Memorandum from Mr Sean Creighton
THE THREAT OF WATER PRICE RISES FROM APRIL
1. I am submitting this memorandum as an
individual, drawing on my experience with water and environmental
issues derived from my work as an administrative, development,
project and research worker for a range of voluntary organisations
over the years, including Secretary of Public Utilities Access
Forum (1991-2000), individual member of the Forum since 2000,
and organiser of the Towards a Water Saving Trust Conference in
2. I welcome the inquiry because it provides
an opportunity for a considered view about what "sustainability"
means in the context of water customers paying for environmental
improvements through their charges, rather than those improvements
being paid for out of taxation or investment borrowing.
3. In this submission I raise issues about
affordability, the sewerage system, water conservation and water
resources strategies. On the issue of affordability and sewerage
system costs my written evidence to the House of Commons Committee
on Environmental, Food and Rural Affairs inquiry into Water Pricing
is relevant (published in its report).
4. "Sustainable development" is
supposed to be about meeting three objectives at the same time:
social progress which recognises
the needs of everyone;
effective protection of the environment,
prudent use of natural resources.
5. Its guiding principles and approaches
Putting people at the centre.
Taking a long term perspective.
Taking account of costs and benefits.
Creating an open and supportive economic
Combating poverty and social exclusion.
Respecting environmental limits.
The precautionary principle.
Using scientific knowledge.
Transparency, information participation
and access to justice.
Making the polluter pay.
6. In its November 2000 report "Water
Prices and the Environment" the Committee considered that
the 1999 Periodic Review provided "a satisfactory outcome
for the environment but there is no room for complacency as we
face new, future quality obligations and uncertain water resource
constraints." (Paragraph 142) However, at the same time it
recommended that "the Director General of Ofwat should be
directly accountable for ensuring that Ofwat makes a positive
contribution to the Government's sustainability agenda."
(Para 220). Ofwat's reluctance to robustly address the "affordability"
of water charges issue suggests its failure to understand what
"sustainability is about".
7. From April 2005 it is anticipated that
water charges will increase substantially as a result of the current
Periodic Review of Water Charging by the regulator Ofwat. The
House of Commons Environment, Food and Rural Affairs Committee
report on Water Pricing (December 2003) has already expressed
concern about "affordability". The Public Utilities
Access Forum is addressing aspects of this issue in its submission
to the Environmental Audit Committee. In terms of the principles
and approaches to "sustainable development" price increases
that increase the cost of water, water poverty, and increase the
stress in the financial management of people's lives, cannot be
consistent with the "putting people at the centre" and
"combating poverty and social exclusion" aspects of
8. The issue of "affordability"
is therefore central to the issue of finding a "sustainable
development" solution to how to fund environmental improvements.
9. In its 2000 report the Environmental
Audit Committee said that it was not satisfied "that Ofwat's
"no deterioration" approach to the maintenance and renewal
of underground assets (sewers and water mains) is a logical or
acceptable means of assessing the amount of investment which water
companies need to meet these requirements. The Committee believes
that this approach has amounted to intellectual neglect of this
important problem." (Paragraph 208) The public concern expressed
a few months ago about the state of the sewerage system suggests
that there has been no substantial improvement.
10. In my evidence to the House of Commons
Environment, Food and Rural Affairs Committee I expressed concern
that the failure to adequately maintain the sewerage system could
aggravate environmental pollution. I suggested that there does
not appear to be adequate information in the public arena about
the age, maintenance state of the system, and the projected cost
of modernising it, and the resultant effect on price rises and
affordability. The Committee did not address the issue.
11. In its 2000 report the Environmental
Audit Committee expressed the view that "companies do not
have sufficient incentives to promote water efficiency and that
there would be merit in investigating the feasibility of setting
company-specific targets for domestic water use, once a robust
methodology for efficiency measurement has been agreed."
12. Metering is seen by Ofwat, the Environment
Agency and the Government as a major instrument to encourage people
to reduce water consumption. The Public Utilities Access Forum
challenged this approach in its evidence to the House of Commons
Environment Committee Water Conservation & Supply Inquiry
in 1996 (Minutes of Evidence and Appendices p 80-95). It argued
that it was not cost-effective, was unlikely to achieve major
reductions in water usage without risk to public health, and that
an alternative approach should be a comprehensive programme to
detect and repair leaks, and measures to encourage the fitting
of more water efficient equipment.
