Examination of Witnesses (Questions 160
- 179)
TUESDAY 27 JUNE 2000
MR MICHAEL
ROUSE, MR
OWEN HYDES
AND MR
MILO PURCELL
Chairman
160. You have had the benefit of hearing the
previous session. Thank you very much indeed for coming along
this morning, we are grateful. You will be inevitably a slightly
shorter session because we have covered some of the points with
our previous guests and we have to finish fairly soon anyway.
Thank you very much for your memorandum. Is there anything you
would like to add before we begin to cross question you on it?
(Mr Rouse) No, Chairman.
Mr Thomas
161. I wonder if at the outset you could explain
to us how the funding works? I understand you are part of the
DETR, do you recoup the costs through charges on water companies,
for example? Are you subject to that Department's own expenditure
limits? How does it all work in practice?
(Mr Rouse) We are civil servants as part of the Department
of Environment. We are a division in the Department so for pay
and rations we are just as any other civil servants within the
Department but we operate as an independent inspectorate. Both
the last government and the current Government decided that we
should operate in the same way as the Environment Agency, so although
the powers rest with the Secretary of State and the National Assembly
for Wales, those powers have been delegated to us in terms of
enforcement and also prosecution. So it is a slightly strange
situation. We are an independent body but we are, for pay and
rations, a division within DETR.
162. In terms of funding for the enforcement
work you carry out, does that set-up give you enough flexibility
to pursue new lines of enquiry or new lines of enforcement? Are
you able to break outside the Department's own spending regime
because you are in a position to charge companies for the work
you are doing? Do you have that sort of flexibility which the
Environment Agency may have, or are you still tied into the Department
in those financial arrangements?
(Mr Rouse) We are tied into the Department but my
experience since I have been the chief inspector is that when
resources have been required, they have been made available.
163. But they would come from the Department?
(Mr Rouse) They would come from the Department, yes.
Chairman
164. There have been some points made that some
people did not think you had enough resources to carry out your
responsibilities as fully as some people would have liked.
(Mr Rouse) I think that rather strange, Chairman,
because in relation to the periodic review we applied whatever
resources were necessary, we did meet our part of the timetable
in terms of responding to water company proposals, when the water
companies were often late in meeting their deadlines we nevertheless
provided a preliminary assessment by the required time with caveats
and then followed up when the water companies had completed the
information. So I find that rather a strange statement because
we believe we met our commitments under the required timetable.
Mr Chaytor
165. Can I ask you if you are generally content
with the outcome of the review in terms of drinking water quality?
(Mr Rouse) Yes, we are, because we understand from
Ofwat that all the requirements, which are a little bit different
from the environmental ones in that they are all required by regulations,
have been included in the consideration of the final price review.
166. In terms of the phasing of the works required,
are you happy with the phasing of the timetable?
(Mr Rouse) Yes. Most of the requirements are set by
dates for example in the European Directive with a new Directive.
Most of the requirements have to be met by December 2003 and so
that has been built into the programme. We have developed the
priorities in relation to cryptosporidium where there is not a
fixed timetable, but we regard it as the highest priority in relation
to public health, so we have worked with the water companies to
make sure that is high up in the programme.
167. As with cryptosporidium, the UK is doing
more than the European Directive strictly requires, are there
any other examples of us taking a more stringent approach than
is strictly required?
(Mr Rouse) Within the Directive itself, the regulations
are currently out for consultation. Within that, there are proposals
that we may wish to do some things a little bit earlier. I do
not know whether you would like to give the details of that, Owen,
but that is currently out for consultation.
168. Is there scope for implementing certain
requirements?
(Mr Hydes) There is. The European Directive sets the
requirements that we have to follow and there is scope for the
Government to go further than required by the European Community
Directive if it wishes. As Michael Rouse has indicated, DETR issued
a consultation document on the Government's proposals for new
regulations to implement the Directive, and those proposals were
issued in April and the closing date for the consultation is 30th
June. The Directive has some mandatory standards and it also has
some indicator parameter values which we interpret as not being
mandatory, but the Government's proposals in terms of implementing
the Directive are to make some of those indicator parameter values
mandatory because they are important for aesthetic water quality
and they would be maintaining standards that we already have in
our regulations because clearly the Government does not want to
see a deterioration in drinking water quality. There are two or
three parameters which are not included in the European Community
Directive which the Government is proposing to have standards
for because either they are important in public health terms or
they are important for the aesthetic quality of drinking water.
