Our aim is to be national leader in water and wastewater services, today but also tomorrow, and it is really important that we are clear about how we do this.
The funding and financing of our business is a central part of this. We employ thousands of people either as employees or through our supply chain partners to make sure we can deliver the best service we can for our customers, investing millions of pounds to build new assets to support this. It’s our responsibility to fund this as efficiently as we can on behalf of all our customers and stakeholders. With these sums involved, combined with the whole host of legislation and regulation we must follow, it’s understandable that the financing arrangements of water companies sometimes appear complex.
Our customers are at the heart of everything we do and we set our water and sewerage charges to reflect the costs of continuing to deliver the safe, clean and reliable water that our customers expect, as well as what is needed to remove and treat wastewater efficiently.
Once every five years a significant, industry wide, exercise is carried out with the water regulator, Ofwat, which sets our price controls for the next five year period. This exercise is known as a Price Review and was last carried out in 2014 to set how much revenue we can recover for the 2015-20 period.
We review our charges in detail annually to make sure they are set fairly so that customers only pay for the services that they use.
In addition customer affordability is very important to us. We make sure no customer group experiences a high increase in their charges from one year to the next as the impact of inflation is also incorporated into bills. We also have many ways to help customers who may use higher than average amounts of water, due to their particular circumstances, as well as helping some customers to reduce arrears and re-schedule payments to ease debt problems. We constantly encourage customers who may be struggling with household bills to take the first step and talk to us, as there is a number of ways we can help.
We keep our bills as low as we can through a combination of:
• Being efficient with how we deliver water in order to keep customers’ bills low by using treatment works with lower running costs and always looking to drive down unnecessary costs. We are the first water company in the UK to use all the sludge remaining after sewage treatment to make renewable energy. We have invested over £70m into this process so that we can produce our own power, saving us millions of pounds and cutting our carbon footprint by 20%. This is not only good for the environment but also for our customers’ bills.
• We also seek to finance our operations efficiently – we borrow money where interest rates may be fixed for many years to make sure we have a stable financing base.
• We invest heavily to deliver reliable and high quality supplies and improve the services we deliver for our customers, and again we seek to do this as efficiently as possible.
• Finally, the way we manage our taxes helps to also make sure we can deliver the lowest possible bill for customers.
The services we provide are essential to life and wellbeing, and it is important to us that our customers should always have complete trust and confidence in what we do. We want our service to be recognised as unrivalled, delivering what our customers consider to be good value for money.
Our finances explained
• We receive revenue from the bills we issue to our customers for providing water and sewerage services in the North East of England as Northumbrian Water and water only services in the South East as Essex & Suffolk Water.
• The cash we collect from bills funds the running of the business and operations – roughly £1.12 per household per day for Northumbrian Water customers (for water and wastewater services) and 70p per household in Essex & Suffolk (water only services).
• We add to this by raising either cash from banks and debt markets.
• This cash is then used to support our large investment programme and fund the building of new assets.
• We pay interest on the debt borrowed.
• This, combined with our significant investment programme, influences how much tax we pay.
• The remaining cash after paying tax and all our other expenditure is our profit.
• We reinvest some of this profit in the business and an element is paid as dividends to our shareholders.
Some of our customers have been surprised in the past to learn that while we make a profit each year we also have a high level of debt within the business. This arises as we do not charge customers every year for the full cost of the investment being made. These costs are spread out fairly over a long period of time to match the period of their expected use, so that the cost of investment is shared by both the customers of today as well as tomorrow.
For a more detailed guide, click here for extra information of each of these key elements of our finances, the investment we are making for both the customers of today as well as tomorrow, and how this translates into customers’ bills, if you would like to know more.
We always aim to be as clear and straight forward as we can be and further details of our finances and the important work we are doing for our customers can also be found in our Financial Statements, our Annual Performance Report, and on our website www.welivewater.co.uk.
All incoming money received by a company, often through charges or bills.
The money invested to enable a company like Northumbrian Water, deliver services to customers.
The money paid at a particular rate for the use of money borrowed.
A compulsory amount of money a company is required to pay to the government on any profit made from business activity.
The amount of money left over once the costs associated with delivering something are taken into account.
The sum of money paid regularly (typically annually) by a company to its shareholders out of its profits or reserves.
A person or company that legally owns one or more shares of stock in an organisation.