13. In its 2000 report the Environmental
Audit Committee accepted that "As metering becomes more widespread,
there will be an increasing price incentive to be water-efficient
and clear pricing signals will be needed. (Paragraph 128) For
many low income households and those requiring high water usage,
because they have children or special medical needs, the price
signal can be a reduction in water consumption to lower than is
needed to maintain personal health, and to enable children's water
play. This will be especially true for those renting water inefficient
homes and whose income level prevents them buying the most water
14. The House of Commons Environment Committee
Water Conservation & Supply Inquiry in 1996 Committee concluded:
"Whilst a case may exist for metering water
on conservation grounds, there are clearly others issues to be
considered and it is far from proven that it is either a cost-effective
or an equitable way to reduce demand. A combination of other measures,
if pursued imaginatively and energetically, will suffice to reduce
demand to levels which, with good management and proper regulation,
water companies should be able to meet in the foreseeable future."
15. In June 1997 the Public Utilities Access
Forum published a research report by John Thackray, a water industry
expert who had been an adviser to the Environment Committee Water
Conservation & Supply Inquiry in 1966. The research was funded
by Joseph Rowntree Foundation as "Paying for household water
services", a summary of which is still on the Foundation
16. Thackray reviewed the problems with
the then (and continuing) rateable value based element of water
charging, and reviewed potential charging options. He concluded:
"Water-metering is not an economically
viable alternative. Only one in 10 homes are fitted with meters
and no more than 50% are forecast to be metered by the middle
of the next century."
"Existing metered tariffs discriminate
against low-income households who need above average amounts of
domestic water, including those with young children or older people
with incontinence problems or other disabilities requiring intensive
17. The economic and sustainability case
for metering is still unproven. The recently published research
referred to in the February 2004 issue of the Environment Agency's
Demand Management Bulletin in an item headed "Impact
of metering explained" suggests that the average effect of
metering on consumption is about 9% (variation 2-14% ) depending
on the volumetric charge; savings are predicted to be c.2% a month
relative to what households used when unmeasured. The study used
information through consumption meters from 6,611 households July
1996 to December 2001. It is almost impossible for interested
individuals like myself and small organisations to assess the
validity of this study given that it costs £200 to purchase.
Any evidence submitted to the Committee based on the study will
need to be subject to robust analysis so that Committee members
may make considered judgements as to whether it provides the basis
that justifies the continued emphasis on metering.
18. The same issue of Demand Management
Bulletin reports a growing lobby for using the powers to compulsorily
meter areas because of water scarcity. Folkestone & Dover
Water propose to apply for "water scarcity status" by
2009, while the Environment Agency suggests the company should
do it earlier. In its "Security of Supply, Leakage and the
Efficient Use of Water 2003-2003" Report Ofwat says that
"water scarce area status should be given serious consideration".
19. Notwithstanding short-term savings from
metering, the population in the South East will continue to grow
and pricing mechanisms cannot drive down consumption inexorably,
particularly since households will buy more water as their incomes
rise and they take advantage of efficiency savings. So metering
therefore cannot be a substitute for developing more water resources.
20. Could it be that Folkestone & Dover
has been failing to adequately develop new water resources? Or
could it be that the small water only companies are no longer
viable to manage their resource needs, and should be absorbed
into the neighbouring areas controlled by water and sewerage companies
which have the capacity to move water resources around their wider
area and spread the costs of developing new water resources across
a wider customer base thereby keeping prices down.
21. Back in December 1996 the House of Commons
Environment Committee recommended that:
"If increasing demands for water are to
be managed and the environment and existing users protected, it
is essential that a long-term strategy for water resources is
in place." (paragraph 319)
22. It suggested that such a strategy must
address, "both on a national and regional basis for each
water company area:
what are the present demands for
what is the amount of water available
to meet these demands
what would be the future demand for
an identification of all the options
available to meet the future demands for water (from demand management
to new resource development, with the emphasis on the former)
a strategic environmental assessment
to be undertaken of all the options identified above to manage
23. Given the relatively new announcements
about house building targets, especially in the South-East, it
is doubtful that there are up-to-date strategies. Their creation
should be central to the last phase of the Periodic Review process
and made available for public debate.
24. At the heart of the Water Pricing review
are the concerns about the provision of water as a basic need,
and about what environmental improvements are needed and how they
should be paid for. At the moment it seems as if the solutions
to these concerns are being driven by virtually unaccountable
Regulatory agencies and commercial companies without taking into
account serious alternative approaches. The likely outcome on
current evidence is that the solutions will not be genuinely sustainable.
In a context of rising energy prices, and concerns about the future
levels of Council Tax increases, rising water charges that contribute
to greater affordability problems, and which do not provide visible
basic system improvements and environmental benefits, will fuel
public discontent. The Committee's inquiry may be the last opportunity
to argue that real "sustainable development" principles
should be applied in the final stages of the Periodic Review process.