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UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 558-i House of COMMONS MINUTES OF EVIDENCE TAKEN BEFORE ENVIRONMENT, FOOD AND RURAL AFFAIRS COMMITTEE
CLIMATE CHANGE, WATER SECURITY AND FLOODING
Wednesday 28 April 2004 MR G SETTERFIELD and PROFESSOR C BINNIE MR B DUCKWORTH, DR P SPILLETT and MR J TOMPKINS Evidence heard in Public Questions 1-104
USE OF THE TRANSCRIPT
Oral Evidence Taken before the Environment, Food and Rural Affairs Committee on Wednesday 28 April 2004 Members present Mr Michael Jack, in the Chair Patrick Hall Mr David Lepper Mr Austin Mitchell Joan Ruddock Alan Simpson David Taylor Paddy Tipping ________________ Memorandum submitted by Institution of Civil Engineers Examination of Witnesses Witnesses: Mr Graham Setterfield, Chairman, and Professor Chris Binnie, Member, Institution of Civil Engineers (ICE) Water Board, examined. Q1 Chairman: Can we welcome the patient members of the audience to this session? I am sorry it has started a little behind time, but a combination of votes and our wish to have a presentation on the matter before we started has delayed us. May I welcome the first of our two sets of witnesses this afternoon, the Institution of Civil Engineers? Mr Graham Setterfield is the Chairman of the ICE Water Board - I did not know you were a private water company, but there we are. You are accompanied by Professor Chris Binnie, who is a member of that board. In your evidence you say "The Foresight project into flooding is a template that we recommend be adopted for climate change as a subject in its own right". Then you say delphically "The support of the Government Chief Scientist would be welcomed". Do you think the Government Chief Scientist is not on side with this Foresight report and if so, why? Mr Setterfield: No, no. I think the Government Chief Scientist is very much on side with the Foresight report on flooding. His interest is something which lots of us have commented upon. I am sure he is very interested in a whole range of matters. You have raised a particular one, which is climate change and water security. The Foresight template, which has brought together some of the most pre-eminent scientists, engineers, experts in their field, is a very good report. There are some issues associated with climate change and water security. It is a very long-term issue and the Foresight template is dealing with a topic which is a long-term issue. I guess our view is that it does that pretty well. Q2 Chairman: It has been said, only to me personally I have to say, that you engineers are the "concrete pourers", the people who will look at engineering solutions to all of the problems which are raised as a result of a combination of climate change and the need to secure water and to deal with flooding issues. I suspect you might want to rebut such an assertion, so now is your opportunity. Mr Setterfield: I would most wholeheartedly rebut it. It is a view which pertained perhaps some 20 years ago, but pertains less and less these days. Certainly as the Water Board of the Institution of Civil Engineers, we spend a lot of time dealing with the environmental issues and these days it is very much about managing the environment in a sustainable way; sustainability is the by-word really. We are not looking to concrete anything, we are just looking to make sure water resources are there when they are needed. Q3 Chairman: We have a water industry which seems to the non-experienced eye by and large to look very similar to the way it was many years ago. We have dotted round the country lots of reservoirs, lots of pipes, we have water treatment works and the whole lot merrily goes round and round. However, there are some challenges as a result of global warming. Take me through a 20- or 30-year perspective. What will change or is it just a question of carrying on as we are? Professor Binnie: May I just go back to one of the earlier issues, demand management? We were very supportive of demand management, we very much pushed for demand management, leakage reduction, all of those elements. When the Environment Agency took up that banner, we very much supported it. However, we do believe that leakage has come down a great deal, it is now down at economic levels or close to economic levels and the further measures which can be done on demand management are quite often quite small and quite slow. Changing the cistern in one's toilet for instance is a very good way of reducing demand. However, you change those about once every 50 years, so it will be a good step but it will take a long time for that sort of thing to come through. We do support economic demand management, but we do think the future benefits of that are going to be much slower than we had in the past. In the longer term, with climate change, we believe that the rainfall in the summer will go down, we do believe that the river flows will go down even more and summer river flows can go down by something like 30 per cent on average from what they are currently. That will mean that water supplies which come from direct extractions from rivers are going to be affected because the environmental part will not change. If anything the environmental flows will have to go up in order to provide sufficient oxygen in the water for the environment, so that will go, so the reduction in that available for water supply is going to be far more affected for direct extractions and also for single season reservoirs. They rely partly on the water which is in storage and they rely on the water which is going to run into them during the relevant dry spell. If the run-offs come down to the extent that they will, that means that single season reservoirs will have lower yields. We believe that there is plenty of rainfall, there is plenty of water available, because the country only uses something like 10 per cent of the