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MARCH 2021 edition

This website includes excerpts from the latest edition of THE WATER REPORT.

PUBLISHED BY

KEW PLACE

Full coverage is available only in the print and digital editions of the magazine

To the wire

In the end, the complexity and significance of the CMA appeals have proved such that every last week has had to be squeezed out of the statutory timetable.

The CMA’s target date for delivering its price redeterminations for Anglian Water, Yorkshire Water, Northumbrian Water and Bristol Water has shifted now to “mid March.” There is no further to go, given the statutory deadline for completion is 18th of this month.

As much as companies originally wanted it all to be done and dusted by Christmas so price changes could be applied from April 2021 (that hasn’t happened, it’s no real surprise that these cases have taken the whole time allowed. Even a cursory review of the evidence published on the appeal web page shows the breadth of interest in the outcomes, and the sheer amount of data the commissioners have had to grapple with.

The whole process has allowed major arguments to be aired, data unearthed and new evidence brought forward with the elapse of time (though as things looked in January, not all of that will be taken into account in the final decisions). But fundamentally, the original points raised by each side a year ago stand and no one has

shifted much from the basis of their starting positions.

Are sector regulators redundant?

A report proposes "normalising" sectors with their own regulators to a point that leaves the watchdogs jobless.

As far as the Competition and Markets Authority (CMA) is concerned, the water sector has been transfixed for a full year now on the minute detail of the four PR19 redetermination cases that are still being slugged out (see p4). But others have had bigger competition and consumer fish to fry.

On the CMA specifically, former chair Lord Tyrie recently blasted the regulator in a letter to the FT, calling it “not fit for purpose” and urging major reform, in particular to call for a more visible, more transparent Authority that engages directly with consumers, fights their corner in cases that really matter and packs a bigger punch.

Meanwhile Weston-super-Mare MP and rebooting capitalism proponent John Penrose has published his chancellor and business secretary-commissioned report looking at how boosting competition and consumer powers will help with Covid recovery, Levelling Up, increasing trust and supercharging the post-Brexit economy.

The Penrose Report is hugely wide ranging and impressive given it was only a few months in the making (commissioned in September), and makes serious recommendations on matters as diverse and challenging as pro-competition regulation of the digital sector; ramping up the CMA’s consumer powers; sorting out trading standards; and better regulation.

A spectrum of green

Do water company contributions to a green recovery go

beyond pale?

Back in July 2020, Defra, Ofwat, the Environment Agency, the Drinking Water Inspectorate and CCW jointly asked companies to voluntarily make proposals to:

accelerate delivery within agreed 2020-25 plans.
bring forward enhancement investment proposals from 2025 and beyond.
implement new innovative ideas to benefit future generations or current customers.

The submission deadline was the end of January and the aim, ultimately, was to boost jobs, prosperity and the health of the environment as part of the bid for recovery from Covid-19.

Some companies, either preoccupied with existing commitments or deterred by the high bar put in place subsequently by regulation, have not advanced any plans. Of those who have, some have decided to keep their cards close to their chest for now. Defra said it was not able to share a full list of submissions because not all companies have gone public.

Buying in bulk

Havant Thicket passes a major milestone as Portsmouth and Southern sign a new supply deal.

New water trades are few and far between, but the formal signing of a

Bulk Supply Agreement (BSA) by Portsmouth Water and Southern Water

relating to the Havant Thicket reservoir last month marked more than

"just" a new trade.

The BSA

The chief executives of Portsmouth Water and Southern Water, Bob Taylor and Ian McAulay, have now signed an 80-year BSA, under which Portsmouth will supply 21 million litres of water a day to Southern, up to a 1-in-200-year drought, enabled by the Havant Thicket reservoir.

The BSA is novel in that it allows large scale infrastructure to be developed across water company service area boundaries (Portsmouth will construct the reservoir purely to cater for Southern Water’s needs rather than its own). This is the first time that a UK reservoir has been developed in this way and provides a precedent that other water companies can potentially follow.

