AMP6 Reporter Annual Performance Report Bristol Water. 13 July 2017

Transcription

1 Bristol Water 13 July 2017

2 Notice This document and its contents have been prepared and are intended solely for Bristol Water s information and use in relation to AMP6 Reporter Annual Performance Audit. Atkins Limited assumes no responsibility to any other party in respect of, or arising out of, or in connection with, this document and/or its contents. This document has 45 pages including the cover. Document history Job number: Document ref: / KA / DG / 223 Revision Purpose description Originated Checked Reviewed Authorised Date Rev 1.0 For Internal Review FAO James Holman; Keith Hutton K Adams / J Archer / M Barker / J Sutherland / J Jacobs / D Hunt / H Gavin / P Fordham Rev 2.0 Final K Adams / J Archer / M Barker / J Sutherland / J Jacobs / D Hunt / H Gavin / P Fordham Rev 3.0 Final re-issued K Adams / J Archer / M Barker / J Sutherland / J Jacobs / D Hunt / H Gavin / P Fordham SJI JPA JPA 09/06/17 SJI GJ JPA 20/06/17 MLB JPA JPA 27/06/17 Rev 4.0 Final re-issued As above MLB JPA JPA 06/07/2017 Rev 5.0 Summary version As above MLB JPA JPA 13/07/2017 Client signoff Client Bristol Water Project AMP6 Reporter Document title Job no Copy no. Document reference / KA / DG / 223 Atkins Version July

3 Table of contents Chapter Pages Executive summary 5 1. Introduction Background Scope Structure of Assurance Report Approach Summary of Findings Performance Commitments (APR Table 3A-D exc. penalty/reward) APR Section 4 Tables GSS Payments Wholesale Cost Assessment Information Tables WRMP Update 40 Appendices 41 Appendix A. 42 A.1. Meeting Record 42 Tables Table 0-1 Performance Commitments (APR Table 3A-D) Overall Assessment 6 Table 0-2 APR Section 4 Tables Overall Assessment 6 Table 0-3 GSS Payments Overall Assessment 7 Table 0-4 Wholesale Cost Assessment Information Tables Overall Assessment 7 Table 0-5 WRMP Update Overall Assessment 9 Table 1-1 APR Performance Commitments and Scope 10 Table 1-2 APR Table 4 scope 11 Table 1-3 GSS Payment Scope 11 Table 1-4 Table of Wholesale Cost Assessment Information and audit scope 11 Table 1-5 WRMP Update Scope 13 Table 2-1 Description of Deliverables 14 Table 2-2 Descriptions for RAG categories 15 Table 3-1 Performance Commitments (APR Table 3A-D exc. penalty /reward) Overall Assessment 16 Table 3-2 APR Section 4 Tables Overall Assessment 22 Table 3-3 GSS Payments Overall Assessment 25 Table 3-4 Wholesale Cost Assessment Information Tables Overall Assessment 26 Table 3-5 WRMP Update Overall Assessment 40 Table A-1 APR Table 3A-D Methodology and Data Audits Meeting Record 42 Table A-2 APR Table 4 Audits 42 Table A-3 GSS Payment Audit 43 Table A-4 Wholesale Cost Assessment Information Audits Meeting Record 43 Table A-5 WRMP Update Audit 44 Figures Figure 2-1 Audit meeting process 14 Atkins Version July

4 Assurance Statement for Bristol Water s APR Based upon our audits of Bristol Water s APR and Wholesale Cost Assessment submissions and the supporting information we saw over a programme of meetings during April, May and June 2017 (See Appendix A.), we conclude that for the reporting of areas we covered, other than where indicated otherwise in our report: at a component level the various teams compiling the documents and information had a reasonable understanding of and were meeting their reporting obligations; the Company has sufficient processes and internal systems of control to meet its reporting obligations; the Company s explanations of where and why it cannot fulfil its reporting obligations are soundly based; the Company has sufficient processes and internal systems in place to identify, manage and review its reporting risks; and the Company s explanations of how it will manage and/or mitigate material or potentially material reporting risks are soundly based. Our overall impression from the audit meetings was that the process of compiling Bristol Water s APR and Wholesale Cost Assessment submissions and the supporting information was based upon the application of processes that are part of an existing or evolving business-as-usual. The data were either as previously reported and audited internally as KPIs or derived from data that were previously reported and audited. Though good progress continues to be made, the Company still needs to document the processes applied and to evidence the checks and controls that are in place. As is normal for reporting across the water industry, the complexity, occasional subjectivity and scale of the data collation process precludes absolute accuracy across all areas. There are areas in the reporting where the exact wording of the Final Determination would have benefited from being clarified. However, we note that there is little or no scope for changes to the Final Determination. We have suggested that the Company should be clear in its methodology documentation and any supporting commentary about the interpretations it has made. While we observed a number of issues for which we provide comment within the main report, we believe these do not impact materially upon the potential to sign-off the Company submission. Each is an area we believe should be given further consideration as part of continuing improvement to performance reporting by Bristol Water. During the assurance activities, we have had free access to the Director of Strategy and Regulation and his team and the full cooperation of the people responsible for preparing and reporting the APR and Wholesale Cost Assessment submissions and the supporting information. We have seen the good progress being made in the documentation of the methodologies applied in reporting data and their alignment with the process charts developed by Bristol Water as part of a wider organisational consideration. Jonathan P Archer Regulation Director Reporter providing Technical Assurance Services to Bristol Water Atkins Version July

5 Executive summary Introduction This report summarises the external technical assurance (Reporter) services Atkins has provided in relation to aspects of Bristol Water s 2016/17 Annual Performance Report (APR) Tables 3 and 4, Wholesale Cost Assessment Information Tables, GSS Payments and Water Resources Management Plan (WRMP) Update. This is our second year of providing these services to Bristol Water and the second year of AMP6 in which Bristol Water has reported against the measures defined in the 2014 Final Determination by Ofwat (as subsequently amended as a result of the deliberations of the CMA). This is the first year that we have provided assurance for the WRMP Update. Our approach has been shaped by the expectations of the assurance to be provided for a prescribed water company. Throughout, we have received the cooperation of the Company and have had the freedom to express our opinions. We have had access to, and have fed back to the Board, Senior Leadership Team and Bristol Water Challenge Panel. The scope of our assurance was the technical audit of the performance commitments (PCs) reportable in the 2016/17 Annual Performance Report, as defined in Bristol Water s Assurance Plan 2016/17 including key supporting data. We also reviewed the Cost Assessment Information Tables (final guidance issued by Ofwat in May 2017), the Guaranteed Standard Scheme payments for 2016/17 and the annual WRMP Update. The Cost Assessment Information Tables include data for 2011/12 to 2016/17. Our assurance did not include reconsideration of previous years reported data that were assured by Mott Macdonald (previous Reporter), other than where obvious changes were needed or the reporting requirements made it necessary. Approach We carried out a series of structured audits, which we tailored to the different data types being reported. For the APR audits against Performance Commitments, we conducted a separate methodology and data audit in line with Ofgem s Data Assurance Guidance. For the APR Table 4B-4G, Wholesale Cost Assessment Information Tables, GSS Payments and WRMP Update we carried out a combined methodology and data audit. Our focus on particular areas was risk-based as highlighted in Bristol Water s own analysis and supplemented by our experience in identifying and quantifying the elements of the journey from raw to published data that introduce material errors. After detailed planning of an audit schedule to ensure the appropriate people (Company and technical auditors) are present, we formally notify all parties of the expectation of the audits. We provide immediate verbal feedback and document our audit findings in both a rapid feedback and a detailed audit summary. These provide the Company with the opportunity to correct errors of fact and respond with explanations or further information to our observations. The essence of the summaries is captured in an Action Log which is used to manage the progress on matters arising. The supporting documentation is available for inspection. Summary of Findings Each data table reviewed at audit was allocated an overall rating of Red, Amber or Green to reflect their priority, with separate ratings for the methodology and the data (see tables below). Descriptions for each category are given in the table below. Category Description RED AMBER GREEN High Priority: Failure to comply with reporting requirements, major failure of methodology or data errors that may lead to misreporting. Medium Priority: Shortfalls in methodology and/or methodology documentation. Methodology under development. Incomplete data set or minor errors identified that do not alter the performance reported relative to targets and threshold values. Low Priority: Minor revisions to methodology and/or methodology documentation needed. Issue(s) not judged to be material or no issues. Atkins Version July

6 Table 0-1 Performance Commitments (APR Table 3A-D) Overall Assessment Measure Methodology Data A1: Unplanned customer minutes lost GREEN GREEN A2: Asset Reliability Infrastructure (Total Bursts and DG2 Low Pressure) A3: Asset Reliability Non-Infrastructure (Turbidity and Unplanned Maintenance) AMBER GREEN GREEN GREEN B1: Population in centres >25,000 at risk from asset failure GREEN GREEN C1: Security of supply index (SOSI) GREEN GREEN C2: Hosepipe ban frequency GREEN GREEN D1: Mean Zonal Compliance GREEN GREEN E1: Negative Water Quality Contacts GREEN GREEN F1: Leakage GREEN GREEN G1: Meter penetration (%) GREEN GREEN G2: Per capita consumption GREEN GREEN H1: Total carbon emissions GREEN GREEN H2: Raw water quality of sources GREEN GREEN H3: Biodiversity index AMBER GREEN H4: Waste disposal compliance GREEN GREEN I1: Percentage of customers in water poverty GREEN GREEN J1: Service Incentive Mechanism (SIM) * GREEN GREEN J2: General satisfaction from surveys GREEN GREEN J3: Value for money GREEN GREEN K1: Ease of contact from surveys GREEN GREEN L1: Negative billing contacts GREEN GREEN Table 0-2 APR Section 4 Tables Overall Assessment Table Methodology Data 4A Non-financial information Covered in APR and WRMP Update audits Covered in APR and WRMP Update audits 4B - Wholesale totex analysis GREEN GREEN 4C - Impact of AMP performance to date on RCV GREEN GREEN 4D - Wholesale totex analysis - water GREEN GREEN 4E Wholesale totex analysis - wastewater N/A* N/A* 4F - Operating cost analysis - household retail AMBER GREEN 4G - Wholesale current cost financial performance GREEN GREEN 4H Financial metrics N/A** N/A** 4I Financial derivatives N/A** N/A** Atkins Version July

7 *Our assurance did not include consideration of this table. As Bristol Water is a water-only company, this table is not applicable to the Company. **Our assurance did not include consideration of this table, as this has been assured by the Company s financial auditor, PwC. Table 0-3 GSS Payments Overall Assessment Area Methodology Data GSS Payments GREEN GREEN Table 0-4 Wholesale Cost Assessment Information Tables Overall Assessment Table Line Description Line Methodology Data Operating expenditure 1-11 GREEN GREEN Table 1: WW Expenditure by business Table 2: WW Expenditure by purpose and Table 2.1: WW Cumulative expenditure by purpose Capital expenditure AMBER GREEN Cash expenditure GREEN GREEN Atypical expenditure GREEN GREEN Total expenditure 31 GREEN GREEN Enhancement expenditure by purpose 1-27 AMBER GREEN Table 3: WW Resources Proportion of distribution input by source type Number and capacity of sources 1-6 AMBER GREEN 7-17 AMBER GREEN Length of raw mains 18 AMBER GREEN Pumping Head AMBER GREEN Total water treated 1-15 GREEN GREEN Number of treatment works GREEN GREEN Table 4: WW Treatment Zonal population receiving water treated with orthophosphate Average pumping head - treatment / Average pumping head - resources Average pumping head - distribution 31 GREEN GREEN 32 AMBER GREEN WTW in size bands GREEN GREEN Proportion of Total DI band GREEN GREEN Table 5: WW Distribution Main lengths 1-9 AMBER GREEN Atkins Version July