available river flow; more important will be storing the increased winter run-off for use in the summer. Q4 Chairman: Do you think that the government and regulators are showing signs of recognising the type of scenario you have just enunciated? Are they well enough prepared to respond to the challenges you have just put before the Committee? Mr Setterfield: They are beginning to recognise it. Certainly the Environment Agency have identified climate change in their water resources plans and the water companies in preparing their plans have been able to make allowances for climate change. So that is good. In terms of the economic regulator, if the Environment Agency allows the water companies to make that inclusion in their plans, then the economic regulator will fund it. It is a long-term issue and economic regulation is done in five-year batches, so it is really quite hard to say how well that is being dealt with, with something which is so long term. One of our major concerns on the whole topic of climate change is that the planning and promotion and arranging for new water resources are very long term and we do believe the evidence points towards the fact that more winter storage will be needed. Coming back to your previous question, looking 20 years ahead, we would hope that we start to see evidence that we are storing more water because it is not an option to run out of water. Q5 Chairman: May I just pick you up on a point? Water UK, our next witnesses, said in their evidence to the Committee that the current five-year periodic review of water industry prices and investment does not encourage long-term investment. Mr Setterfield: I am agreeing. I am sorry if I did not make it clear. I am agreeing: it does not encourage long-term investment, it encourages a quinquennial approach to it. The Environment Agency has said in the water resource plans, which are 20- to 25-year plans that the water companies may make an allowance for climate change. That is at the far end of that spectrum. Q6 Chairman: In your opening remarks you put emphasis on demand management and I suppose there are two key sets of demanders: there is the business user of water and there is the private user of water. From your analysis do you think that those two types of users are waking up to the fact that they have a part to play in responding to this challenge? Mr Setterfield: I guess the answer to that is that as the Institution of Civil Engineers we have not done analysis. We read the analysis other people do and we have a personal interest in the activities of water companies. The industrial users, because of efficiency, because of the price of water, have woken up to trying to be efficient and others can speak better about that. I think some of your subsequent witnesses might well be able to speak about precisely how much industrial usage has declined. They understand that, but probably driven by economics; equally corporate social responsibility and all that goes with that makes them a little aware. Domestic customers? We still only have some 25 per cent of the UK domestic customers being metered. If you are not metered, it is only as and when water companies make pleas for water efficiency or children go home from school having had a lesson about the water cycle and these sorts of things that gradually it enters into the psyche. I would say that on the domestic front the education process has begun, but we are not there. Q7 Chairman: In terms of looking at best practice outside the United Kingdom, as engineers in this field, are there any other countries where you look with interest to see how they use engineering as a contribution to dealing with the types of issue which you have put before us, particularly in terms of water management, better catchment and so on, which we might take due note of in the course of this inquiry? Professor Binnie: Singapore. I lived in Singapore for some time. Water there is much more constrained, because most of it is imported from Malaysia. There, if you have a factory, you have to get a licence to demonstrate that you are using water in the most efficient way and you are subject to inspection every year for your water efficiency and if you are not up to then current practice, you are forced to put in the new practice or else your licence to use water will be taken away. That is something which is way ahead of what we are doing in this country. Q8 Chairman: I presume they have a system of benchmarking best practice, do they? Professor Binnie: Yes, they have. It is in the public sector there and the Public Utilities Board makes sure that the industries are the most water efficient they can be. Chairman: If you have any access to that and might care to send us a little note developing that point, I think the Committee might well be very interested. I hope you do not mind me burdening you with another task. Q9 Mr Mitchell: That means increasing regulation in the future, does it not? More metering and charging more. Which parts of the country are going to be most affected by water shortages? Mr Setterfield: All the evidence points towards the South East. Q10 Mr Mitchell: Is that particularly London? Mr Setterfield: The South-East part of London and the southern counties, Kent, Sussex, East Anglia; it is that South-East corner of the country. If you take the whole of London, that is not quite as affected. That is a combination. It is the climatic conditions, it is the water resource conditions and it is demographic conditions. The sustainable communities plan of course is pushing more and more houses into that sector of the country and it is that sector which finds itself under pressure. There are other pressures which are running in parallel to climate change. The low flows which occur in the chalk streams, for instance in Kent which I know very well, mean that the Environment Agency are keen to see the water companies