WATER & WASTE TREATMENT
THE EFFECT OF COVID-19 ON AMP7
Another area of focus is the environment, with proposals designed to improve the quality of 8,000km of rivers and reduce the number of serious pollution incidents by 90 per cent by 2025. Ofwat has said that it wants to see
Covid-19 means that a more flexible approach will be needed for investment projects during AMP7
Covid-19 has shone a light on efficiency in water asset management, says Matt Hale, international sales & marketing manager at HRS Heat Exchangers
T
he water industry in England and Wales is almost twelve months into the current Asset Management Period, (AMP7) which
determines price settlements, management priorities and infrastructure investment for the sector until March 2025. Normally this stage of the five-year cycle would be marked by a step-up in investment and engineering activity as capital projects are approved and construction begins. However, with the global Coronavirus crisis coinciding with the start of AMP7, what is the current state of play, and how should water companies prioritise their spending and investment in the circumstances?
Asset Management Periods Asset Management Periods (AMPs) were introduced following the privatisation of the water industry in the UK. The five-year timeframe is designed to allow the regulator to review prices and evaluate key performance indicators (KPIs), while providing structure for the water companies to meet the priorities set out by the regulator and government. As a result, not only do AMPs set allowable price increases, but water companies align to their contract and investment framework to the same timetable. AMP periods last for five years and begin on
the 1 April, with the corresponding Price Review (PR) carried out by the regulator in the
32 MARCH 2021 | PROCESS & CONTROL
preceding year. The current PR19 and AMP7 took effect on 1st April 2020 and runs until 31st March 2025. Four water companies: Anglian, Bristol, Northumbrian and Yorkshire appealed their PR19 determinations to the Competition and Markets Authority (CMA), although the investment priorities under AMP7 will not be affected by the outcome of any appeals process. The cyclical nature of the AMP model leads
to a ‘boom and bust’ cycle of investment which repeats every five years. Within these five-year periods, spending peaks typically during the central 12-18 months of the period before tailing off again, with activity resembling a typical bell curve. To try to overcome some of these peaks and troughs in activity, at the beginning of AMP6, the Cyclicality Working Group was formed. This brought together the regulator Ofwat, the water companies, trade unions and supply chain workers to try to find solutions to this ‘boom & bust’ cycle of investment, although the initial optimism seen in 2014 appears to have evaporated long ago.
Management priorities AMP7 focuses on several priorities, including ensuring the long-term resilience of both infrastructure and operations, and has a total approved budget around £50 billion, representing a 13 per cent increase on AMP6.
significant changes in the way that water companies engage with their customers, and PR19 requires companies to improve customer service while also reducing prices: delivering outcomes that customers and society value at a price they are “willing to pay.” To measure this, Ofwat has introduced 14 performance commitments (PC’s) which will allow it to compare the performance of different companies using common methodology across the sector. This will help ensure that they continue to manage their assets well and into the future, with long-term strategies not just for water supply, but also for drainage. The regulator is also taking a more in-depth
and holistic view of environmental performance, including financial, operational and corporate resilience. It will also consider areas such as environmental pressures, demographic change, changing customer behaviour, and climate change. To deliver these sometimes-contradictory objectives, Ofwat has stressed the need for innovation and encouraged the water sector to look to introduce best practice from other industries. As a result, one leading consultant to the industry has said that, ‘Water companies will need to focus on getting the basics right.’
The Covid-19 effect Normally, after twelve months the sector would be starting to see the results of planning and investment for the current
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