8 Table Line Description Line Methodology Data Capacity GREEN GREEN Distribution input 13 Water delivered Leakage Covered in F1: Leakage (APR) Covered in F1: Leakage (APR) Covered in F1: Leakage (APR) Covered in F1: Leakage (APR) Covered in F1: Leakage (APR) Covered in F1: Leakage (APR) Communication Pipes AMBER GREEN Network GREEN GREEN Age of Network AMBER GREEN Pumping Head 35 AMBER GREEN Properties 1-7 GREEN GREEN Meters 8-11 GREEN GREEN Table 6: WW Properties and Population Household Connections GREEN GREEN Population served 14 GREEN GREEN Meters GREEN GREEN Company Area 17 GREEN GREEN Lead Communication pipes 1 AMBER GREEN Supply / Demand 2-5 AMBER GREEN Energy Consumption 6-8 AMBER GREEN Table 7: WW Other Table 18.1: WW Other opex Peak Factor 9 AMBER GREEN Mean Zonal Compliance 10 Volume of leakage 11 Covered in D1: Mean Zonal Compliance (APR) Covered in F1: Leakage (APR) Covered in D1: Mean Zonal Compliance (APR) Covered in F1: Leakage (APR) Other opex 1-8 AMBER GREEN Table 18.2: WW Other Other expenditure and service charges 1-9 AMBER GREEN Table 19: Retail Operating expenditure 1-14 GREEN GREEN Atkins Version July

9 Table Line Description Line Methodology Data Table 21: Non HH costs Costs incurred due solely to the establishment of the non-household retail market 1-21 AMBER GREEN Table 0-5 WRMP Update Overall Assessment Area Methodology Data Supply N/A GREEN Demand N/A GREEN Customers N/A GREEN Based upon our audits of aspects of Bristol Water s APR, Wholesale Cost Assessment submissions, GSS Payments and WRMP Update and the supporting information we saw over a programme of meetings during April, May and June (See Appendix A.), we conclude that for the reporting of areas we covered, other than where indicated otherwise in our report: at a component level the various teams compiling the documents and information had a reasonable understanding of and were meeting their reporting obligations; the Company has sufficient processes and internal systems of control to meet its reporting obligations; the Company s explanations of where and why it cannot fulfil its reporting obligations are soundly based; the Company has sufficient processes and internal systems in place to identify, manage and review its reporting risks; and the Company s explanations of how it will manage and/or mitigate material or potentially material reporting risks are soundly based. Good progress continues to be made, though the Company still needs to improve the documentation of the processes applied and to evidence the checks and controls that are in place. As is normal for reporting across the water industry, the complexity, occasional subjectivity and scale of the data collation process precludes absolute accuracy across all areas. While we observed a number of issues for which we provide comment within the main report, we believe these do not impact materially upon the potential to sign-off the Company submission, insofar as they do not take the reported value across any reference boundaries. Each is an area we believe should be given further consideration as part of continuing improvement to performance reporting by Bristol Water. During the assurance activities, we have had free access to the Director of Strategy and Regulation and his team and the full cooperation of the people responsible for preparing and reporting the APR and Wholesale Cost Assessment submissions and the supporting information. We have seen the good progress being made in the documentation of the methodologies applied in reporting data and their alignment with the process charts developed by Bristol Water as part of a wider organisational consideration. Atkins Version July

10 1. Introduction 1.1. Background Atkins Limited has been appointed by Bristol Water to provide external assurance on the regulatory submissions presented by Bristol Water (the Company) to the Water Services Regulation Authority (commonly known as Ofwat) under the conditions set out in its Licence with the Secretary of State. In its PR14 Business Plan, Bristol Water stated that they would publish an update on outcome performance and present this to the stakeholder representative group. Bristol Water will publish an Annual Performance Report (APR) on some performance indicators common to all other water supply companies (in England and Wales) and some which are bespoke to the Company which were defined through the PR14 Business Plan, Final Determination and Competition and Markets Authority (CMA) deliberations. To the APR submission has been added the Wholesale Cost Assessment Information Tables, which are amended versions of the Wholesale Cost Tables which were separately submitted for We also include in this assurance report consideration of Bristol Water s Guaranteed Standards Scheme (GSS) payments and the annual update to Bristol Water s Water Resources Management Plan (WRMP). We have tailored our assurance with the aim of ensuring that customers and stakeholders can trust the data and information that Bristol Water provides. We consider the processes by which data are produced, the material accuracy of the data and any conclusions drawn by Bristol Water. We take an evidential approach to confirm the application of, rather than just the adequacy and appropriateness of procedures. We note that under Ofwat s Company Monitoring Framework, Bristol Water must share full reports with Ofwat on request, if they have not been published in full. There is no duty of care to Ofwat from the assurer and Ofwat would not publish or share material provided that the Company had not published without agreement. The supporting documentation for this report (audit reports and issue log) is available if required Scope The scope of this audit included the following elements: Performance Commitments (APR Table 3A-D excluding penalty/rewards) APR Section 4 Tables GSS payments Wholesale Cost Assessment Information Request tables WRMP Update The following tables show the scope of the audit in more detail. Table 1-1 APR Performance Commitments and Scope Performance Measure Methodology and Data Audit Completed A1: Unplanned customer minutes lost A2: Asset reliability - infrastructure Asset reliability sub indicator: Bursts Asset reliability sub indicator: DG2 Low Pressure A3: Asset reliability - non-infrastructure Asset reliability sub indicator: Turbidity Performance at WTW Asset reliability sub indicator: Unplanned maintenance events B1: Population in centres >25,000 at risk from asset failure C1: Security of supply index (SOSI) C2: Hosepipe ban frequency D1: Mean zonal compliance (MZC) Atkins Version July

11 Performance Measure Methodology and Data Audit Completed E1: Negative water quality contacts F1: Leakage G2: Per capita consumption (PCC) G1: Meter penetration H1: Total carbon emissions H2: Raw water quality of sources H3: Biodiversity index H4: Waste disposal compliance I1: Percentage of customers in water poverty J1: Service incentive mechanism (SIM) J1: Service incentive mechanism (SIM) (Pelican) * J2: General satisfaction from surveys J3: Value for money K1: Ease of contact from surveys L1: Negative billing contacts* ** *This Performance Commitment is a sub-set of SIM data. **We alternative with Wessex Water s Assurance provider; they are responsible Table 1-2 APR Table 4 scope Data Table Methodology/Data Audit Completed 4A - Non-financial information * 4B - Wholesale totex analysis 4C - Impact of AMP performance to date on RCV 4D - Wholesale totex analysis - water 4E - Wholesale totex analysis - wastewater ** 4F - Operating cost analysis - household retail 4G - Wholesale current cost financial performance 4H - Financial metrics *** 4I - Financial Derivatives *** *These lines were covered under various APR audits and the WRMP Update audit, which are covered elsewhere in this document. **Our assurance did not include consideration of this table. As Bristol Water is a water-only company, this table is not applicable to the Company. ***Our assurance did not include consideration of this table, as this has been assured by the Company s financial auditor, PwC. Table 1-3 GSS Payment Scope Area Methodology/Data Audit Completed GSS Payments GSS Payments (Pelican) * * We alternative with Wessex Water s Assurance provider; they are responsible Table 1-4 Table of Wholesale Cost Assessment Information and audit scope Table Table 1: WW Expenditure by business Line Description Line Methodology/Data Audit Completed Operating expenditure 1-11 Capital expenditure Cash expenditure Atkins Version July

12 Table Line Description Line Methodology/Data Audit Completed Atypical expenditure Table 2: WW Expenditure by purpose and Table 2.1: WW Cumulative Expenditure by purpose Total expenditure 31 Enhancement expenditure by purpose 1-27 Proportion of distribution input by source type 1-6 Table 3: WW Resources Number and capacity of sources 7-17 Length of raw mains 18 Pumping Head Total water treated 1-15 Number of treatment works Table 4: WW Treatment Zonal population receiving water treated with orthophosphate Average pumping head - treatment / Average pumping head - resources Average pumping head - distribution WTW in size bands Proportion of Total DI band Main lengths 1-9 Capacity Distribution input 13 Water delivered Table 5: WW Distribution Leakage * Comms Pipes Network Age of Network Pumping Head 35 Table 6: WW Properties and Population Properties 1-7 Meters 8-11 Atkins Version July

13 Table Line Description Line Methodology/Data Audit Completed Household Connections Population served 14 Meters Company Area 17 Lead Communication pipes 1 Supply / Demand 2-5 Table 7: WW Other Energy Consumption 6-8 Peak Factor 9 Mean Zonal Compliance 10 * Volume of leakage 11 * Table 18.1: WW Other opex Other opex 1-8 Table 18.2: WW Other Other expenditure and service charges 1-9 Table 19: Retail Operating expenditure 1-14 Table 21: Non HH costs *Covered in APR Audit. Costs incurred due solely to the establishment of the non-household retail market 1-21 Table 1-5 Supply Demand Customers WRMP Update Scope Area Methodology/Data Audit Completed 1.3. Structure of Assurance Report This report is structured as follows: Assurance Statement Executive Summary Section 1 Introduction Section 2 Approach Section 3 Summary of Findings Atkins Version July

14 2. Approach Our overall approach to assurance is based around a two-stage audit - methodology and data. For the provision of assurance of the APR Performance Commitments, the methodology and data audits were carried out separately. For the APR Table 4B-G, Wholesale Cost Assessment Information Tables, GSS Payments and WRMP Update we carried out a combined methodology and data audit. The purpose of each audit type is as follows: Methodology Audits: To assess whether the Company s methodology aligns with appropriate guidance, reporting requirements, licence conditions or industry practice and whether appropriate checks, controls and explanatory documents exist. Data Audits: To assess whether methodologies/procedures are applied as indicated including data trailing to source documents to ensure alignment/consistency with the reported number, checks and controls and appropriateness of confidence grades assigned to reported information (where applicable). This approach is consistent with Ofgem s Data Assurance Guidance (DAG) which identifies external methodology audit and external data audit as potential assurance responses, described as follows: External Methodology Audit: Not responsible for ensuring that returns are complete and accurate but to provide an independent challenge to the methodology to produce the submission. Review of the adequacy and effectiveness of the internal control systems to ensure returns are timely, complete and accurate. Formal report produced. Control gaps/areas for improvement identified and issues logged. External Data Audit: Responsible for providing evidence of verification of Data; Intends to determine the level of confidence that can be placed on the figures; Formal report produced. The process flow followed for each audit is summarised as follows: Figure 2-1 Audit meeting process NAF Summary Draft SAF Response Issues Log Final SAF The deliverables for each stage of the process are summarised below in Table 2-1. Table 2-1 Description of Deliverables Deliverable Description Notification of Audit Form (NAF) Issued in advance of audit. Details audit arrangements, scope and agenda summary Initial feedback including detail of any material issues. Summary of Audit Form (SAF) Issues Log Issued following the audit. Details findings and any actions for inclusion in the issues log. Spreadsheet to track and report on responses to issues identified at audit. Includes Reference; Date Raised; Raised by; Line; Observation; Recommendation; Priority; Agreed (Y/N); Company response; Owner; By when; Status Our assessment of the Company s reporting against each table/table section has been assigned an overall rating of Red, Amber or Green to reflect their priority. Separate ratings have been given to the methodology and to the data. Atkins Version July

15 Table 2-2 sets out the definitions for the different categories. Table 2-2 Category RED AMBER GREEN Descriptions for RAG categories Description High Priority: Failure to comply with reporting requirements, major failure of methodology or data errors that may lead to misreporting. Medium Priority: Shortfalls in methodology and/or methodology documentation. Methodology under development. Incomplete data set or minor errors identified that do not alter the performance reported relative to targets and threshold values. Low Priority: Minor revisions to methodology and/or methodology documentation needed. Issue(s) not judged to be material or no issues. Our focus on particular areas was risk-based as highlighted in Bristol Water s own analysis and supplemented by our experience in identifying and quantifying the elements of the journey from raw to published data that introduce material errors. Atkins Version July

