Customer Scrutiny Panel Report on SES Water s Business Plan

Transcription

1 CSP Reprt n SES Water s Business Plan Custmer Scrutiny Panel Reprt n SES Water s Business Plan Reprt t Ofwat : September 2018 Page 0 September 2018

2 CSP Reprt n SES Water s Business Plan Dcument Issue details: Versin # Date Versin status Issued t /06/2018 First draft circulated t CSP CSP /06/2018 Updated draft t CSP & SESW CSP, SESW /07/2018 Updated draft t July 20 CSP CSP /07/2018 Draft fllwing initial Bus Plan CSP, SESW review /08/2018 Draft fllwing further Bus Plan CSP, SESW inputs /08/2018 Draft fllwing CSP feedback CSP, SESW /08/2018 Draft fllwing 20/8 CSP CSP /08/2018 Final versin t Ofwat CSP, SESW, Ofwat Page 1 v2.0 September 2018

3 CSP Reprt n SES Water s Business Plan Cntents Cntents 1. Executive Summary Intrductin CSP assurance statement t Ofwat SESW s Engagement Prcess Overview SESW Assurance and Gvernance SESW s Engagement with its Custmers CSP cnclusins and evidence surces Overview f CSP rle and prcess fr PR Custmer engagement & quality f Plan CSP review and challenges during the custmer engagement CSP review and challenges regarding Triangulatin CSP cnclusins relating t Quality f SESW Custmer Engagement & the Impact n the Business Plan Vulnerability/Affrdability Vulnerability Affrdability/Scial Tariff Challenges & Respnses regarding Vulnerability Resilience/Cnsumptin/Envirnment Resilience planning, engagement & analysis Envirnment & Bidiversity Resilience/Envirnment: Cnclusins Resilience: Challenges & Respnses Innvatin Innvatin: custmer engagement and analysis Innvatin: Cnclusins Innvatin: Challenges & Respnses Financeability, and Willingness t Pay (WTP) Custmer Engagement re Financeability & WTP Cnclusins: Financeability & WTP Financeability & WTP: Challenges & Respnses Perfrmance Cmmitments/Outcme Delivery Incentives (PCs/ODIs) PCs/ODIs: engagement & analysis PCs/ODIs: cnclusins PCs/ODIs: challenges & respnses Securing Cnfidence & Assurance Engagement re Securing Cnfidence & Assurance Page 2 v2.0 September 2018

4 CSP Reprt n SES Water s Business Plan Cnclusins: Securing Cnfidence & Assurance Appendices Appendix 1: CSP Terms f Reference, rle and membership Appendix 2: Challenge Lg Appendix 3: CSP review and challenges during the PR19 prcess CSP review and challenges relating t custmer engagement CSP review and challenges relating t Triangulatin CSP review and challenges relating t Vulnerability CSP review and challenges relating t Scial Tariff CSP review and challenges relating t Resilience CSP review and challenges relating t Innvatin CSP review and challenges relating t Financeability/WTP CSP review and challenges relating t PCs/ODIs Appendix 4: CSP Activity Schedule frm May Sept Appendix 5: References Appendix 6: Glssary NB: Nte fr Ofwat/ther reviewers: Appendix 5 References: Fr ease f clarity, in the accmpanying reference dcument uplads, each file name cmmences with the number referred t in this CSP Reprt e.g. numbers 01-27, then M1-M11, R1-R8. An example being Appendix 5 ref 1 is file name 01 Challenge lg ; Appendix 5 ref M1 is file name M1 January 2017 CSP meeting. Page 3 v2.0 September 2018

5 CSP Reprt n SES Water s Business Plan 1. Executive Summary 1.1. Intrductin As Chairman f the Custmer Scrutiny Panel (CSP) fr SES Water (SESW), I am delighted t present this assurance reprt, n behalf f my Panel members, in supprt f the cmpany s Business Plan. The reprt sets ut the evidence f hw the CSP has perfrmed its rle t advise, scrutinize and challenge the cmpany in the develpment f the Business Plan, in line with the guidance 1 prvided by Ofwat in March 2018 which requires the CSP t prvide independent challenge t SESW and independent assurance t Ofwat n: the quality f the cmpany s custmer engagement; and the extent t which the results f this engagement are driving the cmpany s decisin making and being reflected in the cmpany s Business Plan. The CSP is pleased t reprt that there has been a psitive wrking relatinship between SESW and the CSP, with effective meeting and review prcesses agreed and implemented t enable the CSP t fulfil its bjectives whilst maintaining its independence. This has enabled the CSP t achieve its bjectives t; Prvide cnstructive feedback n the scpe, quality and effectiveness f SESW s custmer engagement prgramme. Ensure that the custmer research and wider engagement was apprpriately used t help shape the SESW Business Plan. Scrutinise the develpment and testing f the prpsed Business Plan cmmitments in relatin t their justificatin, acceptability and affrdability fr custmers. Fllw up with SESW n any perceived shrtcmings in its engagement and planning activity. The CSP can thus cnfirm that SESW has c-perated fully with the CSP in respnding psitively and penly t its challenges and infrmatin requests. The CSP has been given adequate and apprpriate access t cmpany infrmatin and persnnel in rder t carry ut its wrk in line with Ofwat s guidance and bjectives, althugh because a significant amunt f the Business Plan material was prvided late in the prcess, this limited the CSP s ability t fully and effectively discuss and challenge all cntent. The CSP has als had cntact, as apprpriate, with members f the Bard, including private meetings with NED s. SESW has welcmed and acted n the advice and input f the CSP, and agreed, where apprpriate, amendments t its plans. This includes changes t the custmer research apprach, utcmes and measures f success, imprvements t the clarity f the cmpany s cmmunicatin with its custmers, as well as updates t the final Business Plan CSP assurance statement t Ofwat As a result f the detailed review, challenges and fllw up undertaken by the CSP, we cnsider that SESW has struck a reasnable balance between meeting the cmpany s statutry bligatins, maintaining current perfrmance and accunting fr custmer feedback n affrdability and perceptins f value fr mney. Ntwithstanding that there are sme utstanding pints f nte, as summarised belw, the CSP is able t cnfirm t Ofwat that as a result f this prcess, it can prvide psitive assurance that: 1 Aide Memire fr Custmer Challenge Grups Ofwat March 2018 Aide-memire fr CCGs Page 4 v2.0 September 2018

6 CSP Reprt n SES Water s Business Plan In relatin t the quality f the cmpany s custmer engagement 1) The custmer engagement and research emplyed by the cmpany was apprpriate and was cnducted by specialist accredited market research prviders; it was subject t CSP and third party review and fllwed gd industry practice. (See Sectins 2, 3.2) 2) SESW s engagement prvided a genuine understanding f custmer pririties, and presented an apprpriate range f service ptins which were effectively tested fr acceptability and affrdability. (See sectins 3.2, 3.6, 3.7) In relatin t the extent t which the results f this engagement are driving the cmpany s decisin making and being reflected in the cmpany s Business Plan. 3) SESW s Business Plan and its resulting impact n bills apprpriately incrprates the views f its custmers. (See Sectins 3.2, 3.6) 4) The Plan is fcused n a series f utcmes that reflect a sund understanding and reasnable balance f different custmer and stakehlder views and pririties as evidenced by its research, and engagement. (See Sectins 3.2, 3.7) 5) In the pinin f the CSP, SESW has, in its Business Plan, endeavured t meet statutry bligatins, imprve levels f service and accunt fr custmer feedback n affrdability and value fr mney. (See Sectins 3.3,3.6) 6) SESW is prpsing additinal measures t assist thse custmers wh are struggling t affrd their bills, thrugh the evlutin f its scial tariff. (See Sectin 3.3.2) 7) SESW is prpsing t use a reasnable set f measures t mnitr prgress against its stated utcmes. (See Sectin 3.7) 8) SESW s Plan includes a clearly defined set f incentives, rewards and penalties. (See Sectin 3.7) In relatin t securing cnfidence and assurance; 9) The CSP has had assurance frm the SESW nn-executive Directrs that the Bard has apprved a Business Plan that is high quality and deliverable, and that they have challenged management t ensure this is the case. (See Sectin 3.8) 10) SESW has ensured that the Business Plan, and befre that the draft Business Plan cnsultatin dcument, underwent full independent assurance; and has shared the assurance statements with the CSP. 11) The bespke research was carried ut in partnership with specialist accredited market research prviders, wh went thrugh a rigrus tender prcess. 12) The CSP received independent advice and pinin frm its technical adviser (Atkins) n aspects f SESW s engagement cnclusins and Business Plan in terms f gd practice, industry nrms and interpretatins f Ofwat guidance, cherence and clarity f purpse; and particularly regarding perfrmance cmmitments and willingness-t-pay. 13) The CSP received assurance frm DWI and EA that they had n specific cncerns t reprt abut the cmpany s bligatins. (See Sectin 3.7.2). In frming these cnclusins the CSP has fcused its attentin n respnding t the varius questins defined by Ofwat in the Aide memire fr Custmer Challenge Grups 1, the Custmer Engagement Plicy 2, and the Final Methdlgy 3. Table 3.2.3i plus sectins f this reprt include the CSP view, and supprting evidence, f SESW s cnfrmance in respect f the apprpriate Ofwat questins relative t that sectin. A summary f the key pints, and evidence, that supprt the abve CSP cnclusins is prvided belw, including als the key utstanding challenges and pints f nte. 2 Ofwat Custmer Engagement Plicy 3 Ofwat Final Methdlgy Page 5 v2.0 September 2018

7 CSP Reprt n SES Water s Business Plan Summary f key pints and evidence supprting the CSP cnclusins Quality f Engagement High level f SESW engagement with the CSP (at senir management and Bard level), and respnsiveness t CSP challenges and infrmatin requests. SESW MD, Executive Directrs and senir managers attended CSP meetings; mnthly review meetings f CSP chair with MD and PR19 managers; private meetings f the CSP with Bard NEDs. The Custmer Engagement prcess was cmprehensive and effective (ref Business Plan Chapter 1), and the CSP was invlved at all stages (ref Appendix 3) e.g. reviewing prpsals, draft cntent, attending fcus grups and stakehlder events. Outputs were fed back t the CSP at each stage. The CSP put in place a Challenge Lg (refer t Appendix 2, als Appendix 5 ref 1) in rder t keep an nging recrd, and hence evidence, f challenges raised by the CSP and the assciated respnses and utcmes frm SESW. The cmpany welcmed and acted n the advice and challenges prvided by the CSP, and agreed, where apprpriate, changes and amendments t SESW s plans; e.g. changes t custmer research apprach and materials, amendments t utcmes and perfrmance measures, and mre clarity in the cmpany s cmmunicatin with its custmers. There was brad and effective engagement with custmers n the acceptability f perfrmance cmmitments and willingness-t-pay (ref sectin 3.6.1, 3.7.1). The CSP cmmended the quality f the custmer cmmunicatins used t supprt the engagement prcess (e.g. SESW Visin, and Business Plan cnsultatin dcuments). Impact n business Plan Well-cnstructed range f detailed plans, actins and cmmitments in the SESW Business Plan that refer t, and take accunt f, apprpriate custmer engagement; e.g. Chapter 1, Sectin 1 ( What we ll deliver hw insight shaped ur plan ). Fllwing the CSP challenging SESW regarding a lack f triangulatin evidence, SESW prvided (Appendix 5 ref 2) helpful explanatin f evidence surces and linkages t clarify the starting pint cnclusins n custmer pririties, hw the research refined that, and then hw it flwed thrugh t the Plan. Gd engagement with custmers n acceptability f the verall Business Plan, and clear linkages f custmer feedback and supprt t stretching Plan cmmitments (ref sectin 3.6.1, 3.7.1) e.g. SESW aims t achieve upper quartile perfrmance fr supply interruptins; and remains ne f best perfrming cmpanies fr leakage per prperty/day. SESW has a perfrmance cmmitment aimed at maintaining industry leading perfrmance fr the number f bursts. SESW has ne f the best % achievement fr all water cmpanies relating t scial tariff uptake per 10k custmers, and fllwing targeted and detailed research (ref Phase 2/3 utput Appendix 5 ref R2-8) is prpsing a significant increase in subsidy and uptake f the scial tariff. SESW includes additinal lnger term prjectins fr key PCs (e.g. PCC reductin t 118 l/day and leakage/bursts reducing by 50% by 2050) Gd evidence that SESW has taken custmer views int accunt n the prfile f bills ver time, and bill impact acceptability. SESW ensured that it infrmed custmers f the verall bill impact, and hw it might change ver time, in a way that custmers culd easily understand (as per Appendix 3 fig 4.3.1x and p12-14 f Appendix 5 ref R7). Phase 2 analysis f WTP and Phase 3 acceptability testing (ref Appendix 3, sectin 4.3.1), plus the brader Business Plan cnsultatin prvided gd evidence f custmer views n bill impact being taken int accunt. SESW undertk specific custmer engagement n the willingness t pay a premium fr cntinuing t be served by a small lcal cmpany (Appendix 5 ref R4). Page 6 v2.0 September 2018

8 CSP Reprt n SES Water s Business Plan Clear assurance frm the Bard NEDs that the cmpany has clsely cnsidered the Ofwat guidance n financial structures and has agreed plans t ensure the cmpany gearing is within the required levels (ref sectin 3.8). Outstanding challenges/pints f nte While verall the CSP is reprting psitively n the quality f SESW s custmer engagement, and the impact this has had n the Business Plan, there are a limited number f challenge areas and pints f nte that the CSP wuld still flag at the end f this prcess, i.e.; Quality f Engagement The CSP cnsiders that SESW s engagement apprach, while cmprehensive and effective, culd have benefited frm strnger prject planning with regard t engagement and the wider business plan prcess at the utset. The CSP accepts that there was a clear Custmer Research brief and plan but cnsiders that there culd have been a clearer verall engagement strategy including e.g. strategic aims, initial hyptheses, the rle f research vs ther engagement surces (e.g. BAU data) and hw triangulatin wuld be embedded in the apprach. SESW s view is that they intended Phase 1 ( Listen/Learn ) as a basis t infrm a mre detailed apprach and plan; and the CSP agree that the engagement apprach did evlve ver the plan perid and did ultimately deliver an effective utput but the CSP maintains the view that the prcess wuld have been mre efficient had it included clearer aims and prject plans at the utset. While the CSP prvides an verall psitive assurance n the quality f the custmer engagement, there were sme limited areas where the CSP cncludes the sampling and evidence culd have been imprved, and thus prvided strnger assurance e.g. CSP cnsiders there culd still have been mre assurance f evidence f sufficient engagement with custmers specifically relating t nn-financial supprt fr thse in vulnerable circumstances; i.e. while there was gd evidence f engagement n the Scial Tariff aspects f vulnerability, plus inclusin in the Plan f imprved future initiatives n nn-financial supprt, the specific sampling f custmers in nnfinancial vulnerable circumstances was smewhat limited. While SESW has sught t engage with custmers n c-creatin/c-delivery, and refer t gd examples f this in the Business Plan, the CSP cnsiders that the depth and scpe was nt fully in line with the Ofwat guidance prpsed in their Tapped In Reprt, which includes examples f ther cmpanies ding mre in this area. Limited assurance n Future Custmers viewpints and the impact n lnger term cmmitments (e.g. in resilience), where the CSP challenged re lw sampling f specific future custmer grups (althugh there was a larger sample f future custmers in phase 3, and there is detail and evidence fr lnger term resilience actins in the Business Plan Chapter 4 and 7). Business Custmers: the CSP agree that SESW engaged effectively with Business custmers, but cnsider that the segmentatin and sampling culd have been brader (250 custmers and 2 small wrkshps), e.g. engaging with a brader sample f large/medium enterprises. Impact n Business Plan The timetable fr prductin and apprval by the SESW Bard f the detailed Business Plan, and the verall sequencing f custmer engagement, CSP discussins and Bard cnsideratins meant that the CSP was cnstrained in terms f having adequate time t fully cnsider the drafts r final versin f the Plan. This limited the CSP s ability t fully and effectively discuss and challenge all Business Plan cntent and updates. Page 7 v2.0 September 2018

9 CSP Reprt n SES Water s Business Plan The CSP did recgnise that the Ofwat requirement t submit bth the Plan and CSP Reprt n the same day wuld create cnstraints; and that CSP did have earlier insight and engagement with SESW, e.g. n PCs/ODIs, which enabled sme review f hw the custmer engagement was impacting the business plan; plus SESW did attempt t prvide a drip-feed f Plan utputs as they became available. Hwever the CSP did nt see a fully cnslidated draft f the Plan prir t Aug 15 th, which limited the ability t review and prvide feedback t SESW (fr their Bard meeting n Aug 20 th ). SESW accepts this is a learning pint and has agreed t make changes in its Business Plan prcess t make the next price review planning prcess easier. There was gd and helpful debate n utstanding pints at the 20 th Aug CSP meeting, and SESW respnded prmptly with prpsed imprvements t the Business Plan (ref SESW Business Plan Appendix A1.7). Althugh this final iteratin f review was cnstrained by the limited remaining time fr mutual final drafting, and reprt finalisatin befre 3 rd September, the CSP ntes psitively that the final versin f the Business Plan is a high quality, and SESW has taken gd accunt f the final CSP feedback. The CSP wuld prefer t see a greater % f reward/penalty based ODIs, in line with Ofwat guidance, t imprve accuntability; althugh agrees that SESW has prvided (ref Business Plan Chapter 2) apprpriate justificatin as t why a financial reward/penalty is nt sensible in each relevant case (13 ut f 24 PC s). SESW s viewpint is that reducing the number f cmmitments by remving sme with nn-financial incentives wuld set aside sme custmer pririties t meet the regulatr s assumptins (that financial incentives shuld be the default), and SESW cnclude that that this wuld nt be apprpriate. Despite a stretching PCC cmmitment (requiring high metering penetratin), the level f PCC will remain high, and still be utside the frecast upper quartile at the end f the plan perid. It wuld seem unwarranted, therefre, t allw an ODI reward fr exceeding a PCC target which still leaves SESW utside the upper quartile and thus it might be mre apprpriate t set a threshld f the upper quartile level t nly allw a reward if that level is reached. While SESW has enhanced its cmmitment n reducing leakage, excessive leakage will remain a key custmer cncern (despite SESW being ne f the best perfrming cmpanies n leakage per prperty/day). SESW did nt specifically test with custmers any ptential ODI reward/penalty impacts n the bill. SESW prvided the ratinale fr this (ref sectin 3.7.2), but the CSP remains f the view that any bill impact f rewards/penalties abve a net-zer is nt justified based n custmer evidence, and it remains a nn-cnfrmance with Ofwat guidelines. The CSP recgnised that Innvatin is embedded in the culture f SESW and there is a sund strategy in place t empwer staff t innvate which has led t incremental imprvements in a variety f areas t strengthen the peratin althugh such imprvements appear strnger in peratinal areas than in custmer engagement. Althugh the final Business Plan des include sme future custmer service innvatin initiatives, the CSP cncludes that the Plan cntent culd still cver a brader balance f nn-peratinal (e.g. custmer service, envirnment) initiatives versus the many (and gd) peratinal initiatives. The Small Cmpany premium, at 1.75, is a significant prtin f the verall bill impact, and the CSP agrees there is custmer supprt fr this amunt. The CSP cnsidered, hwever, that the evidence and ratinale supprting this culd cme ut mre cnsistently thrughut the Plan, which SESW has nw included in the final versin f the Business Plan. Graham Hansn Chair, Custmer Scrutiny Panel fr SES Water Page 8 v2.0 September 2018

10 CSP Reprt n SES Water s Business Plan 2. SESW s Engagement Prcess 2.1. Overview SESW s apprach and prcess fr the PR19 Custmer Engagement Prgramme is set ut in detail in its (Chapter 1, Sectin 1), and was previusly shared with the CSP via dcument SES Water custmer engagement and insight fr PR19 wrking draft (Appendix 5 ref 9). Fllwing PR14 feedback, SESW made a number f enhancements t its engagement activity fr PR19, which are summarised in its Business Plan (Chapter 1, Sectin 1, Enhancing ur apprach what we have dne differently ). The fllwing extract frm the Business Plan (Chapter 1) prvides a helpful summary f the engagement methds and techniques (fig 2.1i). Fig 2.1i Engagement methds and techniques Page 9 v2.0 September 2018

11 CSP Reprt n SES Water s Business Plan This Chapter f the Business Plan explains in detail SESW s custmer engagement strategy, and SESW s intent t deliver a high-quality prgramme f engagement that directly influences its plan. This sectin als cvers; Engagement methds/techniques: i.e. details f the research methdlgy fr each phase and the different techniques used t gather high-quality insight fr the plan. Custmer insight: i.e. reprting n custmer pririties and preferences gained frm each stage f the research abut what they want in terms f SESW services. Influence n the PR19 Plan: i.e. explaining hw the custmer insight has shaped the Business Plan in terms f what SESW plans t deliver in the plan and the targets set. Further detail n the engagement strategy and prcess can be fund in the SESW Business Plan (Chapter 1) and is nt, therefre, explained further here SESW Assurance and Gvernance Key elements f SESW s assurance and gvernance during the PR19 prcess were; The bespke research was carried ut in partnership with specialist accredited market research prviders, wh went thrugh a rigrus tender prcess, t ensure apprpriate and valid techniques were used. SESW drew n ecnmic expertise t review the WTP survey and t build a mdel that allws it t cmbine the infrmatin cming ut f the survey with ther surces. The Business Plan, and befre that the draft Business Plan cnsultatin dcument, underwent full independent assurance. The custmer engagement prgramme, including raw data, survey scripts and discussin guides etc. are all available within the SESW Business Plan. A dedicated PR19 Steering Grup which included nging cnsideratin f the custmer insight thrugh the varius methds t ensure it led the develpment f the Business Plan. The independent scrutiny f the CSP regarding the custmer engagement activity thrughut the prcess, and CSP s rle in challenging SESW s apprach, plus the CSP s assessment f the quality f the engagement prgramme and the extent t which it infrms the Business Plan by cnsidering hw the cmpany has perfrmed against Ofwat s key questins. Regular interactin with the CSP in the frm f frmal and infrmal meetings, alngside regular sharing f infrmatin and tracking f prgress thrugh the challenge lg. In additin, each CSP member was given respnsibility fr an Ofwat theme n which t fcus their attentin and assure the rest f the grup that apprpriate activity has been carried ut. The CSP was invited t be invlved at all stages frm inputting int the research briefs t bserving activities. Bard members were als each allcated respnsibility fr an Ofwat theme s there shuld be a clear link between the cmpany, CSP and Bard thrughut the prcess t ensure that the plan reflects custmers views and there is clear wnership at Bard level. Bard members attended CSP meetings thrughut the prcess and the CSP members had the pprtunity t discuss the custmer engagement prcess with the relevant nn-executive directr, as well as dedicated private sessins with the Bard. Page 10 v2.0 September 2018

12 CSP Reprt n SES Water s Business Plan 3. SESW s Engagement with its Custmers CSP cnclusins and evidence surces 3.1. Overview f CSP rle and prcess fr PR19 The Terms f Reference f the CSP, and its rle and membership is included in Appendix 1. In particular the key bjectives f the CSP, in the cntext f PR19 and in accrdance with the guidance 1 prvided by Ofwat in March 2018, are t prvide independent challenge t SESW and independent assurance t Ofwat n: the quality f the cmpany s custmer engagement; and the extent t which the results f this engagement are driving the cmpany s decisin making and being reflected in the cmpany s Business Plan. Ofwat stipulated that the independent assurance needed t be prvided in the frm f an assurance reprt submitted by the CSP alngside the cmpany Business Plan, with a due date t Ofwat f 3 September The assurance reprt is required t set ut the evidence f hw the CSP has carried ut its independent challenge rle. It shuld be nted that Ofwat have cnfirmed 1 that it is nt the rle f the CSP: t endrse the cmpany s verall plan; t prvide assurance that all csts included in the cmpany s plan are efficient; The CSP s review and challenge activity has als cvered the wider cnsultatin activity assciated with the cmpany s lnger term strategic directin and water resurces management planning (WRMP). The fcus has been n SESW s: Custmer engagement and research (methdlgies, results, analysis and cnclusins drawn) Develpment f Strategic utcmes and measures (including Perfrmance Cmmitments/ODIs) Stakehlder engagement n the lng-term visin and Business Plan Business Plan develpment and hw it accunts fr custmer engagement utputs and ther available insight (triangulatin) The acceptability testing f the business plan package and impacts n custmer bills The CSP has als challenged the cmpany n the scpe, justificatin, cst-effectiveness and affrdability f its plans, and the evidence frm custmer engagement, bth frm the research prgramme plus wider engagement (e.g. business as usual data, nline cmmunity data and ther custmer/stakehlder interviews and interactin). This included specific review and challenge (ref sectins ), as apprpriate, n the cmpany s plans fr; Affrdability/Vulnerability Resilience Financeability Perfrmance Cmmitments/ODIs Innvatin The CSP and SESW agreed, and implemented, effective meeting and review prcesses t enable the CSP t fulfil its bjectives whilst maintaining its independence. The CSP prcess allwed fr review and rbust challenge f the cmpany s custmer engagement prgramme, and hw this then influenced its Business Planning, assumptins and utcmes. The CSP participated in quarterly meetings with SESW during 2017, but then instituted a mre intensive schedule f meetings fr 2018 (as belw) t ensure an apprpriate fcus n the PR19 prcess. Page 11 v2.0 September 2018

13 CSP Reprt n SES Water s Business Plan Date Meeting type Purpse 05/12/2017 Private CSP meeting Review f SESW engagement plan, phase 2 utcmes and CSP challenges 23/01/2018 Full CSP meeting PR19 final methdlgy summary f Ofwat publicatin; Phase 2 research findings t date and impact n business plan; Discussin theme: resilience. 09/02/2018 Private CSP meeting Review CSP cncerns re phase 2 slippage and sampling etc 20/02/2018 CSP meeting with SESW Review and debate the phase tw engagement cnclusins. 12/03/2018 Full CSP meeting Talk n Water - draft plan engagement material; Research material; Discusin theme: custmer service. 21/03/2018 CSP meeting with SES NEDs A few CSP members wuld meet privately with the nn-exec directrs after the meeting. 17/04/2018 Private CSP meeting Discuss the draft business plan and hw the custmer evidence has fed in. Ptentially als a discussin abut phase three. 01/05/2018 Full CSP meeting Research findings n scial tariff and small cmpany benefits; Phase 3 research material and impact n business plan; Perfrmance cmmitment definitins; Special cst factr claims in cntext f custmer csts and benefits; Discussin theme: affrdability. 12/06/2018 Full CSP meeting Phase 3 research utput; CSP feedback t SESW n initial cnclusins against the Ofwat questins and guidance 03/07/2018 Full CSP meeting Phase 3 research findings and impact n business plan; Discussin f draft CSP reprt; WRMP statement f respnses. 18/07/2018 CSP meeting with SES NEDs Review Bard assurance re engagement and business plan 20/07/2018 Private CSP meeting CSP review f PR19 draft reprt and SESW draft business plan cntent 20/08/2018 Full CSP meeting Review with SESW f CSP PR19 draft reprt and SESW draft business plan In additin the CSP Chair initiated and participated in mnthly meetings with the SESW MD plus apprpriate management, t review prgress and challenges/issues, and individual CSP members had fllw up meetings with SESW managers n specific PR19 tpics (e.g. vulnerability, resilience, innvatin). The CSP Chair als attended the quarterly Ofwat plus CCG Chair meetings (invlving the CCG Chairs frm the ther water cmpanies). These meetings were extremely valuable in receiving regular updates and debates with Ofwat, plus sharing issues and discussins with the ther CCG Chairs. The full CSP meetings generally included a pre-meeting in private (i.e. excluding SESW management) fr the CSP t discuss key issues and agree a cnsensus view t carry frward t the main meeting. The main meeting then cnsisted f presentatins given by SESW (r cnsultants wrking n its behalf) n custmer engagement and technical aspects f its water resurces plan, Business Plan, its planning methdlgies and assumptins and n its interpretatin f Ofwat s business planning requirements. The CSP reviewed and challenged the cmpany n the basis f the supplied infrmatin frm the presentatins and supprting dcuments. Cnclusins and actins were agreed by the CSP, dcumented and fed back t SESW. Fr ease f reference, the minutes f all CSP meetings are available via the SESW website, as well being included in Appendix 5. As part f the PR19 prcess the CSP put in place a Challenge Lg (refer t Appendix 2, als Appendix 5 ref 1) in rder t keep an nging recrd, and hence evidence, f challenges raised by the CSP and the assciated respnses and utcmes frm SESW. The scpe f these challenges reflects the rbustness f the CSP prcess in seeking t clsely mnitr the SESW custmer engagement prgramme and the impact f this n the SESW Business Plan, as well as adhering t the Ofwat methdlgy guidance and expectatins. The cmpany has welcmed and acted n the advice and challenges prvided by the CSP, and agreed, where apprpriate, changes and amendments t SESW s plans. This includes, fr example, changes t custmer research apprach and materials, amendments t utcmes and perfrmance measures, and mre clarity in the cmpany s cmmunicatin with its custmers. The Challenge Lg is updated after each CSP meeting and als reviewed with SESW. The detail f challenges made by the CSP, and hw these were dealt with, are explained as apprpriate in the fllwing sectins ( ). Fllwing the review f the Phase 2 research utput and cnclusins, and the cmmencement f Phase 3, the CSP Chair dcumented a week by week calendar (frm Page 12 v2.0 September 2018

