Memorandum submitted by the Institution
of Civil Engineers Water Board
EXECUTIVE SUMMARY
The Institution of Civil Engineers (ICE) is
a UK-based international organisation with over 70,000 members
ranging from professional civil engineers to students. ICE welcomes
the more transparent approach taken by Ofwat in the periodic review
of 2004. This was in marked contrast to the review of 1999 which
caused the Institution great concern, particularly over the question
of the investment allowed in capital maintenance.
Key issues for consideration
1. Ofwat have clearly attempted to balance
the pressures of rising prices, higher environmental standards
and the need to address the backlog of maintenance in the water
infrastructure. The Institution has concern that the draft determination
has reduced the capital programmes to the detriment of asset renewal
and maintenance and has set efficiency targets for both capital
and operational activities that could threaten the integrity of
operation of the water companies. This in turn threatens the high
environmental and customer service standards achieved in recent
years.
2. For the past three years the Institution
has rated the water and wastewater sector higher than any other
sector in its influential State of the Nation Report on the infrastructure
of the country. In the report for 2004 (attached as Appendix 1
[not printed as available at http://www.ice.org.uk/downloads//SoN_2004.pdf]),
the Institution drew attention, inter alia, to the following
issues:
— The excellent standard of drinking
water in England and Wales.
— Concerns that if water price rises
resulting from the proposed programmes presented by companies
in their business plans were unacceptable, then maintenance expenditure
could be squeezed with serious consequences for our sewers, treatment
works and water mains.
— The Sustainable Communities plans
for southern England, with some extra 200,000 homes to be built,
will put significant pressure on resources. Water resource planning
is very long term and we are pleased that several companies have
included reservoir schemes in their programmes. However, these
can take 20 years or more to come on-stream.
— There has been an increase in the
available funding for water companies to invest in work to reduce
properties at risk of foul flooding and the number of properties
at risk has fallen by 3,300 in the past three years; this leaves
11,600, or less than 0.1% of properties, at risk. However, there
remains a major concern about the investment in the sewer system.
The recent National Audit Office report, "Out of sight, not
out of mind", highlighted the problems we identified in our
2003 State of the Nation report and we agree with their conclusions.
At the current rate of rehabilitation many of our sewers will
have to last 1,000 years. Only 389 km of sewers in England and
Wales out of a total of over 300,000 km were rehabilitated in
2002-03. This is not enough. (It should be noted that the recent
incident of foul water discharge into the Thames is evidence of
previous under-investment in sewer systems.)
— The public must be encouraged to
value this resource more highly, conserve it better and be prepared
to pay more for it.
— Five-year regulatory review periods
are too short a term to deal with water and wastewater issues.
A 10-year capital-planning window is needed to ensure a smooth
workload flow and a 25-year strategic planning horizon.
— Acceptance of the likely requirement
for new reservoirs on the precautionary principle. Planning and
promotion should begin early and not be left until the last moment.
— Greater support being given to water
resource developments, particularly in the light of new European
Directives and climate change predictions.
— Government demonstrating an instinctive
understanding of the interdependence of infrastructure issues
and the particular importance of water, wastewater and flooding,
along with the implications of climate change.
3. The Institution presented substantial evidence
to the Efra Committee on "Climate change, water security
and flooding" (Ev 1-15 of the report) and commented upon
the need for long-term planning given the uncertainties surrounding
climate change. Our comments about climate change and long term
planning equally well apply in the context of the periodic review.
The Institution is keen to see a more long term approach to price
reviews. Whilst there has been movement on this in relation to
water resource planning and capital maintenance, little evidence
of long-term planning exists when it comes to matters of quality
or sewerage. The Defra document, "Directing the flow"
published in November 2002 suggested that more long-term planning
would be forthcoming. The Institution believes that funding to
enable longer-term views of sewerage and quality-related matters
is important, particularly with the Water Framework Directive
in the wings for the next periodic review period.
CONCLUSION
4. Overall, whilst the Institution is not
dissatisfied with the Ofwat process, it remains concerned that
the water companies should be sufficiently funded to be able to
carry out the work they believe is necessary on the infrastructure.
Customers will not appreciate short-term savings if problems with
water supply and wastewater treatment including sewerage occur
in the medium term. There is provision in this periodic review
for the Minister to review the environmental programme at the
end of September. The Institution is concerned that this might
present an opportunity for environmental schemes previously omitted,
which might have been supported by a powerful lobby, to be reinstated
at the possible expense of capital maintenance which has been
the poor relation in previous periodic reviews. This would cause
serious concern to the Institution. ICE hopes that the comments
above assist the Committee and the Institution would be pleased
to amplify upon any of the points made, should that be necessary.
23 September 2004
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