16 3. Summary of Findings 3.1. Performance Commitments (APR Table 3A-D exc. penalty/reward) The table below summarises the assurance category assigned to each PC reported in the Annual Performance Report (APR Table 3A exc. penalty/reward) with further detail below. Table 3-1 Assessment Performance Commitments (APR Table 3A-D exc. penalty /reward) Overall Measure Methodology Data A1: Unplanned customer minutes lost GREEN GREEN A2: Asset Reliability Infrastructure (Total Bursts and DG2 Low Pressure) A3: Asset Reliability Non-Infrastructure (Turbidity and Unplanned Maintenance) AMBER GREEN GREEN GREEN B1: Population in centres >25,000 at risk from asset failure GREEN GREEN C1: Security of supply index (SOSI) GREEN GREEN C2: Hosepipe ban frequency GREEN GREEN D1: Mean Zonal Compliance GREEN GREEN E1: Negative Water Quality Contacts GREEN GREEN F1: Leakage GREEN GREEN G1: Meter penetration (%) GREEN GREEN G2: Per capita consumption GREEN GREEN H1: Total carbon emissions GREEN GREEN H2: Raw water quality of sources GREEN GREEN H3: Biodiversity index AMBER GREEN H4: Waste disposal compliance GREEN GREEN I1: Percentage of customers in water poverty GREEN GREEN J1: Service Incentive Mechanism (SIM) GREEN GREEN J2: General satisfaction from surveys GREEN GREEN J3: Value for money GREEN GREEN K1: Ease of contact from surveys GREEN GREEN L1: Negative billing contacts GREEN GREEN A1: Unplanned customer minutes lost The Company s methodology has continued to evolve and improve and is fit for purpose. The only outstanding issues are common to most of the methodology documents across all reporting areas, such as the need to be clearer about ownership and governance and stipulating the need to retain evidence of checks and controls. When reviewing the reported data, 13.1 minutes against a PC target of 13.1 minutes, we were able to confirm the application of the documented methodology and the in-built checks that are carried out. We saw a demonstration of an ongoing process by which relevant stakeholders are given the opportunity to confirm or otherwise the accuracy of interruption data being fed into the reporting against PC A1. Atkins Version July

17 A2: Asset reliability infrastructure and sub indicators Overall Assessment of Asset Reliability (infra) The outturn for both sub-measures remains between the high and low reference levels and therefore the overall assessment can be made that Asset Reliability (infra) is Stable. We do note that both reported submeasure values are worse this year than last and there needs to be reversal of this trend in the coming years. Sub-indicator: Bursts The Company s methodology has continued to evolve and improve and is fit for purpose. The only outstanding issues are common to most of the methodology documents across all reporting areas, such as the need to be clearer about ownership and governance and stipulating the need to retain evidence of checks and controls. The reported figure was stated as We viewed a spreadsheet listing each of the bursts and the associated dates and job numbers. The source of the data in the spreadsheet was the GIS system. The reporting code for the Business Objects report used to produce the data was inspected and it was confirmed that appropriate reporting fields were used. Sub-indicator: DG2 Our key issue with the methodology was that it implies that the whole DG2 reporting process is reactive and triggered by the receipt of a customer complaint. We believe that the reporting of DG2 is consistent with how it was done previously and that there has been more science applied in the monitoring of pressure and customers who receive poor pressure than is implied in the methodology document. Our discussions confirmed that the methodology understates the efforts made by the Company to identify DG2 failures. There needs to be more made of the checks and controls that are in place and the methodology document needs to be clearer about ownership and governance and to stipulate the need to retain evidence of checks and controls. The reported figure for DG2 was 94 comprising 71 long term problems carried from last year and 23 new DG2 failures identified during the report year. These comprised a single property located near a reservoir that should have already been on the DG2 register, and 2 common supply pipes (CSPs) with 12 and 10 properties fed. In the cases of each of the CSPs, the trigger was a complaint by a single customer. A3: Asset reliability - non-infrastructure and sub indicators A3: Asset reliability non-infrastructure overall measure As both sub-indicators are below reference levels the Company is reporting Stable. We concur with this assessment. Sub-indicator: Turbidity performance at WTW This is a measure that has historically been reported and the documentation is clear as to the source of information. The Company is reporting 0 (zero) works with 95%ile >0.5 NTU. We cross-checked this with the annual data supplied to the DWI, which indicates the 99%ile (representing a maximum) turbidity result to be 0.4NTU. Sub-indicator: Unplanned maintenance events The Company had updated the methodology with a step-by-step description of the approach to data interrogation and interpretation. Having reviewed the adjustments in the combined methodology, we have no issues. We reviewed both the provided unplanned maintenance spreadsheets. We have undertaken a random check on the entries included and excluded from the count and found no issues and consider the reported figure of 2870 to be robust. This figure is below the reference value of The Company has agreed to look at improving version control for the next reporting period. B1: Population in centres >25,000 at risk from asset failure The methodology document for this measure is adequate, insofar as it in effect refers to the completion of the Southern Resilience Scheme (SRS), which is due to be completed by 31st March At this time, the reported figure remains unchanged, insofar as the populations etc. remain as included in the Business Plan and Final Determination for reporting purposes and as exposed as an assumption in the methodology document. The reported figure may need to be subject to further serious consideration nearer the time, should the deadline for the SRS become likely to be missed. The only outstanding issues are common to most of the Atkins Version July

18 methodology documents across all reporting areas, such as the need to be clearer about ownership and governance and stipulating the need to retain evidence of checks and controls. C1: Security of supply index (SOSI) We reviewed the methodology documents for C1 and C2 and found that there was a need to clarify the internal assurance process associated with the reported data. During the audit we were able to confirm that that the correct values had been taken from the WRMP14 tables in relation to Deployable Output (DO), outage, sustainability reductions, target headroom, climate change impact, raw water losses, imports and exports. We also confirmed that the correct Distribution Input (DI) figure from the 2016/17 water balance had been used. During the WRMP Update audit it emerged that the target headroom figure being used was the baseline rather than final planning figure. This will not affect the reported SOSI value, however. The figures seen at audit confirmed that the Company has a current surplus of Ml/d and is therefore comfortably meeting the target SOSI value of 100. C2: Hosepipe ban frequency The flow record used for the hosepipe ban frequency analysis has been updated to March 2009 since APR 2015/16 and the Company reports that there is a desire to update this to include post-2009 data over the coming year. For one of the treatment works, the works loss outturn figure was negative. There is a piece of work underway to quantify the meter error, though this was not resolved in time for the data submission. The Company subsequently updated the hosepipe ban frequency model using an estimated figure, which resulted in a change to the water deployed figure, and a hosepipe ban frequency of 2 in 99 years rather than 1 in 99 years, the original figure seen at audit. A further sensitivity test saw the hosepipe ban frequency remain at 2 in 99 years. The Company is therefore reporting a figure of 2 in 99 years or 3.1 days per year. We were satisfied with this approach and the Company is comfortably meeting its target. The methodology document was updated to address issues raised at audit, and we are classifying the methodology and data as Green. D1: Mean zonal compliance (MZC) We believe that the methodology is fit for purpose. The data were reviewed remotely and no issues found. The Company is reporting 99.97% compliance, which exceeds its 2016/17 Performance Commitment of 99.96%. However, while it is clear the data have been checked and reviewed, there is no recorded evidence of this. We suggest inclusion in the supporting spreadsheets of a cover page which includes QA procedures and records checks and reviews. E1: Negative water quality contacts This Performance Commitment relates to Bristol Water s calendar year performance of customer contacts about the appearance, taste and odour of water. The Company reports in line with the established Drinking Water Inspectorate industry methodology and robust quality assurance checks and controls are built into reporting. The Company has agreed a performance ratchet for this commitment to reach 2,221 consumer contacts for the number of negative water quality contacts by the end of AMP6. For the 2016 calendar year, the target was set at 2,409 and Bristol Water is reporting well within this target with an outturn of 2,162 contacts. F1: Leakage Procedures and processes for leakage are well-established and written procedures are now reflective of the processes that are used. Audit trails and quality assurance were good, water balance closure was good and we consider the minimum night flows are a good reflection of leakage within DMAs. During the report year, there has been an update of the non-household night use (NHHNU) figure, 22.6l/prop/hour compared to 17.5l/prop/hour in The method by which the figure was calculated has not changed, and there would appear to have been a real change in NHHNU. However, there is no way of retrospectively knowing when the change occurred and whether it was gradual or stepped. This implies a level of uncertainty about the way the target PC was set at PR14. Atkins Version July

19 Insofar as the leakage target was defined in the Final Determination, an adjusted NHHNU figure was applied for the 2017 APR which led to a best central estimate of the leakage figure relative to the performance commitment (PC). That is, the whole of the downward adjustment to the reported leakage figure for the updated NHHNU was not applied, as it was offset by a reasonable estimate of the upward adjustment that would be made to the PC if it was to be revisited with an updated NHHNU. With this adjustment we are now confident that the reported figure is consistent with the ODI. The water balance remained within acceptable levels of accuracy once the adjustment was made. G1: Meter penetration The calculation of meter penetration is a well-established and understood process and draws upon the properties data monitored on a monthly basis by the Company from Rapid. The Company s outturn percentage for 2016/17 is 49.6%. This means that the Company has not met its commitment for this year of 54.8%. The reasons for missing this target are well understood by the Company and Bristol Water has flagged up the risk that they are unlikely to improve performance significantly enough to meet this AMP6 commitment in subsequent years. The Company also updated its methodology documentation, which is now fit for purpose. G2: Per capita consumption (PCC) Written procedures are now in place that allow consistent and transparent reporting and assumptions for PCCs. We expressed some concerns about the loss of some of the unmeasured sample in the report year, but we understand that this has been addressed and we can confirm that the sample size was adequate within the report year. We continue to note that the occupancy rate split between measured and unmeasured customers has not been reviewed for a considerable time, and there is some evidence that this is starting to put pressure on the accuracy of the reported figures, particularly on the unmeasured side, as population seems to be growing and occupancy rates overall are changing. However, any error from this will be on the upside, so is conservative in terms of Performance Commitment reporting. We have therefore classified this Performance Commitment as Green for data and methodology. H1: Total carbon emissions The Company s approach is well-established, due the many years of reporting on this measure. Actions from previous audits have been implemented and no significant concerns were identified. The Company has adopted a pragmatic approach to generating its greenhouse gas emissions figures. At time of the audit there were some further data to be obtained and errors to be corrected, but the approach was appropriate. Post audit, all of the issues raised were resolved. We made suggestions to improve the methodology report and clarify the data check and review procedures. Notwithstanding this, we believe the methodology document to be adequate and the data reported to be reasonable. H2: Raw water quality of sources The Company has modified its approach to assessing its status in respect of this measure; a more robust approach which is less subjective. The approach developed is reasonable in that it does enable changes in AMP to be assessed (which is the requirement of the PC). However, we recommended that additional data analysis is used to provide supporting information that can be used to confirm the output from the adopted approach. We reviewed the data and calculations and found no issues. We agree with the assessment of deteriorating; this meets the Company s committed performance level for 2016/17. We have no key concerns on the methodology itself and note that all governance issues have been addressed both in respect of the methodology and data. H3: Biodiversity index This Performance Commitment reflects the direction of travel for Bristol Water, and it is encouraging that the Company has received a letter of commendation from Natural England for its steps so far with this initiative. This is a challenging and innovative measure and is still under development. The Company has developed a useful tool to help it identify and deliver biodiversity improvements to its landholdings. We believe it is not being used to its full potential, and the Company could usefully engage with the tool s creators to obtain a reference manual or document that sets out how the calculator should be used, so that its full potential can be met. Atkins Version July

