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June 2024
Issue 105

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

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

PUBLISHED BY

KEW PLACE

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Highs and lows

Higher charges will make trust in water worse – but few see the sector preparing effectively to tell customers they will be paying more.

Higher water charges will worsen the public’s already deflated trust in the water industry, and companies are not preparing effectively to gain customer consensus, agreement or understanding for higher bills. That’s according to our latest THE WATER REPORT Expert Forum survey.

 

The jury remains out for an extra month on Ofwat’s PR24 determinations, but substantial price rises will be involved whatever the decisions. Meanwhile in Scotland, Scottish Water this year increased prices consistent with its 2021-27 determination, which specifies a 2% uplift above inflation every year. 

Water prices are only heading in one direction, to fund increased investment and greater resilience, and to cover higher costs and interest rates. So how can paying more for water be ‘socialised’ with customers?

Looming problem

88% of Expert Forum respondents felt higher prices would worsen public trust in the water industry. 

There were multiple references to lack of public understanding of the industry in explanation. For instance, one participant said: “Public outrage over polluted rivers and storm overflows has eroded trust. There is a fundamental lack of understanding of how the water sector is governed, funded and overseen so the general public do not see it as 'their' problem to fix.” 

No-one likes to pay more for a service that is perceived to be poor. Unless couched in the right language, this will be horrendous for the water sector's reputation.”

Always and forever

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Drinking Water Inspectorate chief, Marcus Rink, explains how the inspectorate is more than fulfilling its core purpose to secure safe water for the public. 

A group of chemicals known as PFAS, and often dubbed forever chemicals owing to their near indestructible nature, have been linked to serious health conditions, including cancer. The prospect of their presence in drinking water has been covered by the environmental press – particularly since the Environmental Protection Agency (EPA) in the US recently set legally enforceable standards for a set of six PFAS. 

But PFAS in drinking water is global issue and the EPA’s move has raised questions about what is being done elsewhere to protect the 

public. Under European Union rules, 20 widespread PFAS must collectively not exceed 100ng/l in total. Here in the UK, the Royal Society of Chemistry recently called on the UK to apply a 10ng/l limit on each individual forever chemical, and a 100ng/l limit on total concentrations in drinking water. 

Currently in the UK, each of the individual PFAS can be up to 100ng/l, and there is no overarching limit on the total concentration when they are combined. The chemists called for a  However, the Drinking Water Inspectorate is taking an alternative path. Rather than introducing blanket PFAS limits as the EPA has, it is pursuing a risk-based strategy, which it is collaborating with the water industry to develop and advance. “We have taken a pragmatic, systematic and strategic approach to deal with a problem that we don't fully understand, in a way that doesn't impact the industry beyond what is reasonable, but benefits the public in the maximum way possible.” says the inspectorate’s chief inspector, Marcus Rink.

Rivers. Trust?

Environmental activists gathered by the River Wandle and the water industry and a regulator went in where Conservatives feared to tread. Trevor Loveday followed the day’s events.

Broad as the audience was for the UK River Summit 2024, environment activists made up the great majority. This was a place where folk from the water sector, regulators and government might be considered endangered species.

So the appearance of the chief executives of a water company (Southern Water’s Lawrence Gosden), the Environment Agency and supply chain champion British Water at one of the event’s panel sessions was impressive. There, in a packed room, where the cheering for each rant against the water sector created the ambience of a rally, the water sector leaders deserved a nod of respect. There was no government presence.

It takes 20 years to build a reservoir, of which 15 years is 

Gosden said his company had, since privatisation, reduced its abstractions by a quarter to 550Ml, largely through demand-side reductions, but warned: “While those things will deliver something, it is nowhere near enough to meet the challenges that climate change and population growth present us.”

 

He went on: “We are going to have to build the UK’s first big water recycling plant because there just isn’t enough water in the environment to sustain the chalk rivers as well as provide water for human beings.”

 

Environment Agency chief, Philip Duffy, asked: “Are we serious as a country about this? “Because in the plans we have got in front of us, there is quite a lot of hope that consumers will bear the brunt by reducing consumption. Is that a credible pathway? We don’t see much evidence historically of consumers reducing consumption.”

