Yorkshire Water has announced it will invest £3.8 billion over the next five years to remain at the forefront of industry innovation.
Set out in the company’s next business plan leading up to 2020, it will make capital investments which include £50m for water supplies, £180 million to improve the quality of Yorkshire’s inland waterways, as well as £220 million to tackle issues such as climate change and population growth.
It is a significant commitment for the firm, which serves 5.3 million customers in the Yorkshire region through 33,000 kilometres of clean water network and 60,000 kilometres of waste network. These customers are well served by a 2,400 strong workforce who help treat a mammoth 1.24 billion litres of clean water every day, while at the same time one billion litres of waste water is collected, treated and disposed of.
Privatised with the entire English and Welsh water industry in 1989, Yorkshire Water is now part of the Kelda Group which is made up of a number of infrastructure funds including CitiGroup, GIC and Deutsche Bank.
Simon Barnes, Director of Business Support at Yorkshire Water, said: “We have an ideology about customer-centricity where everything starts with the customer. Their needs are our priority and we works backwards from there. According to the UK Customer Service Index we are currently the top customer service provider in the utility sector. Our vision is ‘taking responsibility for the water environment for good’, and we have underpinned that vision with six strategic business objectives looking out over 25 years.
“We developed those business objectives by looking at the 11 externalities we have got coming up in the business, in the water sector and the Yorkshire region. They are underpinned by an ethos of delivering better service at lower cost.”
“Our six strategic business objectives are: being a trusted company at a functional and corporate level; making sure everything we do surrounding water is safe from drinking it to walking round our reservoirs and also from a flooding perspective; continuing to be a water-efficient region and managing resources properly despite the growing population; maintaining excellent rivers and coasts in our catchment by thinking of areas like the east coast of Yorkshire and how we play our part in keeping Blue Flag status; making our resources sustainable by utilising the circular economy; and then finally strong financial foundations meaning how do we keep the bills low while remaining an attractive business to invest in that then allows us to borrow money cheaply to enable us to invest in our assets.
Barnes cited the 11 externalities as: rising energy costs, rising resource costs, recognising climate change, growing population because infrastructure needs to meet demand, growth in households, skills resource and where the company is getting future skills and talent from, recognising and meeting expectations of the diverse customer-base, societal demands that are changing, and the whole affordability and financeability, as well as technological change.
Laying the foundations
Yorkshire Water works with the Office for National Statistics in forecasting data, so the organisation is clear on its direction of travel. The disciplined approach is always brought back to the business plan which works on a five year cycle. It currently sits on the cusp of a brand new regulatory period which runs from 2015 to 2020.
Through consultation with its customers, the company has built seven desired outcomes that directly feed into the six aforementioned strategic business objectives. These outcomes include providing customers with safe and clean drinking water, ensuring there is enough water, protecting people from the environment and sewer flooding, protecting and continuously improving water supplies, understanding the impact on the environment and providing customers with the expected level of service whilst keeping bills as low as possible.
There are a number of business units now collaborating to achieve these objectives. Service Delivery ensures Yorkshire Water is easily contactable and end users receive clean water and can dispose of their waste water safely.
Working alongside that business unit is the Asset Management function, which makes sure the assets are fit for purpose and identifies where the company needs to invest. Naturally this unit has played a central role in where the company will be investing £3.8 billion in the next five years.
The Support Services business unit involves HR, Communications, Health & Safety, Finance & Regulation and the Business Support unit which Barnes spearheads, looking after all the procurement and IT systems, business processes and innovations. Head office is located on the outskirts of Bradford and there are various satellite offices throughout the county. An asset management building in Leeds city centre also hosts Yorkshire Water’s construction partners.
Technology and energy
Yorkshire Water draws its resource from three sources, split equally between rivers, ground water and upland catchments. This encompasses raw water reservoirs and the planned catchments, treatment works pulling from the aquifers and rivers directly, and then clean service reservoirs where the firm stores the potable water it produces. But this can bring its own challenges to overcome.
Barnes said: “We invest extensively from an innovation perspective. For example, moving water is a very expensive business as it is heavy. To move a tonne of water takes quite a bit of pumping if you are not in a gravity-fed situation. You can imagine we have got quite a significant energy bill due to rising energy costs. The question we are constantly asking ourselves is how do we square the better service and lower cost?
“We have been looking at how we can use renewable energy to reduce our exposure to the volatility of the market. Therefore we extended our partnership with npower so half of our future energy needs are met through renewable electricity. The deal was facilitated by RWE Supply and Trading and means Haven Power will supply renewable energy to the region via npower until 2017.
“We do a small amount of hydropower, but getting key assets in the ground for hydro is quite difficult because the pipes aren’t normally near where you need to use the electricity and trying to get the connection right is tricky. We’ve tended to go for a small amount of wind energy but we’re actually looking at how we can start to take the product we receive from our customers and turn that into energy with things like anaerobic digestion.