taking less water from the chalk, leaving more water in the rivers and that is terrific, that is good, but the water companies do not have an option of saying to their customers, actually we do not have any water left, we have run out because we want to support the environment. There really are huge pressures. The evidence when you look at the plans produced by UKCIP or others points towards the South East suffering significantly more. That does not mean there are going to be no problems elsewhere, as we saw in the autumn drought only last year where the problems were widespread across the whole country. Professor Binnie: The word is not "suffering"; the word is greater "effort" will be needed in order to augment the water resources which are available. Q11 Mr Mitchell: What you are saying is that there is no difficulty if we can catch the necessary proportion of precipitation, but there is going to be a problem in needing to store it from winter for summer, which I presume points to more reservoirs, so you will begin pouring the concrete at some stage. Where are those likely to be? Mr Setterfield: The reservoirs we know water companies have presently included in their draft business plans are not yet in the public domain, but we do know some of them. Thames Water have included for a reservoir, Kent Water have included, Southern Water have included the raising of a reservoir, Portsmouth Water have included for a reservoir. Those we know about; there are studies going on in other parts of the country. If you think of that geographically, it does point towards additional work being needed in the South East. I have to say that leakage amongst many of those companies in that southern area is amongst the very lowest in the country and has been for some time. So the effort has been going on for some considerable while. I was very involved in the droughts in 1989-90 in Kent; very involved, I was the local director of Southern Water. Our leakage at that time was low and fortunately we had a large reservoir which was built in the early 1970s which was our salvation because the water in the chalk and other aquifers just was not there. Q12 Mr Mitchell: It is really a question of distributing their reservoirs where the demand is. It is not a question of building more in the North and long supply chains. Mr Setterfield: No. Q13 Mr Mitchell: It is localised reservoirs. Mr Setterfield: It is. Local sources are still the most cost effective way and the most efficient way, subject to the water being available, to provide local water resources. We are really not about covering the South East of England with concrete; we really are simply saying that we need water resources for future generations. Q14 Joan Ruddock: I think the South East of England is going to be covered with concrete to a degree. Mr Setterfield: Not by us. Q15 Joan Ruddock: Very much connected to the Thames Gateway with my constituency at one end of it. You having raised this question of sustainable communities, are you having sufficient input into these plans to have confidence that the water supply will not be an issue? We are talking of hundreds of thousands of new homes. Mr Setterfield: The members of the Institution of Civil Engineers work in a variety of organisations and it has become realised that water is one of the key factors in sustainable communities. I have to add that when the first announcement was made, there was no mention of water. The Institution of Civil Engineers, as well as several water companies, were very vocal in their comments about it and I am pleased to say that it certainly seems to have been picked up. A number of people can add to that. Professor Binnie: You can plan for population in maybe a decade. If you are planning for water resources you may be in two decades or more. It is important that you get those in sync. Secondly, they will not be concrete reservoirs, they will be earth reservoirs; so they will not be looking like stark walls, they are embankments. Many of the reservoirs which have been built since the Second World War are now SSSIs or Ramsar sites because of the environment benefits they bring and they also bring sailing, fishing, canoeing, bird watching, walking. It is not quite the environmental total degradation that one might think. Joan Ruddock: I must say that the concrete I meant was the concrete homes. Q16 Chairman: Could I ask you for some help with paragraph 2.1 in your evidence? You made a very interesting statement. It says "However it can be said that England and Wales only utilise less than ten per cent of available water". Could you just help tease out what you mean by "available water"? Professor Binnie: That is the water which runs in the rivers down to the sea. Q17 Chairman: So it is purely water courses. Professor Binnie: And recharges the aquifers. Chairman: Right. To me "available water" apart from the water courses - and I suppose you could say that all water does eventually end up there - includes the question of what you do with run-off and water which has been through industrial processes, but that does not count. I presume you would end up double counting the amount of water if you included that in your figure. It is purely a question of 90 per cent of what is in rivers, streams, etcetera still being available and that leads us perhaps into capture and reservoirs and David. Q18 Mr Lepper: What a wonderful link. It flows so nicely. You do say in your evidence to us that whilst more reservoirs are needed, and you have described to us how several of them eventually become an important part of the landscape and you talked about some which are SSSIs, I think you do say that there is still often resistance, for instance from the Environment Agency, from conservation groups, when there are proposals for new reservoirs. Could you tell us a bit more about that? In particular, since you have referred to proposals