The water sector must deal with storm overflows, to rescue its reputation rather than rivers. 

Sink or swim

When should sentiment rather than science govern how a situation is managed? It’s been a relevant question over Christmas, with public repugnance at the idea of further restrictions over the festive period winning out over medics’ and scientists’ advice to put the breaks on Omicron transmission.

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According to results from the latest The Water Report Expert Forum survey, the water sector is grappling with the question too in respect of storm overflows (SOs).

While there was a spread of views on how important an issue SO pollution is for the water sector in terms of the harm being caused to the water environment, a whopping 85% said the issue is very important in terms of legitimacy and reputation. One respondent put this bluntly in observing: “Absolutely [a] crisis moment for the industry. No longer socially acceptable, and the whole industry is at high risk of losing its licence to operate. Reputation is in the ditch.”

The industry is at high risk of losing its licence to operate. Reputation is in the ditch.”

Watts: a crisis 

Janet Wood evaluates how water companies are weathering this winter’s power price rises.

Gas prices have been increasing in leaps since the summer and increases show no sign of stopping. Instead of “a few tens of pounds,” forward gas prices for the late winter are up to ten times that. Electricity prices have followed the trend, because while there is an increasing proportion of low-cost renewables in the system, much of the electricity price is set by marginal gas generation.

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Water utilities are on the front line. They have large energy demands – across the industry, energy represents 9% of water company costs. They may have a few hours of flexibility in when, for example, they pump water. But there is no flexibility in customers’ need for water

Water companies cannot pass on any responsibility for their energy costs.”

and wastewater services.  Water companies cannot pass on any responsibility for their energy costs as was tested when energy prices previously became a point of contention between the water companies and Ofwat.

In 2020 some water companies argued that their business plans should be automatically adjusted to allow for changes in energy prices – known as a real price effect (RPE) adjustment) as happens for some other cost items such as labour or chemicals.

The request was part of a Competition and Markets Authority (CMA) referral by four companies – Northumbrian Water, Yorkshire Water, Bristol Water and Anglian Water – in 2020. But the CMA dismissed that part of the referral, saying that because companies have tools to manage their energy costs, they should not automatically be able to collect extra revenue to cover rising prices. 

There were lots of challenges, and not a lot of collaboration”.                        Peter Drake

Ten years of teaming up

Peter Drake marks the milestone of WIF’s tenth anniversary by reflecting on its decade of facilitating collaboration. 

This month, the Water Industry Forum (WIF) celebrates its ten-year anniversary. Executive director Peter Drake says the real cause for celebration is the decade of “facilitated collaboration” that WIF has enabled, helping the water sector to advance and to work through some challenging issues that needed multi-stakeholder input.

WIF’s greatest attributes, he explains, are its neutrality, independence and not-for-profit status, which have served to provide a place where water companies, supply chain, academia, government and regulators can come together confidently to explore the art of the possible.

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Drake launched WIF in January 2012, after taking early retirement from Yorkshire Water. His vision for a neutral stakeholder forum and information hub involved emerged from tallying the challenges facing the water industry then – ageing assets, climate impacts, population growth and environmental needs – with active participants in the space. This showed there were “lots of challenges, and not a lot of collaboration,”  What was needed, he recalls, was a “neutral space in the middle” and a multi-stakeholder approach. 

Will there be a way?

CCW reports positive early findings from its work to pilot some of the actions set out in its Affordability Review. 

CCW’s Summer 2021 Affordability Review was broad and wide ranging, taking in everything from debt to data sharing, and communications to making processes more customer friendly. Most of the headlines were grabbed by the recommendation for a single national social tariff, but there were ten key recommendations in all, underpinned by 40 specific actions.

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Senior policy manager, Andy White, says CCW is planning to publish a full one-year-on report this summer. But in the meantime, he shares that the watchdog is really delighted with how the review was received and is being acted on by stakeholders, including Defra, the Welsh government, Ofwat and the industry.

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For example, the UK and Welsh governments have set up groups to explore a single national social tariff further, and Ofwat has consulted on a review of its debt guidelines. The industry has engaged enthusiastically too in considering the half of the 40 actions identified that are in companies’ control.

On the front line are ten water companies who are working hand in glove with CCW on a series of pilots to explore nine actions from the review. The intention is to share findings with the rest of the sector, to encourage widespread take up of proven initiatives.