Wessex Water has reported a reduction in profitability during 2016-17, the second year of AMP6, with operating profit falling by £7.9 million from £234.2 million to £226.3 million, and profit before tax falling by £7.2 million from £159.6 million to £152.4 million.

The water company, owned by Malaysian group YTL Power International since 2002, has attributed the fall in profits to the increased costs of meeting new obligations and to the impact of the most recent price review agreed with Ofwat in its annual results for 2016-17 published this week .

Turnover for 2016-17 increased from £521 million to £525 million, whilst total operating costs increased by £12.4 million from £286.6 million to £299.0 million. This included a £5.4 million increase in repair costs, a £2.7 million increase in depreciation as well as increases in retail services, site operations, pension costs and Environment Agency charges.

Capital expenditure delivered in the second year of AMP6 was £214.0 million, up from £200.8 million in 2015-16.

Year of top customer service performance and environmental improvements

A year of top customer service performance and environmental improvements are among the other highlights flagged up by Wessex Water in the end of year results.

The results for 2016-17 show the company met or exceeded most of its targets for the year, including those that were of most importance to customers, minimising internal sewer flooding amongst them. For the sixth year running, Wessex Water has been rated by customers as the best water and sewerage company in the country.

Managing director Andy Pymer commented:

"We are committed to providing the best levels of customer service, making it easy for customers to get in touch, while ensuring customers get value for money and services tailored accordingly to suit their needs. As customer aspirations continue to rise, we've made great progress in providing choice, being flexible in the way customers can communicate with us and ultimately encouraging staff to go the extra mile whenever they can to exceed expectations. Inviting customers to let us know if we have done well or need to improve is important to become the best of the best."

Continuing progress on affordability action plan

Continued progress on the utility’s affordability action plan has led to a 28% increase in the number of low income customers receiving support with their bills or debt. The water company also launched five new projects in hard to reach areas to promote discounted tariffs to customers.

Around 10,000 customers are in receipt of the main social tariff, Assist, which offers discounts of up to 90% off water charges for those in the greatest financial hardship. A further 3,000 pensioners on Pension Credit are receiving a discount of around 20% on their bills.

Integrated water grid remains on track for completion in 2018

On operational issues, Wessex said that work on the water company’s biggest ever project, a major integrated water supply grid, which began in 2010, remains on track for completion in 2018.

All the major pipelines have been laid and work is well advanced on the final parts of the scheme at Black Lane in Blandford and Codford, near Warminster. For the first time ever Wessex has  transferred water between its southern and northern resource zones, delivering some of the benefits of the scheme in advance of the target date.

Once fully operational the grid will enable the utility to:

• reduce abstractions from sensitive groundwater sources
• move water more effectively around the region
• ensure future demand is met
• improve the resilience of supplies to customers.

Work started on design of phosphorous reduction schemes

Wessex Water’s programme for the current AMP6 period includes the reduction of phosphorus concentration in discharges at 47 sewage treatment works. During the year, the in-house engineering team began detailed design on the first group of the schemes, with the first few starting construction on site, and also began outline design on the next group.

The utility has also completed four full-scale trials, including a magnetite assisted settlement process, absorptive media reed beds and stretching existing chemical dosing performance on tertiary sand filters and activated sludge plants.

Wessex is currently working with the University of Bath to develop a high-rate algal pond for the removal of phosphorus from sewage effluent. The plant has been constructed at Beckington sewage treatment works and the water company is currently monitoring its performance.

The work is in the first part of a joint research programme with the University of Bath, with whom Wessex  launched a water innovation and research centre based at the university in 2014-15. The main themes include low energy nutrient recovery from sewage, methods for increasing biogas from sewage sludge digesters, emerging pollutants in waste water, and improved techniques for understanding and comparing the whole life costs of water management.

Energy – electricity use continues downward trend

On energy, the report says Wessex Water’s electricity use continues downwards from its peak in 2007-08, largely through energy efficiency work which is delivering around four gigawatt hours of savings each year. The firm is also gaining financial benefits by using innovations such as Open Energi’s dynamic demand system which enables instantaneous, temporary adjustment of the site’s energy use to maintain a balance on the local electricity grid.

Wessex is targeting an increase in its own renewable energy  generation over time, although it said this is mitigated by a heightened demand for power as it delivers other enhancements (e.g. the integrated supply grid). The target profile is 21% in 2015-16 rising to 22% in 2016-17 and 2017-18, before falling to 21% in 2018-19 and rising again to 24% in 2019-20. The profile varies because of the integrated supply grid coming on stream mid AMP6 and anticipated increases in self-generation from sludge schemes at the end of AMP6.

In-house renewable electricity generation during 2016-17 came to 29%, better than the water company’s  performance commitment and included:

• Electricity from combined heat and power fuelled by sewage sludge biogas
• Exported biomethane expressed as the electricity that it would have produced if the source biogas had been converted into electricity instead
• Electricity from hydropower installations
• Renewable electricity from other on-site generation consumed by a regulated activity (i.e. water treatment, distribution, sewerage, sewage treatment or sludge

Following installation of advanced anaerobic digestion and associated electricity generation at Trowbridge sewage treatment works in 2015-16, Wessex is currently making good progress with a scheme to improve digestion at Berry Hill, near Bournemouth.

Wessex Water’s operating division GENeco has also separately finalised an agreement with Unilever for a certified supply of biomethane originating from anaerobic digesters at Bristol sewage treatment works.

Innovation includes launch of EnTrade online auction platform

This year has also seen the launch of EnTrade – an innovative, market-based method for improving the water environment. EnTrade involves an online platform by which farmers bid for payment to carry out measures such as planting cover crops that reduce the amount of nitrogen that leaches from soil into groundwater. Wessex said this approach is much more cost-effective than conventional engineered solutions and the first two auctions were comfortably oversubscribed.

Other innovations include a project in the Bristol Avon catchment, which involves a novel approach to regulating effluent discharges. Wessex has agreed with the Environment Agency a mandatory reduction of 46 tonnes of phosphorus from a group of 24 sites at a cost of £20m less than the traditional approach which in turn each have a discretionary stretch target. This is a more flexible approach than usual, which will allow optimisation of existing treatment and the use of novel processes or additional treatment that has not been over-sized.

The water company also carries out regular trials of new products developed by other companies - in 2016-17 these included:

• a hydrogen sulphide resistant product that deals with corrosion in pipes and tunnels
•  an epoxy lining system that can be used for sewers more than 300mm in diameter
• a mobile unit that analyses the phosphate content of river water.

Andy Pymer commented:

“This has been a great year for Wessex Water with achievements to be proud of in many areas. We look forward to continuing to innovate to help reduce cost, improve resilience and improve the essential services we provide.”