which are already there, which, if not made public, are in the planning for several of the water companies' new reservoirs, are those kinds of hostile reactions already anticipated where the new reservoirs are concerned? Mr Setterfield: Yes. If I could just deal with that very last point, the reason that the reservoirs are identified so far in advance of their actual requirement to be filled with water is because it is anticipated that there will be a hostile reaction and it is beholden upon everybody to do thorough studies. It is beholden upon them to do thorough economic studies, thorough environmental studies to make sure there is no environmental degradation, in fact you would be looking for environmental improvement with the construction of a reservoir. Q19 Mr Lepper: May I just interrupt for a moment? What kind of timescale are we talking about? Mr Setterfield: A 20-year timescale if you are building a new one; if you are raising an existing one it would be less than that. Even so, I certainly know that Southern Water, in raising a reservoir, have to seek parliamentary approval, which is not a short process, and planning and all that goes with that. That is on an existing site. Q20 Mr Lepper: In terms of the pressures which are already on all of us in relation to water, is that too long a timescale? I understand all the reasons why you are saying it is necessary, but can we afford to be planning that far ahead? Mr Setterfield: Yes, we can afford to, provided everybody realises that is the timescale and the funding is done in such a manner that you can start your studies early enough and they are funded. That is the time it takes. I do not have a problem with the fact that it takes that long, provided people realise that if you want a new reservoir in Kent, then it is a 15- to 20-year lead-in time. It will be a long time. I shall give a very brief answer to the first part of your question and then ask Chris, who has huge experience of reservoirs, to come in. There has been an anti-reservoir environmental lobby for a number of years and I can understand that it is beholden upon the Environment Agency to make sure that the water companies drive down leakage and they sort out demand management and do all those things before reservoir plans get too far under way. What I should like to see is more tolerance towards the planning stages and more support of the early planning stages which in turn need funding, bearing in mind that it is a 20-year horizon, that we are doing the work at the right time such that when the need is proven we are ready to go. My concern and the concern of the Institution of Civil Engineers is, given the long timescale, that everything is pushed towards the end and then they will not be delivered in the time they are needed. Chris has infinitely more experience. Professor Binnie: One of the things which concerns me is planning blight; how soon do you announce to the public that you are actually thinking of a reservoir in a particular area? The tendency in the past was to do an awful lot of the work which you could before you announced it and then the public said they were not involved enough in the planning process. Now there is a tendency to go early and announce it and then do the things. You then have blight in the area where the land is going to be and that blight can last for five years or ten years as you go through all the environmental or planning studies and the promotion and public inquiries. That is one of the issues which it is very difficult as a reservoir developer to deal with. The other thing about the Environment Agency is that I should like to see, where a need is demonstrated for the reservoir, that the Environment Agency then supports that but makes sure it gets the maximum environmental benefit from the reservoir because reservoirs can release water downstream, they can maintain the flows downstream from the reservoir storage. In the future, with climate change, that is going to be more and more important because that is where it is going to help to alleviate the problems of climate change on our rivers. Q21 Mr Lepper: Are you saying that usually the Environment Agency is uncooperative? Professor Binnie: I should have said it was unsupportive. Mr Setterfield: I am sure at some stage the Committee will be meeting the Environment Agency to discuss this. I doubt the Environment Agency has, in its existence, actually had a full-blown proposal going in front of it for a reservoir. It is background support which has been looked for thus far as opposed to a background of - I am not sure of the word, "hostility" is too strong, but it is something along those lines. Professor Binnie: You do realise we are being listened to by the Environment Agency. Mr Setterfield: I do; I do of course. Q22 Mr Lepper: Could you give us an example or two of an environmentally sensitively planned reservoir or one which over the years has become important? Give us one or two examples. Mr Setterfield: The one I am most familiar with is a reservoir in Kent called Bule Water on the Kent/Sussex border. It is a big reservoir. They get hundreds of thousands of people going there every year, water is released into a stream which, prior to the construction of the reservoir dried up in the summer. That stream now carries the water 20-odd kilometres downstream to the point where it is extracted for public water supply, so the river is much, much better in terms of environmental condition as well as all the environmental pursuits which go on there, the nature area, the Sites of Special Scientific Interest and the like which surround it. There is one which I know particularly well. Professor Binnie: Abberton reservoir: SSSI, Ramsar site, down in Essex, purely because it is a reservoir; before that it was Grade 3 agricultural land with rather scrubby, dreadful looking hedges. Carsington reservoir, Severn Trent: one million