Memorandum submitted by English Nature
KEY ISSUES
AND SUMMARY
1. The draft price limits will deliver schemes
and investigations worth almost £500 million to enable the
statutory nature conservation programme as well as a small number
of non-statutory nature conservation schemes, to be delivered.
2. The draft price limits excluded or amended
around 86 nature conservation schemes or investigations. With
the Environment Agency, we are discussing these changes with Ofwat,
and will be seeking reinstatement of many of them. We are concerned
that sufficient funding should be available to enable two pilot
schemes at catchment level to be fully implemented.
3. We are working with Defra and other stakeholders
to ensure that parallel action is taken to tackle diffuse water
pollution from agriculture, targeted at priority catchments for
SSSI protection, identified by English Nature.
4. The planned programme will provide an
important contribution to future, more sustainable solutions to
addressing some water quality issues, as well as contributing
to some Water Framework Directive requirements.
5. However, there is scope to adapt the
present price-setting process to enable:
(a) Further use of more sustainable approaches
to tackling water quality issues through catchment management,
rather than through end-of-pipe solutions, with wider benefits
to the environment and for people.
(b) Where end of pipe solutions are needed,
to encourage treatment methodologies that are themselves more
sustainable.
(c) Fuller consideration of the potential
long-term requirements of nature conservation sites for water
resources under changing climate scenarios, as modeling such relationships
becomes more refined.
(d) Greater flexibility in the way water
resources scheme costs and requirements are provided for, based
on sustainability reduction estimates, where the precise volume
to be reduced is not known.
(e) Early agreement among regulators on both
shorter and longer term policy requirements.
(f) Full consistency in policy approaches
between Government guidance and the protocol for changes between
planning rounds.
INTRODUCTION
English Nature is the statutory body that champions
the conservation and enhancement of the wildlife and geological
features of England. We work for wildlife in partnership with
others, by:
— advising—Government,
other agencies, local authorities, interest groups, business,
communities, individuals on nature conservation in England;
— regulating—activities
affecting the special nature conservation sites in England;
— enabling—others to manage
land for nature conservation, through grants, projects and information;
— enthusing—and advocating
nature conservation for all and biodiversity as a key test of
sustainable development.
We have statutory responsibilities for nationally
important nature conservation sites: Sites of Special Scientific
Interest (SSSIs), the most important of which are managed as National
Nature Reserves.
Through the Joint Nature Conservation Committee,
English Nature works with sister organisations in Scotland, Wales
and Northern Ireland to advise Government on UK and international
nature conservation issues.
1. Reaction to draft price limits
1.1 The draft price limits have allowed
for funding of around £454 million for schemes and investigations
to tackle water quality and £38 million to tackle water resources
problems affecting nature conservation sites. These are necessary
in order to meet statutory requirements for Natura 2000 sites
under the Habitats and Birds Directives, and SSSI protection under
Countryside and Rights of Way (CRoW) Act 2000, as well as contributing
to Government's commitment to achieving the UK Biodiversity Action
Plan (UK BAP) objectives for wetland habitats. Ofwat has proposed
funding which would deliver around 275 of the water quality and
82 of the water resources schemes and investigations proposed
by English Nature and the Environment Agency under statutory policy
drivers for nature conservation.
1.2 A number (86) of schemes and investigations
under statutory nature conservation drivers were excluded or were
otherwise amended in draft determinations. Reasons for this include
challenges to the original cost estimates from companies; delays
in the timetable for implementation of schemes, during which other
measures for site protection (such as diffuse pollution control)
should be introduced; and requirements for greater clarity in
the outcomes required. English Nature is discussing these changes
to statutory schemes with Ofwat and the other Regulators to clarify
where uncertainties remain, and we will be seeking agreement for
the reinstatement of many of them.
1.3 We are consider it particularly important
that schemes to achieve long-term and sustainable improvements
to raw water quality through land management measures, should
remain within the programme and receive sufficient funding to
enable effective implementation. These schemes provide important
pilot programmes for the wider adoption of longer-term sustainable
solutions in future water planning rounds, as well as enabling
companies to carry out their Section 28G duties under the CRoW
Act 2000.
