South Staffordshire Water PLC, owners of South Staffs Water and Cambridge Water, has submitted an £819 million AMP8 business plan to Ofwat setting out its investment proposals between 2025-30.

The company supplies water to nearly 2 million customers across its Cambridge and south Staffs regions.

According to the plan, over the past two years the company has faced large increases in the costs of many consumables, including chemicals and power, which has resulted in making “challenging cost choices” for the business which have not been passed on to customers.

It also points out that as one of the smaller companies in the England and Wales water sector, it is more difficult to access the debt market at the same rate as the larger water and sewerage companies.

South Staffs' long-term investors are currently considering making an equity injection of £35 million into the business; during AMP7 investors have provided the company with an equity injection of £25 million.

Investments planned during AMP8 include:

• £150 million net base capital expenditure to maintain its assets for long term, including investment in non-infrastructure assets
• £84 million net on mains rehabilitation and other schemes – the rehabilitation of 254 km of mains across both regions (75 km in the Cambridge region and 179 km in the South staffs region).
• £140 million net capital expenditure to enhance assets under several work programmes
• £12.4 million for a transfer of water from Anglian Water’s Grafham reservoir, which will potentially deliver 26 million litres of water a day into the Cambridge region
• £7.2 million in ground-mounted photovoltaic electricity generating assets at key sites across the South Staffs region 
• £36 million for the reservoir rebuilds of two strategic service reservoir assets at Barr Beacon and Langley in the South Staffs region
• £37 million metering programme in AMP8 – up from £12 million in AMP7 Meter installations (new and replacement) across both regions to rise to around 43,000 a year in AMP8 – up from around 18,000 a year in AMP7
• £19 million WINEP programme – up from £8 million in AMP7

Power costs make up around 18% of base total expenditure (totex) – the plan says despite extensive efforts to reduce energy demand (e.g. through the installation of energy efficient pumps), the challenges associated with the average pumping head costs means it will always be an outlier in terms of consumption. The company has the highest average pumping head costs in the water sector, primarily because of the physical topography of the South Staffs region and the location of dense population areas in and around the Black Country. “It is critical we are funded appropriately for power, to avoid these essential costs crowding out investment and maintenance in our base expenditure,” the plan states.

£1.96 billion Fens reservoir development currently excluded from core AMP8 business plan

The company’s longer term plans for developing alternative water sources include a new reservoir in the Cambridge region.

Separately from the core AMP8 business plan, in partnership with Anglian Water, the company has been developing a strategic resource option – the Fens reservoir – taking it through the RAPID process during this planning period. The plan says that as a small water company, this solution poses many challenges because of the significant costs associated with a project of this scale.

“At this stage, we do not have enough cost confidence to include the development costs within this core business plan submission because of the complexity of the scheme. In addition, as we will be taking 50% of the total yield of the reservoir, the development costs are, proportionately, even more material for than for Anglian Water,” the plan says.

South Staffs does not consider the current regulatory approach works for a company of its size to bring a strategic resource to fruition, and has been “in active dialogue” with all of its regulators about this.

The expenditure needed for the Fens reservoir has therefore not been included in the core plan, but has instead been included as an appendix to this business plan. “We hope to resolve this matter with Ofwat in the coming months,” the plan states.

The Fens reservoir will deliver around 44 million litres of water a day into the Cambridge region from the late 2030s. When complete, the total cost of the scheme is likely to be around £1.96 billion.

“We are still working with our regulators on the right framework to deliver this,” the plan says.

According to South Staffs, at this stage there is no effective regulation for a company of its size to bring such a large investment to fruition. The company’s AMP8 forecast costs are £150 million, which is just to take the scheme to market for an investment provider to then design and build.