Our business model continued

In line with Ofwat's evolution from one single price control to four (see political and regulatory environment), we have structured our business into four distinct areas: Wholesale water; Wholesale wastewater; Domestic retail; and Business retail.

Each business area undertakes both long-term and shorter-term planning to identify how it can best deliver its outcomes. We adopt an integrated approach which considers a whole range of stakeholders including customers, investors, the environment, our employees and local communities. These plans also take into account the internal and external factors described on the Internal environment and External environment pages. Underpinning our approach to planning, we undertake a cycle of continuous assessment using KPIs and other performance measures which helps formulate future plans, with a view to delivering further improvements for our various stakeholders.

All the group's RCV of just over £10 billion sits within the wholesale water and wholesale wastewater business areas and we are allowed to earn an annual return on this asset base based on an industry-allowed cost of debt and equity, set by Ofwat. Allowed costs for both wholesale price controls are determined by Ofwat using its totex cost assessment models. Our cost performance against our allowed cost of debt and totex will determine how much outperformance or underperformance we generate.

Allowed costs within the domestic retail price control are determined using a water industry average cost to serve approach, rewarding companies who are able to achieve costs below industry average costs. The business price control is being increasingly opened up, with full competition expected from 2017, providing a strong incentive for water companies to deliver efficiencies and service improvements in this area.

What we aim to do:


We will adopt all private pumping stations


We will be ready when full retail competition for business customers is introduced


Over 90% of meters will be automatically read

We will reduce by more than 40% the number of properties flooded internally by sewage


We will continue to improve bathing waters to at least 'sufficient' or 'good' status


We will extend our integrated water supply network into West Cumbria


We will improve all inland rivers to be at least 'good' status


We will work with others to achieve 'Blue Flag' beaches along our coastline


We will serve 600,000 more households in the North West

We will install 3 million extra water meters covering 76% of households