20 We have given the Data audit a Green rating as the information gathered for the 2016/2017 reporting year is representative of the activities undertaken. Given that the methodology for this Performance Commitment could be improved in future this aspect has been rated as Amber. We have much confidence that the suggestions and actions discussed in the audit will be explored and assessed in the current reporting year, ready for a review at the next audit, given the very open and positive engagement from the Company. H4: Waste disposal compliance Overall we have no concerns on the updated methodology and can confirm that governance procedures in respect of check/review/sign-off are being followed. We found no material issues with the data spreadsheets and calculations. The Company is reporting a compliance figure of 96% against a PC commitment of 100%. An examination of historic data indicates a deteriorating trend since 2013; while the percentages are small it does suggest that achieving the PC commitment will be a challenge. While governance on the methodology is good we suggest that it would be useful to have a QA tab on the spreadsheet to provide confidence that data has been checked and reviewed. I1: Percentage of customers in water poverty The Company is reporting 0.9% customers in water poverty (4,403 out of 470,743). This represents an increase from the 0.37% reported last year but still well within the ODI target of 2.0%. The increase is unlikely to represent a real increase in the numbers but more likely linked to a tweak in the definitions of disposable and discretionary incomes used by the third-party company, which have slightly different characteristics from the previous year, but are judged to be more accurate. The updated calculation has had the effect of creating a wider dispersal around the mean average, which results in more customers falling into the low end of the range, which corresponds to the water poverty measure. J1: Service incentive mechanism (SIM) Bristol Water: Overall, the SIM processes and reporting for written complaints, unwanted telephone calls and the qualitative survey are robust and accurate. For unwanted calls, the main customer telephone lines which account for about 80% of call volume are recorded, which provides a robust audit trail. Our review of calls to Meter Options and Water Quality suggests there may be some under-reporting of unwanted calls, either because calls are not being consistently logged or they are being logged incorrectly. In the short-term, there appears at the very least to be a requirement for some refresher training for other parts of the business. In terms of future reporting, we were informed that the functionality to record calls in other departments will be rolled out in 2017/18, which would be welcome from an assurance perspective. Notwithstanding the comments made above, we do not believe this issue materially impacts on the overall SIM score. Pelican: We alternate with Wessex Water s assurance provider to audit Pelican each year. We have had sight of their summary reports and no material issues were identified. J2: General satisfaction from surveys The Company is reporting 86% for 2016/17, a 3% improvement on the previous year, against a target of 93%. The source of the reporting are the results from a survey commissioned from a third-party provider carried out in line with established market research practices. We followed the audit trail and confirmed the accuracy of the reporting. J3: Value for money and K1: Ease of contact Following discussions with the Company, it has amended its approach to align with that stated in the Final Determination for both of these ODIs. As a result, reporting for 2015/16 will be re-stated. The Company is reporting: Measure 2015/16 target 2015/16 actual (previous) 2015/16 actual (revised) 2016/17 target 2016/17 actual Ease of Contact 96.3% 93% 95% 96.4% 94% Value for Money 71% 78% 70% 71% 72% Atkins Version July

21 L1: Negative billing contacts The Company is reporting 3,096 negative billing contacts against a target of 2,395. We were able to follow the audit trail to the numbers reported by Pelican and in terms of transcription, everything was in order. Wessex Water s assurance provider is responsible for the assurance of Pelican s reporting this year; we have had sight of the relevant summary reports and no material issues were identified. Atkins Version July

22 3.2. APR Section 4 Tables The table below summarises the assurance category assigned to each table with further detail below. Table 3-2 APR Section 4 Tables Overall Assessment 4A Non-financial information Table Methodology Data Covered in APR and WRMP Update audits Covered in APR and WRMP Update audits 4B - Wholesale totex analysis GREEN GREEN 4C - Impact of AMP performance to date on RCV GREEN GREEN 4D - Wholesale totex analysis - water GREEN GREEN 4E Wholesale totex analysis - wastewater N/A N/A 4F - Operating cost analysis - household retail AMBER GREEN 4G - Wholesale current cost financial performance GREEN GREEN 4H Financial metrics N/A N/A 4I Financial derivatives N/A N/A The underpinning methodology for Tables 4B, 4D and 4F is the Company Accounting Separation Methodology that has been also applied in previous years submissions. This methodology also underpins the following Wholesale Cost Assessment Information Tables: Table 1 WW Expenditure by Business Unit, Table 18.1, Table 18.2, Table 19 and Table 21. These are discussed in Section 3.4 below. We noted that the Company has sought to reflect latest Ofwat guidance in its methodology and that there is a detailed analysis at cost centre code level that is applied in the spreadsheet model that is used to populate the relevant tables. The principles applied for the current submission are consistent with those applied in previous years submissions revised as appropriate by changes in Ofwat guidance and reporting requirements. Whilst the Company has a very structured approach to cost allocation at a cost centre level we think it important that it reviews further its accounting separation methodology to provide greater clarity on the assumptions underpinning the cost centre allocations and how they stack up compared to Ofwat guidance including relevant RAGs. We recognise there is an appropriate balance to be struck in the level of detail to be included in the accounting separation methodology and that Ofwat asks companies to focus on where cost allocation assumptions differ from Ofwat guidance. We discussed the analysis of retail costs provided by Pelican to the Company as we were concerned as to whether there had been sufficient internal assurance of the Pelican analysis. The Company told us that while the management estimate for the split of measured and unmeasured costs is within the guidelines, it appreciated that having more detail to enable an understanding the basis of these estimates would be desirable. The Company explained that it had requested a further update from its billing company, but noted that the reported figures were challenged, sense-checked and amended by Bristol Water prior to their inclusion, and were not simply accepted. We think it important that the Company is able to demonstrate appropriate internal assurance and understanding of the Pelican disaggregation of costs of the 3.3m retail costs for which they are responsible. 4A - Non-financial information These lines were covered under various APR audits and the WRMP Update audit, which are covered elsewhere in this document. 4B - Wholesale totex analysis From what we observed Table 4B has been compiled consistent with the Bristol Water accounting separation methodology. Atkins Version July

23 4C - Impact of AMP performance to date on RCV The Company has a clear audit trail for each of the lines and how the CMA reference outcome has been reflected in the analysis. The Company confirmed that all ODI performance penalties were reflected in income and not in the RCV. We noted at the review that there was no accompanying methodology document although there was a very clear process and audit trail in place. Subsequently, a methodology document has been drafted and we can confirm the table has been completed consistent with the methodology. Based upon what we reviewed and discussed at the meeting we believe the data has been appropriately reported consistent with Ofwat guidance 4D - Wholesale totex analysis water We noted that there are close tie ins to Table 2B which the financial auditors are reviewing. The Company explained that there are data validation check issues that appear to be embedded in the Ofwat pro-formas that are giving rise to error checks when comparing Table 4D to Table 2B. The Company told us that it had queried these and are awaiting a response from Ofwat. We noted some significant movement from 15/16 to 16/17 on Line 1 power between water treatment and water distribution resulting from the latest RAG guidance concerning treatment of high lift pumps. We believe material changes that arise from revised RAGs should be highlighted and quantified in the methodology document. Subsequent to the review meeting the Company has summarised these changes in the accounting separation methodology. We believe it important that the Company highlight in its submission to Ofwat where cost allocation movement has resulted from changes in Ofwat guidance. From what we observed Table 4D has been compiled consistent with the Bristol Water accounting separation methodology. 4F - Operating cost analysis household retail We discussed the disaggregation by Pelican of the retail costs of some 3.3m related to the services they provide to Bristol Water. We believe it would provide more robustness to accepting their analysis if Bristol Water could demonstrate assurance of the Pelican disaggregation assumptions. Pelican describe their allocations as a combination of direct allocation and management estimates. Bristol Water explained that the split between household and non-household reflects the direct allocation of costs to discrete sections managing the work. The basis of the split between measured and unmeasured is a management estimate by discrete sections, although it appears to be in line with ratio of measured to unmeasured households. Subsequent to the audit meeting the Company summarised the Pelican disaggregation assumptions. We believe a greater focus on internal assurance and in being able to demonstrate that assurance would provide confidence in the analysis submitted to Bristol Water by Pelican. From what we observed Table 4F has been compiled consistent with the Bristol Water accounting separation methodology. 4G - Wholesale current financial performance We discussed the IRE element of Line 3 with reference to the Ofwat options that allow the Company to either roll forward the 2014/15 IRC or recalculate the IRC. The Company has chosen the former. We noted that by doing so it will not have reflected the long-term infrastructure renewals assessment made as part of the latest AMP; thus we do not have visibility as to whether the IRE included in this line is representative of the Company s latest assessment of infrastructure renewals need. However, it has followed the Ofwat guidance. The MNI element comes from the SAP CCD fixed asset register rolled forward to 2016/17 and indexed by RPI with contributions netted off. We believe this is reasonable. For all the other lines in this table the Company demonstrated consistency with Ofwat guidance and with other cost tables in the submission. We noted at the review meeting that there was no accompanying methodology document, although there was a very clear process and audit trail in place. Subsequently a methodology document was drafted and we can confirm the table has been completed consistent with the methodology. Based upon what we reviewed and discussed at the meeting we believe the data has been appropriately reported consistent with Ofwat guidance. Atkins Version July

24 4E - Wholesale totex analysis wastewater Our assurance did not include consideration of this table. As Bristol Water is a water-only company, this table is not applicable to the Company. 4H - Financial metrics Our assurance did not include consideration of this table, as this has been assured by the Company s financial auditor, PwC. 4I - Financial derivatives Our assurance did not include consideration of this table, as this has been assured by the Company s financial auditor, PwC. Atkins Version July

25 3.3. GSS Payments Bristol Water: We concluded that the methodology documentation is fit for purpose, there are checks and controls built into the Company s processes which are rigorously applied and our own sampling of payments and appointment records was satisfactory. We can therefore confirm based on what we saw, that the Company is meeting its statutory obligations in relation to the Guaranteed Standards Scheme. Pelican: We alternate with Wessex Water s assurance provider to audit Pelican each year. We have had sight of their summary reports and no material issues were identified. Table 3-3 GSS Payments Overall Assessment Area Methodology Data GSS Payments GREEN GREEN Atkins Version July

26 3.4. Wholesale Cost Assessment Information Tables Table 3-4 Wholesale Cost Assessment Information Tables Overall Assessment Table Line Description Line Methodology Data Operating expenditure 1-11 GREEN GREEN Table 1: WW Expenditure by business Table 2: WW Expenditure by purpose and Table 2.1: WW Cumulative expenditure by purpose Capital expenditure AMBER GREEN Cash expenditure GREEN GREEN Atypical expenditure GREEN GREEN Total expenditure 31 GREEN GREEN Enhancement expenditure by purpose 1-27 AMBER GREEN Table 3: WW Resources Proportion of distribution input by source type Number and capacity of sources 1-6 AMBER GREEN 7-17 AMBER GREEN Length of raw mains 18 AMBER GREEN Pumping Head AMBER GREEN Total water treated 1-15 GREEN GREEN Number of treatment works GREEN GREEN Table 4: WW Treatment Zonal population receiving water treated with orthophosphate Average pumping head - treatment / Average pumping head - resources Average pumping head - distribution 31 GREEN GREEN 32 AMBER GREEN WTW in size bands GREEN GREEN Proportion of Total DI band GREEN GREEN Main lengths 1-9 AMBER GREEN Capacity GREEN GREEN Table 5: WW Distribution Distribution input 13 Covered in F1: Leakage (APR) Covered in F1: Leakage (APR) Water delivered Covered in F1: Leakage (APR) Covered in F1: Leakage (APR) Atkins Version July