1.4 Among concerns raised during draft determinations
has been the need to ensure that action is not required disproportionately
from water customers to tackle problems that derive in part from
other sources, such as diffuse pollution from agriculture. In
our joint advice to Ministers (November 2003), the Environment
Agency and English Nature made it clear that measures to reduce
impacts by other sectors are needed in parallel with action on
the discharges and abstractions made by water companies. Both
point and diffuse sources contribute in different ways to the
problem of nutrient pollution of water, and both sources must
be tackled together.
1.5 Diffuse water pollution from agriculture
is a major source of nutrient enrichment and hence a cause of
unfavourable condition in many freshwater SSSIs and Natura 2000
sites. In order to tackle this problem within the timescales required
for achieving objectives for these sites, a transitional approach
is needed which helps farmers to achieve the required changes
in the short-term. To be effective, this needs to be adequately
funded and implemented quickly. English Nature has identified
those sites most at risk (Prioritising Designated Wildlife Sites
at Risk from Diffuse Agricultural Pollution, English Nature Research
Reports, No. 551, November 2003). This list of 105 catchments
at greatest risk has been used in developing joint work with Defra
and the Environment Agency to agree priority catchments for targeted
action. This will include working with local partners and the
farming community to make the most of opportunities for implementing
best management practices created by the new Environmental Stewardship
scheme.
2. How has this periodic review taken into
account longer term planning for pressures such as climate change?
2.1 In addition to addressing long-term
requirements for the protection of statutory nature conservation
sites, a number of schemes within the proposed programme will
contribute towards longer-term planning. These include the schemes
proposed by United Utilities and Northumbrian Water for sustainable
land management approaches to address long-term deterioration
in raw water quality and schemes to implement solutions to emerging
problems such as endocrine disruption.
2.2 Natura 2000 sites (Special Areas of
Conservation under the Habitats Directive, and Special Protection
Areas for Birds) are defined as Protected Areas under the Water
Framework Directive. The Water Framework Directive requires action
to achieve the conservation objectives of these Protected Areas
to be in place by 2012, and for objectives to be met by 2015.
In tackling risks and impacts to Natura 2000 sites, the water
quality and water resources schemes and investigations under nature
conservation drivers will also enable progress to be made towards
achieving the objectives for these sites as Protected Areas under
the Water Framework Directive.
2.3 However, we consider there is great
scope to improve the process so that longer-term needs can be
better identified and managed during the periodic reviews, as
follows.
2.4 Sustainable approaches to managing
water quality via land management. The schemes (United Utilities
and Northumbrian Water) referred to in paragraph 1.3, will offer
important benefits for upland SSSI management and long-term benefits
for water quality. However they will also provide valuable lessons
for the adoption of similar approaches more widely in future.
We believe that there is scope for similar schemes, for example
in the chalk catchments of SE and SW England. Such schemes have
not traditionally been promoted under the periodic review process
because of the strict requirements on outcomes and criteria for
their acceptance, which tends to favour "end-of-pipe"
solutions, rather than schemes that address problems at source.
Moreover, because the outcomes sought from such approaches often
only emerge over the longer-term (especially changes to raw water
quality) and so are less predictable, their benefits are less
easily quantified using cost-benefit methodologies developed for
more conventional schemes. Regulators should work together in
future periodic reviews to build on the experience gained from
these land management schemes to enable water companies to work
in partnership with farmers, landowners and others to produce
more sustainable solutions to environmental and raw water problems,
help to reduce flood risk and thereby deliver multiple benefits
for people.
2.5 Alternative treatment methodologies.
There is a need for an approach which encourages the adoption
of more innovative and sustainable treatment methodologies. Greater
emphasis should be placed on the use of technologies which generally
offer environmentally sustainable solutions, such as biological
treatment or calcium treatment for phosphate removal. Such alternatives
are often more costly to install or operate, but offer greater
opportunities for phosphorus recovery and beneficial re-use and
carry fewer risks of compromising water quality. Increasing requirements
for phosphorus removal under the Water Framework Directive will
make the need for alternative technologies increasingly acute.
