OUR FINAL ASSURANCE PLAN FOR PR19

Transcription

1 OUR FINAL ASSURANCE PLAN FOR PR19

2 Contents Introduction and background Our governance structure for PR19 What information needs assuring? Forms of assurance Our risk assessment process for data tables Assurance for our Customer Engagement Forum Timescales Feedback PR19 Final Assurance Plan anglianwater.co.uk

3 1 Section 1 - Introduction and background One of the ways Ofwat regulates the water and wastewater service providers in England and Wales is to set the price, investment and service package that customers receive. This includes controlling prices companies can charge their customers. A review of the price limits is carried out every five years - the current price review for 2019, known as 'PR19', will set price controls for the period As part of the PR19 process, Anglian Water (the 'Company') is required to submit a business plan. In that plan we are providing a wide range of information to stakeholders. Stakeholders have a reasonable expectation that they can rely on that information when making judgements about Anglian Water and that the information forms the basis for honest and open conversations about our plan. This document outlines the assurance plan that we have in place for the business planning process, prior to submission and publication of our final business plan in September We published Our Draft Assurance Plan for PR19 in February 2018 and invited feedback from stakeholders. We did not receive any feedback from stakeholders and have therefore finalised the assurance plan based on our initial proposals. This is a supplementary document to Our Assurance Framework which we published in December Key points of our assurance framework are that: Our assurance activities will be guided by an assessment of the risk to data quality Assurance may be obtained in a variety of ways, whether from internal or external parties. We have published a separate assurance plan which covers our annual reporting activities, such as the Annual Report and Accounts and charges information. This can be found on the Anglian Water website in the Assessing our progress section. Section 2 - Our governance structure for PR19 Our PR19 planning process is governed by an overarching framework, with overall accountability and responsibility lying with the AWS Board. They are responsible for assuring our final business plan and providing an assurance statement that outlines why all of the elements add up to a plan that is high quality in the round and deliverable, and how it has challenged company management when developing that plan. Board engagement in the development of our PR19 business plan has been ongoing for many months. The diagram below shows the governance structure for PR19. Where possible, existing business as usual groups are integral to the programme management.

4 2 Our Final Assurance Plan for PR19 Section 3 - What information needs assuring? This assurance plan applies to the information we will be submitting and publishing as part of our business plan for the period This includes, but may not be limited to the following: The 99 data tables and associated commentaries required by Ofwat Associated feeder models PR19 governance framework Approach to engaging customers Approach, structure and content of outline and final business plans Outcomes development, including performance commitments and setting of outperformance / underperformance payments Development of investment options, optimisation of options and cost estimation validation Financial elements such as assumptions and financeability Economic and company scenarios Cost adjustment claims PR14 reconciliation Vulnerability and affordability Direct procurement Cost modelling Bioresources RCV allocation Water Resources RCV allocation. Section 4 - Forms of assurance We ensure the level of assurance is appropriate to the type of data in scope. Consequently, the basis of our assurance activities varies. For PR19 assurance activities are being carried out by a number of parties: Internal Anglian Water employees independent of the areas subject to review Company Internal Audit function PricewaterhouseCoopers (PwC) Third party assurance providers Deloitte for financial elements CH2M/Halcrow for non-financial / technical elements Expert consultants for areas requiring specialist input PR19 Final Assurance Plan anglianwater.co.uk Engaged on a case by case basis Independent strategic challengers Engaged on a case by case basis

5 3 The matrix below summarises how assurance providers have been allocated across the workstreams. It should be noted that in all cases, at least two forms of assurance will be carried out, providing a broad scope of review and added resilience. Assurance Providers Workstreams Internal Internal Audit Third party Expert consultant Strategic challenger Data tables and commentary (1) Feeder models Governance framework Engaging customers Approach, strategy, structure and content Outcomes performance commitments Investment options Financial elements, including financeability Economic and company scenarios Cost adjustments PR14 reconciliation Vulnerability and Affordability Direct procurement Cost modelling Bioresources RCV Water Resources RCV 1. the process to identify which data tables should be subject to assurance by external third parties or by internal resources is outlined in the section below Section 5 - Our risk assessment process for data tables Assurance of the 99 data tables by external third parties will focus on areas of highest risk; those tables where the likelihood or impact of inaccurate data is the greatest. We assessed each data table against the following criteria to identify the riskiest: Whether it contains data which are inputs/feeders to the Ofwat model Whether it contains data which are outputs of the Ofwat model Whether it contains data which are considered key to the business planning process Whether it contains a high proportion of copied or calculated cells (>60%) Whether the data have already been assured as part of an early submission to Ofwat Whether the data are of significant stakeholder interest.