27 Table Line Description Line Methodology Data Leakage Covered in F1: Leakage (APR) Covered in F1: Leakage (APR) Communication Pipes AMBER GREEN Network GREEN GREEN Age of Network AMBER GREEN Pumping Head 35 AMBER GREEN Properties 1-7 GREEN GREEN Meters 8-11 GREEN GREEN Table 6: WW Properties and Population Household Connections GREEN GREEN Population served 14 GREEN GREEN Meters GREEN GREEN Company Area 17 GREEN GREEN Lead Communication Pipes 1 AMBER GREEN Supply / Demand 2-5 AMBER GREEN Energy Consumption 6-8 AMBER GREEN Table 7: WW Other Table 18.1: WW Other opex Peak Factor 9 AMBER GREEN Mean Zonal Compliance 10 Volume of leakage 11 Covered in D1: Mean Zonal Compliance (APR) Covered in F1: Leakage (APR) Covered in D1: Mean Zonal Compliance (APR) Covered in F1: Leakage (APR) Other opex 1-8 AMBER GREEN Table 18.2: WW Other Other expenditure and service charges 1-9 AMBER GREEN Table 19: Retail Operating expenditure 1-14 GREEN GREEN Table 21: Non HH costs Costs incurred due solely to the establishment of the non-household retail market 1-21 AMBER GREEN Table 1: WW Expenditure by BU Operating Expenditure (Lines 1-11) The methodology underpinning Lines 1 to 11 is the accounting separation methodology we discuss in Section 3.2 above. Table 1 includes historic year data that the Company has reviewed and revised in the context of Atkins Version July

28 the latest RAGs and Ofwat guidance. These lines are driven off the same source and Bristol Water cost allocation model as Table 4D. Historic years data have been reviewed and revised by the Company to reflect changes in RAGs and Ofwat guidance with a materiality threshold of 100K applied. This covers: High lift pumps affecting the allocation between treatment and distribution Billing Company FTEs affecting the split between wholesale and retail Borehole pump costs affecting the allocation within wholesale between resources and treatment Regulation costs affecting the split between wholesale and retail and business units Rechargeable costs affecting primarily the wholesale/retail split We asked whether an analysis had been undertaken of the historic value changes between wholesale, retail and business units. Although it is recognised that there has been a movement of some 2m between treatment and distribution related to high lift pumping cost allocations no further analysis is currently available of the movements in historic costs. We think such an analysis would provide clarity on the implications of changes in Ofwat guidance. Power (Line 1) This is consistent with Table 4D. Income treated as negative expenditure (Line 2) This is consistent with Table 4D. Abstraction charges (Line 3) This is consistent with Table 4D. Bulk Supply (Line 4) This is consistent with Table 4D. Other operating expenditure Renewals expensed in year (Infrastructure) (Line 5) This is consistent with that element of other operating expenditure in Table 4D that relates to infrastructure renewals expensed in the year. Renewals expenses in year (Non-Infrastructure) (Line 6) This is consistent with that element of other operating expenditure in Table 4D that relates to non-infrastructure renewals expensed in the year. Other operating expenditure excluding renewals (Line 7) This is consistent with Table 4D excluding those elements related to infrastructure and non-infrastructure renewals. Total operating expenditure excluding third party services (Line 8) This is consistent with Table 4D. Third party services (Line 10) This is consistent with Table 4D. Total operating expenditure (Line 11) This is a calculated line Capital Expenditure (Lines 12-21) It was explained by the Company that the allocation of asset codes was consistent with the capital programme, though precedent is given to alignment with the reporting requirements and RAGs. An example was an exercise to reflect the clarifications in RAG 4 of the allocation of High Lift pumps to the treated water distribution category. These changes were made in SAP for 2016/17 and off-line for the other years. Atkins Version July

29 Our approach to audit was to give detailed consideration of the scheme on SAP for 2016/17. We checked and confirmed that the observations we made on the data from our 2015/16 audits had been acted upon, where appropriate. For years prior to 2015/16, we reviewed the supporting data for the larger or outlier expenditure entries and confirmed consistency with the approaches applied in 2015/16 and 2016/17. Maintaining the long-term capability of the assets infra (Line 12) For the entries for 2016/17, we reviewed the asset additions entries in SAP and considered their allocation in terms of appropriateness of the line and the business unit used; all appeared reasonable. We queried the inclusion of lead communication pipe replacements carried out during planned mains refurbishment. We believe a significant proportion of this expenditure could be considered as enhancement/quality expenditure in accordance with DWI Requirements under Regulation 28(4) dated 12th June The Company has elected to report in the Wholesale Cost Assessment Information tables consistent with the reports made to the DWI. Maintaining the long-term capability of the assets - non-infra (Line 13) For the entries for 2016/17, we reviewed the asset additions entries in SAP and considered their allocation in terms of appropriateness of the line and the business unit used; all appeared reasonable. Other capital expenditure - infra (Line 14) At the time of audit, there was uncertainty about how Line 16 should be completed and no entries had been made for that line. As a result, entries for Line 14 included items which should be excluded and moved to Line 16. Our observations on Line 14 were made in the understanding that there could be such changes. The expenditure against this line can be inferred as being all infrastructure capital expenditure excluding that which is included in Lines 12 or 16 (e.g. Q schemes, new development etc.). Subsequent to the audit, we received an update of the data for Line 16 and noted that consistent adjustments had been made to Line 14. Other capital expenditure - non-infra (Line 15) At the time of audit, there was uncertainty about how Line 16 should be completed and no entries had been made for that line. As a result, entries for Line 15 included items which should be excluded and moved to Line 16. Our observations on Line 15 were made in the understanding that there could be such changes. The expenditure against this line can be inferred as being all non-infrastructure capital expenditure excluding that which is included in Lines 13 or 16 (e.g. Q schemes etc.). Subsequent to the audit, we received an update of the data for Line 16 and noted that consistent adjustments had been made to Line 15. Infrastructure network reinforcement (Line 16) At the time of audit, there was uncertainty about how Line 16 should be completed and no entries had been made. Subsequent to the audit, we received an update of the data for Line 16 and noted that consistent adjustments had been made to Lines 14 and 15. For the entries for 2016/17, we reviewed the asset additions entries in SAP and considered their allocation in terms of appropriateness of the line and the business unit used. Most appeared reasonable, but we noted that the Southern Resilience Scheme expenditure appeared to be 100% allocated to this line. Our audit of Expenditure by Purpose saw an allocation of 70% against resilience and 30% against growth. It was later confirmed that this was referring to 100% of growth expenditure, which is correct. Total gross capital expenditure excluding third party services (Line 17) This is a calculated line. Third party services (Line 18) For the entries for 2016/17, we reviewed the asset additions entries in SAP and considered their allocation in terms of appropriateness of the line and the business unit used; all appeared reasonable. This entry refers to expenditure on a transfer of water from Purton to Pucklechurch, which is for a bulk supply to Wessex Water, a proportion of the cost of which is with Bristol Water. Total gross capital expenditure (Line 19) This is a calculated line. Atkins Version July

30 Grants and contributions (price control) (Line 20) For the entries for 2016/17, we reviewed the asset additions entries in SAP and considered their allocation in terms of appropriateness of the line and the business unit used; all appeared reasonable. Totex (Line 21) This is a calculated line Cash Expenditure (Lines 22-24) Pension deficit recovery payments (Line 22) This is consistent with Table 4D. Other cash items (Line 23) This is consistent with Table 4D. Totex including cash items (Line 24) This is a calculated line Atypical expenditure (Line 25-30) The Company told us that it has applied a 500K materiality threshold with specific project atypical expenditure separately coded as a specific cost centre. The Company told us that there was no atypical expenditure in 2016/17 that was over the materiality threshold. Historic expenditure has been reviewed by the Company consistent with its cost allocation methodology which we discuss above in Total expenditure (Line 31) This is a calculated line. Table 2: WW Expenditure by purpose and Table 2.1: WW Cumulative Expenditure by purpose Our audit was confined to Table 2 and all comments below refer to that table. The audit of Table 2.1 was not completed prior to producing this report. We have received a copy of Tables 2 and 2.1 and an explanation that it was the Company s interpretation that the best representation of completion for compiling Table 2.1 was when a project went into service, and for annual rolling projects, an annual figure (e.g. lead communication pipe replacements). We confined our subsequent analysis of Table 2.1 to sense checking and confirmed that rolling schemes were reported as annually and that there was the anticipated significant upturn in expenditure in the final year of AMP5. In common with other methodology documents, we observed lack of clarity about control and ownership of both the document itself and the data it is related to. Our overall assessment was that the document in its current form provides a high-level overview of what is involved in reporting the data, but would be difficult to use by someone who was not very familiar with the processes to be applied. We made a string of suggestions on how the methodology document could be improved and the Company has indicated that these will be addressed in time for the next submission. These would include clarity in the coding of costs and the inclusion of the correct codes in the reporting tool by which the reported data are gained and specific mention of how checks and controls of the coding should be done and evidenced. We are assuming that the efficacy of the process of entering data into and functioning of SAP is within the scope of the Financial rather than the Technical Auditor. We went through each line and reviewed the supporting SAP data and component projects to confirm that they fitted the definitions required. This was done for each year and then we discussed and agreed an appropriate Confidence Grade to reflect the basis of the reported figure for the total expenditure in each year. We note that this table is intended to deal only with expenditure on enhancement schemes as defined in the PR09 Final Determinations, any Interim Determinations or statutory instruments. Atkins Version July

31 Making ecological improvements at abstractions (Line 1); and Addressing low pressure (Line 2) There were no projects included and the entry was zero for all years. The work on eel screens was included in an additional line for NEP schemes Improving taste / odour / colour (Line 3) At audit, a scheme for trunk main relining was included, which we confirmed was to support efforts to reduce customer complaints about quality. However, there was no formal DWI instrument for the work to be carried out. It was removed in response to our challenge Meeting lead standards (Line 4) The reporting of numbers and cost of lead CP replacement is consistent and aligns with what is reported annually to the DWI. This does not include lead communication pipes replaced as part of a planned mains renewal project. However, for lead communication pipes to be replaced as part of planned mains renewal projects is a specific requirement in DWI Notice BRL3275 dates 12th June 2014 (vis item 2. (a) ii. Page 1 of 3). The Company is carrying out the required activity, but has elected to report in the Wholesale Cost Assessment Information tables consistent with the reports made to the DWI Supply side enhancements to SDB (peak) (Line 5) and Demand side enhancements to SDB (peak) (Line 7) The Company has not carried out any supply or demand side enhancements to the supply/demand balance for dry year critical/peak conditions Supply side enhancements to SDB (average) (Line 6) We trailed the reported numbers back to SAP reports and confirmed that the projects and expenditures reported were appropriate Demand side enhancements to SDB (average) (Line 8) We trailed the reported numbers back to SAP reports and confirmed that there were appropriate schemes making up the reported figures by year and breakdown. We noted that expenditure on the SRS was allocated 30% to growth and 70% to Resilience as reported in Line 11. We believe this sounds reasonable, but have not confirmed the proportional allocation to original sources. For 2016/17 we noted that the SRS spend was the major item. For 2015/16, expenditure was mainly the rollover of expenditure due to late completion of an AMP5 scheme. For the AMP5 years, we saw a list of expenditure by scheme for the additional capacity reservoirs and associated mains and the North Bristol Mains Trunk Mains, which was proportionally allocated 70% to New Development and 30% to Growth. Again, we believe this sounds reasonable, but have not confirmed the proportional allocation to original sources New developments (Line 9) We trailed the reported numbers back to SAP reports and confirmed that there were appropriate schemes making up the reported figures by year and breakdown. We confirmed that connections expenditure was not included Raw water deterioration (Line 10) We trailed the reported numbers back to SAP reports and confirmed that there were appropriate schemes making up the reported figures by year and breakdown. We confirmed that the Cheddar WTW UV and Egford WTW nitrate schemes were in the FD09 obligations and were correctly included in costs. We were given verbal confirmation by the Water Quality Manager that there were DWI instruments in place for Barrow WTW UV. We have confirmed the inclusion of metaldehyde in the FD09. The treatment costs were correctly allocated to water treatment. In discussing the water resources expenditure, we concluded that the expenditure on NEP Catchment Management was appropriate in Line 10 as it was included in FD09 for dealing with metaldehyde and that the NEP Investigations across a wide range of topic areas would more sensibly be in a separate additional line Resilience (Line 11) We trailed the reported numbers back to SAP reports and confirmed that there were appropriate schemes making up the reported figures by year and breakdown. The expenditure in AMP6 is the SRS. Although the Atkins Version July