The BSA contains protections for Southern Water customers to incentivise Portsmouth

to continue to supply water, and Ofwat has specified regulatory protections for both parties to ensure the reservoir is built and operated for the benefit of customers

It is the third of four planned BSAs between the two firms. Portsmouth already has agreements to share up to 30Ml of water a day with Southern Water in West Sussex and Hampshire, and can share a further 9Ml a day from 2024 from other sources.

Once the reservoir is built, it will provide an extra transfer of 21 million litres a day from a mix of sources, bringing the total to 60Ml a day. That’s about a third of all the water Portsmouth produces. The new water will be captured from a spring and is surplus to Portsmouth’s own requirements; it currently flows out to sea in winter.

Open sewers

Sharing data openly on combined sewer overflows had put them in the spotlight, and that will intensify as transparency increases in line with the Storm Overflow Taskforce plan. Yorkshire Water is combining artificial intelligence with behavioural interventions as it looks towards zero pollutions.

The desire to empower customers and communities to hold it to account, and therefore to build trust, was one key reason behind Yorkshire Water’s commitment in 2018 to move to an ‘open by default’ position on data. Richard Emmott, director of corporate affairs, had a vision that by being an open book, the company

could create a cohort of what he termed ‘citizen regulators’ to scrutinise and challenge performance.

While it has not overtly been articulated as such, there is evidence of citizen regulation at play in the recent surge in public and political concern about storm overflows.

will keep you on top of the threats and opportunities emerging from retail and upstream competition.

It's the eye on the competition.

A plan of action

Retailer Wholesaler Group water efficiency arm delivers plan to boost business water efficiency.

The conundrum of how to squeeze more water efficiency out of the business sector has been addressed head on by a new action plan developed by the Water Efficiency Subgroup of the Retailer Wholesaler Group (RWG).

The group, established in February 2020 and led by South West Water’s Holly Corns as chair, has sent its plan to Ofwat and the Environment Agency, following the regulators’ joint letter of March 2020 demanding wholesalers and retailers take action.

The plan comprises five headline actions with a series of associated sub actions, improving coordination between wholesalers and retailers during unplanned events featured in the regulators’ commissioning letter but is now being dealt with by a dedicated RWG sub group separately.

The plan is wide ranging and covers what might be considered all the key bases on this thorny issue: setting ambition, treating data as an enabler, finding a seat at the Water Resources Management Planning table for retailers; tackling barriers; and

raising customer awareness.

Ofwat consulted for ten days to 1 March on an urgent change proposal that would exempt retailers from their obligation under the Customer Protection Code of Practice (CPCoP) to use a meter read

to provide an accurate bill to metered customers at least once a year. This is in light of meter reading difficulties being experienced by retailers, contractors and customers during pandemic restrictions.

In CP0008, the regulator proposed a short, time-limited change which retains the CPCoP requirement but allows a conditional and time-limited exemption for retailers from having to use a meter read to provide an accurate bill where they can demonstrate they have made “all reasonable efforts” to contact the customer before utilising the exemption, and provide evidence that they have met the criteria for the exemption. This includes attempting to contact the customer on two separate business days, where possible

using different contact methods.

MOSL secures approval for business plan and budget

MOSL has published its 2021-24 business plan following member approval at a meeting on 25 February, including sign off for its 2021/22 budget.

The plan covers the twin aims of delivering high quality and reliable core services, together with extensive market improvement programmes. The approved budget for year one of the plan is £11,415,000 covering both elements.

Core service delivery costs are down due to improved efficiency, but spend on improvement programmes and total costs are up. However, MOSL is to deliver a 1.1% cut in its market operator charges from £11,200,000 in 2020/21 to £11,075,000 and will fund the difference from its reserves. MOSL reported broad support from respondents to the draft plan it consulted on ahead of finalising the document for voting.

MOSL chief, Sarah McMath, thanked trading parties for their engagement: “This year, perhaps as a consequence of the pandemic, I have seen trust in the market grow

as we have worked together to address the most

immediate challenges."