14 CSP Reprt n SES Water s Business Plan May 2018 nwards) in rder t ensure an apprpriate fcus f the necessary activities t prgress the CSP PR19 review, and align with the SESW schedule f activity and Bard meetings (ref Appendix 4). The CSP cmmends the management cmmitment f SESW in supprting the CSP review prcess. SESW is a relatively small Water-Only cmpany, with limited resurces, and yet there has been strng cmmitment t the prcess by the whle team. The SESW MD and Finance Directr attended almst all CSP meetings, and individual Bard members als cnsistently jined specific meetings. In additin the CSP was given access t the Bard and particularly the NED s in rder t discuss their perspective and insight n the PR19 prcess. The CSP and the cmpany have been able t wrk cnstructively tgether in rder t achieve their respective bjectives. It has been an iterative prcess and the significant changes the cmpany has made during the custmer engagement activity, and then during the Business Plan drafting and review, is further evidence f the cmpany listening and respnding t custmers, its stakehlders and the CSP. The CSP can reprt that SESW has c-perated fully with the CSP, and has respnded psitively and penly t its challenges and infrmatin requests. It shuld be nted, hwever, that the CSP did raise cncerns that the timetable fr the prductin f the draft Business Plan, and apprval by the SESW Bard f the Final Business Plan, has cnstrained the CSP in terms f having adequate time t fully cnsider the drafts and final versin f the Plan. This has limited the CSP s ability t fully and effectively discuss and challenge all Business Plan cntent and updates Custmer engagement & quality f Plan CSP review and challenges during the custmer engagement Appendix 3, sectin prvides a detailed accunt, n a chrnlgical basis, f the review and challenges made by the CSP during the three phases f the custmer engagement prcess, and als identifies the respnses frm, and any actins agreed with SESW, as well as illustrating examples f evidence in supprt f the CSP cnclusins CSP review and challenges regarding Triangulatin Ofwat s guidance identified Triangulatin as a useful tl t help ensure the review f engagement evidence was mre rbust. Appendix 3, sectin utlines the review and challenges frm the CSP relating t SESW s apprach t Triangulatin, and the imprvements agreed t prvide a mre apprpriate use f Triangulatin in the prcess CSP cnclusins relating t Quality f SESW Custmer Engagement & the Impact n the Business Plan As abve, Appendix 3 (sectins and 4.3.2) prvides detail n hw the CSP reviewed and challenged, as apprpriate, the SESW activity n custmer engagement, triangulatin and the subsequent cnclusins and actins that SESW fllwed thrugh t its business planning. The cnclusins frm this prcess need t be cnsidered against Ofwat s requirement that the CSP cmment n the verall quality f SESW s custmer engagement, which the CSP cnsidered in relatin t the fllwing criteria; Seeing evidence f a clear starting pint f custmer views A rbust and apprpriate research plan Page 13 v2.0 September 2018

15 CSP Reprt n SES Water s Business Plan The quality f the research sample; hw representative it was and the mix f qualitative and quantitative research The quality and inventiveness f the research analysis and feedback, and the linkages f the qualitative and quantitative utputs The extent t which there are clear linkages f the utput cnclusins t evidence f having an impact n the final Perfrmance Cmmitments and Business Plan cntent In the cntext f the abve, the CSP has fcused its attentin n respnding t the varius questins defined by Ofwat in the Aide memire fr Custmer Challenge Grups 1, the Custmer Engagement Plicy 4, and the Final Methdlgy 5. Table 3.2.3i plus sectins f this reprt include the CSP view f SESW s cnfrmance in respect f the apprpriate Ofwat questins relative t that sectin. Overall cnclusins frm the CSP in the cntext f the abve, and based n the mre detailed cmments in Appendix 3, sectins and 4.3.2, are summarised in the fllwing table (Table 3.2.3i). These enable the CSP t cnclude that; SESW has ensured the custmer engagement and research emplyed by the cmpany was apprpriate, sufficient and gd quality; it was supprted by CSP and third party review and fllwed gd industry practice. SESW prgressed a cmprehensive engagement prgramme in 3 prgressive phases that refined the identified custmer pririties and acceptability f prpsals. The CSP prvided review and challenge n such as questinnaires, sampling and perceived gaps in apprach. Overall SESW calculated 2,706 retail custmers were engaged with in the research and Business Plan cnsultatin. althugh the CSP cnsiders that the verall engagement wuld have benefited frm a clearer prgramme plan including strategy, aims, bjectives and triangulatin apprach at the utset f the prcess. The CSP als cnsiders that the quantitative research was strnger and f mre cnsistent quality than the qualitative research The CSP is cnfident that it was apprpriately invlved in reviewing and challenging the utputs and cnclusins f each phase f the custmer engagement, and had the pprtunity t attend and bserve cmpnents f the research (wrkshps etc). The CSP agrees that there was clear evidence f SESW understanding custmer pririties, and testing an apprpriate set f service ptins; with an effective prgramme f acceptability testing in Phase 3; and that SESW has effectively engaged with and understd the needs and requirements f different custmers. The CSP cnsiders that the quality f custmer cmmunicatins imprved as the engagement prcess prgressed. Recent cnsultatin dcuments n WRMP, SESW Visin, and SESW Business Plan were cmmended by the CSP. SESW c-perated well with the CSP and respnded psitively and cnstructively t its challenges and infrmatin requests. As a cnsequence the CSP is cnfident that its challenges have significantly imprved the custmer engagement quality and utput; e.g. amendments t custmer research apprach, utcmes and measures f success (e.g. PC s and ODIs), the clarity f the cmpany s cmmunicatin with its custmers and wider stakehlders, plus updates t the Business Plan cntent. SESW has ensured that the evidence frm custmer engagement has driven and infrmed the develpment f the SESW Business Plan The CSP cncludes that there was a well-cnstructed range f detailed plans, actins and cmmitments in the SESW Business Plan that refer t, and take accunt f, apprpriate custmer engagement; e.g. Chapter 1, Sectin 1 ( What we ll deliver hw insight shaped ur plan ) summarises the linkage between key custmer pririties and SESW planned actins. 4 Ofwat custmer engagement plicy 5 Ofwat Final methdlgy Page 14 v2.0 September 2018

16 CSP Reprt n SES Water s Business Plan Table 3.2.3i In particular the Custmer Experience Transfrmatin prgramme is a key cmpnent f the nging custmer service planned imprvements that were partly influenced by engagement feedback (ref Business Plan Chapter 3). Chapters 2, 3, and 7 f the Business Plan als include clear linkages t frward plans n resilience and perfrmance cmmitments. Questins re Quality f Engagement Custmer engagement; What is the quality f the cmpany s custmer engagement and participatin and hw well is it incrprated int the cmpany s business plan and nging business peratins? Has custmer engagement been an nging, tw-way and transparent prcess, where cmpanies are infrming their custmers as well as sliciting feedback frm them? Has the cmpany develped a genuine understanding f its custmers' pririties, needs and requirements and where apprpriate custmer valuatins drawing n a rbust, balanced and prprtinate evidence base? Has the cmpany engaged with custmers n the issues that really matter t them? Where apprpriate, has the cmpany engaged with its custmers n a genuine and realistic range f ptins? CSP cnclusins The CSP cncludes that verall SESW has ensured effective and gd quality Custmer Engagement; and that utput frm this prgramme has impacted upn and been incrprated in the SESW Business Plan SESW has prgressed a cmprehensive engagement prgramme in 3 prgressive phases that refined the identified custmer pririties and acceptability f prpsals. The CSP has prvided review and challenge n such as questinnaires, sampling and perceived gaps in apprach. The CSP invlved in reviewing and challenging the utputs and cnclusins f each phase, and cncludes there was clear evidence f SESW understanding custmer pririties, and testing an apprpriate set f service ptins, and acceptability testing. The CSP cnsiders the quality f custmer cmmunicatins imprved as the engagement prcess prgressed. Recent cnsultatin dcs n WRMP, SESW Visin, and SESW Business Plan cmmended by the CSP as gd custmer rientated dcuments. The CSP cncludes that the verall custmer engagement has been an effective and transparent prcess, with clear linkages and evlutin acrss the 3 phases. Sectin 2.1 explains the SESW custmer engagement prcess, and Appendix 3 sectin cvers the CSP's review and challenge during the prcess, which are gd evidence f the extent f an nging, transparent and detailed prgramme f custmer engagement, which was refined as the prgramme prgressed. SESW actively sught t ensure that material and structure f all engagement activity was designed t educate and infrm, and the CSP was actively invlved in review, cmment and challenge n cntent and utputs. Wrkshps during the prgramme were used t help infrm/educate custmers as well as gain input and feedback. SESW als implemented a custmer prtal t facilitate nging engagement with research participants and ther custmers; SESW als created a brand fr custmer cmmunicatins ( Talk n Water ) t prvide a theme and link fr cmmunicatins. SESW put significant effrt int prducing custmer friendly cmmunicatins and dcuments, cmmended by the CSP, ntably the SESW Visin, WRMP Cnsultatin, and Business Plan Cnsultatin dcuments. The CSP cncludes that SESW has prvided sufficient evidence that it understands its custmers and stakehlders, and an apprpriate set f pririties was defined and tested. The Phase 2 utput (ref figs 4.3.1i and 4.3.1iii) displayed gd evidence f infrming custmers and gaining effective insight int their pririties, cupled als with the quantitative analysis (ref figs 4.3.1iv vii). The Business Plan cnsultatin exercise prvided further evidence f engaging with custmers n pririties. The "Triangulatin and trade-ffs" dcument (Appendix 5 ref 2) prvided a helpful explanatin f evidence surces and linkages t clarify the starting pint cnclusins n custmer pririties, and then hw the research refined that. The cmprehensive 3 phase engagement apprach was designed t achieve the bjective f understanding pririties, needs and requirements with the inclusin f research int custmer valuatins. Sme challenges frm the CSP e.g. sme limited Phase 2 sample sizes fr qualitative research; and view that sme areas shrt-term fcused and nt enugh input n e.g. envirnmental and lng term resilience. The CSP cncludes that SESW has identified a realistic package f ptins and engaged effectively with custmers fr acceptability testing, althugh the CSP has challenged sme levels f perfrmance cmmitments. Phase tw quantitative research used a genuine and realistic range f ptins influenced by what SESW knew was imprtant t custmers and ther stakehlders. Deliberative wrkshps (particularly thse held as part f Phase 2) fcused arund setting challenges, e.g. design f custmer jurneys, the dry winter challenge. Bx Clever research in Phase 2 (ref figs 4.3.1iv vii) & Phase 3 seen as innvative in way they packaged plan ptins and interactively tested with research grups. Page 15 v2.0 September 2018

17 CSP Reprt n SES Water s Business Plan Where apprpriate, has the cmpany cnsidered hw custmers culd help c-create and c-deliver slutins t underlying challenges? Has the cmpany effectively engaged with and understd the needs and requirements f different custmers, including thse in circumstances that make them vulnerable? Has the cmpany cnsidered the mst effective methds fr engaging different custmers, including thse that are hard t reach? Business Custmers Has SESW engaged with business retailers t learn abut their views and the views f their custmers? Has the cmpany effectively engaged with its custmers n lnger term issues, including resilience, impacts n future bills and lnger-term affrdability? Des the Business Plan adequately cnsider and apprpriately reflect the ptential needs and requirements f future custmers? Wherever apprpriate, has the cmpany engaged with its custmers n the lng-term resilience f its systems and services t custmers? Has the cmpany effectively infrmed and engaged with custmers n its current levels f perfrmance and hw des this cmpare t ther cmpanies in a way custmers culd be expected t understand? The CSP cncludes that, while SESW has sught t engage with custmers n c-creatin/c-delivery, the depth and scpe was smewhat limited; e.g. the CSP cnsiders that the SESW definitin and evidence f c-creatin/cdelivery des nt fully align with guidance in Ofwat s Tapped In reprt. SESW view is that they had met the requirement, including reference t custmer wrkshps in the engagement prgramme n e.g. design f custmer jurneys, the dry winter challenge and implementing cmpulsry metering. Phase 3 included c-creatin wrkshps n a preferred scial tariff prcess. The Business Plan identifies SESW plans fr further c-creatin activity. The CSP cncludes that the cmpany has effectively engaged with and understd the needs f different custmer grups; including thse in vulnerable circumstances. SESW respnse is that they ensured a degree f segmentatin in the sampling, plus implementing a range f different cntact appraches (e.g. hme visits, carer wrkshps, cmmunity grups). SESW sught t ensure that the appinted research agencies created engagement activity designed t prvide a representative sample and therefre represented a brad grup f different custmers. Overall 2,706 retail custmers engaged with. Deliberative wrkshps fcused arund setting challenges, e.g. design f custmer jurneys, including hw t better supprt custmers in vulnerable circumstances. Phase 3 research als included brad sampling, and segmentatin, including sme targeted activity n custmers in vulnerable circumstances and the scial tariff. Hwever the CSP maintains that the engagement relating t nn-financial aspects f custmers in vulnerable circumstances culd have been brader (ref 3.3.1). After CSP challenge during Phase 2 regarding the limited sample f custmers in vulnerable circumstances and future custmers; SESW respnded and tk sme accunt f the challenges raised - augmenting via e.g. cmmunity based wrkshps, and adaptatins t Phase 3 apprach. The CSP cncludes that SESW has met the requirement t engage with business custmers, and accunt fr their views althugh the CSP view is that SESW culd have dne mre sner n business custmer engagement; i.e. the main significant engagement was late in Phase 3 (105 interviews with Business Custmers). Overall cnclusins aligned with husehld custmer utputs, althugh strnger appetite fr SESW t d mre n leakage and PCC. The CSP cncludes that SESW has effectively engaged with custmers n sme aspects f lnger term issues; and included in its Business Plan cnsideratin f ptential needs/requirements f future custmers. but did flag sme challenges (see under Resilience/cnsumptin belw). WRMP research (ref Appendix 5 ref 3), in particular, fcused n meeting the lngerterm supply-demand balance. Particular fcus f qualitative research was n educating custmers regarding the dry winter challenge and debates n what SESW and custmers can d. Phase 2 quantitative research cvered a number f ptins related t the lng-term resilience f supplies metering rate, supply failures, leakage reductins and pipe replacement rate, educatin and water efficiency. Phase 3 research als had sme fcus n this, where SESW tested a package f future services and bill impacts (ref figs 4.3.1iv vii), plus cnsultatin n the WRMP. The Phase 2/3 research purpsely included targeting future bill payers The CSP cncludes that SESW did effectively infrm and engage with custmers n current levels f perfrmance, but less s regarding cmparisns with ther cmpanies. SESW has used cmparative data t assist in evidencing its ratinale fr perfrmance cmmitments, and lnger term targets (e.g. fr leakage, PCC, bursts) and then tested the PCs with custmers. SESW state that current perfrmance is reprted thugh its Annual Reprt including in an accessible custmer-fcused frmat. Sme elements f cmparative perfrmance included in Phase 2 wrkshps, and in Phase 3 quantitative research, and the Business Plan Cnsultatin dcument referred t imprvements vs current perfrmance. Hwever, despite the CSP challenge, SESW cnsciusly chse nt t test the impact f prviding cmparatr infrmatin in Phase 2 quantitative research, stating that prir research by water cmpanies has shwed that prviding cmparative infrmatin has n statistically significant impact n the chices made by custmers. Page 16 v2.0 September 2018

18 CSP Reprt n SES Water s Business Plan Questins re Impact n Business Plan Has the evidence and infrmatin btained frm custmers (including thrugh the cmpany's day-t-day cntacts with custmers) genuinely driven and infrmed the develpment f the Business Plan t benefit current and future custmers? What tradeffs (fr example between different custmers) have been identified and hw has the cmpany prpsed t deal with these? Vulnerability Has SESW a bespke perfrmance cmmitment n addressing vulnerability CSP view Resilience/cnsumptin Hw has custmer engagement impacted n SESW plans fr Resilience/ Cnsumptin; and d the plans reflect the needs and requirements f future custmers, as well as current nes. Innvatin Hw well des the cmpany s business plan demnstrate that it has the right culture fr innvatin which enables it, thrugh its systems, prcesses and peple, t deliver results fr custmers and the envirnment frm innvatin? CSP cnclusins The CSP cncludes that there is apprpriate evidence that verall SESW has ensured that the custmer engagement prgramme has genuinely impacted the develpment f its Business Plan. The SESW dcument (Appendix 5 ref 2) agreed as helpful t the CSP in clarifying the starting pint cnclusins n custmer pririties, and hw the 3 phases f research refined that, and then flwed thrugh t the Business Plan. The CSP initially strngly challenged SESW apprach t Triangulatin, fllwing which SESW reviewed revised prpsals with the CSP, which was agreed as an apprpriate basis f evidence (ref Appendix 3 sectin 4.3.2), and thus imprved the evidence f the linkages between the custmer engagement and Business Plan prpsals. Hwever a clearer strategy and methdlgy arund this frm the start wuld have strengthened the evidence gathering and analysis fr the Business Plan. The WRMP and Business Plan Cnsultatin dcuments (Appendix 5 ref 4, 5) have a clear link back t the research cnclusins frm custmers, and the prpsed PCs (ref sectin 3.4 and 3.7) are als well evidenced frm the engagement utputs. Regarding trade-ffs between different custmers, SESW identified 3 cre grups f custmers (Cst Cnscius, Water Cnscius, Water Blind ref sectin 4.3.1) and used these t segment utput frm research and then create balanced ptins f service packages (ref figs 4.3.1iv-viii) t test in the further research phases. The Business Plan (e.g. in chapters 1, 3, 4) prvides gd evidence f detailed plans fr custmer and service imprvements based n custmer engagement evidence. A key challenge frm the CSP has been that the timetable fr prductin and apprval by the SESW Bard f the detailed Business Plan (as ppsed t the Business Plan Cnsultatin dc) means that the CSP has been cnstrained in terms f having adequate time t fully cnsider the drafts r final versin f the Plan. SESW has met the requirement and have prpsed 2 related bespke PC's fr addressing vulnerability. These are (ref sectin 3.3.1); Vulnerable supprt scheme awareness: Vulnerable supprt scheme helpfulness: The CSP cncludes that PR19 research and custmer engagement n resilience/cnsumptin was brad and effective, with gd engagement acrss custmers and stakehlders, including educating/infrming f disruptin risks. The CSP cncludes that SESW had effectively researched a range f mitigatin ptins and undertaken acceptability testing n an apprpriate range f packaged ptins t identify an ptimal value fr mney t custmers, based n the WTP research. The CSP cnsiders that SESW has effectively engaged with custmers (including future custmers) n sme aspects f lnger term issues. but did flag sme challenges re (i) future custmer research samples being small; (ii) limited assurance n the custmer engagement n levels f service fr lnger term resilience (e.g. custmer views n asset resilience t extreme weather, and ecsystem resilience); (iii) ptential fr imprved reginal planning within WRSE t cnslidate resilience risk assessment acrss water cmpanies WRMP utputs; (iv) Perfrmance cmmitments mre shrt-term (t 2025) than lng-term, althugh Business Plan (Chapter 4) includes sectin n lng-term resilience. The CSP cncludes that SESW has a well embedded culture f innvatin, led frm the Chair, with cncrete examples f existing and planned innvatin. The Business Plan has a specific Chapter n innvatin, with gd evidence f hw SESW has made prgress n innvatin bth culturally and practically, and hw innvatin will deliver results fr custmers. The CSP recgnise that Innvatin is embedded in the culture f SESW and there is a sund strategy in place t empwer staff t innvate. The CSP has als seen bttm up innvatin in sme aspects f the custmer engagement; and innvatin appears t have been prmted and secured as part f the apprach t qualitative and quantitative custmer research. SESW has been explring the use f new innvative techniques f mains cnditin assessments and techniques used t lay new mains. Althugh the final versin f the Business Plan is much imprved in this area, the CSP cncludes that the Plan detail n innvatin still appears strnger in peratinal areas than in custmer engagement; and that the Plan cntent culd have included a brader balance f nn-peratinal (e.g. custmer service, envirnment) initiatives versus the many (and gd) peratinal initiatives. Page 17 v2.0 September 2018

19 CSP Reprt n SES Water s Business Plan Financeability Is there evidence f custmer supprt where cmpanies take steps t address financeability cnstraints? Cst efficiency/investment Is there evidence re custmer supprt fr cst adjustment claims and investment plans prjects? Accunting fr past delivery Is there evidence custmer supprt fr prpsed adjustments t price cntrls? Perfrmance cmmitment levels What is CSP s view n hw the cmpany has apprached this? Is there evidence f Custmer engagement and supprt fr each prpsed utcme, perfrmance cmmitment and ODI? Affrdability f the prpsed business plan fr custmers Has SESW apprpriately tested affrdability with custmers; and what is the CSP pinin/ assessment? Securing cnfidence/assurance T what extent has the cmpany s full Bard prvided assurance that the Business Plan is high quality, resilient and deliverable, and accunts fr custmer engagement? The CSP met with Bard NEDs n 18 July and received assurance frm Bard that the Plan is financeable. The NED s prvided assurance n SESW s apprach t reducing the gearing, in line with Ofwat guidance. Thus, n specific steps t address cnstraints are prpsed in SESW Business Plan, as defined actins n gearing/equity injectins mean n need t add anything t custmers bills t ensure they remain financeable. The CSP assured by SESW that the nly cst adjustment claim is in relatin t SESW s statutry bligatin n sftening; s n relevant cst/investment prjects. SESW has assured the CSP that the impact f adjustments fr past delivery have all been incrprated in the draft Business Plan verall acceptability research. PR14 rulebk methdlgy has been fllwed; and the key pint frm SESW s perspective is that custmers are nt being asked t pay mre than they wuld d if there were n adjustments. The CSP cnsiders that SESW cmpleted an effective prgramme f engagement n PCs, and tk accunt f the views f custmers as expressed by the WTP research; and tk n many f these views. The CSP cncludes that there is gd evidence supprting the acceptability f PCs; and that n balance the degree f stretch seems apprpriate. SESW has increased the level f ambitin n per capita cnsumptin and leakage, in part fllwing custmer and the CSP views, as well as EA/Ofwat WRMP feedback. The CSP als cnsiders that the custmer facing publicatin cntaining the draft cmmitments was very clear and apprpriately pitched. The CSP flagged a number f challenges n PC s/odi s, which SESW respnded t (ref sectin 3.7.3). Hwever the CSP challenged that SESW has nt specifically tested the ptential impact f ODI rewards/penalties with custmers; althugh SESW has explained their ratinale fr this (ref sectin 3.7.2). The CSP cncludes that the research and analysis has prvided sund evidence f an effective apprach t validate the acceptability f the SESW Business Plan and t explre the mst acceptable cmbinatins f service cmmitments versus verall willingness t pay. Gd evidence f infrming custmers, such as the clear explanatin f the ptential bill impact (ref fig 2.3.1x). The Business Plan cnsultatin prvided additinal input t the affrdability research beynd the Phase 3 qualitative and quantitative research Research analysis validated that there was general custmer acceptance f the plan (71%), and as with the Phase 2 research there was an effective apprach f testing acceptance at a packaged service level rather than just individual cmpnents The CSP was impressed with the methdlgy used t prvide effective feedback n the trade-ffs that custmers wuld cnsider (ref fig 2.3.1xi). The research analysis helped infrm subsequent decisins n adjustments t leakage, PCC and Scial Tariff cmmitments. The CSP has had psitive assurance frm the Bard nn-executive Directrs that the Bard has apprved a business plan that is high quality and deliverable, takes accunt f custmer engagement feedback; and that the Bard has challenged management t ensure this is the case. The CSP held tw private meetings with Bard NEDs t discuss the Bards assurance prcesses and cnclusins, and a Bard NED attended mst f the CSP meetings CSP challenges and cmpany Respnse The Challenge Lg (Appendix 2) prvides the detail f challenges raised, the cmpany respnse and the CSP cnclusins. Appendix 3 sectin als describes in detail when and hw the CSP has raised challenges during the engagement prcess. The key challenges relating t quality f the custmer engagement are items 2, 6, 8, 10, 11, 14, 16, 17, 19, 21, 27, 28, 30, 35, 37 plus item 18 in relatin t triangulatin. The scpe f these challenges reflects the rbustness f the CSP attentin and pririty in seeking t clsely mnitr the SESW custmer engagement prgramme, and adhere t the Ofwat methdlgy guidance and expectatins. The Challenge Lg entries als cnfirm that SESW has c-perated well with the CSP, and cnsistently respnded psitively and cnstructively t its challenges and infrmatin requests. Page 18 v2.0 September 2018

20 CSP Reprt n SES Water s Business Plan As a cnsequence the CSP is cnfident that it has adequately challenged SESW in these areas, and has psitively impacted the SESW planning, such that the Business Plan cntent reflects apprpriate impact f the custmer engagement cnclusins. A summary f the key areas f challenge frm the CSP, regarding the quality f custmer engagement, and impact n the Business Plan, plus the SESW respnses t these is; Key areas f challenge relating t Quality f Custmer Engagement Timing and cntent f the (particularly Phase 2) custmer engagement SESW briefed the CCG n its apprach t managing the prductin f its PR19 Business Plan; and prvided a detailed Custmer Engagement strategy (ref sectin 2.1, and SESW Business Plan, Chapter 1). The CSP met with research agencies and reviewed/cmmented n scpe and materials. Cncerns re sme limited sample sizes (e.g. nn-financially vulnerable, future custmers) in Phase 2 research; plus limited cmmunity engagement. the CSP clarified cncerns t SESW (ref Appendix 5 ref 6), and discussed in detail. SESW respnded prmptly, psitively and cllabratively in terms f the challenges raised and prvided pre-reading f SESW respnses. These were then discussed between the CSP and SESW at a pre-meeting prir t the March 2018 CSP meeting (ref Appendix 5 ref M6). SESW has respnded and taken accunt f the challenges raised augmenting via e.g. cmmunity based wrkshps, and adaptatins t Phase 3 samples and apprach. Lack f clarity regarding triangulatin and flw f evidence SESW prduced the Triangulatin and trade-ffs dcument (Appendix 5 ref 2), which prvided helpful explanatin f evidence against each f 9 Business Plan areas t clarify the starting pint cnclusins n custmer pririties, hw the research refined that, and hw it was accunted fr in the Business Plan. Fllwing further challenge frm the CSP re extent f SESW aligning with Ofwat/CCW guidance n triangulatin, the CSP rganised a fllw up cnference call including members f CCWater plicy team invlved in the Defining and Applying Triangulatin in the Water Sectr research (ref Appendix 5 ref 16) t discuss hw SESW might imprve alignment with the guidance. SESW respnded psitively in reviewing and restructuring the triangulatin apprach and develping a prpsed evidence template (ref Appendix 3 fig 4.3.2i), which was presented at the May CSP (ref Appendix 5 ref 7). The CSP agreed that the prpsed template was a significant imprvement and, given the stage in the research prcess, wuld prvide a reasnable basis fr triangulatin, althugh with greater planning and time it culd have gne further. Key areas f challenge relating t reviewing Impact n Business Plan Phase 3 timetable/utputs, and then the timetable fr prductin and apprval by the SESW Bard f the detailed Business Plan meant that the CSP has been cnstrained in terms f having adequate time t fully cnsider the drafts r final versin f the Plan. SESW presented its detailed wrkplan fr Phase 3 and Business Plan prductin, and the CSP integrated this int its wn wrkplan (ref Appendix 5) At the May 2018 CSP meeting (Appendix 5 ref M7), there was further discussin regarding the CSP challenges (ref Challenge Lg items 36 & 37) relating t ptential lack f time fr the CSP t adequately take accunt f the Phase 3 utput plus SESW s Business Plan drafting. The CSP agreed the need fr an additinal private sessin at the end f July (fr CSP members nly), in rder t review cnclusins and drafting prir t the August finalisatin f drafting. Page 19 v2.0 September 2018

