Supplementary letter to the Chairman of
the Committee from Elliot Morley MP, Minister for Environment
and Agri-Environment, Department for Environment, Food and Rural
Affairs
1. When I appeared before your committee
on 11 March, I was invited to send supplementary information in
response to some questions.
COSTS OF
THE ENVIRONMENT
PROGRAMME
2. The Committee asked for an estimate of
the costs of the environment programme outlined in the Principal
Guidance.
3. While I wish to assist the Committee
there are difficulties in providing a figure. Our policy decisions
for the principal guidance used costs and price limit implications
derived, by Ofwat, from companies' draft business plans submitted
in August 2003. I made the point in my evidence that the costs
of all elements of companies' business plans will continue to
move until Ofwat sets final price limits at the end of the year.
4. Ofwat offered advice to the Secretary
of State, published on 19 December 2003. This set out the capital
costs associated with two different policy packages, according
to the costings used by companies in their draft business plans
(Annex A). Neither of these packages corresponds to the combination
of policies set out in the principal guidance. But it may help
the Committee to note that the principal guidance includes virtually
all the measures costed by companies as reference plan A and in
addition some of those in reference plan B. In looking at the
figures in Ofwat's December advice, whether for the capital costs
of investment or the price limit consequences, the Committee will
also wish to note that the environment investment programme is
a subset of the quality investment programme (which also includes
drinking water improvements) which in turn is part of total capital
investment (including also capital maintenance).
5. I share with the Committee the wish to
see fully scrutinised and challenged figures of costs and their
effect on customer bills, for the exact programme that we have
asked companies to develop. Companies will now prepare their final
business plans, based on the principal guidance programme. I look
to Ofwat to scrutinise and challenge the costs. Information about
the plans will be made public.
DIFFUSE POLLUTION
6. The Committee requested copies of the
diffuse pollution papers when they are available. We will be consulting
on a broad range of economic instruments to tackle agricultural
diffuse pollution at the end of this month. We will send the Committee
the consultation document, along with any supplementary papers.
AFFORDABILITY
7. The Committee asked whether new measures
on the affordability of water will be in place when the new price
limits are implemented on 1 April 2005. It is too early to say
what might be the outcome of our review of existing measures on
water affordability. The only specific Government measure already
in preparation is the further proposed changes to the Vulnerable
Groups scheme, on which we consulted in 2003. In the light of
the responses received to the consultation paper, the Government
is finalising plans for revised regulations. The changes will
be announced in a response to the consultation and will come into
effect in April 2005 to coincide with the new price limits.
METERING
8. The Committee asked for the percentage
of customers who are metered and how to increase awareness that
meters are free to install and may offer savings to customers.
Overall, 24% of customers in England and Wales are metered and
this figure is increasing at a rate of 1-2% per year. There is
variation between household and non-household customers and also
between companies (Annex B).
9. Companies, encouraged by Ofwat, give
customers information about the free meter option and meter savings
along with their water bills.
10. The Department has also published a
free information leaflet, "Water Metering: Your new rights",
setting out household water customers' new rights under the Water
Industry Act 1999 including the new right to free meter installation.
Copies were supplied to all water companies and were also distributed
widely through such routes as Citizens' Advice Bureaux, libraries,
benefits offices and local authorities. We have also continued
to co-operate with others in disseminating information, for example
the Consumers' Association published an article about the basis
of water charging and the choices open to customers.
March 2004
Annex A
Table 1
ESTIMATES OF CAPITAL EXPENDITURE IN PERIOD
2005-06 TO 2009-10 TO MEET DRINKING WATER QUALITY, ENVIRONMENTAL
AND OTHER RELATED IMPROVEMENT DRIVERS
Advice to inform the principal guidance on scale
and timing of further quality enhancements: open letter to Ministers
(Ofwat 19/12/03)
Updates of company estimates
Following queries and further information from
some companies (see note 1)
| Main drivers for drinking water quality, environmental and other related improvements
| Capital expenditure in 2005-10 £ million
|
| Reference Plan A |
Reference Plan B |
| WATER SERVICE | |
|
| Water treatment works improvements | 570
| 640 |
| Distribution system renovation | 740
| 740 |
| Lead communication pipe replacement | 370
| 870 |
| Improvements to taste and odour of drinking water
| 210 | 260 |
| Other improvements (includes resilience of water systems)
| 60 | 60 |
| DRINKING WATER QUALITY SUB TOTAL |
1,950 | 2,570 |
| Changes to water systems to improve the environment
| 230 | 540 |
| WATER SERVICE SUB TOTAL | 2,180
| 3,110 |
| SEWERAGE SERVICE | |
|
| Urban waste water treatment directive at STWks
| 740 | 1,120 |
| Intermittent discharges from sewerage systems
| 950 | 1,030 |
| Sewage sludge treatment and IPPC requirements
| 90 | 170 |
| Freshwater fish directive (see note 2) |
30 | 1,620 |
| Bathing waters directive | 160
| 390 |
| Shellfish waters directive | 0
| 1,790 |
| Nature conservation (includes Habitats directive & SSSIs)
| 870 | 930 |
| Ground water protection | 660
| 670 |
| Removal of trace contaminants from STWks effluents
| 100 | 220 |
| Endocrine disruptors demonstration project |
0 | 40 |
| Land management schemes | 0
| 340 |
| Local schemes for improving the water environment
| 220 | 870 |
| Completing the AMP3 programme + other (see note 3)
| 450 | 490 |
| Section A (see note 4) | 620
| 620 |
| SEWERAGE SERVICE SUB TOTAL | 4,890
| 10,300 |
| TOTAL—QUALITY ENHANCEMENTS |
7,070 | 13,410 |
| |
|
Notes
1. These estimates are drawn from the supporting information
submitted by water companies with their Draft Business Plans but
expressed in net terms after the application of the reference
level assumptions for improvements in efficiency.