32 SRS is not PR09 driver code ESL04, it is implicit within FD14 that it is an obligation with a ODI associated with it and we believe appropriately included in this line. For the AMP5 expenditure, we have been unable to confirm that the included costs were against the PR09 driver code ESL04. We requested evidence of the appropriateness of the allocation to this line or suggest the reallocation of expenditure to growth or similar as appropriate SEMD (Line 12) We trailed the reported numbers back to SAP reports and confirmed that there appeared to be appropriate schemes making up the reported figures by year and breakdown. However, the lack of detail and broad brush schemes create uncertainty about the allocation of expenditure between water resources, raw water distribution, water treatment, treated water distribution or even retail. There may be elements of expenditure on security on the head office, which are partially associated with the retail business and we are unclear whether the retail business should be allocated some of the costs. There is a general need for the management of the SEMD and associated programmes to be reportable on a more granular level Improvements in river flows (Line 13) There were no projects included Metering (Line 14-16) Optants / Selective HH / Selective NHH We considered these lines in combination, insofar as they are separately identified with job coding, but treated the same in terms of management. We trailed the reported numbers back to SAP reports and confirmed that there appeared to be appropriate schemes making up the reported figures by year and breakdown. We confirmed that this did not include activities on the replacement of existing meters Other expenditure by purpose (Line 17) Not used Other expenditure by purpose (Line 18) This line was included to cover the cost associated with metering for new service connections (meter only). We trailed the reported numbers back to SAP reports and confirmed that there appeared to be appropriate schemes making up the reported figures by year and breakdown. However, we note that in the Line Definition for Line 9 it states that The capital cost of connecting a new property (including the cost of a meter, communication pipe and boundary stop tap valve etc.) should be recovered through the connection charge and should not be included in this line Other expenditure by purpose (Line 19) This line was included to cover the cost associated with communication pipes for new service connections (including ancillaries). We trailed the reported numbers back to SAP reports and confirmed that there appeared to be appropriate schemes making up the reported figures by year and breakdown. However, we note that in the Line Definition for Line 9 it states that The capital cost of connecting a new property (including the cost of a meter, communication pipe and boundary stop tap valve etc.) should be recovered through the connection charge and should not be included in this line Other expenditure by purpose (Line 20) This line was included to cover the cost associated with NEP (excluding catchment management). We trailed the reported numbers back to SAP reports and confirmed that there appeared to be appropriate schemes making up the reported figures by year and breakdown Total enhancement capital expenditure (Line 27) This is a calculated value. Table 3: WW Resources Proportion of distribution input by source type (Lines 1-6) It was observed that considerable effort has been made to develop the methodology document using the template produced by the Regulation team, although this document was a work in progress at the time of the audit and required a number of updates such that it is fit for purpose. Atkins Version July

33 We discussed the step-by-step process for producing the reported data and looked at the three key spreadsheets used for the submission. We queried whether checks had been made to these key spreadsheets by a second person to ensure that all the formulae were working correctly. Although this appeared to be the case and sense checks are undertaken of the data as they are built up during the year, it was reported that the spreadsheets hadn t undergone a more formal checking process by a second person. We recommended that this is undertaken and recorded in cover sheets. During the audit, we were provided with the current version of the data submission. This was consistent with the Calculations for Ofwat spreadsheet; however, it was reported that an issue with DI data had recently been found. We requested and received updated versions of the spreadsheets and submission which appeared to be consistent. We have therefore classified the data as Green Number and capacity of sources and pumping stations (Lines 7-17) The methodology document was still under development at the time of the audit and we discussed and agreed a number of updates to provide more clarity on the process and assumptions used for these lines. However, is evident that considerable improvements in the process have been made since the last audit in July At that time a series of spreadsheets with lists of sources were used to derive the figures for Lines 7-17, and the categorisations of each source had not been agreed across the Company. Since then, roundtable discussions have been held with the relevant stakeholders to agree site categorisations according to the criteria used by the Company. Source categorisations and parameters have also been added to SAP and a Business Objects report has been set up to run automatically at the start of April to output the data required for these lines. It was reported that a sense check is then undertaken on the figures. If any issues are encountered, changes can be made to SAP and the report is then re-run automatically run on 1st May. These figures are then checked and passed to the Regulation team. It was agreed that there is a need to provide an audit trail of any updates. The use of this more automated process removes the principal sources of human error that were previously part of the reporting of these lines and also provides confidence that there is now a single source of truth across the Company in terms of site categorisations. There remains a need to implement a system by which data checks can be recorded and the data can be formally signed-off; for example, through the use of cover sheets on spreadsheets. This is pertinent to all regulatory submissions and requires and consistent approach. Although the process for reporting the 2016/17 figures appears to be robust, we queried why there were several significant jumps in the data reported for Lines 7-14 between the earlier and later reporting years of the Wholesale Cost Assessment Information tables submission. The Company has since updated the figures for all years to reflect their current assumptions on the definitions, so there are no longer any jumps and we are therefore classifying the data as Green Total length of raw water mains and conveyors (Line 18) The GIS is the source for all mains data reported. The mains activity reporting tool is used to acquire the reported data. The GIS database stores the characteristics of each length of main and these are used to summate the lengths by age, material, use, diameter etc. as required. The GIS can turn off/on mains of particular characteristics and we were able to follow examples of raw water mains from river and borehole sources to treatment works and between storage (raw water) reservoirs. We were able to confirm the clear delineation within the GIS of raw water mains and other conveyors by following the raw water system in the area around Cheddar WTW. We saw the conveyors from Cheddar Spring to Cheddar Reservoir and from Cheddar Reservoir to Cheddar WTW. We also followed the raw water main from the River Axe intake to Cheddar and the transfer of raw water to Banwell WTW. We can confirm that the raw water infrastructure is clearly identified on the GIS and that the reporting is straightforward Pumping head (Line 19-20) The process and calculations used for the average pumping head calculations have improved considerably in the last year and now fall generally within a green classification. Whilst we have recommended a number of improvements, most of these are not significant enough to warrant specific comment at this level. Our only significant concern, which is the reason for the amber classification on the methodology, relates to the validation of the bulk meter data and calculations. Whilst the summary spreadsheets are being managed correctly, within the year there was a significant issue that was identified and addressed with the recording and calculation of flows at the Barrow site. Currently there is no systematic process for identifying and investigating such errors, and we recommend that this is implemented within the next report year. Atkins Version July

34 Table 4: WW Treatment Water treated at works (Lines 1-14) These lines utilise the works type as produced for Lines Water treated uses the HydroLog database and from which annual data are downloaded. The calculations to derive the outputs from works and allocation to type are clearly set out and straightforward to review. We consider the figures being reported are consistent with the data we have reviewed and with the Ofwat definitions. The calculation spreadsheet also includes data for historic years which enables ease of comparison Total water treated at more than one type of works (Line 15) The Company is reporting zero; it has explained that while a proportion of the output from water from Purton WTW may receive additional treatment at Barrow WTW these are of the same type Number of works by type (Lines 16-29) The process by which the work s type is derived is clear; we have suggested that it would be useful in the presentation of the information to include the processes at the works which would provide clarity in respect of the Ofwat definitions and enable any works improvements to be clearly highlighted and, where appropriate, show how the classification has changed. The Company agreed to look at this. During the review process at APR16 two queries were raised regarding the classification of the Axbridge WTW and the approach to phosphate dosing. These were referred to Ofwat for clarification and the responses reviewed. Axbridge WTW is now considered as a pre-treatment asset and has been removed from the classification primarily on the grounds that it does not meet Ofwat s definition as providing direct supply to customers. However, the Company will maintain this as a treatment asset for cost allocation purposes as this is what it has done historically (our assumption is that the treatment it provides has a direct impact on the treatment costs at the final receiving water through improving water quality). Provided this is made clear by the Company we have no issues with how this has been addressed. Phosphate dosing is not considered by Ofwat as a treatment process so has not been considered in the treatment works type definition. Lines These are unchanged from APR16; however, we noted that the number of GW4 works has previously been reported as 9 whereas this should be 8. The Company has looked at this and revised the number accordingly; this appears to be a spreadsheet error which was not previously picked up. Line 30 Number of works requiring remedial action because of raw water deterioration The Company is reporting 1; this is in relation to Cryptosporidium risks at Barrow WTW covered by DWI obligation BRL Line 31 Zonal population receiving water treated with orthophosphate dosing The Company has changed its methodology following the review in APR16 given that the figures reported were greater than the population served figures reported in Table 6. The final methodology adopted by the Company takes on board suggestions we made during this year s audit in which we recommended that the starting point should be the (separately) audited Table 6 total population number. The Company then uses GIS data contained in their Logical Boundary Tables to identify properties in the one WSZ (402) which does not receive phosphate dosed water. The properties are then multiplied by the current year assumed occupancy rate to get a population number; this number is then subtracted from the overall population number to get the figure for reporting. Given the issues with previous numbers reported for this line (i.e. greater than total population served) the Company has revisited the historic data and applied the new methodology to update the historic figures. The Company initially applied a confidence grade (CG) of A1 to this year s figures; however, as the CG of the total population numbers (Table 6) is A2 and given the use of an assumed occupancy rate we have suggested that A3 would be more appropriate Pumping head (Line 32) See Resources Line 19 for relevant commentary on the overall process. We confirm that the attribution between resources, treatment and networks appears to be in line with Ofwat definitions. Atkins Version July