21 CSP Reprt n SES Water s Business Plan SESW agreed t ensuring that infrmatin and dcumentatin wuld be drip fed t the CSP, particularly detail related t the final draft planning stage, due t take place between 11 June and week cmmencing 13 August. The CSP discussed with SESW management the prblems f cmpressing the custmer engagement, analysis and Business Plan preparatin int a relatively shrt timeframe, thus impacting n the quality f engagement and being able t take n bard feedback. SESW has respnded that in future it wuld see custmer engagement as an nging activity t help infrm and adapt plans each year. The CSP has welcmed this as a psitive imprvement fr future planning. Hwever the CSP did nt see any full cnslidated draft f the Plan prir t Aug 15 th, and the Bard were due t sign ff the Plan n Aug 20 th. The CSP did have earlier insight and engagement, e.g. n PCs/ODIs, which enabled sme review f hw the custmer engagement was impacting the business plan; and ultimately were able t review ther Plan cmpnents, but it was very late in the prcess. Resulting frm the abve the fllwing remain the key areas f utstanding challenges/ pints f nte: The CSP cnsiders that SESW s engagement apprach, while cmprehensive and effective, culd have benefited frm strnger prject planning with regard t engagement and the wider business plan prcess at the utset. The CSP accepts that there was a clear Custmer Research brief and plan but cnsiders that there culd have been a clearer verall engagement strategy including e.g. strategic aims, initial hyptheses, the rle f research vs ther engagement surces (e.g. BAU data) and hw triangulatin wuld be embedded in the apprach. SESW s decisin t appint a range f different research prviders t prvide a variety f insights was admirable, but having a lead partner t bring this all tgether fr SESW wuld have perhaps been mre beneficial t help triangulate the emerging findings and made the prcess mre efficient. SESW s view is that they intended Phase 1 ( Listen/Learn ) as a basis t infrm a mre detailed apprach and plan; and the CSP agree that the engagement apprach did evlve ver the plan perid and did ultimately deliver an effective utput but the CSP maintains the view that the prcess wuld have been mre efficient had it included clearer aims and prject plan at the utset. The CSP remains f the view that the timetable fr prductin and apprval by the SESW Bard f the detailed Business Plan meant that the CSP has been cnstrained in having adequate time t fully cnsider the drafts r final versin f the Plan. This limited the CSP s ability t fully and effectively discuss and challenge all Business Plan cntent and updates, althugh the CSP did its best t prvide rapid feedback t SESW, wh equally sught t take accunt f the CSP suggestins in the final Business Plan such that the CSP cnsiders the final Business Plan t be f a high quality. While the CSP agrees that the custmer engagement has been cmprehensive and effective, there are sme limited areas where the CSP cncludes that the sampling and assurance culd have been imprved, and thus prvided strnger assurance e.g. The CSP cnsiders that there culd still have been mre assurance f evidence f sufficient engagement with custmers relating t nn-financial supprt fr thse in vulnerable circumstances. While SESW has sught t engage with custmers n c-creatin/c-delivery, the depth and scpe was smewhat limited (e.g. the Phase 2 wrkshps were rather traditinal in style with limited utput). The CSP ntes, hwever, there were sme better examples in Phase 3 (e.g. c-creatin f scial tariff/vulnerability pathway). Limited assurance n Future Custmers viewpints and impact n lnger term cmmitments (e.g. in resilience), where the CSP challenged re lw sampling f specific future custmer grups (althugh there was a larger sample f future Page 20 v2.0 September 2018

22 CSP Reprt n SES Water s Business Plan custmers in Phase 3, and there is detail and evidence fr lnger term resilience actins in the Business Plan Chapter 4 and 7). Nn-Husehld Custmers: cncern re extent and depth f sampling n nnhusehld custmers; althugh late in Phase 3 SESW presented results f 105 business custmer interviews n acceptability and willingness t pay Vulnerability/Affrdability The CSP has cnsidered separately the SESW research and cnclusins relating t; 1. Vulnerability: i.e. custmers in circumstances that make them vulnerable e.g. due t a custmer s persnal characteristics, changes in persnal circumstances r a cmbinatin f bth 2. Scial tariff: i.e. the specific supprt prvided by SESW fr custmers whse financial circumstances make it difficult fr them t affrd their bills Vulnerability Appendix 3, sectin prvides a summary f the analysis, review and challenges made by the CSP, relating t custmers in vulnerable circumstances, during the custmer engagement prcess, and als identifies the respnses frm, and any actins agreed with SESW. Based n Ofwat s PR19 methdlgy questin pints, and in cnsidering the abve analysis f SESW s engagement n vulnerability, the CSP cncludes that; Vulnerability Cnclusins relating t Quality f Engagement The quality f the cmpany s custmer engagement n vulnerability; hw well cmpanies use gd-quality available data t understand their custmers and identify thse wh are in circumstances that make them vulnerable SESW has prgressed a structured and targeted apprach t custmer engagement f custmers in vulnerable circumstances, bth via qualitative and quantitative research (ref SESW Business Plan Chapter 1). SESW has been respnsive fllwing challenge frm the CSP, and adapted its plans t braden the sample size f custmers in vulnerable circumstances; althugh the CSP remains f the view that sample sizes specifically f custmers in nn-financially vulnerable circumstances was limited. SESW has engaged widely and effectively with custmers in the 3 phases f research t gain imprved understanding and willingness t pay data s that its Business Plan takes due accunt f the custmer views. (See further cmments in the Scial Tariff cnclusins belw). Figs 4.3.3i & 4.3.3ii (ref Appendix 3) illustrate hw the mix f qualitative and quantitative research, plus SESW s engagement with cmmunity grups and stakehlders, has enabled a gd understanding f custmers in vulnerable circumstances as input t SESW s service planning. Evidence that the cmpany s apprach t vulnerability is targeted, efficient and effective. SESW s current scial tariff is well respected, and has ne f the largest % uptake in the cuntry. The CSP cnsistently challenged SESW as t whether it had undertaken sufficient sampling and engagement with nn-financial aspects f custmers in vulnerable circumstances (ref Challenge Lg items 19, 31 & 34). Despite sme valid explanatins frm SESW at the May 2018 CSP (ref belw), the CSP still cncludes that the research n nn-financial vulnerability has been less cmprehensive and targeted. The CSP has als expressed the view, based n cmparisn with best practice examples (e.g. such as in the Sustainability First s Prject Inspire Reprt referenced earlier), that SESW culd further imprve its assistance fr particularly nn-financial aspects f custmers in vulnerable circumstances. Page 21 v2.0 September 2018

23 CSP Reprt n SES Water s Business Plan Vulnerability Cnclusins relating t Impact n the Plan Evidence that there will be an imprvement in accessibility and supprt t custmers in circumstances that make them vulnerable SESW has used the utput frm the research t enhance a range f capabilities fr supprting custmers in vulnerable circumstances, as identified in the May 2018 CSP presentatin n Vulnerability (frm SESW s head f Retail Services, ref Appendix 5 M7), and als in Chapter 3 f SESW Business Plan; e.g. plans t increase the uptake f the scial tariff, imprving the Pririty Services Register apprach and scpe, raising awareness f services via enhanced cmmunity engagement, retaining and enhancing the Helping Hands scheme, imprved training fr emplyees (particularly in custmer service) t help them identify vulnerable custmer needs. Evidence f gd appraches t using custmer data and wrking with third parties, including ther utilities, t better identify, and target supprt when addressing vulnerability. As abve SESW has prvided gd evidence f using custmer data frm Business as Usual and custmer engagement research t better identify and supprt custmers in vulnerable circumstances, including nging plans fr imprved emplyee training and capability. There is less evidence hwever f wrking with ther utilities and third parties, althugh SESW has identified, and prgressed, engagement with e.g. carer rganisatins, as well as the nging cmmunity engagement related t the Helping Hands Scheme. SESW are als wrking, via Water UK, with ther energy prviders t share data n Pririty Services custmers. The CSP has als flagged that there are pprtunities fr SESW t further enhance the capability f supprt via reference t best practice examples in such as in Ofwat s Vulnerability Fcus Reprt, and in Sustainability First s Prject Inspire Reprt (ref cmments and references under Innvatin with Vulnerability ). Cmpanies must have at least ne bespke perfrmance cmmitment fr addressing vulnerability in its Business Plans fllwing custmer engagement and challenge frm their CSP s. SESW has met the requirement and have prpsed 2 related bespke PCs fr addressing vulnerability. These are; Vulnerable supprt scheme awareness: measure custmer awareness f the supprt SESW ffer custmers in vulnerable circumstances thrugh a regular survey t a representative sample f ur husehld custmers; (Are yu aware f the additinal supprt SESW Water ffers custmers in vulnerable situatins thrugh their Helping Hand Scheme?). Vulnerable supprt scheme helpfulness: measure custmers' attitudes twards the supprt SESW ffer custmers in vulnerable circumstances thrugh a regular survey t a representative sample f ur husehld custmers. (Thrugh its Helping Hand Scheme SESW Water ffers a range f services t custmers that may, fr varius reasns, need a little extra help. D yu feel that these services ffered by SESW Water are helpful?) The CSP has challenged SESW as t whether there might be a mre inventive bespke PC that fcuses mre n the impact and quality f the services and supprt fr custmers in vulnerable circumstances (ref Challenge Lg item 32). SESW respnded that it had sught t identify imprved PCs but hadn t been able t find anything it thught wuld be apprpriate and which was measurable Affrdability/Scial Tariff Appendix 3, sectin prvides a summary f the analysis, review and challenges made by the CSP, relating t the SESW Scial Tariff, during the custmer engagement prcess, Page 22 v2.0 September 2018

24 CSP Reprt n SES Water s Business Plan and als identifies the respnses frm, and any actins agreed with SESW. Based n Ofwat s PR19 methdlgy questin pints related t scial tariff, the CSP cncludes that; Scial Tariff Cnclusins relating t Quality f Engagement Evidence f gd engagement with custmers n affrdability including scial tariff element; custmer supprt fr the scial tariff; the effectiveness f SESW s apprach; the accessibility f the cmpany s supprt fr thse struggling t pay. The CSP is assured that there is clear evidence that SESW has undertaken gd engagement with custmers n the affrdability and scial tariff element. All 3 phases f research included specific targeting f custmers arund the scial tariff. SESW tested a range f ptential scial tariff ptins with a brad quantitative and qualitative sample (ref Phase 2 and 3 utput Appendix 5 ref R2-8). SESW has tested custmer supprt fr the scial tariff bth at the generic level ( d custmers supprt the principle ), and at the detailed level i.e. testing a range f scial tariff ptins frm 2 subsidy (7k custmers) t 6 subsidy (25k custmers). The CSP agrees that the verall apprach, and hw SESW has taken accunt f the engagement in its Business Plan and cmmunicatins, has been effective (ref Business Plan Cnsultatin Appendix 5 ref 5). In terms f the accessibility f the cmpany s supprt fr thse struggling, r at risk f struggling, t pay there is strng custmer supprt fr SESW adpting the highest tested subsidy ( 6/25k custmers) but als (ref Appendix 3 fig 4.3.1xii) sme custmers wuld accept a lesser target in return fr a greater SESW cmmitment n leakage and PCC. SESW has thus pted fr a cmmitment f supprting 19k custmers n the scial tariff (recgnising als that SESW are already ne f the best % achievement fr all water cmpanies relating t scial tariff uptake). The ne area the CSP wuld cntinue t challenge n is whether SESW can still d mre, and be mre innvative, in terms f cmmunicating the availability f the service. The CSP has als challenged whether the SESW strategy fr accessibility/scpe f the scial tariff culd be further imprved in advance f the next Business Plan (beynd PR19), due the ptential impact f such as further Husing Assciatin repatriatins n SESW s capacity fr delivering the scheme, and where SESW fresees any cap t numbers; because if the amunt f subsidy n the bill rises further again then that culd be met unfavurably by custmers. CSP members have als challenged that the link between metering plicy and vulnerability requires further investigatin by SESW, given that evidence frm elsewhere (e.g. the Walker reprt) suggests that cmpulsry metering can have a significant detrimental effect n larger pr families in lw rateable value prperties. Scial Tariff Cnclusins relating t Impact n the Plan T what extent has the cmpany demnstrated that it has apprpriate assistance ptins in place fr thse struggling, r at risk f struggling, t pay? SESW has ne f the best % achievements fr all water cmpanies relating t scial tariff uptake per 10k custmers, and fllwing targeted and detailed research (ref Phase 2/3 utput Appendix 5 ref R2-8) SESW are prpsing a significant increase in subsidy and uptake f the scial tariff. SESW has als reviewed the design and qualificatin criteria fr the tariff t make it mre apprpriate t target grups, and identified the need fr brader and better cmmunicatins t custmers. SESW Business Plan Chapter 3 prvides further evidence and actin plans. The CSP has queried, hwever, whether SESW culd further imprve its targeted apprach, t verify whether the right custmers are truly being targeted i.e. the large number n the scial tariff shuldn t detract frm SESW understanding hw t wrk mre practively with brkers (increasing its wrk with partners like CAB and thers) t ensure the mst vulnerable are being reached. SESW respnded that it is Page 23 v2.0 September 2018

25 CSP Reprt n SES Water s Business Plan wrking with ther SE Water Cmpanies t c-perate n imprved targeting f custmers in vulnerable circumstances. Inclusin f a bespke Perfrmance Cmmitment n financial vulnerability SESW has met the Ofwat requirement and defined a bespke PC, i.e. We will cunt the number f custmers n the Water Supprt Scheme n 31 March each year. The infrmatin required will cme frm ur custmer accunts and billing system. The Water Supprt Scheme ffers a reduced bill fr husehld custmers that meet defined eligibility criteria. The CSP challenged SESW as t whether there might be a mre inventive bespke PC that fcuses mre n the impact and quality f the scial tariff scheme (ref Challenge Lg item 32). SESW respnded that it had sught t identify an imprved PC but hadn t been able t find anything it thught wuld be apprpriate and which was measurable. Hwever, it was discussed with SESW that the measure f % f custmers n the scial tariff wh actually pay their bills is a reasnable impact measure, as this is an indicatin f ptential savings in bad debt Challenges & Respnses regarding Vulnerability The Challenge Lg (Appendix 2) prvides the detail f challenges raised, the cmpany respnse and the CSP cnclusins. The key challenges relating t Vulnerability & Scial Tariff are 19,22,28,31,32,34,39. A summary f the key areas f challenge frm the CSP, regarding the custmers in vulnerable circumstances, and scial tariff, is; The CSP cnsistently challenged SESW as t whether it had undertaken sufficient sampling and engagement with nn-financial aspects f custmers in vulnerable circumstances (ref Challenge Lg items 19, 31 & 34). SESW has been respnsive fllwing challenge frm the CSP, and adapted its plans t braden the sample size f custmers in vulnerable circumstances, and fllwed up n suggestins f ther ways t gain a view n hard t reach custmers in vulnerable circumstances. The mix f qualitative and quantitative research, plus SESW's engagement with cmmunity grups and stakehlders, has enabled a gd understanding f such custmers as input t SESW's service planning. The CSP als expressed the view, based n cmparisn with best practice examples, that SESW culd further imprve its assistance fr particularly nn-financial aspects f custmers in vulnerable circumstances. The CSP acknwledges that SESW did respnd psitively t this challenge as evidenced by the cmments under "Innvatin with Vulnerability" in sectin The CSP queried what currently exists r might be planned in terms f custmer service scripts and/r training t help identify (nn-financial) custmers in vulnerable circumstances when they call in, s that practive supprt can be prvided. SESW respnded that its custmer service imprvement plans (ref Business Plan Chapter 3), and training schemes included actins t accunt fr this. The CSP challenged SESW as t whether there might be a mre inventive bespke PC that fcuses mre n the impact and quality f the services and supprt fr custmers in vulnerable circumstances (ref Challenge Lg item 32). SESW respnded that it had sught t identify imprved PCs but hadn't been able t find anything it thught wuld be apprpriate and which was measurable. The CSP challenged whether SESW culd further imprve its targeted apprach, t verify whether the right custmers are truly being targeted i.e. the large number n the scial tariff shuld nt detract frm SESW understanding hw t wrk mre practively with brkers (increasing the wrk with partners like Citizens Advice Bureau and thers) t ensure the mst vulnerable are being reached. Page 24 v2.0 September 2018

26 CSP Reprt n SES Water s Business Plan SESW respnded that it is wrking with ther SE Water Cmpanies t c-perate n imprved targeting f custmers in vulnerable circumstances The CSP flagged the pint that Universal Credit was being rlled ut in the area and needs t be accunted fr in the Scial Tariff implementatin evlutin. SESW is discussing a c-rdinated apprach n Scial Tariff acrss the Suth East. Further t the abve the CSP wuld nte the fllwing utstanding challenges/pints: Despite sme valid explanatins frm SESW at the May 2018 CSP, the CSP still cncludes that the research n nn-financial vulnerability has been less cmprehensive and targeted than that n the Scial Tariff, althugh has still prvided evidence f effective engagement. The CSP has als suggested that the link between metering plicy and vulnerability may require further investigatin by SESW, given that evidence frm elsewhere (e.g. the Walker reprt) suggests that cmpulsry metering can have a significant detrimental effect n larger pr families in lw rateable value prperties Resilience/Cnsumptin/Envirnment Resilience planning, engagement & analysis The verall apprach t custmer engagement is summarised in Appendix 3 sectin 4.3.1, and highlights that resilience related matters were key cmpnents f the research. Appendix 3 sectin then prvides a summary f the analysis, review and challenges made by the CSP, specifically relating t resilience and the envirnment, and als identifies the respnses frm, and any actins agreed with SESW. In additin the WRMP research and planning was an imprtant assciated activity t the PR19 custmer engagement, as this significantly infrmed the resilience and envirnment planning within PR19. This is als cvered in Appendix 3 sectin Envirnment & Bidiversity Appendix 3 sectin summarises the analysis, review and challenges made by the CSP specifically relating t custmer engagement n the imprtance f envirnmental and bidiversity cnsideratins. This highlighted that custmers did recgnise that educatin and actins (by SESW and custmers) n envirnmental aspects were imprtant cnsideratins. The EA representative n the CSP raised n specific cncerns abut the cmpany s envirnmental bligatins, while recgnising that the EA is undertaking its wn assurance prcess directly with the water cmpanies and will be reprting t Ofwat/Defra in due curse. SESW has included a specific chapter n envirnment in its Business Plan. The CSP welcmes the inclusin f this chapter, and the perfrmance cmmitments related t the envirnment and bidiversity, and nte that, fllwing CSP feedback n the draft Plan, the final versin f the Business Plan is much imprved in this area Resilience/Envirnment: Cnclusins Based n Ofwat s PR19 methdlgy questin pints related t resilience, the CSP cncludes that; Resilience/Envirnment cnclusins relating t Quality f Engagement Evidence f engagement with custmers, t help cmpanies understand their custmers expectatins n levels f service regarding resilience Page 25 v2.0 September 2018

27 CSP Reprt n SES Water s Business Plan The CSP cncludes that (fllwing Phase 2 and 3 engagement utput) that there is sund evidence f SESW engaging effectively with custmers n pririties and expectatins n levels f service (ref Appendix 3 sectin and particularly figs 4.3.1i viii and accmpanying text). Hwever the CSP is less assured by the custmer engagement n levels f service fr lnger term resilience; e.g. custmer views n asset resilience (e.g. treatment wrks, pumping statins) t extreme weather and ecsystem resilience. The CSP (as well as Ofwat) cncluded that insufficient custmer engagement evidence was included in the draft WRMP and expect mre in the final WRMP plan. Hw well has the cmpany used the best available evidence t bjectively assess and priritise the diverse range f risks and cnsequences f disruptins t its systems and services, and engaged effectively with custmers n its assessment f these risks and cnsequences? SESW engaged effectively with custmers/stakehlders during the PR19 custmer engagement, including educating/infrming f disruptin risks (e.g. ref Appendix 3 sectin and including Appendix 5 ref 3), and imprved upn the mre limited engagement during the draft WRMP prcess. EA/Ofwat challenged SESW that it may nt be as resilient t drught events as it is presenting in its plan (ref Appendix 5 ref 8). The CSP flagged t SESW t keep the CSP in the lp n its respnses t EA/Ofwat n this (ref Challenge Lg item 40). Resilience/Envirnment cnclusins relating t Impact n Plan Hw well has the cmpany bjectively assessed the full range f mitigatin ptins and selected the slutins that represent the best value fr mney ver the lng term, and have supprt frm custmers? The CSP cncludes that SESW has effectively researched a range f mitigatin ptins and has undertaken acceptability testing n an apprpriate range f packaged ptins t identify an ptimal value fr mney t custmers, based n the WTP research (ref Appendix 3 sectin 4.3.1). The CSP challenged SESW n the degree f stretch in its initial prpsed PCs fr leakage and PCC. These have been subsequently imprved, but the CSP shares the cncern f EA/Ofwat that, even after SESW has implemented its metering plicy, its custmers per capita cnsumptin is still frecast t be ne f the highest in England (ref Appendix 5 ref 8). It wuld seem unwarranted, therefre, t allw an ODI reward fr exceeding a PCC target which still leaves SESW utside the upper quartile and thus the CSP cnsiders that it might be mre apprpriate t set a threshld f the upper quartile level t nly allw a reward if that level is reached. T what extent has the cmpany set ut a well evidenced lng-term strategy fr securing resilient and sustainable water resurces, cnsidering a twin track apprach f supply-side and demand-side ptins and integrating third party ptins where apprpriate, t meet the needs f custmers and the envirnment in the perid and ver the lnger term? The SESW Business Plan (Chapter 4 re Whlesale ) includes a strategy and supprting actins and evidence fr securing resilient and sustainable water resurces. SESW wrked with EA and the WRMP research agency t agree a brad list f types f ptins that culd be implemented t reslve the demand/supply deficit which were reviewed at the August 2017 WRMP. Whilst different futures have nt been mdelled, detailed mdelling frecasts were undertaken fr the WRMP using the mst up-t-date infrmatin in the public dmain. SESW was als part f the WRSE grup f cmpanies that prduced a single supply ptimisatin mdel fr the suth east. Cncerning third party ptins SESW s plan includes a small transfer t Suth East Water later in the planning perid. Hwever, given that the cmpany is in surplus Page 26 v2.0 September 2018

28 CSP Reprt n SES Water s Business Plan thrughut the 25 year planning perid and in a strategic psitin in Suth East England, the EA has challenged SESW t wrk with ther cmpanies t explre the further ptential fr water transfers. The CSP agrees with the EA viewpint, and ntes that SESW s Business Plan cmmits t wrking mre practively with WRSE t build new water resurce infrastructure. The CSP welcmes the varius initiatives utlined in the Business Plan chapter regarding the envirnment, and ntes that this chapter is imprved in the final Plan versin, fllwing feedback frm the CSP. The CSP ntes, hwever, that this culd have gne further t include a natural capital apprach and greater inclusin f catchment initiatives which wuld supprt resilience in the rund (ref Appendix 3 sectin 4.3.5). T what extent has the cmpany Identified and mitigated risks t peratinal resilience thrugh; Day-t-day perfrmance cmmitments, such as an expectatin f achieving frward-lking upper quartile perfrmance fr supply interruptins; and challenge t cmpanies f a 15% reductin in leakage ver five years? SESW is prpsing t achieve upper quartile perfrmance fr supply interruptins; and t remain best perfrming fr leakage per prperty/day. SESW has increased the level f ambitin n leakage and PCC reductins, but these remain key pririties fr custmers, and particularly the PCC ambitin remains mdest. Als greater reductins in leakage and PCC wuld add t peratinal resilience. Asset health perfrmance cmmitments: challenging cmpanies n mains bursts, unplanned utage and treatment wrks cmpliance. SESW has a perfrmance cmmitment aimed at maintaining industry leading perfrmance fr the number f bursts. Risk-based resilience metrics: intrducing new frward-lking resilience cmmn perfrmance cmmitments fr resilience t drught and flding. SESW has a perfrmance cmmitment (PC) fr zer custmers facing emergency restrictins in a 1:200 year event. SESW states that fllwing the 2013/14 flds it did add fld resilience measures (e.g. fld prf drs t critical sites) and is nt prpsing any mre such wrks, hence there is n specific PC. In terms f drught resilience the CSP nted that the EA has questined (ref Appendix 5 ref 8) why SESW planned fr a 1:35 year event rather than a mre extreme event. The CSP ntes that the Business Plan (Chapter 4) prvides limited detail n resilience f key installatins/assets t flding events (althugh the PC f having 100% f custmers n mre than 1 surce f supply is ne cmpnent). Lnger-term perfrmance cmmitments and planning: we are requiring cmpanies t prvide prjectins fr their perfrmance cmmitments beynd the price cntrl perid ut t at least 2035 t supprt a lnger-term fcus. SESW has prvided sme lnger term prjectins fr key PCs (e.g. Business Plan (Chapter 4 re Whlesale includes PCC reductin t 118 l/day and leakage/bursts by 50% by 2050) The CSP cnsiders, hwever, that the qualitative research was mre shrtterm fcused with nt enugh input n e.g. envirnmental and lng term resilience, plus the WTP criteria culd have cvered the inclusin f envirnment and water use restrictins Resilience: Challenges & Respnses The Challenge Lg (Appendix 2) prvides the detail f challenges raised, the cmpany respnse and the CSP cnclusins. Regarding the WRMP and resilience in general the challenges raised were Challenge Lg items 3, 7,15,23,38. Page 27 v2.0 September 2018