“We build our business plans over five years to co-ordinate where in these different areas we are going to place money; introducing new technologies to the market and innovating is crucially important to us. Sometimes it is proven but sometimes it is technology that isn’t proven anywhere so can entail an element of risk. Consequently we selected Business Modelling Associates for the development of an integrated risk and cost modelling capability on a seven-year contract, because it is all about managing the potential risk”
This stance has seen Yorkshire Water begin an anaerobic digestion project that takes the sludge produced from waste water treatment works and put it through a process which has required £12.5 million worth of investment since 2010 to develop.
Although the process is still in the development phase, it has the capacity to produce three times the amount of energy for the same amount of capital investment.
Barnes added: “That’s involved working with a range of global organisations and by investing that much in one area of technology, it has been one of the biggest innovation projects we have taken on.”
Thanks to technological innovation, Yorkshire Water’s carbon footprint continues on a downward trajectory and due to the increased energy produced, it makes the company more efficient allowing it to reinvest those funds elsewhere in the business.
Strong employee focus
One of the biggest assets Yorkshire Water possesses is its 2,400 employees and the company’s senior management rightfully places the utmost importance on staff wellbeing and advancement. It is something that the business is very passionate about and Barnes personally champions.
He said: “We just won the Utility Week award for staff development due to one of our schemes called the Business Support Hotseat Scheme. We opened this up specifically for people who are not currently managers in the organisation, so we are identifying people in the talent pool.
“Broadly, it is a scheme where we will give them Tuesday mornings to work on solving a problem in the business. There is a maximum of six people on the Hotseat scheme, they get assigned a mentor, and it works in six month periods. As directors of the business we meet every week and any individual on the Hotseat scheme gets the chance to sit in on all the leadership meetings to understand what is going on; then they move on to another department.
“They all vote and decide what problem they are going to work on and how. It really is an opportunity to work on something and build their network within the business, getting exposure to people they wouldn’t normally interact with daily. We introduced this in 2013 and are now going through the third Hotseat scheme.”
Yorkshire Water also has a robust graduate scheme; some even travelled to Israel in January in conjunction with the respective embassies to work on company performance commitments.
The first Hotseat scheme came up with ‘ChemVision’, which was around optimising chemicals and it manifested itself in a £250,000 saving per annum on the procurement practice and interaction surrounding chemicals and chemical companies.
The project manager for ChemVision went on to become a full-time project manager in Asset Management. Another participant was able to highlight her skills in value chain engineering when she worked with firms such as Lafarge Tarmac by completing benchmarking exercises with procurement routes.
Barnes said: “What’s great to see is each and every person has either moved on to doing a role they particularly wanted or stayed in their existing role and became more confident and effective in that role.
“With regards to staff development, I took 22 individuals away from the business for a week in March last year. On the Monday afternoon I announced I had organised a networking event in Leeds for a number of our suppliers. They had all paid a fee to be there and our CEO, myself and the Director of HR would also be attending and they needed to organise the event themselves.
“That created a bit of a crisis for them as we had people from all over the world flying in for this event. But they delivered a fantastic networking event where they made a number of contacts with various businesses from an innovation angle and I was very proud of them. It was a way of saying “how are you going to start engaging your supply chain from a systems, business process and value chain perspective?”
“It is a way of galvanising the business to get behind some of the things that we need to do. It is a great way of engaging people within the business but also engaging people from our supply chain.”
The ongoing emphasis at Yorkshire Water is ensuring the four key areas of business processes, systems, procurement and innovation are solidified and locked together. By doing this, the company becomes the main enabler of lower service and better cost and an active member of the circular economy.
This is why the company is investing heavily from a systems perspective, and allocating £1.9 billion of the total investment towards water and sewerage services. Barnes also explained how the organisation is understanding what its current IT systems and future systems needs to be, and there is some motivation and excitement over the emerging big data and artificial intelligence arena.
He said: “In the next five years we’re looking to outperform by £500 million of the £3.8 billion that we’re going be investing and that’s why we need to act smart by employing the circular economy thinking.
“We updated a number of waste water treatment works around the region and some of these aggregate-lined tanks at the plant have become redundant and a big liability. At one site we were looking at a £20 million cost to get rid of the aggregate and put it to landfill.
“From a sustainable resources and trusted company perspective we are trying to reduce what we send to landfill. Some fairly junior innovation staff from a business process point of view analysed the situation and said they actually think the aggregate can be washed in a way that could then be used back into our capital programme.
“So we started partnering with organisations like Lafarge Tarmac who are in the quarrying business. We worked on an innovative project where essentially we were able to turn this £20 million liability into an income stream by developing a technique where the aggregate was removed, cleaned and put back into the building/construction trade.
“So we’ve now in effect got a quarry at these sites. The company that won the work is a company called Thompson’s. They are taking the aggregate off site and using it in the construction industry, paying us a fee per tonne but then returning the site back to its former glory. Which then allows us to develop that site for housing or light industrial use, highlighting the whole circular economy.”
But Barnes is keen to point out all of this would not be possible without the knowledge-sharing and networking events and says really it is about understanding Yorkshire Water’s data and what its business processes currently are and what they need to be in the future.