09/02/2010
Welsh Water to restructure to meet efficiency challenge
Welsh Water is to undertake the biggest re-structuring of the company since it was bought by Glas Cymru and became a “not-for-profit” company - to meet the toughest efficiency targets the company has ever faced.
The price limits for the next five years, set last November by the water regulator, Ofwat, will allow Welsh Water to invest £1.2 billion in water quality and other improvements. But Welsh Water must also reduce its day to day operating costs by 20 per cent to enable the average household bill to fall by £30 before inflation.
Managing Director, Nigel Annett said: “Since Glas Cymru was formed in 2001 we have delivered services to our customers by employing leading companies in the business of operating water and sewerage assets. United Utilities and Kelda Water Services have helped Welsh Water improve significantly the quality of service we give our customers.
“Since 2001, United Utilities and then Kelda Water Services have also helped us to cut our operating costs by more than any other water and sewerage company in the regulated water industry in England and Wales. But in order to deliver the price reductions required over the next five years we must make a further step change in our cost efficiency.
“Over the last nine months we have had lengthy discussions with United Utilities and Kelda Water Services, through the five yearly price and performance review of the contracts we have with both companies. We recognise and appreciate the considerable efforts made by both companies to meet our requirements. However, it has not proved possible to reach agreement with either company in relation to the terms for a continuation of the contracts for a further five years.
“In light of this, we have reached agreement with United Utilities that their staff will transfer to Welsh Water within the next couple of months, or as soon as possible after that. No agreement with Kelda Water Services has been reached however and discussions continue. In the meantime, Kelda Water Services will continue to operate our wastewater assets under the terms of their contract with Welsh Water.
“We have to achieve a reduction of 20 per cent in our day to day running costs. We will do this by exploiting our recent large investment in new technology, by eliminating duplication in management, and by investing in “green energy” and processes to reduce power costs. This involves a considerable expenditure by the company, part of our planned £1.2 billion investment programme to improve services over the next five years.
“There will also be a phased reduction, over the next five years, of around 300 in the number of people required to deliver water and wastewater services to Welsh Water’s customers, and working closely with staff and our trade union colleagues we intend to achieve this through a combination of retirements, natural staff turnover and voluntary severance.
“This major change will be one of the many challenges we face over the coming five years, but at all times our priority will remain the essential task of guaranteeing safe and reliable services for all our customers, as well as safeguarding the environment” said Mr Annett.
Since 2001 Welsh Water has been owned by Glas Cymru, a “not-for-profit” company. The company delivers drinking water and sanitation services to more than three million people in Wales, and some border areas of England.
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For further information, contact the Welsh Water press office on 02920 556140.
Notes for Editors:
- Glas Cymru was formed in April 2000 for the sole purpose of acquiring Welsh Water. It is a ‘company limited by guarantee’ registered under the Companies Act 1985. Glas Cymru has no shareholders. Instead, Members carry out an important corporate governance role but they do not receive dividends nor do they have any other financial interest in the Company. This corporate structure ensures that all financial surpluses generated are retained and reinvested for the benefit of Welsh Water and its customers.
- Glas Cymru’s constitution strictly limits its purpose to that of financing water assets in Welsh Water’s area of appointment and managing Welsh Water’s business so that high quality water and sewerage services are delivered at least cost to the communities served by Welsh Water. Glas Cymru cannot diversify into other unrelated commercial activities.
- On 26 November 2009, the water industry regulator, Ofwat, published its Final Determination of price limits, service standards and investment allowances for the period to 2015. Following careful consideration Welsh Water decided not to appeal against the determination to the Competition Commission.
- On average, household bills for our water and sewerage customers will fall by some £30, before inflation, over the period to 2015. However, the impact on the bills of individual customers will vary. During that period, we are planning to carry out a capital investment programme of some £1,200 million – equivalent to over £1,000 per household.
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