Examination of Witnesses (Questions 100
- 104)
WEDNESDAY 28 APRIL 2004
MR BRIAN
DUCKWORTH, DR
PETER SPILLETT
AND MR
JACOB TOMPKINS
Q100 Paddy Tipping: Talk to us a
bit more about your relationship with OFWAT, the economic regulator.
You are in the fourth price review now. My impression is that
in the past the regulator has not been very interested in climate
change, although you have told us today that in this current review
there is now some discussion. Tell us a bit more about this.
Mr Duckworth: It is fair to say
that climate change and the possible impacts of climate change
were not sufficiently high on the regulatory agendas in previous
reviews and perhaps it still is not as high as the focus we have
had today. It has moved up the agenda a fair amount over the last
couple of years and certainly with both the Environment Agency
and OFWAT talking about taking account of certain climate change
impacts, I feel more comfortable going into this review with the
regulatory approach than perhaps in the past. I think we could
have been addressing some of the issues which we talked about
today five years ago and we ought to have been addressing them
five years ago. All we have seen over that five-year period is
the evidence from the studies from UKCIP and the Met Office being
presented in a much more succinct way. The information was there,
the evidence was there; we all knew about five years ago that
we had nine of the warmest and driest years in the twentieth century
in the 1990s. So we could have been doing more and perhaps we
should have been doing more instead of reducing prices for customers
five years ago.
Q101 Paddy Tipping: You have been
talking to us about long-term projects and telling us how lengthy
they are and it takes us back to the five-year review period.
If we are looking at climate change we are talking 2040, 2060,
2080. What discussion is going on with OFWAT during the current
discussion but also looking just to the next review period and
the review periods after that?
Mr Duckworth: That is a great
question and the answer is: not enough has been going on. As part
of our individual company plans and the way we have presented
our arguments for our investment over the next few years, as I
said right at the outset, priorities are firstly about maintaining
our assets. It is no use thinking about higher levels of quality
or even new reservoirs or pipes if we are not preserving and maintaining
the ones we already have. That is top priority. Then we have to
move onto the other things. Unfortunately and quite understandably
the regulators are driven by statutory guidance. Ministerial guidance,
coming out of Defra, has a much greater priority than customer
service expectations. I have to talk to my customers every day
and they tell me what they want and some of the things they want
are not on the same agendas as ministers. Then we have issues
about the future and climate change, preparing for that. It does
come slightly down the agenda, but I do believe we have started
the dialogue and in my book, having started the dialogue, it can
only get better.
Q102 Paddy Tipping: Tell me about
those. We have Professor King, the Chief Scientific Adviser, telling
us not to worry about terrorism; that climate change is top of
the agenda. The Prime Minister is saying the same thing; well,
not quite, but he thinks it is important. How do we get climate
change up the agenda in the discussion with the regulator?
Mr Duckworth: The only reason
terrorism is high on the agenda is because we have had incidents.
The way we will get climate change on the agenda for the water
industry unfortunately is by having droughts. We shall be under
fire, but I bet some of the politicians will be under fire too.
At times of extremes in climate, floods, droughts, ministers get
quite a lot of profile. It is going to take something like that.
I hate to say it, but it is those short-term issues which quite
often cause us to think more about the long-term. Those will be
the long-term drivers and if someone turns round and says it was
only going to cost £600 million over 100 years, why did you
not do it? We will have a good answer.
Dr Spillett: To be fair, Defra
have been quite progressive on climate change. They have a good
reputation in the UK for promoting research, but apart from the
water industry, the insurance sector is one of the best developed
in this field. We are doing a lot of work with cross-sectoral
groups and with regional development authorities and local planning,
so there are the South East and the London climate change groups.
If society and business are promoting adaptation strategies for
climate change, then to a water customer it starts becoming more
common parlance and it is not just something we are pushing at
them. I do think it is a social thing and as much publicity as
possible from government and everyone else about what is going
to hit them soon would help.
Q103 Paddy Tipping: I just want to
focus on OFWAT. OFWAT wrote to us and said that it is not necessary
to "be taking major precautionary steps to deal with problems
that may arise from climate change. An incremental approach is
most appropriate for what is an incremental problem".[9]
What do you make of that comment?
Mr Duckworth: Precautionary principles
have to come right at the top of our agenda. We are dealing with
the public's health and wellbeing and we cannot take an incremental
approach to health and wellbeing. I do believe that as a long-term
industry we are expected to plan ahead. That planning, as we heard
earlier, has started in several regions. We hope there will be
funding for that and I hope that in due course we shall be able
to see some further developments.
Q104 Chairman: I am going to draw
our session to a conclusion. Had I had two more minutes I was
going to ask you, and you might care to respond to me in writing
if you would be so kind, whether in fact, bearing in mind the
government through emission trading and climate change levy have
tried to put various factors into play to try to depress the demands
for energy and reduce CO2 emissions, there are mechanisms like
that which should be put into place to encourage people to optimise
the use of their water. A question to be responded to in writing.
Gentlemen, thank you very much indeed for your evidence; it has
been very helpful to us at this early stage in our inquiry.
Mr Duckworth: May I just mention
one other thing? One of the biggest issues which we have not considered
very much today is the issue of sewers. That is the most expensive
part of the industry's asset base. It represents £27 billion
of assets in Severn Trent and those are the assets which are going
to be more costly and have a greater impact on our customers'
bills.
Chairman: May I encourage you, bearing
in mind Joan Ruddock's final question, to develop that in a separate
paper for us?[10]
We should find that extremely helpful and thank you for raising
it as an important postscript, but nonetheless a central issue
to this inquiry. Thank you very much indeed.
9 Ev 110 (para E) Back
10
Ev 28 Back
| 
