Establishing a national water utility company - The Scottish Experience BLP Water Forum 25 th June Craig Lawson 15 mins

Agenda for the Presentation 1. Context 2. The Scottish Water Journey from the perspective of: Employees Regulation Supply Chain 3. Why has it been worth it so far

Irish/Scottish Water - Differences Differences Scotland’s Water & Drainage service provider: Pre Municipalities ran water and drainage combined into 3 regional water authorities Scottish Water created by merger of 3 regional authorities Transfer of People Customers in Scotland have always paid for their water and sewerage

Irish/Scottish Water - Similarities Similarities Implied Inefficiencies & Poor Customer Service EU Directives – Large scale investment required Public sector Geographical & Population size similarities

SW High Level Deliverables Targets 2002 – % OPEX reduction £2.3 Billion Capital programme for £1.8B (£0.5 Billion saving) Improve customer service

2. Scottish Water Journey from the perspectives of: Employees Regulators Supply Chain

Scottish Water : A burning platform

Employees 2002 – 2006: “Do less for less” Disbelief, some denial of situation, survival mode Transformation driven by ‘others’ – everything changing Lots of people leaving 2006 – 2010: “Do the same for less Some respect for achieving 02 – 06 targets Our own people now more involved in Transformation projects Roles profiles, T&C, business processes, tools, reports converging towards consistency 2010 – 2015: “Do more for less” Transformation delivered by our own people – more planned Engagement Very High Performance related pay, bonus, employee performance measured, coaching/mentoring leadership New recruits joining the business

Regulators 2002 – 2006 Imposing a ‘contract’ on us Each regulator wanting their priorities 1st 2006 – 2010 Beginning to work in partnership with regulators Stakeholder management structure in place 2010 – 2015 We now lead the development of the investment programme in a collaborative manner Regulators trust that we know our business and our customer’s needs best Working together “Scottish Water has outperformed its projections in the areas of investment in the programme, levels of service to customers, leakage reduction, investment costs and financial strength.” WICS 2012

Supply Chain 2002 – 2006 High number of small suppliers Very aggressive cost challenge on OPEX spend Knowledge brought in from England & Wales through JV New Jobs created in £450M per year Capital Programme 2006 – 2010 Reducing number of suppliers – frameworks deployed Some outsourced opportunities Working to ‘Break the Cycle’ 2010 – 2015 Small number of suppliers – Alliances (11 years)/Frameworks Focus on value and outputs Long term security of work

3. Why has it been worth it so far…. Average Household bill would have been approx. £110 higher than our current £324 We have delivered our statutory objectives at £2.5 billion less than we had proposed in our Business Plans (BP’s from 2001 & then 2005) Performance OPA up from 132 points to 368 points Helps enable inward investment in Scotland Competition gave our 130,000 Business Customers a choice of retailers

OPA in Customer ‘speak’ Measure Inadequate Water Pressure7, properties No of Properties supply restored > 6 hours 35,41521,803 properties Leakage ML/d Water Quality (Customer Taps)99.66 (577 fails) 99.84% Wastewater Pollution Incidents (Cat1 & 2) incidents Sewer Flooding Properties at Risk properties Customer Experience Transactional Score 58%90% (today)