2.6 Consideration of climate change.
There are limitations in the degree to which predicted effects
of climate change can be taken into account in a defined programme
for investment covering a five-year period, but future planning
rounds must incorporate more flexibility to enable such longer
term consequences to be more fully considered. Investigations
aimed at dealing with the changing rainfall pattern are likely
to result in the recommendation of substantial changes to the
infrastructure of water companies. The implementation of this
will need long term planning, so that the infrastructure is in
place before the problems become too large. This is particularly
important in order to protect the water dependent environment,
since supply problems usually result in water scarcity and thus
an increased abstraction pressure on the environment which is
already suffering from the effects of climate change. Most companies
included an assessment of the implications of climate change for
their water resources plans, however in future further work will
be needed to understand the implications for requirements to protect
biodiversity. Assessments of risks and impacts to nature conservation
sites used in determining schemes under PR04 were based on existing
estimates of water supply balance and existing estimates of requirements
for functioning of ecosystems. Refinements to this approach, for
example to take into account more episodic rainfall events and
their consequences for river flow or groundwater recharge, will
be needed in future.
2.7 English Nature and the Environmental
Change Institute (University of Oxford) are leading a major research
project (The MONARCH project: Modelling Natural Resource Responses
to Climate Change) into the potential impacts of climate change
on nature conservation in Britain and Ireland, funded by a consortium
of 15 governmental organisations and NGOs. The model predictions
include an assessment of the susceptibility of a range of habitats
to changing water availability under climate change scenarios
(described in English Nature's evidence to the EFRA Inquiry into
Climate Change and Water Security, April 2004). The first phase
of the MONARCH project had as its primary focus terrestrial systems.
A new project dealing with climate change impacts on freshwater
ecosystems has started this year, led by the Environment Agency.
2.8 Future water resources planning strategies
will need to take account of such further model predictions. Future
industry pricing reviews should give further attention to measures
which will mitigate the effects of climate change on water resource
demand, and should enable more flexible arrangements to manage
and exploit different sources of water within different regions.
Water companies will need to plan to switch resources in response
to seasonal availability from surface and groundwater sources,
and to plan for water storage areas to enable exploitation of
heavier, more episodic winter rainfall, and aquifer recharge.
2.9 Use of sustainability reduction estimates
in water resource planning. Companies were required to prepare
sustainability reduction estimates for water resources schemes
in their business plans, where precise abstraction reductions
needed to meet environmental requirements could not be estimated
at this stage. Although such estimates were valuable in helping
to identify the scale of investment likely to be required to develop
water resources schemes within the AMP4 period, water companies
were unable to use these estimates in deriving projected future
costs of schemes. Whilst costs have been allocated to investigations
or in some cases to carrying out options appraisal in PR04, the
full cost of such schemes, which will need to be carried out during
2005-10, have to be recovered through interim determinations or
logged up to the next price review. Further consideration should
be given to methods of utilising costs based on sustainability
reduction estimates in future price setting, to reduce uncertainty
surrounding logging up and interim determination arrangements.
2.10 Early identification and agreement
over policy requirements. There will always be policy issues
requiring refinement or resolution during the periodic review
planning process. However, where policy issues can be fully resolved
in advance of detailed planning for a periodic review this should
be concluded, with full acceptance by the regulators involved.
An approach is needed which encourages early joint work between
regulators and other stakeholders, to resolve policy conflicts
where they are relevant to shorter term planning, as well as identifying
longer-term policy planning needs beyond the immediate review
period.
2.11 Changes between programmes.
The mismatch between timetables for the Environment Agency's Review
of Consents affecting Natura 2000 sites and AMP4 decision-making
was recognised early in PR04. Investigations under AMP4 and RoC
are likely to lead to changes to schemes which must be implemented
within the period of AMP4 to comply with statutory requirements
and avoid infraction risks. The Change Protocol, which enables
the water companies to implement such changes, is therefore likely
to be an important feature in enabling such compliance over the
period 2005-10. The process must ensure that clear direction is
given to companies about the requirements for meeting government
policy, but at the same time maintain scrutiny over efficiency
in operations. A cost-benefit challenge at this stage, as proposed
in current draft of Change Protocol, is inconsistent with existing
policy. Instead the focus should be maintained on ensuring timely
and cost effective solutions.
27 September 2004
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