Our vision is to be the best UK water and wastewater company, providing great service to our customers.
Over the last five years we have made significant progress towards our vision, having achieved industry-leading status on many performance metrics used by our regulators and other stakeholders. We realise, however, that we have more to do and that the environment in which we operate is changing – adding to both the challenge and opportunity.
We were one of the most improved companies in our sector for customer satisfaction over the last regulatory period and underlying performance last year showed another year on year improvement. Our ambition is to be highly regarded by the customers we serve and so, in addition to water sector measures, we regularly rank customer perception of our performance against other leading brands operating in the North West. We score well in this survey, just behind the well-regarded brands of John Lewis and Marks and Spencer. What is clear is that customer expectations are ever increasing. Improvements since privatisation mean that water supply interruption is very much the exception and customers' expectation of compensation for service failure is growing. Our service proposition must adapt accordingly and we are investing in a complete overhaul of our day to day customer service proposition to provide customers with a best-in-class offering. In addition, the incidents we experienced last year showed us that there is more we can do to help customers at difficult times in their lives and in May 2016 we launched our 'Priority Services' offering to provide targeted support to customers who are experiencing short or long term difficulty.
The 2015 storms in the North West demonstrated the importance of infrastructure resilience and the ability to minimise the impact of severe weather events. Climate change predictions indicate that we can expect more frequent periods of intense rainfall and drought across the UK. Whilst it is impractical to believe we can protect customers fully from the implications of climate change, we can take measures aimed at reducing the impact of weather events and enabling recovery to be as fast as possible. Over recent years, we have invested significantly in enhancing the resilience of our systems and this proved to be of considerable benefit during last year's events. Our plans over this five year regulatory period include investment in enhanced resilience. Water companies are currently working with other stakeholders, including Defra, our regulators and leading research establishments, to consider what additional measures we can take both individually and collectively to enhance our resilience to climate change. We are playing an active role in this dialogue.
In order to deliver our vision, we will need to continue to make significant improvements in our operational efficiency. We have looked for best practice inside and outside our sector and we are progressively transforming our operating model using what we call 'systems thinking'. For water, our philosophy is to consider our landscape of reservoirs, aqueducts, process sites and distribution networks as a 'big system' and to use processes and technology to deliver uninterrupted, wholesome water to customers at lowest cost. It means changing the culture of our organisation from reactive to proactive, finding and fixing problems before they affect our services to customers. A recent example is our Thirlmere pipeline project where our integrated approach enabled us to consider a wide range of factors in determining what we believe to be the best solution for customers, shareholders, local communities and the environment. The project is designed to protect the environment as well as providing long-term resilience of water supplies in West Cumbria.
On wastewater, we are currently piloting the integration of our assets across a full drainage area to understand how we can improve our response to weather and customer activity. Through this work we are seeking to develop systems to optimise the performance of our wastewater network in different conditions, to benefit environmental outcomes, energy generation from renewables and reduce operating cost. Our first 'systems thinking' investment was delivered towards the end of the last regulatory period with the opening of our new integrated control centre and more capability will be delivered over the next 18 months. Our plans for the next regulatory period are currently being developed, taking learning from using the capability in this period and looking to exploit falling sensor costs and developments in artificial intelligence.
Our vision recognises that the market in which we operate is changing. The Water Act 2014 introduced the potential for wide ranging change, commencing with the opening of the non-household retail market to competition in April 2017. The UK Government recently asked our economic regulator, Ofwat, to consider the merits of opening the household retail market to competition and Ofwat will present its conclusions later this year. In addition, under a strategy of progressive evolution of the water market, Ofwat declared its intent to open the market for water resources and sludge processing to competition from 2020.
These developments represent the most significant structural change for the water sector since privatisation and we are working constructively with the government and our regulators to understand the implications for customers and shareholders and offer solutions for their effective implementation. We will continue to put effort into being competition ready as is evidenced by our recent move in forming a joint venture with Severn Trent for the non-household retail market, building on our successful entry into the Scottish market and our investment in new systems to provide an enhanced offering to business customers.
How we create value
We create value for our stakeholders principally by agreeing and then delivering, or outperforming, our regulatory contract. The way we use our key resources, manage our internal environment and interact with our ever-evolving external environment, influenced by our long-term strategic approach, helps to achieve value creation. This facilitates the delivery of outcomes for our customers, employees, the environment and communities, alongside ensuring investors receive an appropriate return.
This is represented in the diagram on the Business model , with the subsequent pages of this report mapping to its colour-coded sections.
Our key performance indicators for 2015–20 measure our progress against some of the most important value drivers for the business, feeding through from our strategic themes: the best service to customers; at the lowest sustainable cost; and in a responsible manner.
'Systems thinking' lies at the heart of our day-to-day decision making, right through from approving our capital expenditure programmes to agreeing our supply-chain partners. Whilst the financial impact is a key driver in decision-making, this is always set in the context of the impact on customers, shareholders, the environment, employees and communities. For many years we have included corporate responsibility (CR) factors as strategic consideration, supported by our CR committee which is chaired by one of our non-executive directors (more details are provided on the Corporate responsibility committee in the corporate governance section).
Pictured above: Our new £200 million extension to Liverpool wastewater treatment works had its official opening in April 2016 when Her Royal Highness the Princess Royal visited our Sandon Dock site (read the full story). As part of the development of the site, a new Sequencing Batch Reactor (SBR) treatment facility has been built, capable of cleaning 11,000 litres of wastewater every second, serving 600,000 people.