169. Could you tell us what those are?
(Mr Hydes) There is a chlorinated solvent called tetrachloromethane
which we have a current standard for and we are proposing to maintain
a standard in the new regulations which is not required by the
European Community Directive. That is one example. Another example
is sodium where there is not a requirement in the new Directive
to have a standard for sodium but we are proposing to have a mandatory
standard for sodium because there is concern about the levels
of sodium in the diet.
170. If these new requirements go ahead, will
they impact on the existing programme up to 2005 or the phasing
of that? How will these be implemented or do they only affect
us after 2005?
(Mr Hydes) No, the requirements on the new standards
I have mentioned—tetrachloromethane and sodium—will
have no impact on water companies' investment because they already
apply. Retaining some of the indicator parameter values on mandatory
standards, for example, for iron, manganese, aluminium and turbidity,
does have an impact on water companies' investment because they
are the parameters which need to be dealt with by improvements
to the distribution system—the re-lining and replacement
of pipes. These give rise to these dirty water quality problems.
My colleague, Milo Purcell, can amplify that if you need further
amplification on that point.
171. Could you give us a little more information,
because I think we are interested on the impact of Directives
on the companies' investment programmes and how fixed is the overall
environmental programme which has now been agreed?
(Mr Rouse) I will ask Milo Purcell to come in with
the detail in a moment but the investment built into the periodic
review already included these requirements, so there will not
be any change. It has been an on-going 20 year programme and we
are now going into the third part of that four part five years
programme.
(Mr Purcell) The programme to deal with the iron problems
is quite a significant one in terms of cost and resources and
has been for the last number of years since privatisation, and
it will continue to be up until 2010 for some of the companies.
Currently, six companies have completed their programme, by the
end of 2005 a total of 19 will have completed and the remainder
in the period up to 2010. They are mainly programmes to deal with
aesthetic water quality problems. That is the single most annoying
feature for consumers and it has been for some time, that there
are intermittent problems because of the condition of the distribution
system. This is a historic problem because of the level of investment
over time and we have effectively got a catch-up programme now
which is running at various speeds in different companies according
to what they have to do and what they can manage. In the period
that is outstanding—because as part of this periodic review
exercise we have actually estimated all the remaining work which
should go into that catch-up programme—there will be approximately
another 37,000 km of renovation. To put that in context, the whole
of the programme will total to around about 80,000 km over a 20
year period.
172. Are you in sympathy with the water companies'
view that the outcome of the review this time leaves them in a
rather vulnerable position as far as maintenance of their assets
are concerned? Here you are saying that 37,000 km are going to
be renewed, but what do you think is the general state of the
companies' infrastructure and the likely impact on water quality
in the years ahead?
(Mr Rouse) Our programme is geared up for dealing
with water quality problems, it is not concerned with leakage
or any other issues. About one third of the system will have been
replaced or renovated for water quality reasons over the 20 year
period. Our concern will be the serviceability measures when that
programme has been completed. It has been a major catching up
programme. There was a lot of investment required. We are beginning
to see the fruits of that. The concern will be to be able to have
serviceability criteria which does not wait for failures but predicts
and pre-empts those failures so that we can work beyond 2005 and
beyond 2010. We are working with Ofwat now to develop that sort
of thinking.
Joan Walley
173. If I could just follow on that a little
bit. Water quality, as you say, is not the only measure, really,
is it, in terms of the whole infrastructure? I am just interested
to know how you are currently working with Ofwat to develop a
more strategic approach to measuring asset performance? I understand
that part of that is within your remit in terms of water quality
but there are other aspects of the infrastructure which relate
to other people's responsibilities. I am not quite sure how this
has all been addressed through the work that is currently going
on with Ofwat to change or rethink the methodology that is used
in terms of asset assessment and standards of serviceability that
there currently are.
(Mr Rouse) We are primarily concerned, obviously,
with any impact on drinking water quality but we recognise that
in the future there ought to be an integrated programme which
covers all aspects of the distribution of water main essentially,
asset maintenance.
174. Who should that be integrated with? Which
other bodies would have that similar responsibility that you have
for water quality?
(Mr Rouse) It is between ourselves and Ofwat because
the other aspects of serviceability are largely with them, as
are the impacts on consumers like loss of supply and so on.
