Ofwat appointed Mott MacDonald to produce a framework document setting out the principles of resilience planning, together with examples of the available evidence-base and of different resilience planning practices.
The report - Resilience -outcomes focused regulation Principles for resilience planning builds upon the Service Risk Framework for flood hazards prepared by Halcrow for Ofwat in 2008 and the Cabinet Office guide “Keeping the Country Running: Natural hazards and Infrastructure”, published in 2011.
The report has developed nine principles for resilience planning, which Ofwat is hoping will be useful to companies when preparing resilience plans in future. The report is also intended to improve Ofwat’s own understanding of resilience. CCWater has indicated that it sees the report as being potentially useful for informing customer representatives and other members of customer challenge groups.
The nine principles are as follows:
- Principle 1: An all-hazards, approach to resilience planning
- Principle 2: Proportionate resilience strategies embedded into corporate governance
- Principle 3: Third party engagement
- Principle 4: Resilience planning focused on risk to service outcomes
- Principle 5: Customer preferences and environmental acceptability for different levels of resilience
- Principle 6: Broad consideration of intervention options for resilience
- Principle 7: Using cost benefit analysis to support significant decisions Principle 8: Preparedness for response and recovery
- Principle 9: Continuous improvement in resilience planning
The report has also adopted the four components of resilience identified in “Keeping the Country Running” :-
- Resistance – relates to protection of infrastructure
- Reliability – relates to the design of assets such that they can operate under a range of conditions (e.g. design of mechanical and electrical plant to operate under a range of temperatures)
- Redundancy – relates to the availability of spare capacity or the ability for services to be provided through other parts of a network
- Response & Recovery – relates to planning, preparation and exercising for the response to both specific and more general risks
Focus on resilience of services to customers and environment
The report is proposing an outcomes focused approach to resilience which would focus on the resilience of services to customers and the environment, rather than on the resilience of assets. The approach is in line with Ofwat’s future price limits consultation which proposes adopting an outcomes focused approach to regulation wherever possible.
The report says that by focusing on outcomes, rather than outputs or inputs, the water companies would be given greater freedom to innovate in delivering value for customers and the environment. The water companies will be expected to to define outcomes through consultation with stakeholders and customer challenge groups. The expectation is that companies will develop “measures of success” associated with outcomes. While there is likely to be variation between companies in the outcomes that are agreed on with stakeholders there are also likely to be some common themes, such as:
• secure and safe water supplies
• reliable removal of sewage and surface water
• protection of the environment
• affordable bills
Continuous re-evaluation of resilience key to climate change adaptation
The report highlights the resilience cycle proposed in the Cabinet Office paoer, which emphasised the need for continuous re-evaluation of resilience in the face of changing risks and the importance of sharing information between stakeholders. Ofwat believe this approach willl be particularly important when assessing climate change risks and adaptation options as knowledge of climate predictions and climate risk to service will change over time.
Although the report is focussed on resilience to natural hazards in particular, Ofwat said the nine principles set out in the report have been developed at a high-level and could potentially be used for managing wider risks, thereby allowing companies to adopt an ‘all-hazards’ approach to resilience planning. Ofwat hope the principles will help companies to review their processes, apply within their general business planning and identify possible gaps that may benefit from further consideration.
Funding and customer engagement are key issues
The report has raised and developed a number of key issues in resilience planning, for example the role of standards, customer engagement, links to other planning processes and an outcomes approach. Event standards identified in the report which describe scenarios under which services should be capable of being maintained include inland flooding, coastal flooding, storms and gales, excessive cold with snow and ice and a prolonged period of Hot/Dry weather.
It also suggests that when the water companies apply resilience planning principles, consideration should be given as to how resilience planning fits in with other water industry planning processes, including Water Resource Management Plans, Drought Plans and Security and Emergency Measures Directions (SEMD). It also recommends that the water companies should consider consulting different segments of their customer base that could be affected by decisions made on resilience, with willingness to pay surveys expected to be an important element of customer research.
The report flags up a range of important issues, including how measures needed for resilience planning should be funded. The report suggests that the Environment Agency’s approach to flood and coastal resilience partnership funding provides a useful example of an approach to funding projects with a range of beneficiaries. Such an approach could allow companies funding for investment up to a level below the benefits customers will receive. It would then be for the company, or another third party, to make up any additional costs required to deliver an outcome.
The report does not set however set out the regulator’s policy on resilience for the next price review – this will instead form part of Ofwat’s price review methodology, which will be consulted on in autumn 2012.
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