6 4 Our Final Assurance Plan for PR19 Under normal circumstances, the riskiest tables would be allocated to independent third party assurance providers, with the lower risk tables being subject to internal review by Anglian Water employees independent of the areas subject to review. However, the results of the risk assessment, as summarised below, indicated that a high proportion of the tables should be subject to external assurance: 87 tables (88%) should be subject to assurance by an independent third party assurance provider (either CH2M/Halcrow or Deloitte) 12 tables (12%) should be subject to internal assurance review by Anglian Water employees independent of the areas subject to review. Having reviewed the results of the risk assessment in the context of the unique nature of PR19, the fact that the data supports significant investment levels and the importance of providing confidence to our stakeholders and our Board, we have decided that every data table should be subject to assurance by an independent third party assurance provider - either CH2M/Halcrow or Deloitte. The list below shows how the 99 data tables have been split between each provider: CH2M / Halcrow (45 tables) App1 - Performance commitments (PCs) and outcome delivery incentives (ODIs) App2 - Leakage additional information and old definition reporting App3 - Abstraction Incentive Mechanism - surface and groundwater abstractions under the AIM threshold App4 Customer metrics App5 PR14 reconciliation ~ performance commitments App6 PR14 reconciliation ~ sub-measures App21 - Direct procurement for customers App27 - PR14 reconciliation - financial outcome delivery incentives summary App28 - Developer services (wholesale) App30 - Void properties App31 - Past performance Deloitte (54 tables) App7 - Proposed price limits and average bills App8 - Appointee financing App9 - Adjustments to RCV from disposals of interest in land App10 - Financial ratios App11 - Income statement based on the actual company structure App11a - Income statement based on a notional company structure App12 - Balance sheet based on the actual company structure App12a - Balance sheet based on a notional company structure App13 - Trade receivables App14 - Trade and other payables App15 - Cashflow based on the actual company structure App15a - Cashflow based on a notional company structure App16 - Tangible fixed assets App17 - Appointee revenue summary PR19 Final Assurance Plan anglianwater.co.uk App18 - Share capital and dividends App19 - Debt and interest costs App20 - Cost of debt / analysis of debt App22 - Pensions App 23 - Inflation measures

7 5 CH2M / Halcrow (45 tables) Deloitte (54 tables) App24 - Input proportions App24a - Real price effects (RPEs) and efficiency gains App25 - PR14 reconciliation adjustments summary App26 - RoRE Scenarios App29 - Wholesale tax WS2 - Wholesale water capital and operating enhancement expenditure by purpose WS2a - Wholesale water cumulative capital enhancement expenditure by purpose WS3 - Wholesale water properties and population WS4 - Wholesale water other (explanatory WS9 - Wholesale water special cost factors WS10 - Transitional spending in the wholesale water service WS12 - RCV allocation in the wholesale water service WS1 - Wholesale water operating and capital expenditure by business unit WS5 - Other wholesale water expenditure WS7 - Wholesale water local authority rates WS8 - Third party costs by business unit for the wholesale water service WS13 - PR14 wholesale revenue forecast incentive mechanism for the water service WS15 - PR14 wholesale total expenditure outperformance sharing for the water service WS12a - Change in RCV allocation in the wholesale water service WS12b - Wholesale water charges impact assessment WS17 - PR14 water trading incentive reconciliation WS18 - Explaining the 2019 Final Determination for the water service Wr1 - Wholesale water resources (explanatory Wr6 - Water resources capacity forecasts Wr7 - New water resources capacity ~ forecast cost of options beginning in Wr2 - Wholesale water resources opex Wr3 - Wholesale revenue projections for the water resources price control Wr4 - Cost recovery for water resources Wr5 - Weighted average cost of capital for the water resources control Wn1 - Wholesale water treatment (explanatory Wn2 - Wholesale water distribution (explanatory Wn3 - Wholesale revenue projections for the water network plus price control Wn4 - Cost recovery for water network plus Wn5 - Weighted average cost of capital for the water network plus control WWS2 - Wholesale wastewater capital and operating enhancement expenditure by purpose WWS2a - Wholesale wastewater cumulative capital enhancement expenditure by purpose WWS3 - Wholesale wastewater properties and population WWS1 - Wholesale wastewater operating and capital expenditure by business unit WWS5 - Other wholesale wastewater expenditure WWS7 - Wholesale wastewater local authority rates

