Portsmouth Water Ltd, which supplies water to customers in Hampshire and West Sussex, has announced its preliminary results for the year to 31 March 2016.

The utility’s average household bill of £98 continues to be the lowest in England and Wales. The firm has also been ranked top of the industry wide survey for customer service for the second successive year. The Ofwat independent Service Incentive Mechanism quarterly survey ranked the company number one for overall service and for both billing and operational matters.

The financial results for the period show a significant increase in operating profit of £1.5m to £8.2m. primarily driven by a £1m increase in turnover and a £1.9m reduction in infrastructure renewals expense, partly offset by a number of other costs. Turnover increased 2.5% to £39.8m reflecting the 2% average tariff increase and 2,300 new properties.

The company also received capital contributions of £1.2m (2015 - £1.3m), towards the cost of new mains serving new developments. Developers services is an important customer segment for the business – Portsmouth said during 2016/17 it will continue to review and refine how it supports developers.

Gross capital investment in the year was £9.3m - the company renewed 11.6km of mains at a cost of £1.8m (2015 - £3.7m). A further £1.7m of new mains and enhancements to the network were capitalised along with above ground capital projects totalling £7.6m.

 During the year Portsmouth began construction on a significant £4.4m investment in two new water quality schemes at its Eastergate and Westergate water treatment works. The two projects will implement Ultra Violet treatment to address the risk of cryptosporidium.The capital spend in 2015/16 was £3.1m and the schemes will be fully commissioned by the summer of 2016.

The company has also announced plans to introduce a “Social Tariff” to support customers who find it difficult to pay. The tariff, which will see a small general increment in customers’ bills in order to support those in genuine difficulty, will be launched in July 2016.

Commenting on abstraction, Portsmouth said it had taken action during the year, with the support of the Environment Agency, to reduce the impact of abstraction in two important rivers in its area of supply. In common with many water companies it is experiencing increasing levels of nitrates in water sources. Rather than undertaking expensive treatment for nitrates at treatment works, the utility is seeking to reduce them at source by working with farmers and recruiting a dedicated catchment manager.

On retail competition, the company said it is continuing to make good progress to ensure that it meets the necessary compliance and market operating requirements for market opening in April 2017. “The preparations remain an area of significant management focus and effort reflecting the importance of this activity.”

The Portsmouth Board has already announced its decision to dispose of its non-household retail business on 1 April 2017 to Castle Water, a water retailer already operating in Scotland. The Board undertook a strategic review of the business and, in light of the decision by Ofwat to introduce retail competition, a decision was made to seek to exit retail activities for business customers. It was the Board’s view that the business did not have the reach or experience to compete in this market on a national scale.

However, commenting on the UK Treasury announcement in December 2015 of its proposal to implement retail competition for household customers by 2020, Portsmouth Water has already indicated it intends to be active in a household retail market should one be established.