WESSEX WATER A summary of our Business Plan Submission to Ofwat - April 1999

OVERALL STRATEGY FOR THE AMP3 PERIOD AND TOP 5 STRATEGIC OBJECTIVES Wessex Water must provide water and sewerage services to standards set by the quality regulators. It must also meet the expectations of customers and provide investors with a return which is sufficient to attract new capital. We have carried out extensive market research which showed that our customers want us to invest most of our efficiency savings in improving environmental standards. The research showed customers would also like those improvements to be carried out over a period of time so bills do not increase in real terms. The regulators and the Government now require us to carry out our largest ever quality enhancement programme. We welcome this but as a consequence it will not be possible for us to meet customer expectations on prices without spending less on maintaining our existing assets. Reducing our maintenance programme is not in the long term interests of customers or the environment. If we did not need to invest in the higher standards then water bills could fall by 13 per cent. However, in order to meet our statutory duties within the timescale set by the Government, Wessex Water has no choice other than to recommend that bills increase over the next five years.

PROPOSED PRICE LIMITS & EFFECT ON AVERAGE BILLS								TOP 5 QUALITY IMPROVEMENTS IN 2000-2005 PERIOD
		2000 -01	2001- 02	2002 -03	2003- 04	2004- 05		1. Works to ensure we continue to provide clean, safe drinking water
	Proposed Price Limit for water and sewerage services							2. New resource development to resolve low river flow problems
1	Proposed Price Limit (Water Service)	3.0%	7.75%	7.75%	7.75%	7.75%		3. Eliminate all unsatisfactory intermittent discharges from the sewerage system
2	Average Household Bill (today's prices)	124	126	127	128	129		4. Upgrading sewage treatment works to further improve bathing water quality
3	Average Household Bill paid	125	131	135	140	144		5. Safe, sustainable recycling of sewage sludge
1	Proposed Price Limit (Sewerage Service)	3.0%	7.75%	7.75%	7.75%	7.75%
2	Average Household Bill (today's prices)	144	154	166	177	188
3	Average Household Bill paid	145	160	176	192	209

PROJECTED EXPENDITURE NEEDS			Annual average for the AMP3 period (£/property/annum)		WHAT IS DRIVING THE CHANGES IN BILLS		£
1	Total Operating Expenditure - annual average		120		Average household bill in 1999-2000		268
2	Total Capital Maintenance Expenditure - annual average		78		Less	(1) passing on past out-performance	(31)
3	Total Capital Enhancement Expenditure - annual average		189		Plus	(2) challenging targets for future efficiency improvements	(18)
						(3) the impact of improvements in water quality	98
RETURN CAPITAL						(4) improvements in service performance
Return on capital - (post tax) (%)			5.5% to 7.0%			(5) Maintaining security of supplies to all customers
					Average household bill in 2004-2005		317

For further information contact : T K Harris, Director of Regulation and Finance, Wessex Water Services, Wessex House, Passage Street, Bristol, BS2 0JQ