Following a recent meeting of water industry CEOs, hosted by new Secretary of State for Environment, Food and Rural Affairs, Ranil Jayawardena, Southern Water has written to the Minister setting its improvement progress and plans to government.

Lawrence Gosden, who took up his role as Chief Executive Officer CEO of Southern Water in July 2022, wrote to Mr Jayawardena to highlight the company’s commitment to delivering significant change in the coming years, saying:

“Whilst I recognise that Southern Water has not always met expectations in recent years, I believe that we are now in a position to deliver significant change for our customers and the environment.”

In September 2021, funds managed by Macquarie Asset Management (MAM) invested £1.1 billion to recapitalise the Southern Water group. This financed additional investment in infrastructure, and reduced group debt. As operational performance improves, distributions will be kept below a 4% yield in each year to March 2025, the letter says.

Changes the water company CEO highlighted in his letter include:

• Investing £2 billion (c.£1,000 per household) over the current regulatory period, 2020-25, more than its regulatory allowance, to significantly improve our performance;
• Storm overflows – pilot projects underway to help inform the optimal approach to reducing overflow of a ‘dual purpose’ network.
• Storm overflows have 98% monitoring in place, allowing near-real time communication with customers and communities through Southern’s Beachbuoy website and via API to the Surfers Against Sewage app.
• Environmental performance – currently on-track to reduce pollutions by 40% compared to 2021 with much still to be done to maintain this to the end of the year; the company is “industry leading in self-reporting2 and is investing £230m above Ofwat regulatory allowances.
• Water scarcity – Havant Thicket will be the first new reservoir to be built in the South East since the 1970s. Southern Water is currently consulting on its Water Resources Management Plan (WRMP) ahead of the next regulatory period
• Leakage –leakage is currently 17%. Whilst this is better than the industry average of 23%, the water company is committed to reducing this by a further 15% by 2025 and by half by 2050.
• Cost of living –supporting vulnerable customers by increasing the discount on its social tariff to 45% (reducing the average combined bill from £402 to £221). This will benefit over 103,000 customers.
• Dividend and pay – Southern Water has not paid a dividend to external shareholders since 2016/17 and its executive pay is amongst the lowest in the sector.

Storm overflows: "we would like to go further and faster; this will require agreement on how this is funded”

Commenting in more detail on storm overflows, the water company chief said:

“As rightly demanded by our customers, Defra and other stakeholders, we would like to go further and faster; this will require agreement on how this is funded.”

“Since privatisation, Southern Water has improved and increased the volume of wastewater that is fully treated before release back into the environment, from 30% to 95%, through investment of £10bn. This has improved the quality of our bathing waters from only 28% meeting public health standards, to 80 out of 83 now rated as ‘good’ or ‘excellent’, with the other 3 being ‘satisfactory’.

“We welcome Defra’s recent Storm Overflows Discharge Reduction Plan, especially the recognition that it requires a multi-agency approach to separate its dual purposes of moving wastewater and capturing storm run-off. Southern Water’s spill rate is amongst the lowest in the sector, and we have plans to reduce it further, to 18 per storm overflow by 2025.”

He also told the Minister that Southern Water is ready to finalise proposals to roll-out a number of existing initiatives more widely, saying the company “could even go beyond the Defra targets in this regulatory period.”

On environment performance, the letter says Southern Water is delivering a significant turnaround on its environmental performance plan, which was further accelerated last year. The water company is currently on-track to deliver a step change in performance in 2022: a 40% reduction in pollution incidents, and a 75% reduction in category 1 and 2 pollution incidents.

Other achievements flagged up by Lawrence Gosden include:

• Invested a record £610m in 2021 to increase network and treatment capacity – and a plan to spend a further £600m in 2022 and plan
• £65m spend on maintenance to improve resilience of the system to better cope with adverse weather
• Undertaken a root and branch culture change programme on transparency and ethics
• Installed 22,000 sewer sensors in the first full-scale roll-out of sewer digitisation to prevent pollution and flooding from network blockages, to be completed in November 2022
• Introduced predictive analytics into the company’s control room to prevent equipment failures across its network of 40,000km pipes, 367 treatment works and 3,476 pumping stations.

According to Southern’s CEO, early results are showing progress, although further investment is required to strengthen performance over the remaining year.

With regard to strengthening water security and preventing drought, he explained that the company is investing £350m over the next seven years, to secure water supplies, including the first reservoir for a generation (Havant Thicket in Hampshire), an ambitious programme of water recycling facilities in Sandown on the Isle of Wight, Aylesford in Kent, Ford in Sussex, and Havant in Hampshire, and water transfer schemes with neighbouring water companies.

On reducing leakage, the company is installing over 7,000 acoustic detectors to proactively detect leaks and fixing more than 250 leaks a week.

He concluded by saying that members of Southern Water’s Executive Team would be attending this year’s Conservative Party conference and would be pleased to meet the Minister’s team there.

“I would welcome the opportunity to discuss these issues with you, in particular how we finance our plans to go further and faster in reducing storm overflows,” he added.