Memorandum from the Drinking Water Inspectorate
ENVIRONMENTAL AUDIT COMMITTEE: Seventh Report
of 1999-2000 [HC 597]
"WATER PRICES AND THE ENVIRONMENT"
RESPONSE FROM THE DRINKING WATER INSPECTORATE
The Drinking Water Inspectorate welcomes the
Environmental Audit Committee's report on "Water Prices and
the Environment"1. The report is an authoritative account
of the 1999 Periodic Review process for the water industry in
England and Wales, and makes a significant contribution to the
development of similar processes in the future.
The Inspectorate was happy to participate in
the Committee's investigation, and is pleased to comment on the
Report. The Inspectorate's response is confined to those matters
raised by the Committee, which are of direct relevance to its
monitoring and reporting on the implementation
of the drinking water quality programme;
reviewing its contribution to the
1999 Periodic Review process; and
ensuring that adequate provision
has been made for asset management, to secure long-term water
quality standards for consumers.
Paragraph 122 The Committee recommends that
a stakeholder forum is held annually to facilitate the presentation
and discussion of progress on the delivery of the environment
and quality programme.
The Inspectorate has sanctioned and overseen
the delivery by water companies of large capital programmes to
improve drinking water quality since 1990. The Inspectorate ensures
that the work is justified against regulatory requirements and
reports on progress with these programmes of work.
Programme implementation is currently monitored
and reported on by various means, including collation of six monthly
returns on progress with each individual scheme, regular audits
and inspections, summaries in the Chief Inspector's Annual Reports,
and returns made to Ofwat as part of its annual June Return. The
Inspectorate will prepare a separate section in future Annual
Reports on progress with the AMP3 programme of work.
The Inspectorate has also put in place special provisions
for some programmes, for example, implementation of pre- and post-renovation
assessment for distribution system renovation, and has provided
detailed guidance for water companies on other programmes of work,
such as that for lead. Briefing on progress has also been provided
to Customer Service Committees and others with a local or regional
Given the extent of monitoring and reporting
currently in place, the Inspectorate is not convinced of the need
for a stakeholder forum on progress with the programmes of work
to improve drinking water quality.
Water Quality Programme
Paragraph 163 The Committee would welcome
a report on the progress of the DWI's review of its procedures
and on the adequacy of its resources.
The Inspectorate does not accept the view of
Water UK that it employed insufficient resources to handle the
Period Review. It appears that Water UK's view is based on a survey2
of water companies carried out on behalf of the Inspectorate,
which took place before the critical period of the Period Review.
The Inspectorate's role in defining requirements,
assessing submissions from water companies, and confirming support
has already been set out in the Inspectorate's evidence to the
Committee. In the period from December 1998 to March 1999 the
Inspectorate adopted an iterative approach to establish the most
appropriate solution for each scheme, and relevant stakeholders
were consulted as part of that due process. All known schemes
were assessed by the Inspectorate, and the companies were advised
on whether they were supported or not, before submission of company
business plans to Ofwat in April 1999.
The resources employed by the Inspectorate delivered
its commitment to the Periodic Review process fully and on time.
The Inspectorate coped with the late and multiple submissions
made by many water companies, despite a reminder to all companies
for timely and complete submissions. In a number of cases, incomplete
submissions had to be returned to companies for further development,
as the Inspectorate could not support proposals on which there
was inadequate information to base decisions. Additionally, almost
all schemes were supported subject to caveats for resolution at
a later date, reflecting less serious inadequacies in the proposals
The Inspectorate has reviewed its procedures
for handling the drinking water quality aspects of the Periodic
Review. The main conclusion was to streamline the process for
water company submissions in future Periodic Reviews. The Inspectorate
will prepare electronic templates for all submissions, and will
make clear to water companies that incomplete submissions will
not be accepted. This will improve the efficiency of data handling
arrangements for both the Inspectorate and water companies. Details
will be discussed with all stakeholders at the planning stages
for the next Review.
Developing a new approach
Paragraph 209 The Committee therefore very
much supports the initiative of the DETR, and the agreement by
Ofwat, to develop a new approach. This approach should be forward-looking
and should enable companies to adequately prepare to renew and
repair the cohorts of sewers and mains which will come up for
renewal/rehabilitation simultaneously as a result of historical
peaks in building activity.