29 CSP Reprt n SES Water s Business Plan The key CSP challenges were; The CSP required greater clarity n hw the research and analysis is linking back t the Perfrmance Cmmitments (and stretch within them), t cnfirm that there are n majr gaps in relatin t prpsed PCs fr 2020 t 2025 that have nt been addressed and/r that need t be addressed in Phase 3. SESW prvided the Triangulatin and trade-ffs dcument (Appendix 5 ref 2) which prvided helpful explanatin f evidence regarding the link frm research and analysis with the perfrmance cmmitments. Hwever, the CSP has an utstanding challenge regarding the justificatin fr the limited level f stretch in the leakage and PCC cmmitments. The qualitative research was cnsidered by the CSP t be mre shrt-term fcused, with nt enugh input n e.g. envirnmental and lng term resilience, plus the WTP criteria culd als have cvered the inclusin f envirnment and water use restrictins. SESW respnded in terms f the challenges raised and prvided pre-reading f SESW respnses. These were then discussed between the CSP and SESW at a pre-meeting prir t the March 2018 CSP meeting (ref Appendix 5 ref M6). The CSP nted the EA/Ofwat challenge that SESW may nt be as resilient t drught events as it is presenting in its plan (ref Appendix 5 ref 8); and the CSP als agreed with the challenge (ref Challenge Lg item 40) that, even after SESW has implemented its metering plicy, its custmers per capita cnsumptin is still frecast t be ne f the highest in England (ref Appendix 5 ref 8). The CSP challenged as t whether the WTP ptins discussed in the research are stretching enugh (particularly re leakage and PCC), given Ofwat requirements, and sught sme clarity n hw SESW wuld test ut the limits f WTP. SESW prvided evidence that sught t justify the level f stretch and discussed with the CSP at a meeting n May 29 th. SESW s key cntentin is that it has tested the level f stretch as part f the WTP research. The CSP queried hw SESW aimed t integrate/align WRMP activity with the PR19 Plan, and test the ptins and cnclusins with wider custmers. SESW prvided a detailed briefing at the March CSP, which reassured the CSP n the integratin f apprach. The CSP als gave psitive feedback n the cnsultatin prcess, and custmer friendly cmmunicatins (e.g. the WRMP Cnsultatin dcument. The Envirnment Agency (EA) & Ofwat subsequently prduced their respnses t the SESW draft WRMP (ref Appendix 5 ref 8), which flagged a number f challenges and recmmendatins, which SESW was then expected t take accunt f in its final Business Plan and WRMP. Further t the abve the CSP wuld nte the fllwing utstanding challenges/pints: SESW need t accunt fr EA/Ofwat recmmendatins in the final WRMP (ref Challenge Lg item 40) e.g. Actins n bringing frward planned water efficiency measures t reduce husehld cnsumptin further. The cncern that SESW may nt be as resilient t drught events as it is presenting in its WRMP plan, and thus SESW needs t demnstrate its resilience t drughts and ther events. SESW t review ptential further pprtunities t wrk with ther cmpanies n water transfers t imprve mitigatin f lng term resilience risks. The CSP ntes hwever that, fllwing EA/Ofwat feedback and CSP challenge, SESW has imprved the final Business Plan cntent t include plans fr mre practive wrking thrugh WRSE in cntributing t the lng-term resilience f water acrss the SE regin. Page 28 v2.0 September 2018

30 CSP Reprt n SES Water s Business Plan While SESW has enhanced its cmmitments n reducing leakage and PCC, excessive leakage will remain a key custmer cncern (despite SESW cmparing very well with ther water cmpanies), and PCC will remain high cmpared t ther cmpanies. SESW culd therefre cnsider pprtunities t reduce leakage and PCC further by 2025 and explre hw it can use innvative appraches t achieve lnger term leakage reductins in line with best practice in leading cmpanies elsewhere. Regarding PCC the Business Plan currently mentins hme visits t accmpany the metering prgramme; and there are varius references t natinal Gvernment driven appraches, but the CSP is nt cnvinced that these are sufficient t deliver the bjective. The CSP ntes that the Business Plan chapter n envirnment is imprved in the final Plan versin, fllwing feedback frm the CSP, but cncludes that this culd have gne further t include a natural capital apprach and greater inclusin f catchment initiatives which wuld supprt resilience in the rund (ref Appendix 3 sectin 4.3.5) Innvatin Innvatin: custmer engagement and analysis The verall apprach t custmer engagement is summarised in Appendix 3 sectin 4.3.1, and Appendix 3 sectin then prvides a summary f the analysis, review and challenges made by the CSP, specifically relating t innvatin Innvatin: Cnclusins Overall the CSP has been impressed with SESW s cmmitment t innvatin: The Chair has persnally led and champined the cause f innvatin; Real strides have been taken twards develping a bttm up innvatin culture; These have led t cncrete examples f innvatin, which appear t be well twards the tp f industry wide perfrmance; The CSP has been given pen access t the impressive SESW lead manager fr innvatin, as well t the Chair; Innvatin appears t have been prmted and secured als as part f the apprach t sme cmpnents f the qualitative and quantitative custmer research. Cnversely the CSP cncludes that the main fcus f innvatin that is evidenced in the Business Plan relates t the peratinal areas f the business, and thus there is less evidence f: bttm up innvatin in custmer service frm frnt line staff; tp dwn innvatin, ntably acrss service areas and the envirnment, including in terms f lcal engagement (being a lcally facing water cmpany); lnger term innvatin in service and peratinal areas beynd Fllwing feedback frm the CSP the final Business Plan des seek t prvide sme further cntent n sme f the abve. Based n Ofwat s PR19 methdlgy questin pints related t innvatin, the CSP wuld thus currently cnclude that; Hw des the cmpany s Business Plan demnstrate that it has the right culture fr innvatin which enables it, thrugh its systems, prcesses and peple, t deliver results fr custmers and the envirnment frm innvatin? SESW has included a specific sectin n innvatin in its Business Plan (ref Chapter 8) that evidences its fcus and apprach t innvatin. Page 29 v2.0 September 2018

31 CSP Reprt n SES Water s Business Plan SESW has a well embedded culture f innvatin. The Chair has persnally led and champined the cause f innvatin; and there is a sund strategy in place t empwer staff t innvate which has led t incremental imprvements in a variety f areas t strengthen the peratin, with sme gd examples f innvatin prjects. The appetite fr innvatin is apparent at all levels but appears predicated n efficiency savings rather than custmer benefits e.g. smart metering is nly being rlled ut t circa 10% f custmers n a trial basis. The CSP has seen bttm up innvatin in sme aspects f the custmer engagement, where innvatin appears t have been prmted and secured as part f the apprach t qualitative and quantitative custmer research. Hwever the Business Plan cntent n innvatin t supprt a thriving envirnment is nt cnsidered very innvative i.e. it predminantly fcuses n reducing carbn emissins; and culd have included mre innvatin arund envirnmental educatin f cmmunities (e.g. innvative initiatives t reduce PCC). Hw well des the cmpany use and engage with markets t deliver greater efficiency and innvatin and t enhance resilience in the prvisin f water and wastewater services t secure value fr custmers, the envirnment and the wider ecnmy; and t supprt ambitius perfrmance fr the perid and ver the lnger term? SESW is fcusing n cllabratin thrugh external prjects (e.g. as described in Appendix 5 Ref 21) and aiming t becme an Innvatin Hneypt s that SESW gets first refusal f flagship prjects; althugh this aspiratin needs t be tempered with what ther cmpanies are ding, e.g. Anglian Water. SESW believes it is well placed t d this nt nly due t its lcatin (near t Lndn and in between tw majr airprts), but because f its track recrd. Evidence f effective use f markets t harness innvatin and reveal infrmatin abut efficient cst f service. The CSP has nt been persuaded that SESW has cmpelling evidence that it is instrumental in changing markets, cmpared t sme ther water cmpanies (e.g. Wessex and Anglian), althugh the CSP accepts that sme f the examples f market-based innvatins (e.g. in Ofwat s Driving Innvatin reprt) appear mre suited t waste water issues. SESW is wrking with Prtsmuth thrugh the initiative Cllabrate t Innvate, t scpe ut better ways f levering better value fr mney deals thrugh cllabrating with a Water-nly-Cmpany like them. SESW has been explring the use f new innvative techniques f mains cnditin assessments and techniques used t lay new mains Innvatin: Challenges & Respnses The Challenge Lg (Appendix 2) prvides the detail f challenges raised, the cmpany respnse and the CSP cnclusins. Regarding innvatin specifically the challenges raised were Challenge Lg items 24 and 33. The key CSP challenges were; Hw the CSP culd imprve the assurance f the quality and effectiveness f the Bard rle in custmer engagement, and the impact n the Business Plan; using Innvatin as a test case t identify the CSP leads wh wuld shadw the Bard member leads, including n innvatin. The CSP leads n innvatin met with Jeremy Heath, the SESW management lead (ref Appendix 5 ref 21), t gain a detailed view n the SESW apprach t innvatin bth frm an peratinal and cmpany culture perspective. There was als a fllw up meeting with the SESW Chair, wh was the Bard lead n innvatin. These meetings, and the fllw up infrmatin, gave the CSP an impressive view f SESW s cmmitment t innvatin. Page 30 v2.0 September 2018

32 CSP Reprt n SES Water s Business Plan The CSP seeking mre evidence f new ideas frm custmers. SESW has sme gd ideas re innvatin, but it was nt clear hw SESW intended testing this in the plan. The final Business Plan has included sme further detail and evidence, but the CSP maintains that the main fcus f innvatin in the Business Plan still relates mre t the peratinal areas f the business, and there is less evidence f cnsidering new ideas frm custmers. As cncluded abve, verall the CSP has a psitive view f SESW s use f innvatin in its activities and plans fr peratinal areas. The key area f utstanding challenge therefre relates t the pints abve cncerning the pprtunity fr mre rbust detail in the Business Plan f custmer service (and custmer fcused) innvatin, and f lnger term innvatin in service, the envirnment and peratinal areas beynd The CSP accepts, hwever, that SESW has included sme further detail in its final Business Plan cntent Financeability, and Willingness t Pay (WTP) Custmer Engagement re Financeability & WTP The verall apprach t custmer engagement, including challenges made by the CSP during the prcess, is summarised in Appendix 3 sectin 4.3.1, and WTP was a key cmpnent f particularly the Phase 2 and 3 research and engagement. Appendix 3 sectin then prvides a summary f the analysis, review and challenges made by the CSP, specifically relating t Financeability and WTP. A specific tpic related t the cmpany s financeability cnsideratins was the review f its financial and crprate structure in the cntext f Ofwat s cnsultatin dcument. SESW has respnded t the cnsultatin (Appendix 5 ref 25), and particularly related t the debate arund gearing the SESW Bard NEDs have cnfirmed that the cmpany intends cmplying with the Ofwat guidance fr bringing gearing belw 70%, with a target f 65%. SESW has advised that it is taking early actin, via agreed sharehlder authrity, t fund equity investment t achieve debt reductin t underpin the cmpliance. SESW als intends creating a cmmunicatin plan t prvide apprpriate custmer messages n these issues Cnclusins: Financeability & WTP The CSP appinted an independent technical adviser, Atkins, selected thrugh an pen prcurement prcess, particularly t advise the CSP n PCs and WTP cnclusins. The CSP discussed its analysis and cre cnclusins with Atkins, wh prvided its prfessinal pinin n aspects f the SESW custmer engagement and draft Business Plan in terms f gd practice, industry nrms and interpretatins f Ofwat guidance, cherence and clarity f purpse. Specifically regarding the WTP analysis and utputs, the CSP has reviewed these with Atkins and cncludes that the quality f the wrk was high, the sample sizes rbust, and thus that the utput is well funded. Althugh timing was tight, the CSP did have the chance t cmment n the prpsed survey questinnaires, and n the Phase 3 research apprach and utput, and in many cases the cmments were taken n bard. A particularly strng feature which the CSP strngly welcmed was the innvative apprach f assessing WTP against alternative packages fr the Business Plan. Therefre the CSP cnsiders that SESW has paid an apprpriate degree f attentin t the custmer feedback frm the WTP studies, and there is a clear line f sight frm the Phase 3 research t SESW s decisin t increase the level f ambitin n PCC and leakage in the final draft Business Plan. Page 31 v2.0 September 2018

33 CSP Reprt n SES Water s Business Plan It is als relevant t register that the CSP ntes the clear assurance frm the Bard NEDs that SESW has clsely cnsidered the Ofwat guidance n financial structures and has agreed plans t ensure the cmpany gearing is within the required levels. Based n Ofwat s PR19 methdlgy questin pints related t Financeability & WTP, the CSP further cncludes that; Evidence that SESW has taken int accunt custmers views n the prfile f bills ver time. The CSP agrees that there is evidence that SESW has taken custmer views int accunt n the prfile f bills ver time. SESW ensured that it infrmed custmers f the verall bill impact, and the CSP cnsiders that the Phase 3 explanatin f hw the bill might change ver time (as per Appendix 3 fig 4.3.1x and p12-14 f Appendix 5 ref R7) was very effective; including als the methdlgy used t prvide effective feedback n the tradeffs that custmers wuld cnsider (ref fig 4.3.1xi, 4.3.1xii). The Phase 2 analysis f WTP and Phase 3 acceptability testing (ref Appendix 3 sectin 4.3.1), plus the brader Business Plan cnsultatin prvides gd evidence f custmer views n bill impact being taken int accunt; particularly regarding SESW recnsidering the leakage and PCC cmmitments. Evidence f custmers views and supprt fr actins re financeability and WTP; and the impact f their prpsals n custmers bth nw and in the lnger term. The CSP agrees that there was evidence t supprt WTP actins and impact. The explanatin f the SESW custmer engagement (as per Appendix 3 sectin 4.3.1), and particularly the acceptability testing and Business Plan cnsultatin exercises prvides gd evidence f custmer views and supprt fr actins n financeability and WTP, e.g. 71% general custmer acceptance f the plan. The apprach f using packaged ptins f services fr testing with custmers, particularly in the quantitative research (Appendix 5 ref R7), is recgnised by the CSP as being bth brad plus targeted n ensuring apprpriate custmer segments were addressed, and the CSP cncludes that the research and analysis prvides sund evidence f an effective apprach t validate that custmer views have been effectively cnsidered regarding the impact and acceptability f the SESW Business Plan prpsals; and t explre the mst acceptable cmbinatins f service cmmitments versus verall WTP. Specific evidence t supprt the applicatin f a Small Cmpany bill impact: The CSP agrees that there is rbust evidence t supprt a small cmpany bill impact (althugh the CSP has nt examined the funding r efficiency arguments, viewing thse as utside its remit) SESW undertk specific research and custmer engagement n the willingness t pay a small premium fr cntinuing t be served by a small lcal cmpany (Appendix 5 ref R4). This cncluded that 82% f respndents were willing t pay up t a 4 premium t be served by a small and lcal water cmpany. Additinal evidence fr the benefits f supply frm a lcal prvider has been seen in the cntext f the recent respnse t the big freeze and subsequent thaw. The CSP cnsiders that SESW s respnse was extremely gd, against a backdrp f widespread criticism f the respnse frm larger cmpanies. Similar anecdtal evidence exists f a genuinely lcal feel t the respnse t bursts. Hwever the CSP has flagged t SESW the need fr a strng fcus n imprved custmer service, custmer cmmunicatin, and custmer engagement as the engagement feedback highlighted that custmer service is a key attribute custmers lk fr in a small/lcal cmpany, and currently the SESW SIM scre des nt align with that. Fllwing CSP feedback SESW has imprved the explanatin f the ratinale and benefits t custmers f the bill impact, in Chapter 2 f the Business Plan. Page 32 v2.0 September 2018

34 CSP Reprt n SES Water s Business Plan Evidence that the Bard has prvided a clear & rbust statement that its plan is financeable n bth an actual and a ntinal basis. The CSP met with Bard NEDs n 18 July and received assurance frm the Bard that the Plan is financeable. In particular the CSP discussed with the Bard and SESW the SESW apprach t reducing the gearing, partly in respnse t encuragement frm Ofwat and gvernment, but mre imprtantly as a means f maintaining SESW s financial resilience in the lng-term (see als cmments in abve). SESW stated that it has cnsistently demnstrated financial resilience even with current levels f gearing; and that SESW has maintained its current rating with the credit rating agencies. The impacts f the actins re gearing (ref abve) result in little difference between the ntinal balance sheet Ofwat assumes fr price setting purpses and SESW s prjected actual balance sheet. The Bard fcus has thus been n the level f new equity required t ensure SESW is able t withstand severe but plausible shcks with financial implicatins in the lng-term; and the Bard cncludes that additinal headrm might be needed beynd 2025 t accmmdate the greater prbability f a cmbinatin f multiple shck ccurring. T address this, SESW s sharehlders have agreed t prvide a letter f supprt, explaining that they are cmmitted t ensuring that the cmpany will be able t cntinue fulfilling its bligatins in such eventualities. Evidence f custmers' supprt, and the strength f that supprt, fr its prpsed adjustments t the price cntrls. (Accunting fr past delivery) SESW has assured the CSP that the impact f adjustments fr past delivery have all been incrprated in the draft Business Plan verall acceptability research; and the key pint frm SESW s perspective is that custmers are nt being asked t pay mre than they wuld d if there were n adjustments. Evidence f custmer supprt where cmpanies take steps t address financeability cnstraints. N specific steps are prpsed in SESW Business Plan, as actins n gearing/equity injectins (ref abve) mean n need t add anything t custmers bills t ensure they remain financeable. Nevertheless, the evidence frm WTP research validates the custmer supprt fr brader service enhancements; and the small cmpany research cncluded that custmers wuld accept a small bill impact fr cntinuing t be served by a small/lcal cmpany. SESW states in its Business Plan that it cnsiders that this small cmpany adjustment shuld be allwed in price limits because the three criteria set ut in the methdlgy statement have been satisfied namely that its debt has been efficiently incurred, that it has custmers supprt fr an allwance, and making an allwance is in the interests f custmers in general. The Business Plan includes evidence f meeting these criteria. Evidence (assured by the CSP) that custmers supprt any cst efficiency/investment prjects (in relatin t cst adjustment claims and investment plans) The CSP is assured by SESW that the nly cst adjustment claim is in relatin t SESW s statutry bligatin n sftening. All ther investment plans have been included in the willingness t pay and verall acceptability research Financeability & WTP: Challenges & Respnses The Challenge Lg (Appendix 2) prvides the detail f challenges raised, the cmpany respnse and the CSP cnclusins. The challenges raised Regarding Financeability & WTP were Challenge Lg items 32, 38, 42. These challenges predminately relate t the CSP challenging the prpsed level f stretch within Perfrmance Cmmitments, particularly fr leakage and PCC; which have been cvered already in sectin The CSP did seek clarificatin, hwever, relating t; Page 33 v2.0 September 2018

35 CSP Reprt n SES Water s Business Plan The SESW calculatins f bill impact, and an apparent discrepancy relating t actual inflatin % assumptin used (research materials stated 2% inflatin used, which is the case fr but 2.5% has been used up t 2020). SESW respnse was that using 2% in the research materials was t keep things simple and nt refer t multiple different values fr inflatin adjustments n the same screen. Hence SESW made a cnscius decisin t include a descriptr that kept the page as simple as pssible. The small cmpany research and hw the 193 average bill quted relates t the 235 in the main research and the basis fr the industry average bill? SESW respnse was that it was lking t make the research as meaningful fr custmers as pssible s that they culd give an infrmed view n the financing ptins f a smaller cmpany. Hence the decisin t prvide a bill cmparatr i.e. 193 is SESW s current average bill and 189 is the average water bill (see Beynd the cmments abve, there are n additinal areas f utstanding challenge that have nt been cvered under sectin relating t PCs/ODIs Perfrmance Cmmitments/Outcme Delivery Incentives (PCs/ODIs) PCs/ODIs: engagement & analysis The verall apprach t custmer engagement is summarised in Appendix 3 sectin 4.3.1, and Appendix 3 sectin then prvides a summary f the analysis, review and challenges made by the CSP, specifically relating t PCs/ODIs. Ofwat defined the required cmmn set f PCs within the PR19 guidance as described belw. Of the 14 verall cmmn PCs nly 9 relate t SESW as a water-nly cmpany PCs/ODIs: cnclusins As summarised in Appendix 3 sectin 4.3.8, the CSP cncludes that the quality f bth the qualitative and quantitative research and analysis n PCs, and the willingness-t-pay against these, has been gd. SESW clarified relative pririties frm Phase 1 research and tested a range f PC levels n an individual and packaged basis within Phase 2; then validated the prpsals in Phase 3. The CSP has cnducted a full assessment n the prpsed Page 34 v2.0 September 2018

36 CSP Reprt n SES Water s Business Plan perfrmance cmmitment levels, and ODIs, with supprt frm its independent technical advisers. As is evidenced in Appendix 3 sectin 4.3.8, as well as in sectins 3.4 (resilience) and 3.7 (WTP), the CSP review f PCs/ODIs has had a strng fcus n leakage and PCC as these are the identified key pririties with custmers. It is apprpriate, therefre, t nte sme specific pints regarding the CSPs cnclusins n these 2 PC/ODIs; Leakage: The Ofwat guidance requires that the leakage perfrmance cmmitment be calculated n a three-year average basis. On this basis SESW are targeting a 12.4% reductin by 2025 (t 21.1 Ml/d); i.e. belw the Ofwat guidance n leakage PC s which challenges cmpanies t cmmit t a 15% reductin by 2025 and frward-lking upper quartile perfrmance n leakage per prperty per day. Hwever, n a year-nyear basis SESW are targeting a leakage reductin f 15% by 2024/25 when cmpared t the expected utturn perfrmance in 2019/20 a reductin frm 24 Ml/d t 20.4 Ml/d; with a lnger term aim t halve leakage by In terms f leakage per prperty/day SESW are already ne f the best perfrming water cmpany (at 82.9 ltr/prperty/day), and the abve figures translate t a 18% yearn-year reductin by 2025, and a 16% reductin based n a three-year average. The CSP thus cncludes that SESW has accunted fr custmer, stakehlder and the CSP feedback n leakage cmmitments, and that the prpsed Business Plan cmmitments d align with Ofwat challenges n % reductin and upper quartile perfrmance n leakage per prperty per day. Per Capita Cnsumptin PCC): SESW has applied, as required, the cnsistent reprting methdlgy which reduces the current reprted usage by 8%, with a revised 2019/20 start pint f l/h/d. SESW is then targeting a usage reductin f 7.3% by 2024/25 (t l/h/d). The lng-term cmmitment is t aim t reduce PCC t 122 litre per head per day by Ofwat guidance requires the perfrmance cmmitment t be based n the mvement in the three-year average PCC, which equates t a 2024/25 target f 6.6% reductin. In additin the Ofwat guidance is challenging cmpanies t cmmit t a frward-lking upper quartile perfrmance n PCC l/h/d. SESW has assessed the ptential change t the upper quartile ver time and cnsider that further year n year reductins frm all cmpanies are likely. Assuming that average industry reductins seen between 2014/15 and 2017/18 cntinue (circa 0.5% reductin per annum) the frecast upper quartile level at 2024/25 will be circa 131 l/h/d. Thus, althugh SESW has imprved its ambitin n PCC reductin fllwing custmer, stakehlder and CSP feedback, the 2024/25 cmmitment is still utside f the frecast upper quartile. SESW s stated ratinale fr its cmmitment level f l/h/d by 2024/25 is based n custmers acceptance t pay fr this level f reductin. Further reductins, and the additinal cst, were nt tested with custmers as SESW states that the prpsed reductin tested was the reasnable maximum reductin that is feasible in the perid. It requires a significant increase in meter penetratin t 90% and significantly mre activity n ther aspects f encuraging water efficiency. In additin SESW states in its Business Plan that its efficiency target is partly dependent n gvernment actins which, in the CSP s pinin, are unlikely befre 2025 (ref Appendix 3 sectin 4.3.5). The CSP thus cncludes that SESW has accunted fr custmer, stakehlder and CSP feedback n PCC, and that the prpsed Plan cmmitments are justifiable n that basis. Hwever, since the 2024/25 PCC remains utside the frecast upper quartile it wuld seem unwarranted t allw an ODI reward fr exceeding a PCC target which still leaves SESW utside the upper quartile and thus it might be mre apprpriate t set a threshld f the upper quartile level t nly allw a reward if that level is reached. On individual targets the CSP cnclusins are summarised in the fllwing table (Table 3.7.2i). Page 35 v2.0 September 2018

37 CSP Reprt n SES Water s Business Plan Table 3.7.2i Perfrmance Cmmitments Cmex Dmex Water Quality Supply Interruptins Leakage PCC Drught Risk Bursts Unplanned Outage Summary Definitin Cmmn PC's Mechanism t incentivise water cmpanies t prvide an excellent custmer experience fr residential custmers, acrss bth the retail and whlesale parts f the value chain. Measured via weighting fr cmbinatin f custmer service ( cntact ) and custmer experience ( nncntact ) surveys. Mechanism t incentivise water cmpanies t prvide an excellent custmer experience fr develper services custmers. Six-mnthly satisfactin survey t assess cmpany perfrmance n average f the tw surveys cmbined. Using DWI Cmpliance Risk Index; a measure designed t illustrate the risk arising frm treated water cmpliance failures Average number f minutes lst per custmer prperty fr the whle custmer base fr interruptins that lasted 3 hurs r mre. % change in megalitres a day (Ml/d) based n a three-year average. Measured as the sum f distributin system leakage, including service reservir lsses and trunk main leakage plus custmer supply pipe leakage % change in litres per persn per day based n a three-year average amunt f water used by each persn that lives in a husehld prperty. Percentage f the ppulatin the cmpany serves that wuld experience severe supply restrictins (fr example, standpipes r rta cuts) in a 1 in 200 year drught 0 0 Number f mains bursts per thusand kilmetres f ttal length f mains. Mains bursts include all physical repair wrk t mains frm which water is lst. The temprary lss f peak week prductin capacity in the reprting year weighted by the duratin f the lss (in days). PC f/cast 17/18 19/20 NA NA PC Target by 2025 TBA TBA zer 2.1 mins 20.4 Ml/d -12.4% vs 2019/ % vs 2019/20 Zer 57.8 per 1,000 km ODI definitin (r Nn Financial Incentive - NFI where NB: CSP nted SESW pted nt t d custmer engagement n acceptability f ptential bill impact f ODI rewards/penalties. In-perid ut/underperfrmance payment/penalty will be payable In-perid ut/underperfrmance payment/penalty will be payable In-perid penalty will be payable where fail t deliver perfrmance belw the penalty deadband f 2.6. In-perid ut/underperfrmance payment/penalty will be payable where beat r fail t meet the annual target. In-perid ut/underperfrmance payment/penalty will be payable In-perid ut/underperfrmance payment/penalty will be payable NFI 2.3 NFI In-perid ut/underperfrmance payment/penalty will be payable T be determined by Ofwat. Methdlgy due after April Recgnising that C-Mex and D-Mex are new measures, SESW will reprt results frm C-MeX pilt, and will reprt results fr the SIM scre until it ends in March As abve CSP Cnclusin RAG= acceptability f degree f stretch Zer target is as expected; Ofwat agreed k t have a threshld > 0 CSP cncur target is apprpriate. Stretching, as supply interruptins generally cme frm lcalised netwrk interruptins, where any ne event can result in a penalty. After CSP and custmer feedback, SESW imprved their ambitin frm 12% t 15% yr-n-yr reductin by S althugh the reductin based n a 3 yr average is 12.4%, SESW are already ne f the best pefrming cmpanies fr leakage/prperty /day, and the PC equates t a 18% reductin in leakage/prperty/day yr-n-yr and 16% reductin based a 3 year average. After CSP and custmer/stakehlder feedback, SESW imprved their ambitin frm 5% t 7.3% yr-n-yr reductin by 2025 (equivalent t 6.6% reductin n 3-year avg basis). This wuld remain utside the frecast upper quartile at 2025, but is based n tested WTP with custmers. PCC will thus remain a high prfile area fr SESW frward actin. A new cmmn PC and is rather blunt, but sends the right message. The variable and uncertainties abut such an unlikely event will make this hard t prve ne way r anther CSP cncur that the target is apprpriate but queried if SESW may be verambitius, given that the mre wrk dne n leakage the greater the number f recrded bursts. PC seems reasnable, but althugh the definitin definitin is set buy Ofwat, there may be an issue f cnsistent applicatin acrss the industry, as its a new measure. Page 36 v2.0 September 2018

