WET News

MARCH 2014 WET NEWS 9 8 WET NEWS MARCH 2014 Taking the 'bust' out of the AMP cycle • The Cyclicality Working Group has been working away behind the scenes to eradicate the negative side of the five-yearly AMP cycles. Communication and innovation are key to the process going forward. Maureen Gaines spoke exclusively to the group's chair, Richard Coackley, to find out more. I 'm at One Great George Street, Westminster – the home of the Institution of Civil Engineers (ICE). Inside, the building has the "wow" factor and you can't help but feel the presence of the engi- neering greats – the Stevenson brothers, Brunel, Telford to name but a few. My guide on this quick tour, and the man I'm here to meet, is Richard Coackley, director of energy development at engi- neering consultant URS Infra- structure & Environment UK and a former president of ICE. How times have changed and people now work in teams and groups. Coackley is chair of the Cyclicality Working Group tasked with eliminating the downside of the regulated AMP cycle, which has resulted in up to 40,000 job losses as well as created uncertainty and inefficiency for contractors. He firmly believes the answer lies in communication and innovation. This is a big opportunity to change the way the industry operates in sharing forward information to increase effi- ciency and provide the cus- tomer with savings. The working group was established following the Treasury / Ofwat report Smoothing Investment Cycles in the Water Sector, published in July 2012 with the aim of finding a solution to the nega- tive impact of the five-yearly cycles in the water industry's supply chain. In setting up the working group, Coackley wanted to represent all aspects of the water industry. "I wanted to get a real cross-section of the whole of the industry." British Water and Water UK are key members of the group as the overall industry umbrella, also including the Treasury and Ofwat. The Drinking Water Inspec- torate (DWI) and Environment Agency were brought on board to provide a long-term legisla- tive planning understanding. The group includes repre- sentation from large and small water companies, including Anglian Water, Southern Water, Yorkshire Water and Bristol Water, to give "a cross- section to assist us in under- standing where they're coming from". On the contractor side, Coackley considered consult- ant engineers as being contrac- tors in the process as well because "they form that con- tractor partnership with the client". As with the consultants, he wanted contractors "to wear two hats" to represent their industry associations as well as understand the pain in the cycle. Coackley says: "It's quite a large table of people in the group. A lot of effort was spent on making sure a really rounded group of people with commit- ment to change attended." Transition process The group's first job was to analyse the Treasury / Ofwat report and specifically the rec- ommendations that were put forward. A major positive for the group has been Ofwat's deci- sion to allow water companies to bring forward AMP6 invest- ment into the last year of AMP5. Coackley explains: "The very first thing the group felt we needed to do was formally recommend Ofwat incorporate a transition process. Ofwat was receptive to the industry's rec- ommendations, and I'm abso- lutely delighted that took place." It is important to note that this is not the first time that Ofwat has tried to solve the problems associated with the AMP cycles. The regulator has, in the past, tried to incorporate some- thing similar to the transition period, says Coackley. "But it was fraught with financial mis- understandings and finance directors weren't able to change the five-year cyclicality. "That's why water company representatives on the group are finance directors and asset management directors. They combine finance and asset management so we are working with senior industry "That's why water company representatives on the group are finance directors or asset management directors. ...we are working with senior industry representatives that make those decisions" Richard Coackley News+ REALITY CHECK • The five-yearly cycles have created peaks and troughs of workload in the industry • The regulated periods have resulted in up to 40,000 job losses • In the past, Ofwat has attempted to introduce a scheme similar to the transitional investment period • The AMP cycles have created uncertainty and inefficiency for contractors representatives that make those decisions." The dra¢ submissions have now been made and the group feels "there's something really tangible " in that transition period. "I'm not aware of the figure but I would love to know how much it is, what it adds up to," says Coackley. "If our clients are able to generate for the transition period some hundreds of mil- lions of pounds brought for- ward from AMP6 into 2014-15 then that's great. We've done something as an industry," he says. However, the work does not stop there, and there are sev- eral sub-groups working on different issues as they look towards the long-term. Once Ofwat has approved the water companies' plans for the transition period and AMP6, Coackley says getting that knowledge into the supply chain will be important. NEED TO KNOW 1 The transition period enables water companies to bring AMP6 investment forward 2 Some water companies, such as Thames Water, already have their AMP6 Tier1 contractors in place 3 More than £20B will be spent on water and wastewater infrastructure in AMP6 4 The Cyclicality Working Group is working with all areas of the industry, Ofwat and the government. 5 The HM Treasury report, Smoothing Investment Cycles in the Water Sector, was published in July 2012

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