8 6 Our Final Assurance Plan for PR19 CH2M / Halcrow (45 tables) WWS4 - Wholesale wastewater other (explanatory WWS9 - Wholesale wastewater special cost factors WWS10 - Transitional spending in the wholesale wastewater service WWS12 - RCV allocation in the wholesale wastewater service Deloitte (54 tables) WWS8 - Third party costs by business unit for the wholesale wastewater service WWS13 - PR14 wholesale revenue forecast incentive mechanism for the wastewater service WWS15 - PR14 wholesale total expenditure outperformance sharing for the wastewater service WWS12a - Wholesale wastewater charges impact assessment WWS18 - Explaining the 2019 Final Determination for the wastewater service WWn1 - Wholesale wastewater sewage treatment operating expenditure WWn2 - Wholesale wastewater large sewage treatment works explanatory variables and operating expenditure WWn3 - Wholesale wastewater network (explanatory WWn5 - Wholesale revenue projections for the wastewater network plus price control WWn6 - Cost recovery for wastewater network plus WWn7 - Weighted average cost of capital for the wastewater network plus control WWn4 - Wholesale wastewater sewage treatment (potential explanatory Bio1 - Wholesale wastewater sludge (explanatory Bio2 - Wholesale wastewater sludge treatment process and disposal routes Bio3 - Wholesale wastewater sludge opex Bio4 - Wholesale revenue projections for the wastewater bioresources price control Bio5 - Cost recovery for bioresources Bio6 - Weighted average cost of capital for the bioresources control R2 - Residential retail special cost factors R9 - PR14 reconciliation of household retail revenue R10 - PR14 Service incentive mechanism R1 - Residential retail R3 - Residential retail ~ further information on bad debt and customer services R7 - Revenue and cost recovery for retail R8 - Net retail margins Depending on the individual data tables, the terms of reference for the assurance reviews may include an assessment of the following: PR19 Final Assurance Plan anglianwater.co.uk Compliance with PR19 methodology requirements, including any assumptions The robustness of supporting evidence Data validation processes Consistency of data across tables Areas of concern or weakness.

9 7 Section 6 - Assurance for our Customer Engagement Forum Our Customer Engagement Forum (CEF), comprises members from a number of interested stakeholder groups. For the purpose of PR19, the role of the CEF is to provide independent challenge to companies and independent assurance to Ofwat on: The quality of a company's customer engagement The extent to which the results of this engagement are driving decision making and are reflected in the Company's plan. In addition to the assurance activities outlined above, our CEF can independently request additional assurance activities are carried out on its behalf to help satisfy itself that it has provided sufficient challenge. Regular assurance updates are provided to the CEF by the Company and by third party assurance providers if required. Section 7 - Timescales Our assurance plan is already underway, having begun earlier in For example, we have already submitted our initial Bioresources RCV allocation and Water Resources RCV allocation, which are referred to in this final assurance plan. Both were subject to independent third party assurance. Our assurance activities will continue throughout 2018 until we submit and publish our final business plan, and beyond that to manage the period of activity until Ofwat's final determination in December We will publish for consultation our outline business plan in March 2018 and will make amendments following feedback from stakeholders. We will submit and publish our final business plan, along with a signed Board Assurance Statement and copies of reports produced by our independent third party assurance providers, by Ofwat's deadline of 3 September Section 8 - Feedback We welcome feedback from stakeholders on this final assurance plan for PR19. You can contact us in any of the following ways: stakeholderfeedback@anglianwater.co.uk Call: Although this is our final assurance plan for PR19, we will continue to share any feedback we receive and explain how we have responded to it. If any feedback results in a change to our assurance activities, we will update and re-publish this assurance plan, as required.