38 Bespke PC's Cust Cncerns Number f custmer cntacts abut taste, dur and discluratin per 1,000 abut their water ppulatin each year. Cust Cnfidence Supprting custmers in financial hardship Vulnerable Supprt Scheme awareness Vulnerable Supprt Cust survey (scale f 1 t 5) ref Taking everything int accunt, I am cnfident in SES Water s ability t prvide me with a reliable supply f high quality water. CSP Reprt n SES Water s Business Plan Cunt the number f custmers n the Water Supprt Scheme n 31 March each year. 8.1k 11.5k Cust survey re answering "yes" t "Are yu aware f the additinal supprt SES Water ffers custmers in vulnerable situatins thrugh their Helping Hand Scheme?" Cust survey re Helping Hands Scheme; answering "yes" t "D yu feel that these services ffered by SES Water are helpful?" NA 90 44% 53% 0.5 per 1k 90 NFI 19k In-perid penalty will be payable where fail t meet the annual target. NFI 58% NFI NA 80% NFI Page 37 v2.0 September 2018 CSP cncur with the aim t achieve a reductin in cntacts and t maintain industry leading perfrmance. CSP cncur, althugh a reputatinal PC, s based n perceptin rather than any detailed evidence r knwledge. SESW felt it was valid, as based n custmer feedback re pririties. This is a reductin in ambitin frm the draft plan, despite custmer supprt, althugh still keeping SESW ne f best perfrming cmpanies n scial tariff uptake. SESW prvided ratinale fr reductin based n balance f WTP feedback. Awareness is likely t be lw, and mre relevant that peple wh are likely t need access t the services(r their family/carers) are aware f the services n ffer. May mtivate SESW t increase awareness if a financial incentive defined. CSP cncur, but sme CSP members felt this questin wuld be mre relevant if addressed nly t peple wh have received help Managing bad Measure f the cst each year f the mney billed but nt paid by custmers fr 0.64% debt the year and express as a percentage f annual revenue. 0.64% 0.80% NFI CSP cncur it is a gd PC as within the cmpany s cntrl and measure f the effectiveness f its practices VfM perceptin Cust survey (scale f 1 t 5) ref "hw satisfied r dissatisfied are yu with the 9% CSP thught mre relevant t measure satisfactin (vs dissatisfactin) 10% NFI value fr mney f the water services prvided?". Measure is % dissatisfied. 10% with VfM. SESW view and ratinale is in Appendix 5 ref 34. Vid prperties Measure f the % f prperties (bth husehlds and businesses) that are New PC and required by Ofwat (incl ODI); but CSP felt that if evidence 3.5% In-perid ut/underperfrmance cnnected t ur netwrk where ur recrds shw that they are vacant and 2.2% SESW nt being effective in identifying vids, then this wuld supprt a 3.0% payment/penalty will be payable therefre nt using water. case fr a penalty but d nt see the case fr a reward. AIM The Abstractin Incentive Mechanism (AIM) is a mechanism established by Ofwat SESW agreed via EA that n lcatins meet the criteria specified by that incentivises water cmpanies t reduce their water abstractins frm the Ofwat s guidance regarding AIM. Hwever, SESW still agreed (with EA) a NA 19 Ml NFI mre envirnmentally sensitive water surces when river flws are lw. bespke AIM PC t limit abstractin frm tw chalk brehles clse t Measured in millins f ltrs reduced abstractin. the headwaters f the River Wandle at The Oaks & Wdcte. Risk f supply failure First cntact reslutin Greenhuse gas emissins Pllutin incidents Land based imprvement - bidiversity River based imprvement - delivery f WINEP Measure the percentage f ur prperties that can be supplied by mre than ne water treatment wrks. Measured by recrding repeat cntacts received within a perid f 10 wrking days. Measure f peratinal greenhuse gas emissins; presented as emissins (kgco2eg) per millin litre f water put int supply. We will measure the number f the mre severe pllutin incidents that we cause. These are categry 1 and 2 incidents as categrised and reprted by the Envirnment Agency (EA) n an annual basis, fr pllutin t land, air r water. We will measure the number f ur water prductin and treatment sites where we achieve and maintain the Bidiversity Benchmark ver the perid 2020 t Water Industry Natinal Envirnment Prgramme (WINEP) sets ut the investigatins, imprvement measures and measures t prevent deteriratin needed t meet the water framewrk directive (WFD) bjectives and thse f ther drivers. Measured as number f prjects 36% 56% 75% 78% % 85% In-perid ut/underperfrmance payment/penalty will be payable In-perid ut/underperfrmance payment/penalty will be payable CSP cncur with PC as effective in measuring imprvement in resilience. CSP cncur with PC, which is an imprving target ver time. 55 NFI Reasnable PC as SESW mving t 100% renewable supply. zer NFI 3 sites NFI 18 NFI CSP cncur as acceptable PC, althugh felt an ODI culd have been cnsidered s that there is a bill-related financial penalty fr any incident. Als PC nly n Cat1/2 incidents is deemed sft as water-nly cmpanies dn t have many pllutin incident, althugh SESW state they will accunt fr Cat 3. Desn't appear ver ambitius with just 3 sites. Hwever n ODI is prpsed s acceptable as an additin t the ther bespke envirnmental PC's. WINEP is a statutry requirement, s agree that SESW shuld nt apply ODI reward. SESW view is that Ofwat/EA expect t see this cvered in the PC framewrk.

39 CSP Reprt n SES Water s Business Plan Taking accunt f the abve Table and in cnsidering Ofwat s PR19 methdlgy questin pints related t PCs/ODIs, the CSP cncludes that; Cnclusins n PCs/ODIs relating t Quality f Engagement What evidence supprts the verall acceptability f the package f perfrmance cmmitments (PCs) and ODIs t custmers? Hw apprpriate, well-evidenced and stretching are the cmpany s prpsed perfrmance cmmitments and service levels? The CSP cncludes that there is gd evidence supprting the acceptability f PCs. Acceptability testing was develped prgressively thrugh Phases 1 t 3 f the engagement prgramme with targeted quantitative and qualitative evidence, triangulated with business as usual evidence frm regular interactins with custmers. Phase 2 WTP surveys f husehld and nn-husehld custmers asked specific questins n PCs and targets, and the innvative tl develped by the survey prvider (BxClever) prvided a means in phases 2 and 3 f understanding trade-ffs between these fr custmers in aggregate and fr key sub-sets. The Phase 3 verall acceptability testing exercise tested custmer pinins n different service levels n an individual and packaged basis, which infrmed the debate, with the CSP feedback, n SESW cmmitting t mre ambitius leakage and PCC prpsals, as well as a revised level f scial tariff uptake. The CSP has examined the degree f stretch, with the assistance f Atkins. Althugh the CSP prvided feedback and challenges where it was felt stretch was excessive, and thers where it might be less s, the CSP cncludes that n balance the degree f stretch seems apprpriate. Hw apprpriate, well-evidenced and justified is the cmpany s package f utcme delivery incentives. Hw well the prpsed ODI utperfrmance and underperfrmance payment rates reflect a suitably wide range f evidence n their custmers' preference; as well as hw the cmpany will share infrmatin abut hw it achieved the perfrmance imprvement that earned it an enhanced utperfrmance payment; The CSP cncludes that based n the custmer engagement and acceptability testing that the prpsed package f ODIs are apprpriate and justified. Hwever the CSP has challenged that SESW has nt specifically tested the ptential impact f ODI rewards/penalties with custmers. The WTP research (ref Appendix 3 sectin plus Business Plan Chapter 1) prvides clear evidence f custmer preferences, and bill impact acceptability. Hwever, SESW pted nt t specifically test acceptability f ODI impact, as it cnsidered that custmer research n these figures wuld nt add value, given the scale f incentives relative t the verall bill. SESW s justificatin is that it is setting very stretching PC/ODI targets and intend t deliver the targets set with the aim f receiving n penalties r rewards, and thus have n impact n custmer bills. The CSP can understand, and accept, this argument, but SESW then argues if we d manage t deliver mre we will be able t recver the csts f delivering this thrugh a reward paid thrugh custmers' bills, in line with Ofwat s framewrk. The CSP des nt cncur with this ratinale, as SESW des nt have custmer evidence that such further bill increases are acceptable. The CSP cncludes that there is sme ratinale that there culd be a balance f ut/underperfrmance n ODIs which culd ffset each ther, but this wuld nt be justifiable beynd a netzer bill impact. Has SESW explained t custmers/ CSP the size f its asset health underperfrmance penalties (and any utperfrmance payments), and hw they relate t past perfrmance and the asset health challenges Page 38 v2.0 September

40 CSP Reprt n SES Water s Business Plan SESW s custmer engagement included infrming custmers n current perfrmance, especially relating t leakage, PCC, bursts/utages. The CSP has reviewed asset health PC prpsals in the cntext f past vs frward prjectins, nting SESW s view that its assets are generally in gd cnditin bth belw grund (the pipes) and abve grund (the treatment wrks etc.), and its perfrmance (acrss all water cmpanies) is gd in these areas. Cnclusins n PCs/ODIs relating t Impact n Plan Are ODI utperfrmance and underperfrmance payments (fr the cmmn PCs) based n cmparable data? Table 3.7.2i abve (and Business Plan Chapter 2) identify the current perfrmance (where there is cmparable data available) and frecasts fr the subsequent tw years; s that cmparable data is available. These als fllw any Ofwat guidance fr cnsistent measurement, t allw acrss cmpany cmparisns. Has SESW prvided cnvincing evidence that any reputatinal-nly ODIs are apprpriate? This includes evidence frm its custmer engagement r that a perfrmance cmmitment is nt well suited t a financial ODI. The CSP has reviewed all the prpsed ODIs, and is assured that SESW has prvided (ref Business Plan Chapter 2) apprpriate justificatin as t why a financial reward/penalty is nt sensible in each relevant case. Hwever, in line with Ofwat guidance, the CSP wuld prefer t see a greater % f reward/penalty based ODIs t imprve accuntability. SESW s ratinale is based n tw key cnsideratins: t reflect custmers pririties in perfrmance cmmitments; and then try t establish a sensible financial reward/penalty rate and if this is nt pssible, then fall back n a nn-financial incentive. This has resulted in 13/24 PCs having a nn-financial incentive (ref Table 3.7.2i abve). The CSP has challenged SESW n this, and the respnse is that reducing the number f cmmitments by remving sme with nn-financial incentives wuld set aside sme custmer pririties t meet the regulatr s assumptins (that financial incentives shuld be the default), and thus is nt apprpriate. Has SESW prvided evidence why any in-perid ODIs are nt in custmers' interests, including why future custmers shuld pay fr/benefit frm incentives related t the service perfrmance affecting current custmers? SESW feedback is that this des nt apply as the cmpany are nt challenging the Ofwat default psitin that financial rewards and penalties shuld apply in perid. Has SESW prvided evidence f custmer supprt fr the verall return n regulatry equity (RRE) range prpsed in its Business Plan; and hw SESW will prtect custmers in case its ODI payments turn ut t be much higher than its expected RRE ranges fr ODIs? The CSP is assured that SESW has apprpriately cnsidered and accunted fr the ptential impacts f ODI payments vs RRE ranges. SESW states that the verall return n regulatry equity being assumed in the Plan is that indicated by Ofwat in its methdlgy and is reflected in the draft Business Plan bill impacts used fr the acceptability testing. SESW s apprach t testing the financial impact f unplanned events is set ut in the Lng term Viability Statement in SESW s Annual perfrmance Reprt (Annual Reprt) and the level f headrm needed t enable the Bard t prvide assurance n lng term financial resilience has been the subject f particular debate. Hw apprpriate is the cmpany s fcus n service perfrmance in its risk/return package? The CSP cncludes that there is an apprpriate fcus n service perfrmance in SESW s risk/return package. Page 39 v2.0 September 2018

41 CSP Reprt n SES Water s Business Plan The use f C-Mex and D-Mex will give a feeling fr verall satisfactin with service. The CSP cnsiders that the service interruptins cmmitment is apprpriate - and indeed has cmmented that the underperfrmance penalty being pen ended may be mre stretching than intended. The CSP als cncurs with SESW n the risk f supply failure cmmitment. In terms f custmer service the CSP has pressed SESW t expand the first cntact reslutin t cver digital channels. The CSP als has agreed with SESW t cntinue t reprt n the issues which underpin the pr SIM scres in the past 18 mnths, until such time as the SESW remediatin plan has achieved satisfactry perfrmance. Abstractin Incentive Mechanism (AIM): assurance and evidence that the cmpany, fllwing engagement with lcal stakehlders (particularly EA), has identified suitable AIM sites. SESW has liaised with EA and agreed there are n lcatins where its abstractin f water frm the natural envirnment meet the criteria specified by Ofwat s guidance regarding AIM. Hwever, SESW still aim t accunt fr the fact that custmer engagement feedback identified the prtectin f the natural envirnment as a pririty. SESW has therefre wrked with the EA and ther stakehlders t develp a prpsal that will achieve the bjectives f AIM despite n sites meeting the criteria specified, i.e. t limit abstractin frm tw chalk brehles clse t the headwaters f the River Wandle at The Oaks & Wdcte. Evidence frm SESW t explain in its Business Plans, hw it will disseminate its perfrmance infrmatin during the perid t custmers, the CSP and ther stakehlders. The CSP has wrked with SESW n develping reprting f perfrmance cmmunicatins ver the last few years including ensuring a fcus n the custmer perspective in the annual reprt, develping n-line and custmer friendly digests frm the full reprt (including the materials displayed in pster frm in ur ffices), cmmunity/stakehlder briefings and the regular perfrmance updates prvided at CSP meetings, including psting the minutes f such meetings n the SESW website. The CSP has cmmended SESW n the quality and excellent accessibility f the cmpany s custmer facing dcuments during the WRMP and Business Plan cycle. SESW Business Plan (particularly Chapter 2, 4, 5) prvides explanatins n imprved cmmunicatins and custmer service cmmitments. In additin it was a requirement frm the Ofwat methdlgy fr the CSP t take accunt f the views and feedback f statutry bdies, ntably EA and DWI. The feedback frm EA is cvered in sectin 3.4, including SESW s apprach t the AIM cmmitment. In terms f DWI feedback there are tw key cmpnents f DWI feedback that the CSP fcused n; 1. The general advice frm DWI t all f the water cmpany custmer scrutiny panels is that DWI will nt frm r advise a judgement n the likelihd f draft Business Plans t meet statutry requirements, as they are nt sighted t sufficient relevant detail f Business Plans t enable them t frm a cnsidered view. The lng term planning guidance that DWI issued t cmpanies sets ut DWI s expectatins f the issues that they wuld expect cmpanies t take accunt f draft Business Plans. 2. The specific letter frm DWI t the CSP (and SESW) dated 29 June Appendix 5 ref 23), prviding a statement frm DWI fr use by the CSP in its PR19 reprt. The letter frm DWI reaffirms that, fr PR19, water cmpanies are expected t ensure that their Business Plans make prvisin t meet all their statutry bligatins. SESW has assured the CSP that it will meet all its statutry bligatins. The ne area f query frm the CSP was a request fr clarificatin frm SESW regarding the DWI statement that SESW had nt submitted any new prgrammes. SESW respnded t the CSP that; Page 40 v2.0 September 2018

42 CSP Reprt n SES Water s Business Plan SESW nly has tw risks identified as requiring additinal/n-ging mitigatin measures t ensure cmpliance with DWI Regulatins metaldehyde at Bugh Beech Treatment Wrks and lead in the distributin netwrk. Metaldehyde is cvered by a current Undertaking and SESW will be lking fr DWI supprt t maintain a prgramme thrugh AMP7 t further secure cmpliance with this parameter. DWI agreed that n frmal submissin was needed, since there will be an extensin t the existing Undertaking. SESW had a lead Undertaking in AMP5 and an n-ging prgramme f wrk thrugh AMP6, which will als cntinue thrugh AMP7 with sme planned enhancements t expedite the replacement f lead pipes when samples exceed lead cncentratins that are abve half the PCV f 10 µg/l (whereas SESW currently replace abve the PCV nly). Since SESW has n ther cnfirmed risks (in Drinking Water Safety Plans) where the risks are cnsidered unacceptable, there are n ther schemes identified. The CSP invited Mil Purcell (DWI, Deputy Chief Inspectr) t the July 20 th CSP meeting, at which DWI cnfirmed that they had n issues f nte regarding SESW water quality cmpliance. Summary cnclusins Overall, the CSP cnsiders that SESW has cmpleted an effective prgramme f engagement n PCs, and has listened t the CSP views and thse f custmers as expressed by the WTP research; and has taken n many f these views. The CSP cncludes that there is gd evidence supprting the acceptability f PCs; and that n balance the degree f stretch seems apprpriate. Hwever, the CSP has challenged that SESW has nt specifically tested the acceptability f ptential impact f ODI rewards/penalties with custmers. In particular: The CSP ntes that there are clear linkages f utputs and cnclusins n relative pririties acrss the 3 phases f research; and gd quality f acceptability testing in Phase 3. SESW has increased the level f ambitin n per capita cnsumptin and leakage, in part fllwing custmer and CSP views, as well as EA/Ofwat WRMP feedback. The CSP identified sme areas where it thught the draft ODIs and cmmitments were excessively stretching, as well as sme which culd be pushed further; and thus cncludes that the verall level f ambitin seems apprpriately balanced. The CSP als cnsiders that the custmer facing publicatin cntaining the draft cmmitments was clear and apprpriately pitched. SESW has pledged t cntinue t mnitr the issues which led t recent pr perfrmance against SIM, even thugh frmally these have been superseded by C-Mex and D-Mex. The CSP endrses the use f upper quartile industry perfrmance as a reasnable benchmark. The CSP is nt a strng supprter f sme elements f the ODI regime, e.g. the cncept f allwing reward based bill increases, but wuld stress that the CSP des nt hld SESW respnsible fr this regime. The CSP als recgnise that it is nt its rle t quality assure the underlying mdelling and data, and that its assessment has had t take this n trust. Page 41 v2.0 September 2018

43 CSP Reprt n SES Water s Business Plan PCs/ODIs: challenges & respnses The Challenge Lg (Appendix 2) prvides the detail f challenges raised, the cmpany respnse and the CSP cnclusins. Regarding PCs/ODIs in general the challenges raised were Challenge Lg items 32, 38,39,40,42. In additin the Envirnment Agency published its respnse t the SESW draft WRMP at the end f May 2018 (ref Appendix 5 ref 8), and Ofwat als published its cnclusins n the draft WRMP plan in June 2018, bth f which identified similar challenges t the CSP relating t leakage and PCC, as well as further challenges and recmmendatins. The key CSP challenges were; The CSP required mre clarity n hw the research and analysis was linking back t the Perfrmance Cmmitments (and stretch within them), t cnfirm that there were n majr gaps in relatin t prpsed PCs fr 2020 t SESW prvided initial views n PCs and evidence fr hw these were "stretch" fr the April CSP. The CSP agreed this was helpful and apprpriate. The CSP fllwed up via mre detailed review using supprt frm Atkins, and prvided feedback n challenges/cmments t SESW (see item belw). The CSP challenged SESW n the justificatin fr sme PCs (especially leakage and PCC) n the basis they did nt appear "stretching" in cmparisn t Ofwat expectatins. Als the CSP asked fr sight f the supprting detail f the Business Plan cntent that underpins the PCs, as evidence f the custmer engagement impact. A meeting was held between the CSP and SESW management n May 29th which prvided helpful clarificatin, and agreement f sme fllw up actins. The CSP refined its cnclusins and prvided updated feedback t SESW, and agreed t then await the Phase 3 utput. The CSP flagged the cmmnality f the CSP challenges n leakage/pcc with the EA/Ofwat respnses t the draft WRMP, and asked fr SESW s planned respnse and prpsed imprvements t the final WRMP/Business Plan. The challenges were discussed at the June CSP and SESW agreed t keep the CSP in the lp n the respnses t EA/Ofwat and hw these get reflected in the Business Plan. Based n the BxClever research cnclusins, and CSP discussin at June CSP, SESW was asked t include clear justificatin in its Business Plan f any rebalance f leakage/pcc vs scial tariff PCs vs WTP. SESW stated that it had recgnised the need t take accunt f the strng custmer feedback regarding these areas, and had als discussed with the Bard. SESW agreed t increase the cmmitments n leakage and PCC, and t reduce the cmmitment n scial tariff (frm an additinal 25k custmers t 19k) t maintain the custmer bill impact within the WTP acceptable range. This was deemed t be in line with the WTP cnclusins as per fig 4.3.1xi and Appendix 5 ref R7 pages SESW has cvered this in its Business Plan. SESW t cnsider hw it will justify custmer evidence f WTP fr ODI (rewards) ptential impact n bills in its Business Plan. As per cmments in sectin n ODI evidence, SESW has prvided justificatin in its Business Plan as t why it pted nt t d custmer engagement n ODI rewards/penalties. This remains an utstanding challenge in that it is a nncnfrmance with Ofwat guidelines. Further t the abve the CSP wuld nte the fllwing utstanding challenges/pints: SESW pting t nt invlve custmers in testing the acceptability f ptential bill impact f ODI rewards/penalties, remains a nn-cnfrmance with Ofwat guidelines, althugh SESW has prvided its justificatin (ref sectin 3.7.2). Page 42 v2.0 September 2018

44 CSP Reprt n SES Water s Business Plan While SESW has enhanced its cmmitments n reducing leakage and PCC, excessive leakage will remain a key custmer cncern (despite SESW cmparing very well with ther water cmpanies), and PCC will remain high cmpared t ther cmpanies. SESW t cntinue t cnsider hw it might reduce leakage and PCC further by 2025 and explre hw it can use innvative appraches t achieve lnger term leakage reductins in line with best practice in leading cmpanies elsewhere Regarding PCC the Business Plan currently mentins hme visits t accmpany the metering prgramme; and there are varius references t natinal Gvernment driven appraches, but the CSP is nt assured that these are sufficient t deliver the bjective. SESW culd have prvided mre cmparative data re hw its cmmitments lined up against the published frward ambitin f ther cmpanies (e.g. as published in their draft WRMPs, r based n CCW feedback), e.g. regarding PCC and leakage ambitin. The CSP maintains the view that the prpsed envirnmental targets appeared t fcus n adhering t existing standard (e.g. EA) cmpliances, rather than being aspiratinal. e.g. the PC fr pllutin culd have been cnsidered as an ODI (rather than just reputatinal ) s that there wuld be a bill-related financial penalty fr any incident. The CSP has queried if there might be apprpriate PCs that culd relate t the Lcal Cmpany benefit f SESW e.g. speed f peratinal respnse Securing Cnfidence & Assurance Engagement re Securing Cnfidence & Assurance Sectin 1.2 summarised the gvernance prcess invlving the CSP, and nting that the CSP has been given adequate and apprpriate access t cmpany infrmatin and persnnel in rder t carry ut its wrk in line with Ofwat s guidance and bjectives. The CSP has als had cntact, as apprpriate, with individual members f the Bard, as well as cllectively with the Bard (including private meetings with Bard NED s). The cmpany MD and Finance Directr attended almst all f the CSP meetings, and at mst CSP meetings there was an apprpriate Bard NED attending. Tw key meetings with Bard NEDs were in March 2018 (Appendix 5 ref 26) and July 2018 (Appendix 5 27). The March meeting aimed t seek assurance n the rle and invlvement f the NEDs and Bard in general, in ensuring there has been apprpriate quality f custmer engagement, and hw the Bard review and assure the degree t which this is reflected in its Business Plan. The feedback frm the NEDs was that verall they were assured that SESW was engaging custmers effectively; and that SESW was wrking n the right pririties and range f ptins. The NEDs cnsidered that SESW management have been diligent, and passinate in driving the PR19 planning and engagement. The CSP cncludes that it has a psitive view f the NEDs feedback, and their explanatin f their invlvement and hw they are engaged in the PR19 prgramme. The July meeting with the Bard NEDs fcused n the CSP seeking assurance that the Bard were assured n the 4 key Ofwat questins related t securing cnfidence and assurance (ref belw). The key areas f discussin and assurance are included in the meeting brief and ntes (Appendix 5 ref 27), and in sectin belw, but ne ntable area f discussin was related t the cmpany s financial and crprate structure in the cntext f Ofwat s cnsultatin dcument Putting the Sectr back in Balance. SESW had respnded t the cnsultatin (Appendix 5 ref 25), and particularly related t the debate arund gearing the SESW Bard NEDs have cnfirmed that the cmpany intends cmplying with the Ofwat guidance fr bringing gearing belw 70%, with a target f 65%. SESW advises that it is taking early actin, via agreed sharehlder authrity, t fund debt Page 43 v2.0 September 2018

45 CSP Reprt n SES Water s Business Plan reductin t underpin the cmpliance. SESW is als creating a cmmunicatin plan t prvide apprpriate custmer messages n these issues. The CSP had a final meeting with SESW, including the SESW Chairman, n 20 th August t review cmments/cnclusins frm the CSP n the final draft f the Business Plan and t discuss SESW respnses (Appendix 5 ref M11) t sme challenges/pints raised by the CSP in rder t seek alignment between the Business Plan and CSP Reprt. The meeting was cnstructive in agreeing sme mutual actins t imprve cntent and alignment f the reprts. SESW als agreed t share the independent assurance statements with the CSP, which has prvided further psitive assurance Cnclusins: Securing Cnfidence & Assurance In cnsidering the CSP cnclusins related t securing cnfidence & assurance it is imprtant t clarify that it was nt the CSP rle t assure the verall SESW Business Plan, but rather t be assured that the Bard (and particularly the NEDs n the Bard) were assured f the rbustness, quality and deliverability f the plan. The CSP s engagement with the Bard has thus fcused n reviewing the key Ofwat PR19 methdlgy questin pints relating t securing cnfidence & assurance and challenging the NEDs t explain their basis and evidence fr prviding assurance against these, as summarised belw. Cnsequently the CSP cnfirms that the Bard prvided psitive assurance that; - They have apprpriately challenged management t ensure the Business Plan is high quality and deliverable - The gvernance and assurance prcesses are apprpriate t deliver peratinal, financial and crprate resilience ver the next cntrl perid and the lng term - The Business Plan will enable custmers trust and cnfidence, and is based n high levels f transparency and engagement with custmers. - The Bard will effectively mnitr the delivery f the Business Plan utcmes.based upn the fllwing; T what extent has the cmpany s full Bard prvided cmprehensive assurance t demnstrate that all the elements add up t a Business Plan that is high quality and deliverable, and that it has challenged management t ensure this is the case? The gvernance chapter in the Business Plan (Chapter 6) describes the nging gvernance arund the plan itself and the n-ging apprach t gvernance (including perfrmance mnitring); plus individual Bard member persnal summaries n the Business Plan). The independent assurance statements prvide a psitive respnse n the prcess and data management. Executive team led PR19 Steering Grup with regular reprting t the Bard f prgress in develping the Business Plan. PR19 discussed at every Bard meeting, including tw half-day dedicated sessins in September 2017 and February PR19 themes each led by ne f the nn-exec directrs/chairman, with psitive impacts n the plan and assurance, e.g.; NED verview f the capital investment prgramme, including custmer feedback n leakage and PCC in cntext f Is this deliverable? Bard fcus n service transfrmatin prgramme t deliver a step change in service. Bard challenge arund the scale f the Transfrmatin Prgramme which gets SESW match fit fr Page 44 v2.0 September 2018

