We held a co-creation workshop with customers to show them how this document could look. But thanks to their participation, they told us they would prefer a bill breakdown explanation with their annual bill, and for the rest of the detail to be housed online.
So welcome to Our Finances Explained section of the website – co-created by you, our customers.
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.
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.
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 commitments to you, Our contribution, Financial Statements, and our Annual Performance Report.
An item of property owned by a person or company. For a water company this can be our network of pipes, treatment works and reservoirs.
A type of long-term borrowing.
An expenditure that a UK business may claim against its taxable profit (eg. spending money on buying equipment). The allowance may be deducatable in one year or over several, allowing companies to delay payment of corporation tax until a time when the level of investment reduces.
The amount of money or assets invested in the business by the owners. The capital contribution increases the owner’s equity interest in the company.
The money invested in assets to enable a company like our to deliver services to customers.
The sum of money paid regularly (typically annually) by a company to its shareholders out of its profits or reserves.
The money paid at a particular rate for the use of money borrowed.
Investment grade credit ratings
Is the quality of a company’s credit and shows if they are a low risk of a credit default, making it an attractive investment.
Principal intermediate holding companies
Companies between the ultimate parent company and the operating company.
The amount of money left over once the costs associated with running the business are taken into account.
All incoming money received by a company, often through charges or bills.
A person or company that legally owns one or more shares in an organisation.
A amount of money a company is required to pay to the government on any profit made from business activity.