NAO says Tideway Tunnel payback remains uncertain

Thames Water customers’ bill for the Thames Tideway Tunnel project remains unclear and 60% of the benefits of the 25km sewer overflow protection scheme will go to consumers who will not have to pay towards it according to spending watchdog, the National Audit Office (NAO). “As the project is scheduled to be fully operational by 2024, it is still too early to form a value for money conclusion.” the NAO reported in its review of the project

.The watchdog noted that the estimated value of the benefit from the Tideway tunnel at £1.8 bn - £3.1 bn was "uncertain." And it reported as “unclear” the amount that Thames Water customers will have to pay for the project currently costed at £4.2 bn. It added £13 to Thames’ customers’ average annual bill for 2016-17 said NAO.

The NAO said its latest report was an update in line with developments in the project since 2014. It added: “As the project is scheduled to be fully operational by 2024, it is still too early to form a value for money conclusion.”

The NAO’s findings included a number of instances where greater rigour in assessing specifications and costs were eschewed for expediency in ensuring compliance with European legislation. It found that Thames Water’s analysis of the costs of options other than the tunnel was “less detailed, with its costing of alternatives not independently scrutinised.” But Defra decided, according to NAO, not to explore alternatives on the grounds that delay could lead to the UK being fined for breaching European Union (EU) urban wastewater treatment directive.

The EU Court of Justice in 2012 found the UK to have breached the directive and it remains at risk of being fined said the NAO. The watchdog said Defra and the Environment Agency endorsed the full tunnel option without exploring fully the uncertainties in the modelling its performance. The NAO reported that the Agency, after making adjustments to its modelling in 2009 “did not consider that any of the areas of uncertainty with the results were sufficient to justify the costs necessary to any improved data.”

Refinements to the modelling showed that the Tideway project’s performance targets could be achieved with a smaller tunnel and reduced the estimated costs by almost £650 m. NAO said further refinements could have led to greater reduction in the capacity of the tunnel. But Defra’s view was “the cost of rectifying a tunnel with inadequate capacity would be prohibitive and that the Tunnel chosen offers greater certainty that it will be future-proof,” said the NAO.

The NAO highlighted the 10 years to 2010 taken by Defra and the Environment Agency “to agree measurable standards and the specifications of the Tunnel.