Excerpts from THE WATER REPORT
June 2021 issue 72
FULL STORIES AVAILABLE ONLY IN THE MAGAZINE IN PRINT AND PDF
CONTENTS full contents of the magazine
REPORT Ofwat raises the curtain on PR24.
REPORT URNI’s PC21 final determination.
REPORT CCW’s Affordability Review findings.
REPORT Green Recovery draft decisions.
INDUSTRY COMMENT Indepen Forum: CMA appeal lessons.
REPORT British Water and WIF seek to merge.
INTERVIEW Nicci Russell, Senior Water Demand Reduction Group.
UKWRC chair, Phill Mills, provides the context that at the 2019 REC review, retailers submitted evidence of their costs and experiences in the market, but Ofwat indicated the data was problematic – insufficiently robust and not directly comparable company to company. “We thought this was an opportune time to have an independent review of the prime issues four years on, and try to provide the evidence that Ofwat had asked us for, which is essentially what is in the report. It’s a definitive report: it’s robust, it’s independent and incisive.”
Director of regulation and compliance at Wave, Wendy Monk, adds: “The other thing that Ofwat was saying was there are issues in the industry that need fixing and they were looking to the industry to do what they could themselves to fix it…We came up with an evidence-based, independent market study as the best thing we could do to help.”
SOCIAL CONTRACT SUMMIT Stocktake survey.
The lynchpin of the thinking is that price controls must focus on the long term and encourage companies to do so. Armstrong says this is “core” and there will be few who will argue with the sentiment. Ofwat lists among the drivers: climate change pressures, altered expectations and affordability challenges, teamed with company and government long term targets (for example, on net zero carbon, leakage, drought resilience, per capita consumption and water poverty) with more to follow in the Environment Bill. The paper points out: "The price review has a key role in supporting a long-term focus. We want to encourage companies to sequence their investments carefully, in line with wider strategic planning frameworks, to efficiently achieve long-term outcomes.”
REPORT Annual MPS and OPS league tables.
REPORT UKWRC calls for a REC review for a loss-making market.
INTERVIEW Affinity Water’s Steve Hervouet.
REPORT MOSL’s CEO Forum.
REPORT What’s the future for the Codes Panel?
INDUSTRY COMMENT Today’s technologies to improve metering.
NEWS REVIEW Covid bad debt relief timetable.
NEWS REVIEW A net zero equivalent for nature.
NEWS REVIEW Welsh Water celebrates 20 years as not-for-profit.
Given the AMP7 Water Industry National Environment Programme (WINEP) is worth £4.8bn, £2.8bn of new funding is a significant sum. Ofwat’s chief executive David Black says that in terms of the new allowances, it was not just a numbers game, either.
A joint letter of November 2020 set out what the government and regulators would look for in proposals. This included for schemes seeking new funding, innovative ideas that would benefit current customers or future generations. Black explains: “We were looking to drive better environmental outcomes, looking for innovation, new ways of working…What came forward was a pretty exciting package of proposals from some companies.”
Collaborate on challenges
In fact it is the needs of the whole sector rather than organisational need that is really driving the move to combine. Individually, each organisation is respected and financially stable. But together, they can go “from strength to strength,” says Fletcher.
The associations describe each other as “complementary and mutually supportive”. British Water supports and champions interests across the water supply chain, through three forums (UK, Technical and International) with other support services, events and networking opportunities.
Meanwhile, the Water Industry Forum is independent rather than representative; it convenes stakeholders from the water sector to facilitate challenge-led thought leadership, it says to “enable conversations to occur which otherwise wouldn’t happen”.
The review’s ultimate objective is to end water poverty, which it defined as customers spending 5% or more of their household income after housing costs on water bills. CCW’s director of policy, research and campaigns Mike Keil said if implemented, the measures would “represent a step change in the breadth and quality of help available”.
The fairer’point is pertinent given the inequalities of existing financial support. CCW highlighted examples – customers in North Yorkshire have access to a £108 bill reduction whereas those in Lancashire can access nearly three times that (£295). Shropshire customers have
£221 available, whereas in Wales it is £101. The differences include who is eligible and the nature and extent of help available. “This support isn’t defined by what you need but where you live,” CCW said.
Moreover the review illustrated that the overall need is great. Despite water company efforts to support 900,000 households in 2019-20 (up 28% on the previous year) through £150m-worth of annual bill reductions, one in ten find their bills unaffordable, suggesting some 2.5m households are in hardship.
The Panel approved a discussion document on its purpose at its April 2021 meeting, which has now been published for feedback. Among the considerations are whether:
there is a need for the Panel to take strategic action to deliver Defra and Ofwat’s policy direction, vision and strategy for the market as well as efficiently designing and developing technical solutions for market rule changes;
governance should be market-led rather than industry-led, encompassing stakeholder voices and needs beyond those of trading parties including end customers, regulators, government, the market operator and other groups; and
the Panel should pay a role in matters that stretch beyond the Codes.
Hervouet explains Affinity Water has taken a number of specific, practical measures to improve the service it provides to retailers and self-suppliers. These include offering meter reading services (currently provided to seven retailers and eight self-suppliers) and developing alternative credit offerings (currently six retailers and five self-suppliers have agreements in place). These are market fundamentals.
Meter reading underpins many outcomes including those in billing, service and water efficiency. Credit can enable retailers – the small and new entrant retailers in particular – to be able to play in the market. “As an ex-retailer (before Affinity he worked with Water Plus the Scottish market operator), I understand that retailers value the practical things we can do for them,” Hervouet says.