46 CSP Reprt n SES Water s Business Plan Bard engagement n the financial strategy (including a dedicated Bard Cmmittee n PR19 Financing) and the intensive discussins with sharehlders n the level f equity injectin needed t meet the external challenges arund gearing in the business. Tw private meetings between the CSP and the Bard NEDs t discuss Bard assurance. T what extent has the cmpany s full Bard been able t demnstrate that its gvernance and assurance prcesses will deliver peratinal, financial and crprate resilience ver the next cntrl perid and the lng term? SESW Business Plan Chapter 7 (Resilience) describes the apprach t financial and crprate resilience, the risk management prcess related t these, and the rle f the Bard in prviding assurance that the prcesses are effective. The Business Plan utlines the cmprehensive wrk-stream dedicated t assessing resilience in the rund, invlving emplyees drawn frm acrss the business (and cvering all aspects f resilience (peple, systems, prcesses, assets, financial). Spnsred by the Bard champin fr resilience wh has attended wrkshps in persn t demnstrate Bard cmmitment and engagement in the prcess. The scpe f the reviews have been tested with practitiners frm ther industries t bring an utside expert view t bear t identify any emerging threats r themes that may have been missed. Whle exercise embedded in the cmpany s risk registers and risk management, including stress testing. Specific initiatives n lng- term resilience included in plan e.g. the mains resilience prgramme t deliver enhanced ability t mve water arund the netwrk, ensuring that all ur custmers can be supplied frm mre than ne treatment wrks. T what extent has the cmpany s full Bard prvided assurance that the cmpany s Business Plan will enable custmers trust and cnfidence thrugh high levels f transparency and engagement with custmers, n issues that matter t custmers (which extends t their ability t understand bth the cmpany s crprate and financial structures and hw they relate t its lng-term resilience)? Bard invlved at all stages f engagement prgramme with nging review and assurance at each Bard meeting. Bard review f key publicatins lng term visin statement, water resurces management plan, and draft Business Plan t assure they were designed t be accessible and build engagement and transparency. Assurance that every emplyee has been briefed in the draft Business Plan in the Directrs Rund Table sessins. The Talk n Water n-line cmmunity has ver 300 members and cntinues t debate water-related issues. Invlvement f cmmunity engagement, and the envirnmental educatin prgramme and planned capability thrugh a secnd educatin centre in Leatherhead. Cnsideratin f SESW s crprate/financial structure had detailed invlvement f the Bard, particularly in agreeing the actins n gearing, and cnsideratin f hw best t cmmunicate t custmers. The bard have agreed t cnsider further hw best t cmmunicate dividend levels t custmers. T what extent has the cmpany s full Bard prvided cmprehensive assurance t demnstrate that the Business Plan will deliver and that the Bard will mnitr delivery f its utcmes (which shuld meet relevant statutry and licence bligatins and take accunt f the UK and Welsh Gvernments strategic plicy statements)? Data strategy and assurance chapter in the Business Plan (Chapter 12) details hw the cmpany will reprt perfrmance ging frward; and has received psitive assurance frm the independent advisers. The cmpany has maintained its psitin in the targeted categry f the cmpany Mnitring Framewrk (CMF) since it was established. Page 45 v2.0 September 2018

47 CSP Reprt n SES Water s Business Plan N serius cncerns have been raised in the CMF assessments and in 2016/17 we met expectatins in all areas. Established prcess that fed int the CMF assessment ver the last tw years will be maintained. Significant amunt f effrt ging int structuring a plan t meet Ofwat s expectatins and ensuring clarity in all areas f the plan. The Bard receives a reprt every mnth n cmpany perfrmance and delivery f Perfrmance Cmmitments that underpin the existing lng-term Outcmes is a key fcus and helps fcus Bard discussins n areas fr imprvement. The CSP receives a full reprt frm the MD persnally n perfrmance against targets n a quarterly basis. These well-established perfrmance reprting prcesses will cntinue t frm the bedrck fr mnitring and reprting in the future. Has the Bard prvided a clear statement that its plan is financeable n bth an actual and a ntinal basis? The CSP met with Bard NEDs n 18 July and has received assurance frm the Bard that the Plan is financeable (see further cmments in 3.6.1). Page 46 v2.0 September 2018

48 CSP Reprt n SES Water s Business Plan 4. Appendices 4.1. Appendix 1: CSP Terms f Reference, rle and membership The CSP was riginally established (as the then named Custmer Challenge Grup ) in April 2012 in rder t supprt the PR 14 prcess, and was renamed the Custmer Scrutiny Panel in April The CSP has a diverse membership including custmer representative rganisatins, the statutry water and envirnmental regulatrs, lcal authrities, businesses, envirnment and cuntryside grups. Hwever it is imprtant t nte that while the CSP has a functin t represent custmers, the CSP membership is nt intended t be fully representative f custmers. Terms f Reference 1) Brief The CSP is a custmer fcused grup that has tw key areas f activity; 1. T the cmpany T be an independent Grup, with an independent Chairman, wh will advise, scrutinise, and challenge the cmpany in the develpment and implementatin f their plans fr meeting their custmers pririties (including water resurce and drught plans). 2. T the Regulatr (Ofwat) T prvide independent assurance t Ofwat n the quality f the cmpany's custmer engagement; and the extent t which this is reflected in the cmpany s Business Plans. 2) Objectives a. T prvide cnstructive feedback n the cmpany s custmer engagement prgramme; b. T actively mnitr prgress, frm a custmer perspective, against measures f success in the cmpany s Business Plan; c. T fllw up with the cmpany n any shrtcmings; d. T prvide cnstructive challenge n the develpment f the cmpany s Business Plan, and in particular the way that custmer research and engagement is used t shape the plan; e. T engage with Ofwat as apprpriate, particularly in respect f the PR19 review, including the cmmitment t submit an independent custmer engagement fcused reprt t Ofwat at the same time as the cmpany submits its Business Plan. 3) Rle The CSP is nt aiming t be representative f the entire cmmunity f custmers but t be sufficiently cnnected t custmers dmestic, cmmercial and industrial and ther stakehlders t be able t deliver the bjectives. 4) Reprting Prcedure 1. T the Cmpany The CSP will reprt n decisins and issues, and prvide minutes f meetings, after each meeting t the Managing Directr, wh will then reprt t the SESW Bard f Directrs. Minutes f CSP meetings will be publically available via the cmpany website. Once a year, the CSP Chair will meet in persn with the cmpany Bard f Directrs. The CSP will als prvide a reprt annually t the cmpany Bard f Directrs, plus the CSP will prvide a reprt n the activities f the CSP t be included in the cmpany Annual Reprt. Page 47 v2.0 September 2018

49 CSP Reprt n SES Water s Business Plan 2. T the Regulatr (particularly re the PR19 Review) The CSP will have an active invlvement with Ofwat in relatin t the Business Plan. As part f the bligatins t the Regulatr, the CSP will prvide an independent reprt t Ofwat when the cmpany submits its Business Plans in This reprt will prvide Ofwat with assurance and valuable independent evidence t infrm their assessment f the Business Plan as part f the risk-based review. If the cmpany des nt achieve enhanced status in the risk-based review, the CSP will be required t submit a secnd independent reprt that fcuses n the changes the cmpany has made t their plans when the cmpany revises its Business Plans (r parts theref). 5) Membership Ofwat have advised that CSP membership shuld reflect lcal circumstances and challenges and include a representative frm the Cnsumer Cuncil fr Water (CCWater). Chairs shuld nt represent particular rganisatins r grups f custmers. The envirnmental and drinking water quality regulatrs shuld play a significant rle infrming CSP discussins and CSP reprts shuld highlight any cncerns raised abut the ability f the prpsed plan t meet statutry bligatins. The Panel will nrmally have a maximum f 12 members in additin t the Chair, but will als have pwers t c-pt additinal members t ensure its effectiveness. The appintments will be fr 3 years and individuals may re-apply. Members culd be drawn frm: Envirnment Agency Cnsumer Cuncil fr Water Drinking Water Inspectrate Natural England Reigate & Banstead Brugh Cuncil Lndn Brugh f Suttn Other Lcal Authrities (e.g. Tandridge, Mle Valley) Majr business cnsumers Chambers f Cmmerce Residents Parish Cuncils Citizens Advice Bureaux Age related rganisatins Envirnment related rganisatins e.g. Surrey Wildlife Trust, Kent Wildlife Trust, RSPB, Blue Print fr Water (which itself represents a number f Envirnmental Charities). NB: the current list and prfiles f the members f the CSP are available via CSP Members. Page 48 v2.0 September 2018

50 CSP Reprt n SES Water s Business Plan 4.2. Appendix 2: Challenge Lg NB: the Challenge Lg is als available in an accessible frmat via Appendix 5 ref 1. LOG DATE ITEM RAISED NO. Last updated: 20/08/2018 SUBJECT CHALLENGE(S) RAISED SESW RESPONSE/ACTIONS TO DATE STATUS Open r Clsed CSP RESPONSE JANUARY CSP & ther 1 Jan-17 Custmer Relatins/ Custmer service perfrmance 2 Jan-17 Readiness fr PR19 custmer engagement prgramme 3 Jan-17 Resilience planning/leakage Challenged re belw target perfrmance f SIM, CSP received detailed feedback and assurance Clsed - althugh belw target SIM still an issue. including the related negative perfrmance n frm SESW that there was a clear peratinal fcus CSP reassured n apprpriate set f actins in cmplaints and asking fr SESW plans fr and attentin n imprving the perfrmance with prgress. recvery/imprvement. rbust actin plans in prgress bth n SIM and cmplaints. The CCG is cncerned abut an verly cmplex apprach with risks f slippage and cmpressin in the timetable. The CSP supprted the apprach but again highlighted the need fr mre clarity frm SESW n hw they intended planning fr and prviding the infrmatin that will enable the CSP t answer the specific set f questins that Ofwat has mandated as part f the PR19 prcess. The CSP recgnised that sme f the scpe f the Ofwat questins will be cvered by the research that SESW are prgressing, and thus the CSP asked fr greater clarity f plans/actins and milestnes at the July CSP meeting, by which time the expected scpe and likely utcmes f the stakehlder research shuld be much clearer. Meeting the leakage target was a challenge. CSP asked that resilience planning be added t the agenda fr a future meeting, incl the incremental gains that can be made and what wuld be needed, in terms f innvatin, t drive a stepchange. 4 Jan-17 SESW rebrand CSP asked fr their invlvement in review and feedback n custmer letters explaining the change. APRIL CSP 5 Apr-17 Custmer Relatins/ Custmer service perfrmance 6 Apr-17 Readiness fr PR19 custmer engagement prgramme This challenge lg aims t capture actins and ther matters raised by CSP members either at CSP meetings r at ther times utside f such meetings. While primarily aiming t supprt the PR19 prcess it will als include actins etc n ther CSP related areas (e.g. custmer service, perfrmance). The lg will be reviewed and updated mnthly in participatin with SESW Challenge lg sent t SESW within 3 wrking days f receiving CSP minutes r within 5 wrking days f private CSP meetings. SESW t issue respnse t CSP chair within 5 wrking days f receiving lg. SESW t cmplete "SESW Respnse" clumn CSP t review respnse and cmplete CSP Respnse clumn. SESW briefed the CCG n its apprach t managing the prductin f its PR19 business plan including custmer engagement at the March 2017 meeting. Engagement strategy presented t CSP at Octber 2016 meeting. The shrt-term management f leakage was fcused n finding leaks and making sure there was minimal back-lg in relatin t fixing them. In the lnger-term cntinual reductins in leakage wuld require asset replacement and the business planning prcess wuld identify where and when t invest. CSP were circulated drafts and prvided feedback. Clsed CSP remain cncerned re timescales, and additinal challenges in Lg 6 Challenged re cntinued belw target SESW explained several prjects and initiatives in Clsed - carried frward as Lg 9 perfrmance f SIM, althugh recgnising the pipeline t imprve SESW s ranking in the management fcus n imprvement plans. industry league table e.g. clearing custmer CSP asked if there are separate measures (aside service backlgs, plans t intrduce a new frm the SIM ranking) that can shw (t the CSP telephne system, weekly perfrmance updates and thers) hw SESW are imprving their and increasing measured bill runs t tw per week. custmer service. SESW tk an actin t put tgether a list f separate measures CSP reiterated there is still a lt t be dne, in a relatively shrt time frame, t ensure apprpriate levels f engagement are being carried ut within the PR19 prcess, and that the CSP have a cre remit t ensure the engagement is apprpriate and effective and thus will expect t see evidence f this frm SESW alng the way. Clsed Clsed SESW summarised the mix f qualitative research Clsed - carried frward as Lg 10 methds being used t btain the custmer feedback. CSP members had been invlved in witnessing sme f the custmer wrkshps. Cnclusins frm phase 1 wuld infrm phase 2 planning. Engagement activity happening in line with prcess first presented t CSP at Octber 2016 meeting. 7 Apr-17 Resilience/WRMP CSP queried hw and when stakehlders /custmers views wuld be cnsidered in the WRMP plan, and hw CSP culd be invlved. Als there was cncern abut nly having the preferred ptin shared and all CSP members agreed that there wuld be value in having sight f the ther ptins. Stakehlder event invlving CSP scheduled fr June, including review f varius ptins. Clsed Wrkshp held with stakehlders in August, althugh CSP raised cncerns re limited attendees. CSP wuld review custmer engagement impact fllwing phase 2/3 utput. Page 49 v2.0 September 2018

51 JULY CSP & ther 8 Jul-17 Cmmunicatins with CSP CSP felt there was a need fr imprved cmmunicatins frm SESW particularly regarding PR19 and the custmer engagement prgress. 9 Jul-17 Custmer Relatins/ Custmer service perfrmance 10 Jul-17 Readiness fr PR19 custmer engagement prgramme 11 Jul-17 Cmmunity Engagement events CSP Reprt n SES Water s Business Plan CSP seeking nging assurance n prgress f initiatives t imprve custmer service and SIM The Ofwat PR19 methdlgy has been published and highlights the significant wrk required bth by the water cmpany and by the CSP t meet the stated requirements, particularly regarding custmer engagement. CSP still need t see the evidence f the necessary custmer engagement that hpefully the phase tw activity will start t deliver. CSP felt imprvements culd be made t phase 2 engagement brief and tk actin t give crdinated feedback. Hw is SESW cnsidering wider cmmunity engagement activity t enhance its custmer engagement (e.g. attending existing lcal clubs, scieties, meetings etc)? Need t recrd, and shw evidence f hw acted n the feedback received frm custmers thrugh this channel. Is there utput CSP can see? Hw is utput analysis cmplementing/impacting n cnclusins? Research partner fr phase ne research attended Clsed July meeting and presented results f the CSP agreed SESW prpsed actins were research. SESW presented an verview n hw the apprpriate research was feeding int plan develpment and next steps. CSP Chair met with SESW MD and thers, and agreed SESW wuld prvide mre regular cmmunicatins with the CSP via regular bulletins and a mnthly update meeting with CSP Chair. SESW gave feedback n perfrmance vs the varius targets, plus prgress n custmer service initiatives. SESW MD cnfident f seeing frward imprvements in SIM. CSP received a detailed feedback frm Accent n phase 1 utput and cnclusins. CSP members prvided detailed feedback t SESW n suggested imprvements t phase 2 brief. SESW has carried ut sme dedicated cmmunity Clsed engagement activities as part f PR19 with the PACE grup fr the elderly and als Caterham Fd Bank. Althugh the researchers spke t a small number f peple, the exercise was intended t enhance the ther research activity, rather than include representative samples. The sessins were helpful, with ne f the benefits being a cntinued relatinship with these tw grups in terms f ffering mre infrmatin abut ur supprt fr vulnerable custmers and als ur Wise abut Water cmmunity talks which are fcused n where water cmes frm and the imprtance f using it efficiently. We plan t carry ut mre cmmunity activity in phase three, as well as talk t custmers abut ur future plans at the summer events we are attending this year. We presented infrmatin n nging cmmunity engagement at the 1 May meeting 12 Jul-17 Resilience/WRMP CSP querying hw SESW will integrate/align WRMP Separate WRMP stakehlder sessin planned fr activity with PR19 Plan. 16 August at Bugh Beech Hw will the ptins and cnclusins be tested with wider custmers. OCT CSP & ther 13 Oct-17 Custmer Relatins/ Custmer service perfrmance 14 Oct-17 Readiness fr PR19 custmer engagement prgramme CSP seeking nging assurance n prgress f initiatives t imprve custmer service and SIM SESW cnfirmed that several initiatives already in place (e.g. new telephny system) and that SESW aims t implement additinal initiatives that frm part f a wider prject. Despite the high cmplaints figure, there is an upwards trend that suggests SESW hpes e t reprt perfrmance clser t the target by the end f the year. Clsed - carried frward as Lg 13 Clsed CSP remain cncerned re SIM, but accept SESW prgressing relevant actins. Carried frward as Lg 13 SESW prvided update and evidence t April CSP meeting, including circuating BxClever stakehlder engagement initial cnclusins. Updated dcument n Triangulatin prvided useful clarificatin f cmmunity invlvement. Clsed - carried frward as Lg 15. The separate WRMP stakehlder sessin in September was beneficial despite the limited availability f CSP members Clsed Presentatin in the meeting n the Retail Strategy was helpful assurance that significant imprvements are planned, althugh these are unlikely t have a big impact during the PR19 timeframe. CSP will be lking fr evidence f cmplaints and SIM imprvement ging frward. CSP suggested a briefing n the new C-MeX measure, and hw this will differ t SIM. This was prvided at March CSP. CSP expressed sme cncerns regarding the SESW agreed with CSP prpsal t arrange Clsed slippage in the cmmencement f phase 2 separate meeting f CSP and SESW management t Meeting tk place n 5 Dec. Actins carried stakehlder engagement activity plan, and hence there are risks, given very limited timeframe available, t cmplete effectively the CSP assurance rle, in relatin t apprpriate evidence f custmer engagement and assciated impact within the PR19 Business Plan. review the mst effective way frward. frward in Dec CSP Lgs 15 Oct-17 Resilience/WRMP CSP queried, further t Lg 12, the extent t which bard discussins n WRMP were predating /prejudging cnsumer engagement, and thus hw wider stakehlders /custmers views wuld be cnsidered in the WRMP plan (given limited attendance at stakehlder sessin). SESW advised that resilience, and therefre cnsideratin fr the WRMP, cvered extensively in phase tw research, e.g. discussins n metering, discussins n dry winters. Draft WRMP published fr cnsultatin n 5 March including a custmer-friendly summary. Prpsals in the WRMP, e.g. increased metering and increased leakage reductin tested extensively with custmers s far and full package f services, including thse addressed in the draft WRMP, will be tested in phase three as planned. In additin, there is specific engagement activity planned fr the WRMP which will be discussed n 12 March. Clsed CSP were reassured by the helpful presentatin at March CSP frm Alisn Murphy/Tm Kelly. CSP gave psitive feedback n the cnsultatin prcess, and cust friendly cmms. Als CSP leads are meeting with Tm Kelly n 22 March. Page 50 v2.0 September 2018

52 DEC CSP & ther 16 Dec-17 PR19 evidence & timeframe CSP Reprt n SES Water s Business Plan As fllw up t Lg 10 agreed that Dec CSP was a SESW prvided a useful brief in advance f the meeting t fcus n (1) The need fr SESW t meeting as an update n the plan and prgress fr prvide clear evidence f the quality f the custmer engagement and evidence gathering. Cmpany s custmer engagement, against the Ofwat guidelines, and the extent t which the results f this engagement have been reflected in the cmpany s plan; (2) Given the current planned milestnes fr the custmer engagement activity and the draft and final business plans, there appeared t be limited time available fr the CSP t carry ut their rle, in relatin t apprpriate evidence, effectively. 17 Dec-17 PR19 Business casesw Agreed it wuld be helpful fr CSP t have sight f apprpriate business casesw being prepared by SESW fr PR19. Actin fr SESW t prepare and share a list f business casesw that impact custmers. 18 Dec-17 Triangulatin CSP emphasised the imprtance f triangulatin and t evidence hw it s been carried ut. The detail f the prcess needs t be presented in an accessible frmat fr the CSP. 19 Dec-17 PR19 custmer engagement CSP challenged if the Cmpany feels that it has dne enugh engagement t infrm the business plan; and is there cnfidence in the results e.g. the number f attendees at events. CSP raised the need fr SESW t recrd the limitatins f the custmer research t date; e.g. minimal respndents attending the vulnerable custmers grup giving a very limited perspective, & therefre needs t be supplemented thrugh careful triangulatin. CSP asked that when the phase tw engagement results are presented t the CSP, that the Cmpany s interpretatin f the findings are als included, such as any early decisins that have been made. Agreed t prvide list SESW suggest that a discussin is needed t understand what additinal evidence the CSP are seeking that has nt been prvided in the dcuments circulated in February s that it can take an actin(s) t prduce the additinal evidence sught. Ofwat guidance n triangulatin is very limited hwever SESW cnsider that current apprach is meeting the guidance available. Example f describing triangulatin in a diagramatic frm with scpe f influence shared with GH n 26 April. SESW expect triangulatin will help with this and the start f phase three culd be used t address any gaps. Als stakehlder and draft WRMP cnsultatin in Jan - Mar, as well as nging use f the nline engagement tl. Agreed actin fr SESW t prvide the Cmpany s interpretatin f phase tw custmer research 20 Dec-17 SESW NED engagement CSP flagged need t ensure private engagement f Cmpany agreed t add CSP attendance t the CSP with Cmpany nn-executive directrs abut March Bard meeting agenda their views n the custmer engagement, and hw they feel it has impacted n the business plans. Clsed Dec CSP meeting discussed the issues, in the cntext f the brief prvided by SESW. Meeting was a very helpful update and prvided greater assurance n the next steps; althugh n nging basis CSP still need t review clear evidence f the quality f the Cmpany s custmer engagement, and the extent t which the results are reflected in the SESW plan. Clsed List prvided Clsed SESW have prvided a dc n "triangulatin & trade ffs", which is helpful. CSP still had sme queries n whether verall triangulatin apprach meets Ofwats guidance effectively, and discussed at March CSP, and via cnf call including CCW "experts" n Triangulatin t discuss hw SESW might imprve alignment with CCW/Ofwat guidance. SESW presented at April CSP a prpsed template/apprach t evidence triangulatin which CSP felt was very apprpriate. Challenge nw prgressed via Lg 30. Clsed (nging actins via Lg 27 & 28) SESW have prvided respnsesw t the actins raised by CSP, and these have helped reslve a number f queries. CSP still cncerned thugh re limited sample sizes in Ph 2 qualitative research, and lack f utput/evidence s far n wider BAU analysis and stakehlder and cmmunity engagement feedback. CSP have dcumented cncerns t SESW and suggested an apprach t fllw up. Clsed CSP met in private with independent NEDs in March t discuss their views n custmer engagement quality. CSP als had separate meetings with individual NEDs related t innvatin, resilience and custmer engagement. 21 Dec-17 Evidence template CSP flagged the imprtance f apprpriate Cmpany agreed actin t use the Metering Clsed evidence t supprt the custmer engagement evidence example template t be updated and SESW have prvided further evidence templates as impact n the business plan and reviewed and circulated. In additin private sessins held with agreed. agreed a standard example template t be used t Jeremy Pelczer and tw CSP members, Jn Wds assist in this. and the CSP chair and a further meeting scheduled with tw CSP members including attendance frm Dave Shemmans. 22 Dec-17 SESW PR19 starting assumptins CSP flagged the need t better understand the Cmpany agreed t prvide the dcument Cmpany starting assumptins (prir t PR19 phase 1 research). SESW were asked t create a dcument summarising the Cmpany s initial starting pint assumptins regarding custmer issues, pririties and preferences (e.g. based n PR14 utcmes, updated cnclusins in , plus phase 1 cnclusins), tgether with the surce f evidence fr these; plus its current view n SESWs prgress/cmpliance regarding Ofwat s seven requirements f CSPs. This wuld then act as a living dcument that is updated ver time and which the CSP can als cmment n. Clsed SESW have prvided a dc n "triangulatin & trade ffs", which includes the starting assumptins in each area. The SESW Visin dc is als a helpful summary f assumptins and current plans. Page 51 v2.0 September 2018

53 CSP Reprt n SES Water s Business Plan JAN CSP & ther 23 Jan-18 C-rdinated cmms n water resilience Water c's, including SESW, have recently put ut cmms n ptential water shrtages, and the need fr custmers t be cnscius f water efficiency measures. The messages are nt cnsistent r crdinated acrss cmpanies and can be cnfusing t custmers. It wuld be better t have a mre crdinated apprach t such cmms acrss the cmpanies (at least in Suth East). There was a meeting f SE water c's n 31 Jan. The cmms apprach t ptential water shrtages has been reginally c-rdinated thrugh Water UK and the Envirnment Agency (EA) fr well ver a year. The EA and Defra led a natinal media briefing n the situatin n 5 January n the day that Suthern Water submitted their drught permit applicatin with all ther cmpanies using their agreed practive messaging n that day t. The challenge is cmmunicating t custmers in a jined up way that als takes accunt f the very different gelgical and resurces situatins acrss the regin s the tw key messages have been that we need mre rain and everyne shuld save water whatever the weather. Ofwat have been n the natinal telecnferences and praised the industry fr the wrk dne t date. 24 Jan-18 Innvatin CSP suggested using Innvatin as a test case t Brief/TR prepared and agreed by CSP and SESW. shadw Bard member leads n the 4 SESW Meeting held with Jeremy Heath t discuss key wrkstreams f Innvatin, resilience, cust questin areas. Minutes f the meeting prvide engagement, affrdability. Challenge t Bard useful update frm SESW n their apprach t leads t be t understand hw they are Innvatin, and current plans. ensuring/assuring quality f custmer engagement, and impact n business plan. CSP leads were agreed t interface with each wrkstream. 25 Jan-18 Driving cultural change t supprt custmer engagement fcus 26 Jan-18 Custmer Relatins/ Custmer service perfrmance 27 Jan-18 PR19 custmer engagement FEB CSP & ther 28 Feb-18 PR19 custmer engagement What is SESW ding t create a custmer facing culture, with staff and prime cntractrs. Als, given the feedback n imprtance f being a lcal cmpany hw are SESW ensuring imprved cmmunity and lcal engagement. A presentatin n the verall custmer service Clsed imprvement prgramme, including the rle f culture change, is scheduled frm Dan Lamb (Head f Retail Services) fr the March meeting. On the secnd pint, lcal cmmunity engagement is imprtant t the cmpany and as such we are cntinually lking t extend ur already substantial activities. Belw are sme examples f current activity: SIM remains an issue, althugh CSP recgnised Lg 13 cvers actins n existing SIM. SESW have that Ph 2 PR19 research suggests custmers dn't agreed t arrange a sessin n CMeX lking at see custmer service as pririty issue, and tend t trends, initiatives and impacts. give psitive feedback n SESW respnsiveness. CSP thus suggested a briefing n the new C-MeX measure, and hw this will differ t SIM. SESW presented Ph 2 research at Jan CSP meeting. SESW cnfirmed they were prgressing the CSP raised a number f queries and issues, and utputs t the actins frm the Dec CSP meeting agreed t fllw up with a mre detailed review f and these shuld respnd t a number f CSP the research during a private CSP meeting in Feb. queries. The summary f queries and issues wuld then be dcumented and prvided t SESW fr nging fllw up. Private meeting f CSP t review Ph 2 research in Subsequent t the Feb meeting SESW have detail and identify queries and challenges t prvided respnsesw t the Dec meeting actins SESW. CSP dcumented challenges and prvided raised by CSP. Agreed that March meeting is used t SESW with a suggested fllw up plan. t define a list f utstanding challenges that SESW can take away as actins. MAR CSP & ther 29 Mar-18 Ph3 planning CSP have a cncern that the timing and phasing f There are a number f cnsideratins that went the Ph3 briefs and wrk is nt cmpatible with the int the stated timetable fr engagement activity timetable f CSP meetings agreed s CSP can input utlined in the brief f which the CSP schedule is and scrutiny re e.g. scpe. nly ne. All material being shared with CSP when we receive if fr their cmments and attendance ffered at activity t date. Final utput will be available by end f May. A milestne timetable has been prvided t the CSP and it was agreed at the 1 May meeting that sectins f the plan will be shared with the CSP when they are in an apprpriate stage fr review. Clsed Accept respnse frm SESW, althugh still a cncern frm CSP perspective. Clsed. CSP fllwed up with Jeremy Heath & Jeremy Pelczer, and SESW prvided a helpful dc utlining the apprach t innvatin. The CSP leads felt this was a very psitive respnse and effective plan. CSP received presentatin frm Dan Lamb at March CSP and were satisfied this summarised the plan n driving cultural change. Clsed Presentatin prvided n SIM at March CSP. Onging review f SIM perfrmance is cvered by Lg 13. Clsed Private CSP meeting held in Feb t review Ph 2 research and dcument queries and challenges t SESW. Summary f challenges prvided t SESW. Onging actins via Lg 28. Clsed SESW respnsesw have helped reslve a number f queries. In particular the revised Cust Engagement Strategy dc. CSP have reviewed these in cntext f challenges raised. CSP maintain the cncerns re limited sample sizes in Ph 2 qualitative research, and lack f utput/ evidence s far n wider BAU analysis and stakehlder and cmmunity engagement feedback; but recgnise these are fllwed up in Lg 29, 30,31 Clsed CSP discussed the timetable with SESW at March CSP, and fllwed up re input n Ph3 scpe etc. Credibility f phase 3 research, and CSP invlvement in reviewing utputs/impacts will be keenly watched by the CSP. (see als Lg 36) Page 52 v2.0 September 2018