(Mr Purcell) The current serviceability indicators
are set out in two information notes by Ofwat, information notes
35A and 35B which were dated February 1999 I think. For the above
ground assets, treatment works primarily, they incorporate two
requirements. One measures a number of incidents involving the
treatment works and the other measures total coliforms. For underground
assets, mainly the pipelines but also incorporating service reservoirs,
there are some—from memory—four or five indicators,
one of which is water quality, the others concern the number of
burst mains, the number of interruptions, the pressure, yes, there
are four, the final one is water quality. They provide information
to Ofwat on an annual basis. We are now taking a lead from the
advice in Raising the Quality which was circulated by Ministers
that perhaps the process needs to be looked at again to define
better the indicators which are used. We are in the process, as
Michael has indicated, of discussing that with Ofwat and we would
like to see the indicators that are used for serviceability as
relevant as possible to the different aspects which they measure.
I would like to make the point that we should not confuse the
issue of serviceability indicators and company management responsibilities
for asset maintenance. There is a difference here in that serviceability
indicators measure in my view the effectiveness of the water company
management of assets, in other words it measures the outputs.
That should not be confused with the matter of—how do I
put it - substitution for management strategy, in other words
determining what management needs to input to maintain the standards.
There is that difference there. We would welcome guidance. We
would welcome anything that the companies can input into the process
to demonstrate that they are putting in place operation and maintenance
strategies. We felt that they needed a nudge in this direction
and we have made it a requirement for them to provide us with
a draft copy of their operation and maintenance strategies by
the end of 2001. It is a difficult area for us because, as Michael
has indicated, our brief is strictly with water quality but we
would hate to see an awful lot of money spent improving the distribution
systems for it then not to be followed up by adequate expenditure
on maintenance. We are seeking reassurance from the companies
that when they spend the money to bring the situation up to an
acceptable level that they will continue to maintain those assets.
175. Would you not agree that somehow or another
the current philosophy is based on something having to go wrong
before remedial action is set into place? If we were truly taking
a precautionary principle should we not be getting some kind of
methodology in relation to assessment of the current condition
of all the infrastructure so that we have a methodology for assessing
its condition and could have a renewal programme which was part
and parcel of the environmental programme, if you like, which
was built into the whole spending programme, which does not seem
to be the case at the moment? How is Ofwat actually addressing
those concerns, or is it?
(Mr Rouse) We are in the very early days of this but
I think you have to consider the consequences of failure. If the
consequences of failure of an asset means that you are going to
have then a much more expensive repair and you are also going
to possibly damage the environment, you are going to affect drinking
water quality, then you want to pre-empt that and prevent it.
You need the tools to predict where that is going to happen. I
think it is vitally important to know that as part of that process
so you do not spend money unnecessarily where you are not going
to get a failure. We need a lot more knowledge and we need to
be able to understand that process.
176. In terms of talking about the new approach
that you are working on with Ofwat, could that be applied retrospectively
to the 1999 Review?
(Mr Rouse) It is difficult to say. I would hope it
could be done because you need to see how well you have done previously
in context of the model. I would be very keen to know, for example,
on all the work that is being done for water quality, how much
benefit that has also achieved in relation to leakage, it must
have been quite a lot.
Christine Russell
177. Mr Rouse, I think you are on record as
having expressed concern over possible job losses in the water
industry and the deleterious impact this could perhaps have on
water quality. Could you perhaps tell us what your particular
areas of concern are?
(Mr Rouse) It was really, I suppose, a shot across
the bows, it was actually a warning to water companies that if
there were to be failures we would be looking to see whether those
failures resulted from inadequate manning, inadequate training,
whatever it might be. We would take that into consideration as
to whether the company had exercised due diligence if we were
to be considering prosecution. It was a sort of warning really.
178. Is there a particular key area of water
quality that you were particularly thinking about?
(Mr Rouse) It would be particularly the way the systems
were operated, both treatment works and distribution systems,
that if there were to be more failures in operation, because there
was inadequate staffing or inadequate systems or inadequate training,
then we would have more incidents, more threats to health and,
therefore, we would be very concerned to see whether a company—It
is this lovely term due diligence which companies have as defence
in relation to prosecutions. Have they done anything which you
would reasonably expect them to have done, it is that judgment
against that as to whether a reduction in staff would constitute
a lack of due diligence.
179. Do you feel that the water companies have
heeded your warning shot?
(Mr Rouse) I hope they have. Certainly in the last
period we are beginning to see a reduction in the number of incidents,
which is the first time over the last several years, so we are
seeing that as progress.
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