35 WTW in size band 1-8 (Line 33-40) These are new lines for this reporting year. The Company has developed a methodology based on data derived from HydroLog and which we consider to be robust. The calculations to derive the outputs from works and allocation to size band are clearly set out and straightforward to review. We consider the figures being reported are consistent with the data we have reviewed and with the Ofwat definitions. The calculation spreadsheet also includes data for historic years which enables ease of comparison. The Company is not reporting specific named works in each band because these will change year by year depending on actual usage Proportion of Total DI band 1-8 (Line 41-48) These are new lines for this reporting year. The Company has developed a methodology based on data derived from HydroLog and which we consider to be robust. The calculations to derive the outputs from works and allocation to size band are clearly set out and straightforward to review. We consider the figures being reported are consistent with the data we have reviewed and with the Ofwat band definitions. The calculation spreadsheet also includes data for historic years which enables ease of comparison. Table 5: WW Distribution The GIS is the source for all mains data reported. The mains activity reporting tool is used to acquire the reported data. The GIS database stores the characteristics of each length of main and these are used to summate the lengths by age, material, use, diameter etc. as required. The GIS can turn off/on mains of particular characteristics and we were able to follow examples of raw water mains from river and borehole sources to treatment works and between storage (raw water) reservoirs. We were able to confirm the clear delineation within the GIS of raw water mains and other conveyors by following the raw water system in the area around Cheddar WTW. Insofar as the reporting is all taken from the GIS and it is beyond the scope of our assurance to challenge the efficacy of the GIS software which is industry standard, we believe there should be coverage in the methodology of the data going into the GIS system and the checks and controls on the accuracy of the data therein; and how data are reported (i.e. SQL coding etc). The methodology needs to be clear where line entries are mutually exclusive (e.g. a length of main cannot appear as having two different diameters) and where they are not (e.g. a renewed main will appear as renewed and being of a particular size). Further, the lines reported have different assumptions associated with each. We suggest the methodology document should be more modular and broken down by line or block where there are specific assumptions and definition differences Total Length of potable mains (Line 1) We checked the reported data and associated confidence grade against previously submitted information for 2013/14, 2014/15 and 2015/16 and confirmed it to be correctly transcribed. The reported data for 2011/12 and 2012/13 was previously assured by others. The 2016/17 data are reported directly from the GIS and we note does not include mains within Bristol Water s treatment sites. The previously reported data were inclusive of 31km of onsite mains; with the separate reporting for treatment and distribution costs, it is essential to be consistent in defining the boundaries for asset quantum and cost purposes. We accept that there may be some mains now reported as treatment assets which are between the high lift pump outlets and the boundary fence of the treatment site. We believe this is unlikely to result in material error, but should ideally be rectified on an opportunist basis. We confirmed that the reported value is equal to the sum of the mains of different diameters Total length of main relined / renewed (Lines 2/3) Bristol Water do not and have not previously chosen to reline mains. The individual renewed mains are marked on the system as renewed and the reports run on that basis. It needs to be clear that these mains are also included in the mains of different diameter. We checked the reported data and associated confidence grade against previously submitted information for 2013/14, 2014/15 and 2015/16 and confirmed it to be correctly transcribed. Reported data for 2011/12 and 2012/13 was previously assured by others Length of new mains (Line 4) The individual new mains are dated when entered on the system and it is possible to run a report of the mains laid during a particular timescale or report year. We checked the reported data and associated confidence grade against previously submitted information for 2013/14, 2014/15 and 2015/16 and confirmed it to be correctly transcribed. Reported data for 2011/12 and 2012/13 were previously assured by others. Atkins Version July

36 Lengths of various diameters (Lines 5-8) We checked the reported data and associated confidence grade against previously submitted information for 2013/14, 2014/15 and 2015/16 and confirmed it to be correctly transcribed. Reported data for 2011/12 and 2012/13 were previously assured by others. The previously reported data were inclusive of onsite mains Length of non-potable and partially treated main for supplying customers (Line 9) The Company does not and has not previously reported the total length of non-potable and partially treated main for supplying customers Capacity and number of booster pumping stations, service reservoirs and water towers (Lines and 24-26) Last year the GIS system was used as the source of data for reporting these lines, and the data reported by the Company last year have now been recognised as having a low level of accuracy. This year SAP has been used as it has been identified by the Company that SAP provides the most accurate source of data for above ground assets. The production team will be providing the owner of the GIS system with the correct set of data with which to update GIS, so that these data sources are consistent in future. The production team has developed a robust reporting process for these lines using Business Objects and there did not appear to be any areas of concern during the audit. We recommended that the data reconciliation process undertaken over the past few years to ensure that the data in SAP are accurate is documented as an appendix to the methodology, and this has now been added Distribution input, water delivered and leakage (Lines 13-19) These lines were covered under the APR audit for F1: Leakage Water taken unbilled (Line 20) This line was covered under the APR audit for F1: Leakage Number of lead/galvanised/other communication pipes (Lines 21-23) The GIS is the source for communication pipes data. A reporting tool is used to acquire the reported data. The GIS database stores the characteristics of each communication pipe and these are used to summate the lengths by age, material, use, diameter etc. as required. The GIS can turn off/on characteristics and we could follow examples of communication pipes of different materials on the live system. We went through the methodology applied and noted that there is further detail needed and granularity to allow for the different assumptions and checks for different reported data. There needs to be reconciliation with and cross-checking against information relating to lead communication pipes which is also held (for quality purposes) in another part of the business. There should be supporting evidence to see the previously reported data and the associated assurance documentation. Our assurance will then be confined to check for transcription errors. We noted that the methodology document is silent on the need to report on previous years and any assurance confirmation that will be required. Assembling the supporting information would be a one-off exercise with future submissions needing to only consider the reporting year. Insofar as the reporting is all taken from the GIS and it is beyond the scope of our assurance to challenge the efficacy of the GIS software which is industry standard, we believe there should be coverage of the data going into the GIS system and the checks and controls on the accuracy of the data therein; and how data are reported (i.e. SQL coding etc.). We could confirm that communication pipes are shown on GIS and the diameter, date laid and material is included. We believe it should be possible to reconcile between changes in lead communication pipe materials and the number reported in GIS Average network age (Line 27-34) We note that other than one transcription error, the reported figures matched previously submitted information for 2013/14, 2014/15 and 2015/16. Reported data for 2011/12 and 2012/13 was previously assured by others Pumping head (Line 35) See Resources Line 19 for relevant commentary on the overall process. We confirm that the attribution between resources, treatment and networks appears to be in line with Ofwat definitions. Atkins Version July

37 Table 6: WW Properties and Population Property numbers (Lines 1-7) and Meters (Lines 8-16) These lines have an established methodology, satisfactory audit trails and, subject to a few minor queries which we do not believe to be material, the reporting appears to be reliable and complete. We have also suggested where some improvements can be made to the methodology documentation in order to capture the end-to-end processes Company area (Line 17) The Company has historically reported 2,400 km 2. However, this appears to have been rounded up for simplicity rather than representing the most accurate estimate of the Company area. We confirmed the figure of 2,367 km 2 derived by selecting the Company boundary in GIS to calculate the area should be reported. Table 7: WW Other Number of lead pipes replaced for water quality (Line 1) Data are transferred from SAP to GIS which is then interrogated for reporting purposes. The GIS is a reasonable source of data for Table 5 WW Distribution, Lines 21-23, which are reporting absolute numbers of CPs of different materials rather than the year on year numbers replaced for quality reasons. We reviewed the requirements from the table definitions and the communication dated 12th June 2014 from DWI Water Supply (Water Quality) Regulations 2000 (as amended): Notice under Regulation 28(4). It is our opinion that the scope in the methodology document does not align with the table and DWI requirements. The reporting would appear to be significantly under-reporting the number of lead communication pipes replaced for water quality, insofar as it does not include Opportunistic replacement of lead communication pipes during -planned mains renewal works. The Company has elected to report on this lines as it does to the DWI. It was agreed with Bristol Water that we should not revisit previously assured data unless we have a specific and agreed reason to do so. We were provided with the supporting the assurance documentation for previously reported data. We noted that the methodology document was silent on the need to report on previous years and any assurance confirmation that will be required Supply and demand side enhancements to the supply demand balance (Lines 2-5) The Company is not reporting a figure for Lines 2 or 4 as it does not use a critical period scenario. For Line 3, the Company is reporting a figure of zero for the current reporting year. This is because the Company has not yet implemented any schemes in AMP6 that would deliver supply-side improvements under annual average conditions. An agreed reduction in the bulk transfer to Wessex Water will apply from 2017/18, which will then be included in Line 3. The majority of the audit focused on Line 5. There are three overall option sets that are delivering demand-side enhancements in AMP6 and which are therefore included under Line 5: Option D004: Subsidised supply pipe replacement when leak identified This option has not yet been implemented and therefore there are no demand-side savings being delivered as a result of this scheme. We felt that the assumption included in the methodology on supply pipe savings required further justification. Although this is not affecting the reported figures at present, this assumption should be discussed internally and resolved prior to the next reporting period. Option D006: ALC increase & Option D001: Pressure Reduction Programme The impact of these schemes is being reported as a combined figure because of the difficulty in separating the source of leakage savings. The current approach being used is to subtract the reporting year outturn leakage from the WRMP target leakage. We confirmed that the reported 2016/17 figures were consistent with the water balance and WRMP tables respectively at the time of the audit. The leakage figure has since been revised and the Company has updated the figure for this line accordingly. Option C004: Change of Occupier Metering The Company reported that this scheme has changed slightly from the final WRMP14 version of the scheme as it is now an enhanced scheme involving a collaboration with Wessex Water, which has been in place since October For 2015/16 and 2016/17 the savings delivered by this scheme were being calculated using the total number of meters installed (8,975), rather than the number of meters installed on change of occupancy, Atkins Version July

38 which could overestimate the savings. For 2016/17, 5,263 optant meters were installed and 3,712 meters were installed on change of occupancy. The Company has therefore revised the 2015/16 and 2016/17 reported figure to include meters installed on change of occupancy only, and has adopted a cumulative approach to reflect the continued savings likely to be achieved upon meter installation. The assumption of the saving due to metering on change of occupancy has also been revised down to reflect the values used in the WRMP tables. We have therefore classified the data as Green Energy consumption (Lines 6-8) It was observed that considerable effort had been made to develop the methodology document, although this document was a work in progress at the time of the audit and required a number of updates such that it is fit for purpose. It was reported during the audit there were a number of data challenges associated with these lines and that last year energy used by fleet transport, standby generation and liquid fuels was not included in the submission. Significant effort appears to have been made to compile figures for electricity, transport, diesel and gas and to ensure consistency in the split between wholesale, network plus and resource with the Finance department. Based on a review of the figures provided after the audit we did not find any issues with the data, and have therefore classified the data as Green Peak factor (Line 9) As with Lines 6-8, several updates are required to the methodology document to ensure that it is fit for purpose. Peak factor is a relatively straightforward measure to report, defined by Ofwat as the ratio of maximum to average consumption. However, we noted that based on Ofwat s definition and the equation within the methodology document, peak factor was reported incorrectly in last year s submission as it appears to have been reported as average DI/peak week DI rather than the inverse of this. This has now been addressed for this year s submission. We trailed one of the daily spreadsheets to the annual spreadsheet and the figures for DI were not consistent. This is because there had been data issues with the DI figures from Barrow treatment works and some other meters, so the data had been cleansed. Following the audit, we were able to confirm that the reported figure for 2016/17 reflected the corrected DI figure, and have therefore classified the data as Green Mean Zonal Compliance (Line 10) This area was covered in D1 - Mean Zonal Compliance in the APR section of this report Volume of Leakage above or below the Economic Level (Line 11) This area was covered in F1 - Leakage in the APR audit. Table 18.1: WW Other opex (Lines 1-8) The methodology underpinning Lines 1 to 8 of this table is the accounting separation and cost allocation methodology discussed in Section 3.2. The methodology summarises the approach to and key assumptions related to this table. This table splits water resources into sub business units which are inconsistent with the Company s cost centre and management accounts structure. At the time of the review meeting the Company had applied broad brush assumptions, in particular to the allocation of Lines 4 and 5. We challenged these assumptions as to whether they resulted in a reasonable assessment of costs at the sub unit level. Subsequently the Company has reviewed further its cost centre analysis and has been able in Line 4 to directly allocate some 77% of the costs related to abstraction charges and purchase of water to the sub units. The Company advised us that it will be reviewing for future submissions its assumptions related to Line 4 costs that are not directly allocated and Line 5 costs currently allocated pro rata to net book value, as it recognises that there are issues related to the confidence in the reported costs at sub unit level in relation to the allocations. We recognise that the reporting lines required by Ofwat are not consistent with the cost structures which the Company operates under and thus further review of the basis of cost allocation would be helpful in moving such analysis forward. For Line 1 (power) the Company has been able to analyse at a site level the value of power and thus we can have confidence in the data reported. The overall power cost is consistent with that reported in Table 4D and we think that this merits the confidence grade reported. Line 2 is zero, consistent with that reported in Table 4D. Lines 3 (rates) are allocated pro rata to year end net book value and this appears reasonable and merits the confidence grade reported. Line 4 (Other Direct) costs Atkins Version July

