John Cuthbert: Water chief must face the music on prices as costs rise

A Day in the Life: Before his evening band practice the head of Northumbrian Water must grapple with problems such as energy costs

6.30am

"I'm one of those fortunate people who live only about seven minutes away from where I work," says John Cuthbert, the managing director of Northumbrian Water. "Seven if it's a good day, 10 minutes if it's a bad day."

The fact that his home in Chester Le Street, County Durham, not far from the cricket ground, is so close to his company's offices does not, however, mean he allows himself a relaxing start to the day.

"I have breakfast standing up," he says. "There's always something else to do, finding the papers I have been reading overnight, gathering up the things I need. My wife's a teacher and she's normally trying to leave the house at about the same time as well."

Upon arriving, the office is calm by comparison, not least because Mr Cuthbert is usually the first in. He takes the opportunity to surf the internet news sites for any issues cropping up around Northumbrian or the water industry in general before his colleagues start to arrive.

Northumbrian's offices are open-plan and the company's four main executives (himself, finance, operations and the all-important regulation) have their own four-person pod on the floor. "We actually have smaller desks than the secretaries – the space is assessed on the basis of need," he says. "Early in the morning, colleagues come in and the open-plan works well because we can debate and discuss developing issues as people arrive at the office. It makes you feel accessible and means that you see people more than you would if you were tucked away in an office somewhere."

9am

Mr Cuthbert's first meeting of the day is with his regulation team. These sessions usually last up to two hours – sometimes longer – as the company moves toward the submission of its draft business plans to Ofwat in August. The next five-yearly review is fast approaching and with inflation surging and Britons reeling under the burden of sharply increasing food and fuel prices, the ongoing discussions about water prices are set to be a hot topic.

"There is a reasonable visibility on how things are going to go but there is an awful lot of work to be done both within the company and by the regulators once we have submitted these draft business plans in August," says Mr Cuthbert.

"Currently, there are some particularly challenging aspects that we face. Energy prices, for example, every individual, every household is being impacted by changes in energy prices and our business is no different, so one of the things that is a particular challenge is trying to determine what is going to happen to energy prices during the five years from 2010 to 2015. That really is what the draft business plan is all about, trying to estimate the way costs will develop, the efficiency gains we can make and, of course, the final outcome which is what customers are interested in." This will probably not be finalised until November next year.

Mr Cuthbert says: "Last December, we published a strategic-direction statement, looking forward 25, 30 years and we indicated that we would ideally like to aim for prices to be kept fairly close to inflation. That remains our objective but energy prices will clearly be a factor."

There has been much debate about how more competition can be introduced into the water industry, but Mr Cuthbert would like to see a review done of whether the introduction of competition between other utilities, such as electricity, has actually benefited consumers. "It may just serve to increase the cost of capital for the companies rather than bringing prices down," he argues.

Cost of capital is another vexatious issue, although in this case Northumbrian is in a relatively fortunate position – its £2bn debt pile is funded until 2011, meaning it has not been badly hit by the credit crunch. Yet. "Clearly we are hoping that by 2011 things will have settled down."

11am

Mr Cuthbert heads back to his desk to go through his post: "Invariably I will get copies of letters from customers and I always look at any letters that come in which are addressed to me. I like to see the response that goes out as well."

The ever-present issues of leakage and the introduction of water meters are never far away. Mr Cuthbert says Northumbrian has met its targets on the former, while he is a strong advocate of the latter. "Metering is an important part of supply-demand balance. I'm of the view that if you are dealing with a precious resource, which we are, then it's not sustainable in the long run to basically provide that scarce resource at a zero marginal cost. If you are on a fixed charge, based on rateable value the next litre, the litre after that which you use doesn't cost you. That can't be right. We therefore have a programme that is progressively increasing meter penetration in the Essex area, for example, where water is scarce."

After half an hour he gets together with his human resources director. Mr Cuthbert is a big believer in education, and improving his staff's qualifications. To this end, the company has developed an MA in leadership and management in conjunction with Northumbria University's business school as well as a BA in the same subject.

"Some people don't like employees to gain externally accredited qualifications because they think that makes them more marketable and they might leave. We tend to work on the basis that this has to be a win-win situation. We want bright people who can deliver value, and if they are going to put effort into the programme they should gain from that. Some of these people have been working for the company for many years, and the only route for them is through this structure," he says.

12.30pm

Mr Cuthbert buys lunch at the staff canteen, but takes it back to his desk to eat while poring over reports from the regulators. He then meets with the management team to review the company's accounts in the wake of the recent results announcement with the finance director, Chris Green. After this he heads to the University of Durham, where he chairs the finance and general purposes committee.

The main item on the agenda is to review the budget for the forthcoming academic year. So are universities as underfunded as they have been arguing? Mr Cuthbert will not be drawn: "Universities would always argue that they are not getting enough funding but it's about making a balance, really. You just have to cut your cloth to suit the income you have." However, he continues: "This is a good opportunity to look for ways the company can better engage with the university and we're working on one or two ideas."

4pm

It's back to the office and a meeting of the IT steering group, which overseas the company's investment in technology. "I've always had an interest in this. I'm quite a technophile and I'm very interested in what IT can do for us. We're looking at replacing e-mail systems, revising and updating our intranet and a project that is providing our field workforce with handheld units to improve communication."

He will leave the office at 6pm and snatch a bite to eat before heading to his band practice. He plays guitar and sings in a band with a group of fellow businessmen from the North-east called 55 degrees. Fortunately, the bassist has a distribution business, which affords them space at a local business park to use for rehearsals. Blasting out covers of the Kaiser Chiefs and REM songs helps to clear Mr Cuthbert's system before heading for home and another session of reading reports from, and for, the regulator.

The CV

Name: John Cuthbert, managing director, Northumbrian Water.

Age: 55

Marital status: Married with two grown up children.

Education:

Sunderland Polytechnic, holding a degree in applied physics. Durham University Business School, MBA.

Career: 2000-present: joined Northumbrian Water, appointed operations director and made managing director in 2001.

1996–2000: appointed managing director of Essex and Suffolk Water.

1991–1996: started work for North East Water as finance director, appointed managing director in 1993.

1986–1991: made finance director at North Eastern Co-op.

1979–1986: joined Associated Co-operative Creameries, with positions including audit development accountant and finance director.

1975–1979: started career at Peat Marwick Mitchell & Company.