2. The plan B number includes some companies' estimates
for more work than sought by the EA.
3. At PR99 Ofwat assumed some quality enhancement schemes
would be delivered in the period April to December 2005. The costs
for these schemes will need to be allowed for in setting price
limits for 2005-10.
4. Section A covers improvements falling outside the
formal National Environment Programme and improvement requirements
that have arisen since the 1999 determination.
Annex B
Table 2
WATER CUSTOMERS 2003-04
| Unmeasured Supplies
| Metered Supplies | Proportion metered
|
| Households | Non-households
| Households | Non-households
| Households | Non-households
|
| (thousands of customers)
| | (percentage)
|
| Water & sewerage companies |
| | | |
| |
| Anglian | 859.5 | 15.5
| 926.3 | 109.3 | 51.9
| 87.6 |
| Dwr Cymru | 964.7 | 14.8
| 205.8 | 87.1 | 17.6
| 85.5 |
| Northumbrian: | |
| | | |
|
| Northumbrian | 931.5 |
16.7 | 92.0 | 46.5
| 9.0 | 73.5 |
| Essex & Suffolk | 438.7
| 4.9 | 249.7 | 38.0
| 36.3 | 88.5 |
| Severn Trent | 2,308.0 | 14.0
| 694.0 | 211.0 | 23.1
| 93.8 |
| South West | 383.2 | 5.5
| 260.3 | 65.7 | 40.5
| 92.3 |
| Southern | 691.4 | 14.5
| 231.4 | 51.1 | 25.1
| 77.9 |
| Thames | 2,549.1 | 24.6
| 639.4 | 179.6 | 20.1
| 87.9 |
| United Utilities | 2,328.2 |
21.2 | 412.8 | 183.2
| 15.1 | 89.6 |
| Wessex | 324.5 | 7.8
| 150.9 | 46.1 | 31.7
| 85.5 |
| Yorkshire: | |
| | | |
|
| Yorkshire | 1,334.7 |
19.5 | 466.7 | 109.4
| 25.9 | 84.9 |
| York | 67.2 | 0.6
| 7.3 | 4.5 | 9.8
| 88.7 |
| WaSC Total | 13,180.7
| 159.6 | 4,336.5
| 1,131.4 | 24.8
| 87.6 |
| Water only companies |
| | | |
| |
| Bournemouth & W Hampshire | 115.1
| 1.1 | 55.6 | 13.3
| 32.6 | 92.6 |
| Bristol | 346.7 | 8.3
| 92.8 | 33.8 | 21.1
| 80.3 |
| Cambridge | 52.5 | 1.0
| 57.1 | 8.9 | 52.1
| 89.6 |
| Cholderton | 0.6 | 0.0
| 0.0. | 13.6 | 28.6
| |
| Dee Valley | 72.2 | 0.9
| 31.0 | 7.4 | 30.0
| 89.3 |
| Folkestone & Dover | 40.7
| 0.8 | 24.4 | 4.4
| 37.4 | 84.3 |
| Mid Kent | 144.3 | 1.8
| 72.6 | 19.8 | 33.5
| 91.5 |
| Portsmouth | 259.4 | 2.6
| 9.8 | 15.0 | 3.7
| 85.2 |
| South East | 388.1 | 7.1
| 149.6 | 34.1 | 27.8
| 82.8 |
| South Staffordshire | 426.9 |
6.6 | 69.9 | 31.1 |
14.1 | 82.6 |
| Sutton & East Surrey | 206.8
| 2.8 | 41.1 | 13.3
| 16.6 | 82.7 |
| Tendring Hundred | 26.8 | 0.1
| 37.2 | 4.9 | 58.1
| 98.4 |
| Three Valleys: | |
| | | |
|
| Three Valleys | 773.2 |
9.4 | 186.9 | 46.3
| 19.5 | 83.1 |
| North Surrey | 145.7 |
1.7 | 37.8 | 10.1 |
20.6 | 85.8 |
| WoC Total | 2,999.1
| 44.1 | 865.8 |
242.3 | 22.4 | 84.6
|
| Industry Total | 16,179.8 |
203.7 | 5,202.3 | 1,373.7
| 24.3 | 87.1 |
| |
| | | |
|
Notes:
a. Figures are company estimates of customers servied
in 2003-04.
b. The totals may not add up due to rounding.
Ofwat: Tarrif structure and charges 2003-04 report.
|