39 are allocated either on a direct cost centre basis, some 77% of costs, related in particular to abstraction charges and purchase of water, with the remainder pro rata to year end net book value. Line 5 (Other Indirect Costs) are allocated pro rata to year end book value. For Lines 4 (Other Direct) and 5 (Other Indirect) the total water resources costs are as reported in Table 4D. Where costs have been allocated across the sub units based upon the net historic cost book value it is difficult to assess whether this represents a reasonable allocation of costs, although we recognise that alternatives such as FTEs or volumes would probably raise similar issues. The Company view is that the cost allocations across the business units are reasonable. In this respect, we believe the methodology adopted is reliable being based upon net book value, although it gives rise to data accuracy issues that are reflected in the confidence grade reported. Given that some 77% of costs in Line 4 are directly allocated, this merits a higher confidence than Line 5. The Company advised us that it would review the basis of the assumptions underpinning these lines for future submissions. At the time of the review Line 7 related to historic cost depreciation had yet to be finalised. It will be based upon analysis from the Historic Cost Fixed Asset Register at an asset level and thus we have confidence that it should be reliable and to a degree of accuracy consistent with the level of site data held on the Fixed Asset Register. We note also that the net book value has been used to allocate costs across Lines 3, 4 and 5 and we comment upon this above. Table 18.2: WW Other (Lines 1-9) The methodology underpinning this table is summarised in the accounting separation and cost allocation methodology we discuss under Section 3.2 above. Lines 1 and 2 are consistent with the source figures underpinning Table 4D. Lines 3 and 4 related to the FTE analysis across the wholesale business units and are based upon the FTE analysis by the HR section. We did not track back to the source data from the HR report. We noted that there have been significant reductions in FTEs over the past two years reflecting the business restructuring. We queried why the number of FTEs in Line 3 under raw water distribution had increased from 7 to 13 between 15/16 and 16/17. The Company told us this appears to arise from a change in some cost centres resulting from business restructuring. For Line 5 traffic management act the Company told us that it had no costs associated with permits, but had sought clarification from Ofwat on other costs associated with traffic management and were awaiting a response. Block B service charges are consistent with Table 4D. Table 19: Retail (Lines 1-14) The methodology underpinning Lines 1 to 8 and 15 to 20 of this table is the accounting separation and cost allocation methodology we discuss in Section 3.2 above with costs consistent with those reported in Table 4F. We checked for consistency with Table 4F and confirm this is the case. At the time of drafting this report we had not seen Lines 15 to 20. We understood that these were to be populated from the Fixed Asset Register. It was to be based upon analysis from the Historic Cost Fixed Asset Register at an asset level and thus we have confidence that it should be reliable and to a degree of accuracy consistent with the level of site data held on the Fixed Asset Register. Table 21: Non HH costs (Lines 1-21) Subsequent to our review meeting the Company has produced a summary methodology. We think this needs to be subject to formal document control and that it would be helpful to set out in more detail the assumptions underpinning the analysis. We noted that all Open Water related costs have been coded separately on SAP with reference to both the Company s internal SAP coding and also the Wessex Water project codes that relate to the Pelican joint venture and the setting up of Water2Business. Subsequent to the review meeting the Company provided the SAP downloads that relate to the relevant cost codes underpinning this table so that we could check back to source data. We assume that all costs have been correctly coded within SAP. Based upon what we reviewed and discussed at the meeting we believe the data has been appropriately reported consistent with Ofwat guidance. Atkins Version July

40 3.5. WRMP Update Table 3-5 WRMP Update Overall Assessment Area Methodology Data Supply N/A GREEN Demand N/A GREEN Customers N/A GREEN This audit was undertaken remotely and was a data audit only as there was no methodology document. We agreed with the Company that it would be useful to produce one. We were provided with the Company s WRMP Annual Review report, data submission and supporting spreadsheets. We were able to trace the majority of the figures, but raised queries on several components. As these have now been resolved, we are classifying the data as Green. Atkins Version July

41 Appendices

42 Appendix A. A.1. Table A-1 Meeting Record APR Table 3A-D Methodology and Data Audits Meeting Record Performance Measure Owner/Auditee Auditor Methodology Audit Date Data Audit date A1: Unplanned customer minutes lost Glenn Hiscock Jonathan Archer 27/04/ /05/2017 A2: Asset reliability - infrastructure Michelle Ashford Jonathan Archer 26/04/ /05/2017 Asset reliability sub indicator: Bursts Kevin Henderson Jonathan Archer 26/04/ /05/2017 Asset reliability sub indicator: DG2 Low Pressure Mathias Pacalin Jonathan Archer 11/05/ /05/2017 A3: Asset reliability - non-infrastructure Wendy Staden John Sutherland 05/04/ /05/2017 Asset reliability sub indicator: Turbidity Performance at WTW Wendy Staden John Sutherland 05/04/ /05/2017 Asset reliability sub indicator: Unplanned maintenance events Wendy Staden John Sutherland 05/04/ /05/2017 B1: Population in centres >25,000 at risk from asset failure Kevin Henderson Jonathan Archer 26/04/ /05/2017 C1: Security of supply index (SOSI) Liz Cornwell Monica Barker 19/04/ /05/2017 C2: Hosepipe ban frequency Liz Cornwell Monica Barker 19/04/ /05/2017 D1: Mean zonal compliance (MZC) Graham Williams John Sutherland 05/04/ /05/2017 E1: Negative water quality contacts Jon Scott Julian Jacobs 12/05/ /05/2017 F1: Leakage Mathias Pacalin Doug Hunt 19/04/ /05/2017 G2: Per capita consumption (PCC) Mathias Pacalin Doug Hunt 19/04/ /05/2017 G1: Meter penetration James Holman Julian Jacobs 25/04/2017 Completed with methodology H1: Total carbon emissions Patric Bulmer Helen Gavin 21/04/ /05/2017 H2: Raw water quality of sources Matt Pitts John Sutherland 11/04/ /05/2017 H3: Biodiversity index Patric Bulmer Helen Gavin 21/04/ /05/2017 H4: Waste disposal compliance Robert Luckwell John Sutherland 20/04/ /05/2017 I1: Percentage of customers in water James Holman Julian Jacobs Remote Audit Remote Audit poverty J1: Service incentive mechanism (SIM) Sue Clarke Julian Jacobs 21/04/ /05/2017 J2: General satisfaction from surveys Sue Clarke Julian Jacobs 21/04/ /05/2017 J3: Value for money Sue Clarke Julian Jacobs 21/04/ /05/2017 K1: Ease of contact from surveys Sue Clarke Julian Jacobs 21/04/ /05/2017 L1: Negative billing contacts Sue Clarke Julian Jacobs 21/04/ /05/2017 Table A-2 APR Table 4 Audits Data Table Owner/Auditee Auditor Methodology and Data Audit 4A - Non-financial information Mathias Pacalin N/A N/A covered in APR audits 4B - Wholesale totex analysis Matt Woolley Peter Fordham 07/06/2017 4C - Impact of AMP performance to date on RCV Beverley Lawton Peter Fordham 08/06/2017 4D - Wholesale totex analysis - water Matt Woolley Peter Fordham 07/06/2017 4F - Operating cost analysis - household retail Matt Woolley Peter Fordham 07/06/2017 4G - Wholesale current cost financial performance Jonathan Hucker Peter Fordham 08/06/2017 Atkins Version July

43 Table A-3 GSS Payment Audit Area Owner/Auditee Auditor Date GSS Payments Lynn Hawkins; Jayne Hooper; Neil Terry, Steve Robbins Julian Jacobs 08/06/2017 Table A-4 Wholesale Cost Assessment Information Audits Meeting Record Area Owner/Auditee Line Auditor Audit Date Operating Expenditure Matt Woolley 1 to 11 Peter Fordham 14/06/2017 Capital Geraldine Jonathan /06/2017 Expenditure Redman Archer Table 1: WW Cash 14/06/2017 Expenditure by Matt Woolley Peter Fordham Expenditure business Atypical 14/06/2017 Matt Woolley Peter Fordham Expenditure Total 14/06/2017 Matt Woolley 31 Peter Fordham Expenditure Table 2: WW Expenditure by purpose and Table 2.1: Cumulative Expenditure by purpose Table 3: WW Resources Table 4: WW Treatment Enhancement expenditure by purpose Sarah Landen 1-27 Jonathan Archer 06/06/2017 Proportion of distribution input Rebekah Rice 1-6 Monica Barker 26/04/2017 by source type Number and capacity of sources Mark Phipps 7-17 Monica Barker 26/04/2017 Length of raw Jonathan Henry Ditoos 18 mains Archer 18/05/2017 Pumping Head Rebekah Rice Doug Hunt 11/05/2017 Total water Rebekah Rice 1-15 John 09/05/2017 treated Number of treatment works Zonal population receiving water treated with orthophosphate Average pumping head - treatment / Average pumping head - resources Average pumping head - distribution WTW in size bands Proportion of Total DI band Mark Phipps Graham Williams 30 Henry Ditoos 31 Sutherland John Sutherland John Sutherland John Sutherland 09/05/ /05/2017 Remote Rebekah Rice 32 Doug Hunt 11/05/2017 Rebekah Rice Rebekah Rice John Sutherland John Sutherland Remote Remote Atkins Version July

44 Table 5: WW Distribution Table 6: WW Properties and Population Table 7: WW Other Table 18.1: WW Other opex Table 18.2: WW Other Table 19: Retail Table 21: Non HH costs Area Owner/Auditee Line Auditor Audit Date Main lengths Henry Ditoos 1-9 Jonathan Archer 09/05/2017 Capacity Mark Phipps Monica Barker 25/05/2017 Distribution input Rebekah Rice 13 Doug Hunt 11/05/2017 Water delivered James Holman Doug Hunt 11/05/2017 Leakage Mathias Pacalin Doug Hunt 11/05/2017 Comms Pipes Tim St John Jonathan Archer 18/05/2017 Network Mark Phipps Monica Barker 25/05/2017 Age of Network Henry Ditoos Jonathan Archer 09/05/2017 Pumping Head Rebekah Rice 35 Doug Hunt 11/05/2017 Household Billed James Holman 1-7 Julian Jacobs 26/04/2017 Meters Glenn Hiscock 8-11 Julian Jacobs 12/05/2017 Household connections James Holman Julian Jacobs 26/04/2017 Total Population Served Mathias Pacalin 14 Julian Jacobs 12/05/2017 Meters James Holman Julian Jacobs 26/04/2017 Company Area Henry Ditoos 17 Julian Jacobs 26/04/2017 Lead Jonathan 18/05/2017 Communication Tim St John 1 Archer 24/05/2017 pipes Supply / Demand Liz Cornwell 2-5 Monica Barker 26/05/2017 Energy Consumption and Peak Factor Rebekah Rice 6-9 Monica Barker 26/04/2017 Mean Zonal Compliance Volume of leakage Graham Williams Incl in APR John Sutherland N/A Mathias Pacalin Incl in APR Doug Hunt N/A Other opex Matt Woolley 1-8 Peter Fordham 14/06/2017 Other expenditure and service charges Operating expenditure Costs incurred due solely to the establishment of the nonhousehold retail market Matt Woolley 1-9 Peter Fordham 14/06/2017 Matt Woolley 1-14 Peter Fordham 14/06/2017 Matt Woolley 1-21 Peter Fordham 14/06/2017 Table A-5 WRMP Update Audit Area Owner/Auditee Auditor Date WRMP Annual Return Liz Cornwell Monica Barker Remote 07/06/2018 Atkins Version July

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