UNITED UTILITIES GROUP PLC ANNUAL REPORT AND FINANCIAL STATEMENTS <strong>2015</strong>Stock Code: UU.<strong>united</strong><strong>utilities</strong>.comOur performance 2014/15narrowly missed the target in 2014/15,being 19 per cent below the baseline,impacted adversely by an 11 percent increase in the carbon contentin the UK energy mix in the yearwhich increased our <strong>report</strong>ed carbonemissions. Notwithstanding this, in2014/15, we have purchased lesselectricity than in any of the previous10 years and still achieved our highestever renewable energy production of144 GWh. This is the equivalent ofc18 per cent of our total electricityconsumption, up from c17 per cent inthe previous year and c13 per cent in2012/13. We are already implementingplans to significantly increase selfgenerationover the next few years,with a target of around 35 per cent ofour electricity consumption by 2020(see business insight on page 37).Employees – we work hard to sustainhigh levels of engagement by ouremployees. The company has seensignificant change over the last fouryears and our plans will engage ourteams for further improvements.Employee engagement is 79 percent, well above the norm for UKcompanies going through businesstransition and just below the normfor high performing UK companies, soour employees demonstrate a strongcapability to adapt. We continueto be successful in attracting andretaining people and have continuedto expand our apprentice and graduateprogrammes, having recruited a further22 graduates and 32 apprentices in2014/15, taking the current total to 56graduates and 97 apprentices. As partof our health and safety improvementprogramme, we have implemented anumber of initiatives which helpedreduce the employee accidentfrequency rate to 0.112 accidents per100,000 hours for 2014/15, comparedwith a rate of 0.137 in 2013/14 and0.188 in the previous year. Whilst weare pleased with our performanceimprovement, we recognise we stillhave more to do. Health and safetywill continue to be a significant areaof focus, as we strive for continuousimprovement.Communities – we continue to supportpartnerships, both financially andin terms of employee time throughvolunteering, with other organisationsacross the North West that shareour objectives. We recently set upCatchment Wise, our new approachto tackling water quality issues inlakes, rivers and coastal waters acrossthe North West, and our ‘Beachcare’employee volunteering schemehelps to keep our region’s beachestidy. We continue to support localcommunities, through contributionsand schemes such as providing debtadvisory services and our CommunityFund, offering grants to local groupsimpacted by our capital investmentprogramme.Key performance indicators:Leakage – we met our economiclevel of leakage target forthe ninth consecutive year in2014/15, with a performance of454 megalitres per day versusthe regulatory target of 463megalitres per day.Environmental performance –on the Environment Agency’slatest assessment (2013/14<strong>report</strong>), which covers a broadrange of operational metrics,United Utilities is an upperquartile company. Based on ourperformance across the range ofmetrics, this indicates we were injoint 2nd position among the 10water and sewerage companiesand aligns with our medium-termgoal of being a first quartilecompany on a consistent basis.Corporate responsibility – we havea strong focus on operating in aresponsible manner and are theonly UK water company to have a‘World Class’ rating as measuredby the Dow Jones SustainabilityIndex. The group has retained its‘World Class’ rating and aims toretain this rating each year.Systems thinking approachTo support the delivery of ourobjectives, we are focused oncontinuous improvement and overthe last few years have progressivelyinstilled a ‘systems thinking’ approachinto the way we run our business.This is an engineering-led approachwhich integrates the use of our assets,leverages data intelligence and employstechnology and new work processes todeliver improved customer satisfactionand operational efficiency. We havemade good progress over the lastfew years and this ‘systems thinking’approach is expected to deliverbenefits of over £100 million over the<strong>2015</strong>–20 regulatory period, which arealready built into our business planassumptions.The step change in performance ofthe business over the 2010–15 periodhas its origins in good managementpractice; constancy of purpose, clearobjectives, attention to detail, goodpeople and performance management.However, it was also clear to us thatwe could improve further if we tookthe learning from other sectors totransform the way a water company isrun and we started that transformationover three years ago. There are five keyphases of transformation:• ‘Systems thinking’ – we haveprogressively instilled anengineering-led ‘systems thinking’approach which integrates theuse of our assets, leverages dataintelligence and employs technologyand new work processes. Wehave audited our asset base andare investing in a new enterpriseasset management system andfield force scheduling system,supported by the recruitment ofnew people from other sectorswith experience in these areas.By capturing and processing datafrom multiple information points,we are aiming for ever-improvingasset intelligence. We have fittedsensors in our water networks toprovide visibility as to how theyare performing, helping us toreduce burst frequency, and weare currently piloting drainagesystem performance monitoring38
UNITED UTILITIES GROUP PLC ANNUAL REPORT AND FINANCIAL STATEMENTS <strong>2015</strong>Stock Code: UU.<strong>united</strong><strong>utilities</strong>.comin our wastewater networks. Weare building enhanced visibilityof our assets and more effectivemonitoring and control, enablingus to make more informed andproactive management decisions.This should lead to better modellingand prediction of events beforethey occur, reducing reactive workand thereby improving efficiency,operational performance and,importantly, customer service.• Production lines – for the lastfew years we have considered ourtreatment works as ‘factories’,each with its own productionline. We have over 600 of these‘factories’, small and large,producing clean water, bio wasteand energy. Our business has beenrestructured to create a strongfocus on accountability and delivery,integrating the disciplines oftenfound as functional silos in othercompanies. Our managers areresponsible for the performanceof their production lines includinginvestment of capital to optimiseoperational performance, to deliverenvironmental or water qualityrequirements and to maximiseenergy production, providing a moreintegrated approach.• Organisational structurealigned with new price control– we recognised that we wouldbest address the regulatoryreform agenda by aligning ourorganisational structure withthe new price control, with threebusiness areas: Wholesale,Domestic Retail and Business Retail.We did this nearly three years agoand recruited a business retail teamexperienced in competitive utilitymarkets.• Wholesale business split – wesubsequently subdivided ourWholesale business to concentrateon three business areas: Water,Wastewater and Energy, with astrong focus on increasing ourrenewable and self-generation toreduce the amount of electricity wepurchase. Our people are all alignedto this model and our productionleadership team has responsibility,authority and accountability for theperformance of their assets usinga total expenditure, whole life costapproach to decision management.• Integrated control centre –underpinning our ‘systems thinking’ethos is our recently openedintegrated control centre inWarrington (see ‘business insight’below).Business InsightNew integrated controlcentre acts as the‘digital brain’ of oursystemsLike many companies in our sector,we have no real time view of how ourgigantic water and wastewater systemis performing. Too often our customerstell us when the service has failed andthen we react but incidents are expensive,disruptive for us and more importantly forour customers.In April <strong>2015</strong>, we opened our newintegrated control centre (ICC) (picturedbelow) at our head office in Warrington.This acts as the ‘digital brain’ of ournetwork, providing visualisation of theservice we are providing right across theregion.This has all been supported by asignificant cultural change in thecompany over the last few years, whichhas helped United Utilities progressinto a leading operational performer inthe sector. A critical enabler has beenour people and we continue to invest inattracting talent and in developing thebest, giving us a powerful mix of waterexperience and knowledge of othersectors.In preparation, we have been investingin a new digital network with over3,000 facilities which are now able totalk to each other and the ICC over ourdata highway. We are now beginning toshare real time information about theperformance of our assets.With our new ’systems thinking’ approach,our goal is to improve both efficiencyand performance and aim to prevent aproblem or fix it before a customer’sservice is disturbed.SHAREHOLDER INFORMATION FINANCIAL STATEMENTS GOVERNANCE STRATEGIC REPORT39
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