The Inspectorate is sympathetic to the views
of the Committee on the need for further development of arrangements
for asset management by water companies. The Inspectorate wishes
to ensure that the improvements to drinking water quality achieved
over the period since 1990 are maintained.
The quality-driven capital programme implemented
since 1990 has improved or replaced a significant proportion of
water treatment works and water mains, and provision has been
made for further large-scale programmes of work during AMP3 and
beyond. This represents a massive investment in asset improvement
in a relatively short period of time, and is a significant contribution
to clearing the backlog of work discovered following the introduction
of regulatory standards and monitoring in 1990. As the pace of
investment for quality-driven reasons slows down, however, the
Inspectorate expects that appropriate levels of maintenance and
renovation will be adopted to secure drinking water quality for
consumers in the future.
The Inspectorate is supportive of the direction
given by Ministers on serviceability and maintenance of assets
in "Raising the Quality"3. The Inspectorate is currently
managing a joint DWI/Ofwat study4 with the aim of developing a
set of robust serviceability indicators for water supply assets.
Specific objectives include examining the adequacy of current
serviceability indicators, and investigating the options for improved
or new serviceability indicators used for measuring the performance
of drinking water quality assets. The study will incorporate input
from other stakeholders, including water companies, at an appropriate
stage. An outline of the study with timescales is attached as
Annex A. However, this work is but a part of the input necessary
to establish a framework for determining the provision required
for, and methodologies for delivering, adequate capital maintenance
programmes for individual water companies. It is the Inspectorate's
expectation that further initiatives will be required appropriate
to a largely asset-driven industry if water quality standards
are to be maintained.
1. Water Prices and the Environment, Seventh
Report of 1999-2000 [HC 597], Environmental Audit Committee, House
of Commons. The Stationary Office Ltd, ISBN 0 10 268400 6.
2. DWI Information Letter 11/99, Feedback
from Water Companies on DWI Performance in 1998.
3. Raising the QualityGuidance to
the Director General of Water Services on the Environmental and
Quality Objectives to be achieved by the Water Industry in England
and Wales 2000-2005. DETR. September 1998.
4. Review of Drinking Water Quality Aspects
of Serviceability Relating To Infrastructure and Non-Infrastructure
Assets. A joint DWI/Ofwat study currently in hand.
REVIEW OF DRINKING WATER QUALITY ASPECTS
OF SERVICEABILITY RELATING TO INFRASTRUCTURE AND NON-INFRASTRUCTURE
The aim is:
To develop a set of robust serviceability indicators
for water treatment, supply and distribution to measure water
company performance in maintaining serviceability of water supply
assets, to be used to inform the determination of asset maintenance
The specific objectives are:
1. To improve understanding of links between
drinking water quality and the operation and maintenance of treatment
and distribution system assets in maintaining serviceability to
2. To review critically current methods
of measuring serviceability of water supply assets.
3. To investigate the options available
for improvements to current indicators of serviceability for water
4. To further develop any options agreed
with DWI/Ofwat into serviceability measures, possibly including
an overall Serviceability Index, appropriate to the measurement
of performance of water supply assets in meeting statutory requirements
to enable water industry regulators to measure and compare water
company performance. To test these measures using data from four
water companies or more if deemed appropriate.
5. Confirm the appropriateness of the serviceability
measures developed by conducting a full-scale trial for all water
companies using year 2000 drinking water quality data, June Return
2001 data, and any other data deemed necessary.
The project is split into four phases, defined
and timetabled as follows:
Phase 1: Definition "brainstorming"
and confirmation of scope, information requirements and preparation
of a detailed programme of work. Work completed
Phase 2: Complete and report on Objectives 1,
2 and 3. By 28 February 2001.
Phase 3: Complete and report on Objective 4.
By 30 July 2001*
Phase 4: Complete and report on Objective 5.
By 30 November 2001*
[*Indicative dates only. The detail of how the
project will proceed will be established at the conclusion of
the second phase of the project.]