54 30 Mar-18 Triangulatin, BAU data & Custmer prtal/cmms CSP Reprt n SES Water s Business Plan Given CSP cncerns limited qualitative research sample sizes in phase tw, hw will SESW augment this via business as usual data analysis, and phase three? CSP still t see mre utput/analysis f nging cmms (prtal etc) and evidence f any impact f the campaign and hw this cnfirms r queries the Phase tw research cnclusins? Online prtal results shared with Graham and with CSP at 12 March meeting. An updated Triangulatin and Trade-ffs dcument shared in May and a simplified diagrammatical presentatin f evidence als shared. 31 Mar-18 Vulnerability CSP have flagged previusly the need fr mre assurance n vulnerability, e.g. given limited sample sizes. What new r existing services re vulnerability/ affrdability will we test and hw t assure adequate depth f research. Hw can SESW get mre specific input n vulnerable grups and any innvative technlgies t engage with them. Over bth phase ne and phase tw the 32 Mar-18 Perfrmance cmmitments engagement exercisesw targeted slely at custmers in vulnerable circumstances were designed as supplements t the main engagement activities, t add clur and depth t the picture we btained frm this grup f custmers. The main engagement activities, including bth qualitative wrkshps and willingness t pay surveys, were designed by ur expert advisers t capture a representative sample f custmers in vulnerable circumstances and did s. Fr example, 20% f custmers surveyed in phase tw self-identified themselves as financially vulnerable. We therefre have n cncerns abut the number f interviews cnducted as supplements t the main engagement activities. Clsed In respnse t CSP at April meeting SESW presented an updated apprach and examples t imprve evidence f triangulatin and hw BAU etc link int this. CSP agreed this was an apprpriate and useful apprach, and SESW nw develped the apprach t cver all key business areas plus included with an update f the "triangulatin and Business case" evidence reprting. Clsed CSP sught t be assured that SESW had sufficient evidence n vulnerability, and SESW reprted t April CSP, cvering all evidence surces and cnclusins, including recent BxClever and ther stakehlder interviews. CSP respnded that this was a very helpful update in addressing the challanges. CSP have nw reviewed SESW Business Plan cntent n vulnerability and accunted fr this in the CSP Reprt cnclusins. CSP need mre clarity n hw the research and We cnsider that there are n majr gaps in Clsed analysis is linking back t the Perfrmance relatin t prpsed perfrmance cmmitments. SESW prvided initial views n PC's and evidence Cmmitments (and stretch within them), t We will be using phase three as planned t test fr hw these were "stretch" fr the April CSP. CSP cnfirm that there are n majr gaps in relatin t hw these perfrmance cmmitments cme agreed this was very helpful and apprpriate. prpsed PCs fr 2020 t tgether int a package t further test stretch and CSP fllwed up via mre detailed review using CSP have seen the areas prpsed fr PCs frm cst f delivery. Welcme discussin n 12 March SESW but still need t see the PC targets, and the f any perceived gaps. The cre aim fr phase supprt frm Atkins, and prvided sme challenges/cmments t SESW. Carried frward as cntext f the draft Business Plan, and then t three is t t take ur prpsed plan t custmers Lg 38 what extent these reflect stretch PCs and hw they t ensure that their pririties and preferences are being tested in Ph3. have been understd. As such we will be describing what we think we have the mandate t deliver based n ur understanding f custmers pririties. If custmers disagree that we have that mandate we will change the plan in the necessary areas. We prvided evidence at April meeting f hw ur current and prpsed perfrmance lks cmpared t thers in the industry (where data is available) and therefre cnsider that the rginal challenge has been addressed. A list f pints frm the CSP was prvided n 10 May and a meeting is being arranged t discuss these. 33 Innvatin Innvatin: Is there evidence f new ideas frm custmers? SESW have sme gd ideas re innvatin, but it's nt clear hw SESW are testing this in the plan e.g via PCs. APR CSP & ther 34 Apr-18 Custmer Relatins/Vulnerability CSP queried what currently exists r might be planned in terms f custmer service scripts and/r training t help identify (nn financial) vulnerable custmers when they call in, s that practive supprt can be prvided. In phase ne we prbed custmers n this tpic in the sectin innvatin and the future. We received limited feedback frm the grups but the majrity, if nt all, nted smart meters and water recycling. The Cnjint Chice Based apprach t quantitative research in phase tw and the presentatin f results thrugh a simulatr tl is a cutting edge apprach t quantitative research. We are als nt aware f ther water cmpanies reaching ut t fdbanks and therefre this is innvative fr the water industry. A pint t nte thugh is that all the enhancements we have made t the engagement prgramme since PR14 we see as evidence f ur innvative apprach. Further testing f perfrmance cmmitments will be carried ut thrugh phase three as planned. Dan Lamb has respnded t the query. (i) SESW have prduced Helping Hands dc as a cmmunicatin t custmers; (2) SESW have recently been fcusing n staff training acrss all subject areas, but Pririty Services has been a key theme; e.g. Partnered training prgramme fr all staff and management n Custmer Service inclusive f PS; Skills Matrix which will regularly test and identify knwledge gaps inclusive f PS; Quality Assurance Call Mnitring Framewrk, which includes criteria as Affrdability/Hardship, Pririty Services triggers. Clsed CSP recgnise there are examples f innvatin bth in the SESW peratins and in their apprach t cust engagement. CSP have nw had sight f the Business Plan cntent n Innvatin, and taken accunt f this in the CSP REprt cnclusins. Clsed Althugh CSP will be interested in future evidence f hw effective the training is in identifying and supprting vulnerable custmers. Page 53 v2.0 September 2018

55 CSP Reprt n SES Water s Business Plan 35 Apr-18 Business Plan CSP gave very psitive feedback n the BP timeframe and structure update timetabled fr Clsed cnsultatin dc fr the Business Plan (5 Pledges); 1 May meeting. Latest psitin n structure shared Mre detailed wrkplan presented by SESW at but flagged the need t see the full business plan detail (e.g. supprting prgrammes/actins t deliver cmmitments) in rder t gain assurance f the "cust engagement impact n the business plan". with GH n 26 April. April CSP. SESW agreed t drip feed draft BP cntent t CSP s they can review evidence etc as early as pssible. CSP have created a crrespnding detailed wrkplan f CSP activity. 36 Apr-18 Ph3 & Business Plan timetable CSP requested an update f the detailed timetable BP timeframe and structure update timetabled fr fr Ph 3, the Bus Plan cnsultatin plus the 1 May meeting. detailed Bus Plan; s that CSP are clear n what they will be able t review and when; plus including (beynd Bard) when ther stakehlders will review/input. Clsed Mre detailed wrkplan presented by SESW at April CSP. SESW agreed t drip feed draft BP cntent t CSP s they can review evidence etc as early as pssible. CSP have created a crrespnding detailed wrkplan f CSP activity. MAY CSP & ther 37 May-18 Business Plan CSP flagged need t get early sight f the mre SESW agreed with CSP prpsal t arrange Clsed detailed business plan cntent, s that they can separate meeting f CSP and SESW management t SESW started prviding "drip feed" f Business achieve the required aim f assuring the extent t review the mst effective way frward. Plan cnents frm mid July. which custmer engagement actually impacts upn the business plan. CSP members requested infrmatin and dcumentatin t be drip fed t them 38 May-18 Perfrmance cmmitments Further t Lg 32, CSP challenged SESW n the Meeting with SESW management n May 29th justificatin fr sme PC's (especially leakage and which prvided helpful clarificatin, and PCC) n the basis they culd be argued as nt agreement f sme fllw up actins. SESW nw "stretching" in cmparisn t Ofwat expectatins. prvided Business Plan sectin n PC/ODIs. CSP Als (linked t Lg 37) CSP asked fr sight f the agreed t refine their cnclusins and prvide supprting detail f the business plan cntent that updated feedback t SESW. underpins the PC's, as evidence f the cust engagement impact. 39 May-18 Scial Tariff CSP challenged SESW regarding the capacity fr delivering the Scial Tariff scheme in the future i.e. what SESW s future strategy is, and where SESW fresees a cap t numbers; CSP believe a strategy needs t be cnsidered fr the future in advance f the next business plan. Als culd SESW wrk mre practively with brkers (increasing their wrk with partners like CAB and thers) t ensure the mst vulnerable are being reached. JUNE CSP & ther 40 Jun-18 Resilience/WRMP EA have submitted their cnclusins re the draft SESW WRMP, which include a number f challenges and recmmendatins. Ofwat have als published their cnclusins/required actins n the SESW draft WRMP which align with the EA challenges plus flag cncern at insufficient custmer engagement (husehld and nnhusehld) in the draft plan. CSP will be interested in the SESW respnse and prpsed imprvements t the final WRMP/Business Plan. SESW explained their ratinale f the Scial Tariff PC target, and the basis fr reducing the stretch frm 25k t 19k. SESW (Alisn Murphy) prvided a status update n WRMP respnses at the July CSP meeting, prviding assurance that the varius actins wuld be respnded t. 41 Jun-18 Business Plan/cmms SESW t ensure that the Business Plan included prpsals and actins t address the cmms areas identified in the Phase 3 utput e.g. need t see imprved cmms plan n hw t prmte small c and service; prmte awareness and availability mre effectively f scial tariff incl partnership wrking; Details prvided in the engagement, retail and cmmunity chapters f the business plan. 42 Jun-18 Perfrmance cmmitments/odis Based n the BxClever reseach cnclusins, and SESW have prvided Business Plan sectin n CSP discussin at June CSP, SESW t include clear PC/ODIs t CSP fr revew, which includs he SES justificatin in its business plan f any rebalance f ratinale fr the rebalancing. leakage/pcc vs scial tariff PC's vs WTP. Als SESW t cnsider hw it will justify custmer evidence f WTP fr ODI (rewards)ptential impact n bills. Clsed Meeting with SESW management n May 29th plus sight f Business Plan cntent n PC's prvided helpful clarificatin. CSP taken accunt f these in updated cnclusins. Clsed CSP have accunted fr SESW feedback in their cnclusins n Scial Tariff; and recgnise that the brader challenge re future caps etc is mre directed twards the next Business Plan rather than PR19. Clsed CSP assured that SESW are apprpriately fllwing up. Clsed CSP reviewed Business Plan cntent n cmms Clsed CSP have had pprtunity t review the Business Plan cntent n PC/ODIs, and revise their cnclusins apprpriately. Page 54 v2.0 September 2018

56 CSP Reprt n SES Water s Business Plan JULY CSP & ther 43 Jul-18 Perfrmance cmmitments/odis CSP requested SESW t ppulate a simple table f SESW have prvided the required table and PC/ODIs (nw cmpleted), t which CSP added cntents. nging cnclusins. Additinal request t add the "starting pint" perfrmance (e.g. perfrmance at start f PR19 r target frm PR14, whichever is mre apprpriate. 44 Jul-18 Small Cmpany premium SESW researched premium and gained cust supprt; but key factr fr custs was "better cust service" frm lcal cmpany. CSP challenged SESW t ensure clear justificatin in the Bus Plan re actins t imprve custmer service. AUG CSP & ther 45 Aug-18 Envirnment in Business Plan CSP welcme inclusin f sectin f the Business Plan and a PC fr bidiversity, but cnclude that SESW culd have mre rbust detail in its Business Plan actins. Fr example it is unclear whether the bidiversity enhancement is t be delivered nly n SESW s sites r mre widely in the envirnment/sesw s area f peratin. SESW have prvided Business Plan sectins n Retail plus PCs which include the ratinale fr the Small Cmpany premium, plus the plans fr custmer service imprvements. Details prvided in the envirnment chapter f the Clsed business plan. Nte - this PC frms part f ur pledge t g further t enhance the lcal envirnment and nt just reduce the impact f ur peratins n it - it is nt linked t resilience and r a sustainable water supply. Clsed Table ppulated as requested. Clsed CSP have had pprtunity t review custmer service imprvement plans, and assured f nging fcus and cmmitment t nging imprvements. CSP have reviewed and discussed the Business Plan cntent n envirnment and bidiversity. There are sme remaining pints f nte which have been picked up in the CSP reprt. Page 55 v2.0 September 2018

57 CSP Reprt n SES Water s Business Plan 4.3. Appendix 3: CSP review and challenges during the PR19 prcess CSP review and challenges relating t custmer engagement Thrughut the prcess the CSP has had the pprtunity t review, discuss and prvide effective challenge (particularly via the Challenge lg prcess) t SESW n varius cmpnents f the custmer engagement (e.g. scpe, justificatin, willingness t pay and acceptability f its plans, and hw the cmpany intends t use the evidence frm custmer engagement). SESW prgressed a cmprehensive custmer engagement prgramme in 3 prgressive phases (as described in sectin 2.1, and in mre detail in the SESW Business Plan, Chapter 1). The CSP prvided review and challenge n such as questinnaires, sampling and perceived gaps in apprach. The fllwing sub-sectins utline the key cnclusins and challenges made by the CSP. Phase 1: Listen, Learn Infrm (ref Business Plan Chapter 1, Sectin 2) The CSP cmmenced engagement with SESW n the PR19 custmer engagement plan at the January 2017 CSP meeting (ref Appendix 5 ref M1). Having been given an utline f the prpsed engagement prcess, the CSP supprted the apprach but highlighted the need fr mre clarity frm SESW n hw it intended planning fr and prviding the infrmatin that will enable the CSP t answer the specific set f questins that Ofwat has mandated as part f the PR19 prcess. The detail f the challenge is lgged as Challenge 2 in the Challenge Lg (ref Appendix 2). SESW subsequently briefed the CSP n its apprach t managing the prductin f its PR19 Business Plan including custmer engagement at the March 2017 meeting. The CSP then asked fr greater clarity f plans/actins and milestnes at the July CSP meeting, by which time the expected scpe and likely utcmes f the stakehlder research shuld be much clearer. The CSP reviewed the Phase 1 research brief prir t the January 2017 CSP meeting. Overall the CSP agreed that the brief was apprpriate fr the first phase, but prvided a number f areas f feedback n the brief t SESW (refer t CSP minutes as per link abve). The CSP received a further update n Phase 1 prgress at the April CSP meeting (Appendix 5 ref M2). Accent were appinted as the research partner fllwing a cmpetitive pitching prcess. The CSP was further assured that there was a rbust plan, and the initial phase was nw in prgress, but the CSP flagged again that much needs t be dne in a relatively shrt time frame t ensure apprpriate levels f engagement are being carried ut within the PR19 prcess (ref als Challenge Lg item 6). The CSP thus requested a detailed sessin in July t fcus n an update regarding the prgress and cnclusins s far frm the custmer engagement. The CSP members attended a number f the Phase 1 wrkshps, which gave a useful insight int the research apprach. This gave sme assurance t the CSP that the initial custmer engagement apprach was effective, and apprpriate. The Phase 1 utputs and cnclusins (Appendix 5 ref R1) were presented t the CSP at the July CSP (Appendix 5 ref M3). The full findings frm Accent had been previusly circulated t the CSP members fr review. The custmers wh participated in Phase 1 were categrised, using lifestage and sci-ecnmic gruping, int eight dmestic custmer wrkshps, tw wrkshps fr SME s and tw wrkshps fr students/future bill payers. There were als seven face-tface in-hme discussins with custmers in vulnerable situatins. SESW nted sme areas that it felt were innvative research, e.g. using a pre-task apprach and cntacting the seldm heard and future custmers (student grup). Page 56 v2.0 September 2018

58 CSP Reprt n SES Water s Business Plan The interactive pre-task (thrugh Crwdlab) incrprated a pstcard t a friend in Sctland, water diaries, water deprivatin exercise, VOX POP. These were designed t raise the custmers awareness and water cnsciusness, nt t infrm. Accent explained that the research shwed, as yu wuld expect, custmers had different attitudes t water and that custmer segments were starting t emerge depending n their attitudes: cst cnscius, water cnscius and water blind. The research identified custmer pririties, which were cnsistent acrss participants, and were split int brilliant basics and blw me away. Brilliant basics included: lcal custmer service centre, fair tariffs, the envirnment, investment in infrastructure and leak/pipe maintenance, water supply resilience and water quality. Blw Me Away initiatives included an app t help them manage their water use, smart meters, schl educatin visits/materials, water sftening advice/devices and free efficiency devices. Custmers were advised that SESW is already ding sme f these and custmers are delighted t have heard abut them. SESW explained the next step wuld be a Bard Strategy discussin in September 2017 including a series f White Papers t be taken t the September Bard meeting which address a series f tpics including leakage and demand management. The CSP questined hw envirnmental resilience wuld be factred within the verall Business Plan as it was nt clearly cvered by the prpsed white papers, and SESW cnfirmed envirnmental resilience wuld cut acrss all areas f the plan but it wuld cnsider in develping the white papers hw that culd be made clearer. SESW als advised the CSP that it had appinted Bard member leads fr pririty areas f the Business Plan i.e. Custmer pririties (Jn Wds) Affrdability (Murray Legg) Resilience (Dave Shemmans) Innvatin (Jeremy Pelczer) The intent was fr themes t be injected int technical wrkstreams: e.g. innvatin in netwrk management, custmer cntact channels, envirnmental educatin; resilience in cntinuity f supply, financing structure, successin planning and staff develpment; affrdability fr different custmer grups. The CSP agreed this was a psitive way f ensuring Bard level assurance during the prcess, and decided t allcate CSP members as shadw leads t assist in develping the CSP assurance in these areas. Phase 2: Test and Infrm (ref Business Plan Chapter 1, Sectin 2) Having reviewed the Phase 1 utput, the CSP als reviewed the Phase 2 brief at the July 2017 CSP Meeting (Appendix 5 ref M3). Subsequent t the meeting the CSP prvided detailed feedback t SESW n a number f cncerns we had with the brief (ref Appendix 5 ref 10), which SESW tk accunt f in an updated brief (8 th August). The CSP als challenged SESW regarding hw it was ensuring wider cmmunity engagement activity t Page 57 v2.0 September 2018

59 CSP Reprt n SES Water s Business Plan enhance the custmer engagement (e.g. attending existing lcal clubs, scieties, meetings etc), and hw the CSP wuld see evidence f this (ref Challenge Lg item 11). SESW respnded that it wuld be including sme dedicated cmmunity engagement activities as part f PR19, and wuld be develping further nging plans fr cmmunity engagement. This CSP challenge remained an pen issue thrughut Phase 2, pending further assurance during the Phase 3 perid. The CSP held a meeting in private in Octber 2017 (Appendix 5 ref 11) where the CSP agreed an allcatin f lead members by subject area t shadw the SESW Bard leads; and als where the CSP expressed sme cncerns regarding the slippage in the cmmencement f Phase 2 stakehlder engagement activity plan (ref Challenge Lg item 14). As a result, given the current planned milestnes fr the custmer engagement activity and the draft and final Business Plans, there appeared t be limited timeframe available t cmplete effectively the CSP assurance rle, in relatin t apprpriate evidence f custmer engagement and assciated impact within the PR19 Business Plan. These cncerns were discussed at the Octber 2017 CSP Meeting (Appendix 5 ref M4), and it was agreed that a separate meeting f the CSP and SESW management wuld be arranged t review the mst effective way frward, and t discuss in mre detail; A checkpint f where we are regarding the timeframes f custmer engagement, Business Plan prcess and where/hw the CSP gets t review evidence and impact f the engagement What were the starting assumptins based n PR14 and subsequent custmer views What additinal assumptins were taken frm Phase 1, and what impact they had Hw and when d the CSP then review Phase 2 versus the draft Business Plan, and then Phase 3 etc. The fllw up meeting was held n 5 th December 2017, and in respnse t the CSP challenges abve (als referenced as Challenge Lg items 16 & 18), SESW had prepared a briefing dc SESW custmer engagement review 5 December 1217 (Appendix 5 ref 12), which utlined SESW s views n hw it expected t meet the CSP requirements, particularly relating t a prpsed apprach fr identifying evidence surces. The meeting was agreed by all as a psitive step frward, with a number f actins agreed (refer t CSP minutes 5 Dec Appendix 5 ref 13). The main areas f actin were; Agreement f a mre intensive, and fcused set f CSP meetings, at least mnthly, during 2018 SESW t develp the prpsals presented regarding dcumenting the SESW starting assumptins, Phase 1 impacts and gaps t be filled (via Phase 2/3 etc) against the agreed Business Plan areas. As a fllw up actin the CSP prepared a brief (fr the CSP and SESW) t utline the expectatins fr a (CSP in private) Phase 2 research review in Feb 2018 (ref Appendix 5 ref 14). A key input t this meeting was subsequently met by SESW prducing the Triangulatin and trade-ffs dcument (Appendix 5 ref 2) which prvided helpful explanatin f evidence against each f 9 Business Plan areas, i.e.; 1. Metering 4. Resilient netwrk 7. Educatin and water efficiency 2. Leakage 5. Mains replacement 8. Custmer services/lcal call centre 3. Supply interruptins 6. Water quality 9. Affrdability and vulnerability This dcument aimed t als address Challenge Lg items 18, 21, 22, and has subsequently becme a key reference dcument fr the CSP in understanding the thread f assumptins and evidence surces fr these areas; and is a gd example f where the CSP has psitively influenced SESW s apprach and evidence assurance. The dcument was further updated Page 58 v2.0 September 2018

60 CSP Reprt n SES Water s Business Plan after Phase 3 t prvide a cnsistent glden thread f evidence surces and cnclusins justificatin. Als during December 2017, fllwing varius CSP members attendance at Phase 2 wrkshps, a number f further challenges were raised regarding the Phase 2 research (ref Challenge Lg item 19). These were discussed at the January CSP meeting (Appendix 5 ref M5), when the initial utput and cnclusins frm Phase 2 were presented t the CSP. The January meeting included a useful discussin with SESW n the final Ofwat PR19 methdlgy, prviding the CSP with gd insight n SESW s wn expectatins. The CSP asked if SESW is aiming fr an exceptinal rated Business Plan. SESW cnfirmed that the cmpany expected t submit a high-quality plan and ultimately is aiming t achieve exceptinal status. The CSP had been prvided full detail n the Phase 2 results frm bth Explain (qualitative) and Bx Clever (quantitative) in advance f the January CSP), and were grateful t get immediate access t utput at the same time as the cmpany (and befre any Bard presentatin). Despite sme areas f challenge (refer belw ref cmments relating t Challenge Lg item 27), the CSP was impressed with the scpe and depth f the research, and particularly nted sme f the inventive appraches used in the Bx Clever research (as evidenced under Quantitative belw). A summary f the SESW scpe fr Phase 2 is cvered in sectin 2.1 (and in the SESW Business Plan, Chapter 1), but specific pints f key evidence nted by the CSP were; 1. Qualitative (Explain) (Appendix 5 ref R2) The c-creative wrkshp prvided an effective means f discussing custmer pririties. The wrkshp included 22 custmers in ttal, split acrss three tables (reflecting the 3 segments f cst cnscius, water cnscius, water blind), and SESW representatives presented infrmatin abut the tpics at hand enabling uninfrmed and infrmed pinins t be gathered (i.e. the first sessin had n additinal infrmatin r explanatin prvided, and then fr the infrmed sessin SESW gave mre explanatin f the ptential pririty areas). It was nted that n the whle pririties rankings did nt change frm the beginning t the end f the sessins with water quality, reliability f supply and acceptable taste/dur/clur remaining as the 3 tp pririties thrughut. There was als nt any significant variance f pririties acrss the 3 custmer segments as evidenced by the results table (fig 4.3.1i). Cupled with the brader quantitative research this gave gd evidence f SESW identifying apprpriate pririties, needs and requirements as per Ofwat expectatins. The qualitative wrkshps als cllected additinal views and ideas frm custmers n what they wuld expect frm a water cmpany (e.g. ref Appendix 3 fig 4.3.1ii) Regarding future custmers, the research did include a specific wrkshp with a grup f students but the research agency cncluded that future custmers fund it difficult t relate t the services prvided by SESW. This was a challenge picked up by the CSP as part f Challenge Lg item 28. There was, hwever, sme useful discussin acrss the future custmer and ther wrkshps (ref Appendix 5 ref R2) n Dry Winters, and Educatin, which cllected custmer views n future expectatins and ideas fr water efficiency. In particular there was discussin n custmer views re water metering, and the balanced pinins re cmpulsry metering and smart meters. Page 59 v2.0 September 2018

61 CSP Reprt n SES Water s Business Plan Fig 4.3.1i Fig 4.3.1ii Further insightful analysis and thus evidence (in supprt f SESW seeking a genuine understanding f custmer pririties, testing a genuine set f custmer ptins and wrking with custmers in a c-creative way) were the wrkshp discussins n varius aspects f water resilience. Again the research used a priritisatin exercise, where each respndent ranked the service issues individually, and then mderatrs n each table prbed t understand which scenaris they were mst willing and least willing t accept and why (ref Fig 4.3.1iii). Overall respndents were least willing t accept scenaris relating t the water quality, althugh lking at the individual scenaris a sudden interruptin t the water supply t yur hme fr mre than 4 days n prir ntificatin was the scenari respndents were least willing t accept. The CSP challenged the cmpany n sme aspects f the qualitative research in Phase 2 (e.g. sme limited sample sizes), but recgnised that it prvided useful insight and evidence in supprt f SESW seeking a genuine understanding f custmer pririties, testing a genuine set f custmer ptins and wrking with custmers in a c-creative way. These cnclusins then prvided a gd basis fr develping the Business Plan and acceptability testing in Phase 3. Page 60 v2.0 September 2018

62 CSP Reprt n SES Water s Business Plan Fig 4.3.1iii 2. Quantitative (Bx Clever) (Appendix 5 ref R3) Bx Clever explained that they use advanced analytical techniques t quantify the extent t which cnsumers are willing t pay / be cmpensated fr changes in the level f service they receive; and als are able t explre hw this willingness t pay varies and the extent t which framing and cntextualising the tpic can drive willingness t pay up r dwn. The CSP was very impressed with the apprach taken by Bx Clever and the analytical techniques used (cnjint analysis, Hierarchical Bayes, Gabr Granger etc) The key cnclusins frm the Bx clever research/analysis were; Whilst change in bill is the single mst imprtant element in driving decisin making, ther elements accunted fr 63% f the chices made. The mst influential being metering, a lcal service prvider and educatin & advice Prtectin against a risk f failure / interruptin are the areas that cmmand the mst willingness t pay mre Nearly 1 in 5 respndents wuld be classified as financially vulnerable, and this has a significant impact n their reactin t prpsed price increases The mre peple engage with their use f water / water services, the mre imprtance they place n where the custmer service centre is lcated, with a significant majrity wanting a lcally based cntact centre Page 61 v2.0 September 2018

