Examination of Witnesses (Questions 1280
- 1286)
THURSDAY 27 JANUARY 2000
MR MIKE
WALKER, MR
KEITH SEXTON,
MR BEN
GILL, AND
MR JACOB
TOMPKINS
1280. If you could let us have a note, that
would be helpful.
(Mr Walker) Since Ofwat's determination the value
of water companies has decreased substantially and profitability
is going to be reduced. There has been a very tough review which
has just gone through for the next five years.
1281. I think it would be helpful just to get
a feel for the scale of the cost of the levy relative to your
profits. Do you have any interest in getting involved in emissions
trading as the CBI is currently looking at?
(Mr Walker) Yes, we have been following that very
closely. We are very interested both at the national level as
a sector and trading with other sectors. When we have spoken to
ACBE, CBI about this, they have suggested there could be a separate
bubble—a trading bubble, if you like—for methane,
so that methane reduction would then be offset against other carbon.
So they are keen to talk with us because we offer a potential
which other industries do not offer.
1282. You think it would be quite easy to deal
with the practicalities, doing the necessary measurement, given
that you are not currently covered by the IPPC?
(Mr Walker) One problem is the measurement, particularly
with methane production but also our efficiency in energy use
within the industry. We are doing this ourselves but we would
rather work with Government and get some independent audit, perhaps
working with the Energy Technology Support Unit which is carrying
out central studies. A study has been carried out within the whole
of the water sector for some time and we really would like to
work with Government and the Energy Technology Support Unit to
get up-to-date figures for the whole of the sector. The benefit
of doing it with the DETR and with the Energy Technology Support
Unit is that there will be an independent audit rather than industry
figures. We are quite happy to have an open and transparent process
here.
Mr Olner
1283. Is that because the water companies have
such a diverse portfolio of companies within their grasp now?
(Mr Walker) It is true there is a lot of diversity
within the sector. Water UK only represents the regulated businesses,
which are the ones appointed by licence and regulated by Ofwat
and the Environment Agency.
1284. But the fact of the matter is that the
water companies have got many diverse businesses within them.
(Mr Walker) The plc is a diverse business but the
water company is actually appointed and regulated very heavily
by Ofwat and that does not contain diverse businesses. It is the
parent companies and the parent groups which have that.
1285. So Water UK does not represent the parent
groups?
(Mr Walker) No, we represent the regulated part of
the business.
(Mr Sexton) All the discussions we have been having
with the Government up to today have been purely on the basis
of the ring-fenced business.
1286. So how transparent is the separation of
the other companies the water companies hold?
(Mr Walker) Extremely transparent because the system
of economic regulation presents more than accounts—they
are called "the July return" which is a huge amount
of data which goes on an annual basis to Ofwat. There are also
very, very strict rules about trading within companies and how
accounts are prepared. It is very ring-fenced.
Chairman: We had better leave it there. Can
I thank both sets of witnesses for their evidence and could we
have the next witnesses please?
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