Utility Week Live

8 Water/Content & context Take a b r o a d e r view of totex W ater companies need to adopt a broader defi nition of totex which sees them optimising spend across the whole business rather than just for their asset interventions, according to Greg Bradley, partner and head of business advisory at EC Harris. Bradley, who is speaking in the Utility Week Live water theatre on 21 April, says that while the water sector has grasped the importance of totex from an 'asset-centric' point of view – thinking in terms of the whole life cost of assets and evaluating capex and opex interventions - this was only one dimension of how a totex approach can benefi t utilities. "That asset-centric perspective is defi nitely part of it, and an important part," says Bradley. "However, the bigger picture is a business-centric perspective on totex, where it's all about how the business and the operating model is geared towards delivering customer outcomes, and where 'a pound, is a pound, is a pound'. Whether you are spending on a capital intervention, a maintenance intervention, asset management and planning, design, IT or customer service, every pound spent towards an outcome should count equally. Our challenge would be how many water companies are looking at totex from that wider, business-centric point of view." We are pleased water companies have committed to improving the services that matter most to their customers. Now they need to deliver." Tony Smith, chief executive, Consumer Council for Water New technology on its own will not get us near zero leakage. It would also need a concerted change in the way we connect and communicate with our customers." Dennis Dellow, Northumbrian Water/UKWIR "Thinking bigger" about totex can also help companies with a third dimension to the new framework continues Harris. This is "future proofi ng" the business and building long-term capabilities, he added. Under this vision, investment in skills, people and teams, and alliances with partners, can all be totex- optimised and aligned towards long-term goals. Harris says that asset knowledge and u n d e r s t a n d i n g of asset performance is improving in the sector, but some water companies still have work to do to ensure they have a full and accurate asset register with a fi rm picture of the costs and risks associated with each asset. Investment in systems for monitoring energy consumption, and the roll out of technology such as smart metering, are positive developments towards this. Bradley points the water industry towards the rail sector as a source of relevant lessons for adjusting to totex. He cites Network Rail, which has standardised its inspection and maintenance procedures and linked them to risk and unit cost. Lessons could also be drawn from oil and gas companies, where contractor management is increasingly based on productivity rather than cost, because unit costs have been largely standardised across the industry. Harris says it will take several years for totex-led thinking to permeate the water sector. He also describes it as an opportunity for the water sector and one of the most positive outcomes of PR14. "From a regulatory perspective, I think the shift to performance commitments and outcome delivery incentives, supported by a totex menu from an economic regulation perspective, is a really positive enabler," says Bradley. "I think the onus will be shifted towards better overall asset planning... the capital programme, capital maintenance and operations programme should all be aligned and integrated into one overall programme to deliver the outcome for customers. That's the way it should work." speakers the numb er of c ustomers involve d in water company consult ation exercis e s as par t of PR14 Whether you are spending on a capital intervention, a maintenance intervention, asset management and planning, design, IT or customer service, every pound spent towards an outcome should count equally. Under this vision, investment in skills, people and teams, and alliances with partners, can

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