason.....we recognise that we need to find more solutions without restricting essential network maintenance and upgrade work.”

The water company has also not been meeting its targets for the level of service it provides when customers do need to make contact for any reason.Sutton and East Surrey attributed this to employee shortages in its Contact Centre following the retirement of a number of experienced, longserving employees and challenges in finding replacements in an area of relative high employment, saying there were “some lessons to learn” from its recruitment process.

The consequent delays in responding to customer contacts have contributed to an increase in written complaints and a “disappointing overall 14th ranking” (out of 18) across the industry in the Service Incentive Mechanism surveys undertaken for Ofwat.

The firm said a successful recent recruitment campaign and an intensive training programme for new recruits would provide the platform for improved performance in the coming months.

A third party provided extension to the Contact Centre was also proving very successful in minimising the number of customers who might otherwise have been inconvenienced by being unable to speak to an employee at peak times - plans to extend the scope of this additional capability are well advanced.

Commenting on market reform, Sutton and East Surrey said ensuring that the firm is ready for the opening of a competitive market for all business customers in April 2017 has been subject to increased Board scrutiny in the last six months.

Market reform - awareness of changes still low amongst business customers

The report says the company is continuing to enhance its retail capabilities to capitalise on the opportunities that a competitive market will offer.

However, while it has been pleased with the findings of the regular survey of business customers launched last year, “it is clear that awareness of the planned changes in the market is still low among business customers and much work is needed to raise understanding of the options that will be available to them”, the report said.

Water efficiency forms important part of demand management strategy

The company said it is continuing to promote water efficiency measures as an important part of its demand management strategy and in the six months to the end of September estimated savings of 0.14 Ml/d had been achieved, just over half of the target for the full year.

SES's successful Aquasave scheme has been extended in partnership with energy efficiency experts Climate Energy offering free home visits from a trained Domestic Energy Assessor. The water company is working closely with six other water companies in the South East England Water Efficiency Partnership, to achieve greater collective action across the region to complement individual programmes within each company. It also supports the Water Resources in the South East partnership which aims to provide combined resilience in the event of a serious water supply incident.

Commenting on capital investment, SES said it has made a good start on the capital programme and already invested £8.5m (2014 - £7.4m) during the first six months of AMP6. The water company's major AMP6 project to enhance the capacity and resilience of the water treatment works at Woodmansterne has secured planning permission, a lead contractor has been appointed and preliminary surveys on site have commenced

On track to deliver strong performance

Sutton and East Surrey Water said it remains on track to deliver a strong performance across its key water supply activities, flagging up the following achievements:

• 91 per cent of customers are satisfied with overall level of service;
• Overall water quality compliance was 99.96% with just two failures out of 8,000 tests – both at customers’ taps and caused by the condition of private pipes rather than the quality of the water supplied;
• Water supply interruptions were, on average, just over two minutes per property in Sutton and East Surrey Water’s supply area;
• Leakage is currently being reduced by a further 80,000 litres a day beyond the company’s annual target of 24.4 million litres per day;
• The number of burst in the first six months of the year is more than 30 per cent less than expected;
• 11km of new water mains have been laid and 3,656 water meters installed so far this year.

Anthony Ferrar, Managing Director at Sutton and East Surrey Water, said the focus of this year had been on delivering the commitments made to customers in the company’s 2015 – 2020 business plan, commenting:

“Meeting these commitments is a challenge, which is why progress in the first six months of this financial year is better in some areas than in others, but we remain confident we are on track to deliver high standards of service in all areas of our work, given our strong track record of performance.”