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planning and permitting with study after study after study… we need fundamental change in the planning system.” 
Lawrence Gosden

Environmental performance: time for a rethink

Ahead of the Environment Agency’s consultation, Martin Hurst makes the case for a fundamental reset on how water company performance for the environment is assessed. 

Every year the Environment Agency publishes its assessment of how water companies are performing. The Environmental Performance Assessment (EPA) is based on a range of metrics, such as the number of severe pollution incidents.

So now is a perfect opportunity to step back and ask what a system looking at environmental performance should look like. 

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Key points:

  • The Environment Agency is reviewing the EPA during something of a crisis in parts of the water industry and public distrust in both water companies and regulators. This is compounded by systematic failures to improve the water environment by multiple stakeholders. The EA almost seems to be using the EPA to improve its reputation as a water regulator rather than to restore wider trust or improve the environment. This trust is important not just to the sector, but also because without trust it will be harder to work with customers – to use less water and wet wipes for example – and with other partners and investors.
     

  • The public does want some at least of the existing information to be published. Companies’ performance in terms of the regulatory requirements has not been good enough.
     

  • But the EPA is an asset focussed assessment of performance against numeric regulatory compliance metrics.  There is little about what a company is doing to improve (or worsen) the water or the wider environment, let alone the contribution of other polluters such as farmers. It is a partial picture and at worst it is positively misleading. 

Water recycling: winning people round

Water recycling will be part of our future. How can the sector encourage people to embrace it?

Purifying what is currently considered ‘waste’ water – treated effluent from wastewater works – so that it is once again suitable to drink is going to be part of the UK’s water supply future. There are multiple such ‘water recycling’ schemes going through RAPID’s strategic water resource programme – including in Hampshire, London, Poole and Minworth (to augment flows in either the Severn to Thames or the Grand Union Canal transfers), as well as non-strategic schemes in company Water Resource Management Plans. 

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in an environmentally sustainable manner. Water recycling will
be an increasingly important
part of our national strategy
as it is independent of rainfall and brings circular economy benefits. This technology is
well-tested elsewhere in the world, and we have a robust regulatory framework in place
to support its application

domestically.”

RAPID managing director Paul Hickey comments: “We face a step change in ambition on water resource resilience to meet future needs

A new lease of life 

Mains and sewers are expected to last hundreds of years, yet everyone agrees resilient assets are vital.

A new project is calling for collaboration to find a forward path on infrastructure health.

Across the economy, it often seems easier to build new things than to keep the ones we have in good condition – as potholes in roads and mould in social housing will attest. In water, the next AMP will be characterised by an enormous building programme to meet new standards and requirements. Meanwhile, history suggests capital maintenance is vulnerable in price reviews, despite healthy and operationally resilient assets being critical to the provision of essential services for customers and the environment.

 

In the past, the argument has run that this vulnerability, together with shortcomings in the regulatory models used to calculate 

maintenance allowances, has led to underfunding – with chickens now coming home to roost in the form of ridiculously long-life assumptions for mains and sewers, and deteriorating overall asset health. 

 

The two main criticisms of Ofwat’s calculations relate to econometric models which put too much store in historic data and do not adequately reflect current and future risk; and upper quartile efficiency benchmarks which are based on water companies with the lowest spend, without verifying whether the thrift is a result of genuine efficiency or simple underspending. 

 

Against that backdrop, four water companies – Anglian Water, Northumbrian Water, Wessex Water and Affinity Water have opened a public consultation (until 21 June) available here: https://www.water.org.uk/investing-future/infrastructure-health

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

It's the eye on the competition.

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Ofwat gives green light for planned performance assurance committee

Ofwat has approved the first in a series of planned changes to reform the Market Performance Framework (MPF) – the mechanisms designed to monitor, govern and incentivise trading parties to deliver their obligations in the non-household retail market.

