But the company is still proposing to invest £1.93bn over the five years to maintain and enhance services. "Our challenge is to minimise the impact on customers,! stresses Yorkshire Water director of regulation and investment Jonathan Hodgkin.
"We need to capture the hearts and minds of the customer base who pay for the investment and do only what is appropriate."
"The key pressure is to continue to achieve a balance between the demands of our stakeholders with the pressures to meet environmental standards and climate change requirements.
"Climate change is a long term shift so we can’t rush into spending the money. In terms of clean water asset resilience to flooding for instance, we've done the first pass but need to go back and refine that.
"And let’s take the challenge of Hull with regard to flooding. We know it’s a complicated site where a number of agencies have a role to play. We need to do the right preparation via modelling work to find out what needs to be done. The challenge will be: will Ofwat let us do the work? We are proposing a notified item (that would allow Yorkshire to raise prices during AMP5) with a trigger point depending on the outcome of the modelling work so if we find we need investment we can access to funds to do it before the next AMP period starting in 2015."
Another item that could add to water bills is waiting on the outcome of a European Court case brought by the UK government over the designation of the River Humber as a "Sensitive Water" under the Urban Waste Water Directive. If government loses then Yorkshire Water would be required to invest between £400M and £600M putting in extra treatment to further improve water quality that would need to be paid for.
The focus of the AMP5 investment plan has switched slightly, Hodgkin says. In the current five year period work was split 50:50 between maintenance and capital. Next time it will be 60:40 in favour of maintenance to maintain and improve performance of existing assets.
The introduction of the 25 year strategic plan has had the benefit of allowing the company to place investment in a longer term
context, he says. "It allows us to do things in a five year AMP that make sense in the longer term. For instance, we have proposals for automated water reading that have a 15 to 20 year payback.
"We’ve included a proportion of the expected operating costs related to customers over the 20 years in our draft submission and wait to see if Ofwat will back us in what we have done."