63 CSP Reprt n SES Water s Business Plan CSP members expressed the view that the cnjint analysis apprach ( t develp a clear picture f what cnsumers find imprtant and hw much value they attach t the varius aspects f their water service ) f testing varius packages f services (rather than individual cmpnents) was an effective apprach in analysing custmers willingness t pay, and prviding sund evidence f an apprach that ensured testing a realistic range f custmer ptins and pririties. The extracts belw (Figs 4.3.1iv - vi) clarify the apprach used. Fig iv Fig 4.3.1v The initial analysis cncluded that whilst change in bill was mst imprtant, ther elements accunted fr 63% f the chices made (ref Fig 4.3.1vi). The mst influential being metering, a lcal service prvider and educatin & advice. Page 62 v2.0 September 2018

64 CSP Reprt n SES Water s Business Plan Fig 4.3.1vi The research apprach then sught t identify the perceived value that cnsumers attach t each level f service SESW culd ffer. Within the cnjint exercise respndents were cnstantly trading different levels f service and cst ff against ne anther; s thrugh the further analysis Bx Clever were able t calculate the mnetary value they attribute t each level f service, where these values are calculated relative t the current level f service within each attribute. An example f the utput is as belw (ref Fig 4.3.1vii); Fig 4.3.1vii Fig 4.3.1viii The analysis was then used t als test the sensitivity f custmer acceptance against varius price pints (ref Fig 4.3.1viii) t give a detailed view f the likely willingness t pay (WTP) against varius ptins, and Bx Clever als prvided a stand-alne mdel fr SESW t keep which then allwed nging testing f WTP ptins and sensitivities. The CSP recgnised this apprach as an innvative aspect f the research, which tgether with the qualitative research gave psitive evidence f SESW engaging effectively with custmers n a genuine set f pririties and ptins plus testing the affrdability f ptins and willingness t pay, and als that SESW has used the mst effective methds fr engaging with different custmer grups. The January CSP als included SESW sharing with the CSP its custmer rientated lng term visin dcument, (Appendix 5 ref 15). The CSP feedback was that this was a wellstructured dcument that wuld help infrm custmers n SESW s plans, in supprt f the custmer engagement prgramme. This dcument was used as part f the educatin prcess during Phase 3. Page 63 v2.0 September 2018

65 CSP Reprt n SES Water s Business Plan Althugh the CSP was impressed with the quality and insightfulness f the Phase 2 research, fllwing the January CSP meeting there was feedback frm CSP members which identified sme remaining challenges that the CSP felt were imprtant t address (ref Challenge Lg item 27). The CSP therefre cnvened a further private CSP meeting n 9 th February 2018 t agree a list f challenges/queries and prpsed frward actins (ref Appendix 5 ref 6). These were registered as Challenge Lg item 28, and discussed with SESW management at a meeting n 20 th February. The key areas f challenge were; The CSP required greater clarity n the verall custmer engagement prgramme, and hw the research and analysis is linking back t the Perfrmance Cmmitments (and stretch within them), t cnfirm that there are n majr gaps in relatin t prpsed PCs fr 2020 t 2025 that have nt been addressed and/r that need t be addressed in Phase 3. Insufficient depth and breadth f sme f the qualitative research (small sample sizes, sme key lines f enquiry nt cvered adequately) The CSP cncerned re sampling f nn-financial aspects f custmers in vulnerable circumstances, and ideas re new r existing services re vulnerability/ affrdability which wuld be tested. Als cncerns re limited sampling f future custmers; and culd there be a mre innvative apprach t engaging with "future custmers"? The CSP challenge as t whether the WTP ptins discussed in the research are stretching enugh, given Ofwat requirements, r at least seek sme clarity n hw SESW wuld test ut the limits f WTP against reasnable ptins. Limited stakehlder invlvement s far, in terms f clear pririties/views f stakehlders. Qualitative research seemed t be shrt-term fcused; nt enugh input n e.g. envirnmental and lng term resilience. WTP criteria culd als have cvered the inclusin f envirnment and water use restrictins Triangulatin is seen as a key cmpnent f the engagement analysis but the CSP is nt cnvinced SESW has sufficiently applied the suggested guidance frm Ofwat/CCW (Appendix 5 ref 16) SESW respnded prmptly, psitively and cllabratively in terms f the challenges raised and prvided pre-reading f SESW respnses. These were then discussed between the CSP and SESW at a pre-meeting prir t the March 2018 CSP meeting (Appendix 5 ref M6). The SESW respnses helped reslve a number f the CSP queries, with agreed actins t mve frward. The CSP re-iterated its psitive view that SESW management were being respnsive and transparent in seeking t address the CSP queries and challenges. The intrductin f the Challenge Lg is seen as a gd reference dcument f queries, challenges and actins/utcmes. Hwever, the CSP maintained its cncern re limited sample sizes in Phase 2 qualitative research and lack f utput/ evidence s far n wider BAU analysis and stakehlder and cmmunity engagement feedback; but recgnise these are fllwed up in Challenge Lg items 29, 30, 31 plus SESW wuld seek t take the cncerns int accunt as part f Phase 3. In additin, bth in advance f the meeting and during the discussin n the Phase 3 research, the CSP flagged sme queries and challenges relating t utstanding ptential gaps f evidence gathered s far and hw Phase 3 might address these. SESW shared the Phase 3 prpsals with the CSP, wh tk an actin t summarise its views n pssible areas f challenge re scpe/cntent. At the March CSP meeting SESW als summarised the remaining Phase 2 engagement findings including business custmers willingness t pay results, expert stakehlder interviews and activity n the Talk n Water nline cmmunity; plus a summary f the cmpany s bservatins n the results and the next steps f the prgramme. Page 64 v2.0 September 2018

66 CSP Reprt n SES Water s Business Plan The March CSP meeting als included a helpful update frm SESW n the difference between the prpsed C-MeX measure f custmer service and the current SIM scre and methdlgy. WRMP engagement The Water Resurces Management Plan (WRMP) research and planning was an imprtant assciated activity t the PR19 custmer engagement, as this significantly infrmed the resilience and envirnment planning within PR19. Mst f the activity related t SESW s WRMP planning tk place during the Phase 2 custmer engagement prcess timeframe, fllwed by acceptability testing (particularly regarding netwrk resilience, leakage and PCC) during Phase 3 custmer engagement. A key input t the WRMP prcess was the stakehlder event (run by AECOM Infrastructure & Envirnment UK Limited) n 16 August 2017 (ref Appendix 5 ref 3), with the aim t review SESW prpsed ptins fr meeting its supply deficit identified in the WRMP prcess. SESW, wrking with the Envirnment Agency and AECOM had dne significant pre-analysis in screening a brad set f ptential resilience/supply ptins and agreed a lng-list pririty set t cnsider at the wrkshp. Althugh nt particularly well attended by stakehlders (mainly invlving the CSP and EA representatives), the event was seen by thse CSP members present as an innvative, and well thught ut prcess t cnsider varius packages f resilience/supply ptins, i.e.; The agency agreed with SESW a brad list f types f ptins that culd be implemented t reslve the deficit (refer t table 1 in WRMP Optins Reprt ). Participants were then presented with playing cards giving the ptin name/type and the yield it culd ffer (Appendix A in Appendix 5 ref 3). Attendees were asked t identify a series f ptins that wuld add up t the vlume f water required t clse t deficit (in rder t generate 35 Ml/d). Participants were then given a new set f playing cards cntaining mre infrmatin in additin t the yield; the cst, envirnmental impact, carbn emissins, and ptential fr disruptin. The grups were then asked t recnsider their chices f ptins t meet the deficit vlume in light f the new infrmatin. Examples f the playing card apprach are shwn in fig 4.3.1ix Fig 4.3.1ix Page 65 v2.0 September 2018

67 CSP Reprt n SES Water s Business Plan The exercise was further evidence f innvative thinking in the apprach t custmer/stakehlder engagement, and prvided custmer based input t the WRMP planning. Stakehlders appreciated the difficult balance between ensuring there is enugh water fr supply while minimising envirnmental impacts, carbn emissins and the disruptive effects f cnstructin wrk in rads and in frnt f custmer s hmes n a large and nging basis. Hwever, the CSP cncluded that, in its pinin, the cmpany placed t much reliance n this ne event befre the SESW bard signed ff the first draft WRMP. Althugh further custmer engagement n resilience was then included within the Phase 2 and 3 main activity f the PR19 engagement, this was subsequent t the draft WRMP and a mre shrt-term viewpint than WRMP cnsidered. This is cvered mre in sectin 3.4. Further t the WRMP planning at the end f 2017, SESW published its draft WRMP plan dcument (Appendix 5 ref 17) in January and then prepared the WRMP cnsultatin prcess and presented the WRMP Cnsultatin Plan at the March 2018 CSP (Appendix 5 ref 4). The CSP was grateful fr the update n the WRMP cnsultatin prcess, and hw this linked int the PR19 planning prcess. In particular, the CSP gave psitive feedback n the planned cnsultatin prcess and the quality f the custmer friendly briefing dcument. Similar t the SESW Lng-Term Visin dcument referred t earlier, the CSP recgnised the WRMP dcument as gd evidence f SESW psitively infrming custmers; plus prvided the CSP with reassurance arund the cnsultatin apprach t water resurces and the cmpany s lng-term plans. The CSP did identify sme challenges t SESW regarding the WRMP and resilience in general (ref Challenge Lg items 3, 7, 15, 23, 38), particularly relating t challenging the levels f prpsed stretch n perfrmance cmmitment fr leakage and per-capita cnsumptin (PCC). The Envirnment Agency published its respnse t the SESW draft WRMP at the end f May 2018 (ref Appendix 5 ref 8), which als identified similar challenges relating t leakage and PCC, as well as further challenges and recmmendatins, e.g. further clarificatin f hw resilient SESW is t drught and nndrught events; greater ambitin n leakage reductin; new and innvative ways t reduce per capita cnsumptin; cllabratin with neighburing water cmpanies t share water. The CSP reviewed the EA recmmendatins and agreed the challenges were apprpriate (ref Challenge Lg item 40) t be taken accunt f by SESW as prpsed imprvements t the final WRMP/Business Plan. These are cvered further in sectin 3.4. Ofwat als published its cnclusins n the draft WRMP plan in June A key cnclusin frm Ofwat was that the draft WRMP plan did nt have sufficient evidence f custmer engagement (bth husehld and nn-husehld), and als aligned clsely with the EA stated cncerns regarding resilience t drught and nn-drught events, plus the need fr greater ambitin n leakage and PCC. Again sectin 3.4 refers further t this. Phase 3: Acceptability testing (ref Business Plan Chapter 1, Sectin 2) SESW s apprach and bjectives fr Phase 3 were utlined in sectin 2.1 (and in mre detail in the SESW Business Plan, Chapter 1). The CSP prvided feedback n sme f the Phase 3 material, e.g. the need fr the questinnaire t explain t custmers that SESW s PCC was higher than that f ther cmpanies. The apprach and plan were discussed with the CSP at the March CSP meeting. The CSP challenged SESW re the timings f the research prgramme fr Phase 3 and in particular the lack f time available fr the CSP members t meet in persn t review the scpe and fcus f the research prpsals, plus that the timing and phasing f the Phase 3 wrk is nt cmpatible with the timetable f CSP meetings currently agreed (ref Challenge Lg item 29). Cnsequently the CSP members had a detailed discussin with SESW management and scped ut a detailed weekly plan f SESW plus the CSP activity up until September 2018 (ref Appendix 4). This was fund acceptable t the CSP, ther than Page 66 v2.0 September 2018

68 CSP Reprt n SES Water s Business Plan the CSP emphasised the need t see as early as pssible the relevant detail frm the Business Plan that wuld supprt the evidence f the impact f the custmer engagement. Fllwing the March CSP meeting, the CSP began cnslidating its initial views n the quality f the custmer engagement (up t that time) and cnvened a private CSP meeting n 17 th April (ref Appendix 5 ref 18) with the aims; T discuss/agree initial cnclusins n quality f custmer engagement plus 7 Ofwat questins T review and cmment n initial SESW Business Plan cnsultatin dcument T review and cmment n initial PCs/ODIs. SESW management attended the first hur f the meeting t answer sme queries and prvide sme input n their view re prgress against the Ofwat questins. SESW had (in February) prvided t the CSP initial views n this prgress, and the CSP had added its wn views. This has subsequently evlved t the summary f cnclusins in sectin 1.3. SESW presented the Business Plan cnsultatin dcument (Appendix 5 ref 5)) which included the additinal questins SESW felt needed sme clarificatin via this prcess. The CSP again cmmended SESW n the quality f the custmer fcused dcument, which the CSP felt gave a gd, easy t understand view f the draft plan. Hwever the CSP advised SESW (ref Challenge Lg items 35 & 37) that it was imprtant fr the CSP t see the full Business Plan detail (e.g. supprting prgrammes/actins t deliver cmmitments) in rder t gain assurance f the "custmer engagement impact n the Business Plan". The CSP recgnised that this wuld nt apply t the whle Business Plan, but just t thse cmpnents that relate t the areas f custmer engagement, and/r the Ofwat aidememire scpe. SESW agreed t cmply with the request, and aim t prvide the (draft) cntent f these sectins at the earliest pprtunity. The CSP als challenged SESW regarding the Phase 3 acceptability testing n Perfrmance Cmmitments, and whether all f these were really stretching enugh (especially re Leakage and Per Capita Perfrmance). These issues are cvered further in sectin 3.7. At the May 2018 CSP meeting (Appendix 5 ref M7), there was further discussin regarding the CSP challenges (ref Challenge Lg items 36 & 37) relating t ptential lack f time fr the CSP t adequately take accunt f the Phase 3 utput plus SESW s Business Plan drafting. The CSP agreed the need fr an additinal private sessin at the end f July (fr CSP members nly), in rder t review cnclusins and drafting prir t the August finalisatin f the reprt. CSP members again highlighted the need fr infrmatin and dcumentatin t be drip fed t them, particularly thse related t the final draft planning stage, due t take place between 11 June and week cmmencing 13 August. The CSP Chair circulated a first draft f the CSP PR19 reprt t the CSP members in early June, as a basis t cllect feedback and cnsensus views n the key verall cnclusins n quality f engagement and impact n the Business Plan. The Phase 3 utput and cnclusins was presented t and discussed with the CSP at the June CSP meeting (Appendix 5 ref M8). The CSP cncluded that the quality f bth the qualitative and quantitative research and analysis was very gd, and nted the cmments f Jn Wds (as bth a Bard NED and General Manager f Cca Cla UK) that frm his experience the depth and quality f research/analysis was high class. The utput fcused n fur key areas; Acceptability f the scial tariff prpsals Page 67 v2.0 September 2018

69 CSP Reprt n SES Water s Business Plan Review and enhancement f the prpsals fr custmers in vulnerable circumstances, via a Design Sprint with agencies invlved with custmers in vulnerable circumstances. Acceptability/willingness-t-pay testing f the verall Business Plan cmmitments. Validating the acceptability f a bill impact fr being a small/lcal cmpany The CSP was particularly impressed by the cncept f the Design Sprint (Appendix 5 ref R5) which was seen as an effective methd t review and enhance, with knwledgeable participants, the ptimal prcess and supprt fr custmers in vulnerable circumstances. Althugh nting that the Design Sprint wrkshp had limited attendance, the utput and prpsals were explred in mre detail and refined via further in-depth interviews with key stakehlders and vulnerable custmer cntacts at relevant cmmunity lcatins. Key general cnclusins frm the qualitative research (Appendix 5 ref R4, 5, 6) were that SESW needed t fcus strngly n imprved cmmunicatins n such as prmting the benefits f being served by a small cmpany; imprving the awareness and prmting the availability mre effectively f the scial tariff and vulnerability supprt, including imprved partnership wrking. The CSP challenged SESW (ref Challenge Lg item 41) t ensure that the Business Plan included prpsals and actins t address these areas. The quantitative research (Appendix 5 ref R7) was recgnised by the CSP as being bth brad plus targeted n ensuring apprpriate custmer segments were addressed (e.g. including future custmers, custmers with recent SESW cntact, varied scial grades, husehld/nn-husehld). The CSP cncludes that the research and analysis prvided sund evidence f an effective apprach t validate the acceptability f the SESW Business Plan and t explre the mst acceptable cmbinatins f service cmmitments versus verall willingness t pay. There was gd evidence f infrming custmers, such as the clear explanatin f the ptential bill impact (ref fig 4.3.1x and p12-14 f Appendix 5 ref R7). Fig 4.3.1x The research analysis validated that there was general custmer acceptance f the plan (71%), and, as with the Phase 2 research, there was an effective apprach f testing acceptance at a packaged service level rather than just individual cmpnents, as well as segmenting the analysis between separate acceptability f the service imprvements, the bill impact and the verall plan. The quantitative analysis then als explred specific attitudes t varius ptins fr leakage, usage (cnsumptin in litres/day) and scpe f the scial tariff Page 68 v2.0 September 2018

70 CSP Reprt n SES Water s Business Plan (numbers f peple n the scheme). The CSP was impressed with the methdlgy used t prvide effective feedback n the trade-ffs that custmers wuld cnsider (ref fig 4.3.1xi). Fig 4.3.1xi The cnclusins frm this stage f the analysis identified that custmers wuld t sme degree prefer that SESW did mre t bth further reduce leakage plus further reduce husehld usage, whilst the exercise als caused a prprtin f custmers t reduce their view n the scpe f custmers cvered by the scial tariff (ref fig xii) Fig 4.3.1xii Als during the June CSP Meeting the CSP presented its initial verall cnclusins t SESW n the custmer engagement prgramme, having reviewed and agreed these in the private pre-meeting. During the discussin the CSP re-emphasised its agreement with the research cnclusins regarding the preference fr further imprvements in leakage and PCC; and that these cnclusins aligned with the challenges (ref Challenge Lg item 38) raised by the CSP, as well as EA, and SESW accepted that there was nw sufficient validatin and evidence fr it t wuld review the perfrmance cmmitments. This exercise represented a gd example f SESW taking accunt f custmer viewpints as well as the views f the CSP, and reflecting that in its Business Plan (ref challenge lg item 42). Fllwing the June 12 th meeting the CSP prduced, with input frm SESW, a simple table f PCs/ODIs against which the CSP culd add its evlving cnclusins (see table in 3.7.2). These were discussed at the July 3 rd CSP Meeting, bth in plenary with SESW and then in Page 69 v2.0 September 2018

71 CSP Reprt n SES Water s Business Plan private with the CSP (Appendix 5 ref M9, 19). In the private CSP July meeting the CSP als reviewed an updated set n summary cnclusins n the quality and impact f the custmer engagement, as input t an updated draft CSP PR19 Reprt being prvided in advance f the fllwing July 20 th CSP meeting. The CSP again met in private after the full CSP meeting n the 20 th July, at which SESW prvided an update n their respnses t EA/Ofwat regarding WRMP, plus an update n the SESW cnclusins regarding bill impact. The CSP advised SESW that they preferred the ptin t spread the bill impact ver the plan perid, rather than a ne-ff adjustment. Mil Purcell, DWI Deputy Chief Inspectr, als attended the meeting and cnfirmed that DWI had n specific issues t flag regarding the SESW cmpliance t DWI statutry bligatins. The CSP had a final meeting with SESW, including the SESW Chairman, n 20 th August t review cmments/cnclusins frm the CSP n the final draft f the Business Plan and t discuss SESW respnses t sme challenges/pints raised by the CSP in rder t seek alignment between the Business Plan and CSP Reprt. The meeting was cnstructive in agreeing sme mutual actins t imprve cntent and alignment f the reprts CSP review and challenges relating t Triangulatin Ofwat s guidance identified Triangulatin (ref Appendix 5 ref 16) as a useful tl t help ensure the review f engagement evidence was mre rbust. The CSP had asked SESW t explain hw it intended using Triangulatin t assimilate and validate key insights frm all relevant and available data and infrmatin surces. This resulted in the CSP challenging SESW s initial apprach t Triangulatin (ref Challenge Lg item 18) in December 2017, as it culd nt understand the linkages between business-as-usual data, the custmer engagement research and hw this will then flw thrugh t impact the Business Plan (i.e. the Ofwat methdlgy requirement f shwing a glden thread ). SESW respnded psitively t the challenge, and discussed the cncerns with the CSP at the 5 th December meeting (ref Appendix 5 ref 13). In respnse SESW prduced the Triangulatin and tradeffs dcument (Appendix 5 ref 2) which prvided helpful explanatin f evidence f the use f varius data surces t infrm twards each f 9 Business Plan areas, i.e.; 1. Metering 4. Resilient netwrk 7. Educatin and water efficiency 2. Leakage 5. Mains replacement 8. Custmer services/lcal call centre 3. Supply interruptins 6. Water quality 9. Affrdability and vulnerability This dcument aimed t als address Challenge Lg items 18, 21, 22, and has subsequently becme a key reference dcument fr the CSP in understanding the thread f assumptins and evidence surces fr these areas; and is a gd example f where the CSP has psitively influenced SESW s apprach and evidence assurance. The dcument was further updated after Phase 3 t prvide a cnsistent glden thread f evidence surces and cnclusins justificatin. During the review f the Phase 2 activity, the CSP challenged SESW further n triangulatin fllwing the private CSP meeting n 9 th February 2018 (ref Appendix 5 ref 6). The specific challenge was that Triangulatin is seen as a key cmpnent f the engagement analysis but the CSP is nt cnvinced SESW has sufficiently applied the suggested guidance frm Ofwat/CCW (Appendix 5 ref 16), e.g. nt prviding assurance n relative weightings f varius surces f evidence and hw these wuld be used. These were registered as Challenge Lg item 28, and discussed with SESW management at a meeting n 20 th February. SESW respnded prmptly, psitively and cllabratively in terms f the challenges raised and prvided pre-reading f SESW respnse. These were then discussed between the CSP and SESW at a pre-meeting prir t the March 2018 CSP meeting (ref Appendix 5 ref M6). SESW asked the CSP fr sme further clarificatin n what Page 70 v2.0 September 2018

72 CSP Reprt n SES Water s Business Plan the CSP was expecting, and the CSP rganised a fllw up cnference call including CCW "experts" n Triangulatin t discuss hw SESW might imprve alignment with CCW/Ofwat guidance. SESW respnded psitively in reviewing and restructuring the triangulatin apprach and develping a prpsed evidence template, which was presented at the May CSP (ref Appendix 5 ref 7). The CSP all agreed that the prpsed template was a significant imprvement, and wuld prvide the necessary assurance n triangulatin nce it is cmpleted (fllwed up as Challenge Lg item 30). This was further psitive feedback frm SESW in answering the CSP queries ref hw SESW culd evidence vs f hw the custmer engagement links t the challenges made by the CSP and then hw this was (r was nt) reflected int the Business Plan. The SESW template (ref fig 4.3.2i) aligns with the Triangulatin and trade-ffs dcument (Appendix 5 ref 2) referred t abve, which acts as the evidence surces fr the areas identified in the template fr each f the same 9 business areas. SESW has made a business judgement n the influence level that takes int accunt wh the infrmatin represents (custmers, regulatr, stakehlder) and hw the infrmatin was derived (reprts, qualitative research, quantitative research). Triangulatin has then been adpted n tw levels a tp line apprach t decide the pririty areas (ur pledges) and a bttm up apprach t identify what is f specific imprtance t the custmers in each pledge (ur perfrmance cmmitments). The tp line is therefre cnsistent in all diagrams. The bttm line references mre specific evidence fr the area in questin, e.g. fr water quality it highlights the infrmatin that is specific t this tpic that cmes frm the tp line data surces. Fig 4.3.2i CSP review and challenges relating t Vulnerability Vulnerability Research Fig 4.3.3i illustrates hw the mix f qualitative and quantitative research, plus SESW s engagement with cmmunity grups and stakehlders, has enabled a gd understanding f custmers in vulnerable circumstances as input t SESW s service planning. Page 71 v2.0 September 2018

73 CSP Reprt n SES Water s Business Plan fig 4.3.3i (Vulnerability custmer engagement) SESW s research indicates that verall custmers in vulnerable circumstances pririties mirrr ther custmers pririties (ref Appendix 5 ref 7), and that verall custmers welcme supprt being given t custmers in vulnerable circumstances. Hwever, there are mixed pinins amngst custmers n whether there shuld be additinal services fr custmers in vulnerable circumstances (ref Phase 2 Qualitative Research Appendix 5 ref R2) In Phases 1 & 2 custmers in vulnerable circumstances were nt researched n a quantitative basis as a discrete grup, SESW rather taking the view that it was sufficient t include sme custmers in vulnerable circumstances in the generic research sample. On being challenged n this SESW respnded that 20% f custmers surveyed in Phase 2 selfidentified as financially vulnerable. This was accepted by the CSP, althugh the CSP still challenged (ref Challenge Lg item 31) hw effectively SESW had researched nn-financial aspects f custmers in vulnerable circumstances (and indeed what the definitin f that grup might be, based n Ofwat s guidance in the Vulnerability Fcus Reprt). SESW did d sme qualitative engagement with custmers in vulnerable circumstances in Phases 1 & 2; i.e. sme in-hme interviews, a custmer c-creative wrkshp, 2 small fcus grups and stakehlder interviews (e.g. with carer grups). The CSP raised challenges (ref Challenge Lg items 18 and 31) abut the small sample size and limited breadth f custmers in vulnerable circumstances either researched directly, r thrugh intermediaries wh represent them, especially in the early stages f the research (Phases 1 & 2). The CSP asked SESW t lk at this, and t investigate innvative technlgies t engage with them. SESW did make effrts t braden the sample size f custmers in vulnerable circumstances, and fllwed up n suggestins f ther ways t gain a view n hard t reach custmers in vulnerable circumstances and thse unable t articulate fr themselves, e.g. thrugh East Surrey Carers Supprt Assciatin and Age UK Surrey (Phase 2) and Actin fr Carers (Phase 3). SESW als fllwed up n cntacts given t them. As a result SESW nw have third party stakehlders wh say that they are keen t d mre partnership wrking, acting as intermediaries. The CSP welcmed this and ging frward will cntinue t lk fr assurance n fllw thrugh. Phase 3 research (ref sectin 2.1 and Appendix 5 ref R5) included a six hur sessin as an expert design sprint n scial tariff and ther nn-financial supprt. The CSP acknwledged Page 72 v2.0 September 2018

74 CSP Reprt n SES Water s Business Plan that this was an innvative apprach t research, and determined the selectin f this particular research agency. In additin the Talk Abut Water prgramme includes an nline cmmunity (currently 300) which had as its first tpic a frum n what else SESW culd d t help peple during a supply interruptin. The CSP challenged thugh (ref Challenge Lg 31) whether the vulnerability element was sufficiently vert and targeted at specific vulnerable grups, and culd have benefited frm sme brader segmentatin. The CSP als pinted ut that relying n an nline discussin may rule ut many custmers in vulnerable circumstances wh are less likely t be nline, which culd skew results. Business As Usual insight Fig 4.3.3ii summarises SESW business-as-usual activity. SESW has existing cmmunity talks via Wise Abut Water which includes metering and the Helping Hand Scheme, and ver the last year 248 peple have been spken with. While the cmmunity talks are a psitive, the CSP queried whether the vulnerable custmer element f these talks is sufficiently targeted t reach the vulnerable audience. fig 4.3.3ii (Business as Usual activity) In additin, thugh, SESW has the Helping Hand Scheme and Pririty Services Register 6. The scheme is aimed at mainly elderly, frail r custmers in vulnerable circumstances and enables them t register with SESW, wh will ntify them directly if there is an emergency. SESW acknwledged that currently awareness f this scheme is lw, and that actins were in place during PR19 t imprve this, e.g. SESW prviding training t thse wh have cntact with custmers t help them identify pririty services custmers and thse that may be facing financial hardship. SESW als has a WaterSure scheme which prvides financial help fr metered custmers wh need a lt f water fr medical reasns, e.g. SESW ask hme dialysis users t ntify it s that it can give them warning f any knwn water supply interruptins. SESW als stated that it is wrking hard n raising awareness f services ffered thrugh enhanced cmmunity engagement and wrking with thers. The CSP welcmed these initiatives and stated it wuld lk fr nging evidence and assurance in the Business Plan 6 Helping Hand Scheme Page 73 v2.0 September 2018