CPM058a and CPW149a, which will be implemented on 26 June, establish new governance arrangements for the MPF, including the creation of a new Performance Assurance Committee (PAC) to replace the existing Market Performance Committee. The PAC’s composition, quoracy and voting rules will boost independent/customer representation. It will consist of an independent chair, two independent members, a CCW representative, three retailer members and three wholesaler members. 

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Businesses can be vulnerable too
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Jo Mayes outlines why Business Stream believes it is right to support business customers in vulnerable situations – and how it is working towards this.

To date, customer vulnerability has been almost entirely focused on household customers, within the water sector and beyond. There has even been some resistance to the notion of considering vulnerability in the context of business customers, built on the view that their retailers deal with organisations, not individuals. 

However, at their core businesses are made up of individuals, some of which, at times, will find themselves in a vulnerable situation. While we are unlikely to be our customers’ primary source for support, we do believe we have a role to play in supporting our customers in need.

Which is why we’ve committed to launching our vulnerability strategy this year with work already underway to identify the steps we need to take as a business to ensure we’re even better equipped to help support our customers. Some of it we’re already doing, but the development of a strategy will help us to prioritise this activity, invest in additional resources and training and ensure greater consistency in our service delivery. 

MOSL and IWater create equality toolkit for the sector

MOSL and the Institute of Water (IWater) have partnered to produce a toolkit for use by water sector organisations and others to support equality, diversity and inclusion (EDI).

The partners noted while there has been some improvement in increasing the diversity of the water workforce, the sector has “a long way to go” – for instance, only 33% of the workforce is female, and people from ethnic minority backgrounds make up just 7% compared to a UK average of 13%. They said there also needs to be attention on people with disabilities and neurodiversity, and those from different age, sexual orientation and socio-economic groups.

They said: “As an industry, we need to get better at strengthening our processes, including recruitment and retention, and building better policies that foster inclusive work environments and more open conversations about what EDI really means in practice.”

MOSL nudges up in annual performance survey

Trading parties have ranked MOSL 4 out of 5 overall, in this year’s performance survey. This is up slightly from last year’s 3.9 overall score.

The survey, issued in March to wholesalers and retailers, sought views on six areas, on a 1-5 scale.

Results:

  • Market operations – 3.9, down from 4.0 in 2023.

  • Market assurance – 3.7, flat.

  • Market improvement – 3.8, up from 3.7.

  • Governance and support services – 4.0, up from 3.9. 

  • Engagement and communications – 4.0, up from 3.9.

  • Website – 3.9, down from 4.1.

Outgoing retailers to get auto-notifications of transfer read changes

Outgoing retailers will automatically be notified of any alterations to transfer reads by the incoming retailer when a business customer switches, under a code change accepted by Ofwat.
 

Transfer reads will be updated in CMOS and notifications automatically sent to the outgoing retailer to inform them of the change. This currently does not happen, and can lead to inaccurate final bills for customers.

CONTENTS June 2024  full contents of the magazine  
 

TWR EXPERT FORUM Preparing for price hikes.

 

REPORT DD outlook.

 

INDUSTRY COMMENT Weighing up the CMA option.

 

NEWS REVIEW NIC Progress Review.

 

FEATURE Asset health – finding a new path.

 

INTERVIEW DWI’s Marcus Rink on PFAS strategy.

 

NEWS REVIEW Crypto impacts continue. 

 

REPORT Rivers Summit: freshwater emergency.

 

INDUSTRY COMMENT The EPA: time for a rethink.

NEWS REVIEW Nutrient stripping list.

 

FEATURE Anglian’s pollution plan.

 

FEATURE South East Water’s 25YEP.

 

FEATURE Water recycling: winning people round.

 

INDUSTRY COMMENT Resilience: be smart and swift.

 

REPORT WEF2 and Breakthrough 4

 

NEWS REVIEW Scots customers want climate action.

 

NEWS REVIEW Smarter regulation push.

NEWS REVIEW New committee for the reformed MPF.

 

INDUSTRY COMMENT Business Stream on vulnerability.

NEWS REVIEW Thames’ undertakings to be lifted.

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