people go there each year for the recreation the walking, the birdwatching, the sailing, canoeing and the general ambiance of being at a lovely water area. Effingham reservoir, Rutland Water: the land values around have gone up 50 per cent or 100 per cent above what they were before. Chairman: I think we have now just moved into DCMS as the tourism committee, but that was very graphic and enlightening. Q23 Alan Simpson: Before we all become happy-clappy over reservoirs, could I just get you to acknowledge that it is not only the Environment Agency which has objections to this? If we look at the objections over the Ilisu dam, the Three Gorges in China, the huge trans-continental objections to the dam projects in India, it is the massive displacements of human beings which get factored into this as well. There was a suggestion for a significant reservoir which would just entail the flooding of the Vale of Oxford which began to bring home the fact that there are human consequences which are not necessarily going to be driven by the Environment Committee but by the communities which would be displaced. Mr Setterfield: I should be the first to support the fact that anybody promoting a reservoir has to take all of those points into consideration and that is part and parcel of the studies. The Environment Agency have a particular role in that they ultimately licence the abstraction of water. With or without that you have or do not have a reservoir potential. Q24 Alan Simpson: I just want to bring us back onto demand management and the use of existing water. You make a point about recommending the greater use of treated waste water. Where do you see the most productive starting points for us to be doing this? My particular area of knowledge is the South East of England. Where I see something which seems to me not to make sense and we need to move on is the fact that the population of southern England is essentially around the coast. All of those coastal towns have in the last decade had very sophisticated waste water treatment plants installed. There is now a very, very good, high standard of treatment there and that water simply goes into the sea or into estuaries. Something like 80 per cent of the population of Kent, Sussex and Hampshire live in coastal or estuarial communities. It does not take a lot of imagination to think that if, instead of putting it out to sea, we could pump it inland, somewhere into the rivers, with the right consent on it, then what you are doing is providing a base flow which allows those rivers during dry periods in the summer to have a base flow. You do not have to do it in winter; there could be other mechanisms in winter and thus you would be re-using it, letting nature treat the waste water, having already put it into a high standard. That is already done on the river Thames, on the river Severn, but anywhere where there is a maritime community it is not done and that applies to a huge percentage of the population of this country. Professor Binnie: Apart from Graham's scheme for Herne Bay which comes over the divide into the Stour River and adds 4.5 megalitres per day of water extracted for the Thanet area of Kent. So it is already done in one place. Mr Setterfield: It is just a move towards seeing that this has potential. Q25 Alan Simpson: I am interested in this partly because of our own experiences of the downpours here yesterday which made it quite clear that one of the consequences of climate change is much more dramatic and erratic weather patterns. Our existing sewage and drainage systems just cannot cope with those monsoon conditions. We are going to be forced into doing something. What I am trying to explore is whether you have ideas about how we deal with the imperative of engaging with those changed climate conditions, having water we have to try to dispose of and doing it in ways which connect into the thinking about recycling of grey water? Mr Setterfield: That is moving into the area where I believe more and more research is needed: under extreme conditions. The present systems are such that under the storm flows most of that is discharged to waste. It bypasses full treatment works, some part is treated and then some part bypasses it; that is how the combined sewer systems work. When I talk about returning waste water, I am primarily thinking about these base flows. In cities like Portsmouth, which has a brand new treatment works going straight into the sea, it could be pumped inland. Under those storm conditions which we experienced here in London yesterday - and I experienced them first hand as well and got soaked but that is not where we are particularly focusing in our written evidence - I believe you will always need overflow conditions which allow you to discharge excess flows to prevent people being flooded. Q26 Alan Simpson: In the cost equation choices we face you were quite quick to dismiss desalination plants because of the economics. Professor Binnie: We did not dismiss it. What we did say was that it was an expensive way of doing it. It required a very large power consumption in order to do it, which has to come from fossil fuels, which in turn add to greenhouse gases. If you are using desalination to overcome the problems of climate change, doing it that way, you are adding more to the problem. Q27 Alan Simpson: What I was trying to fish for was whether you have done any calculations at this stage about the cost hierarchy of choices that we might need to be looking at in terms of where in the scheme of things desalination would come, where that would be in relation to the treatment of flash flooding and the adaptations we would have to do to the sewers, where that figures in relation to addressing the 20 per cent of leakage in the existing system. What is the cost hierarchy? Mr Setterfield: We have not done that cost hierarchy. Thames Water are at the present time working on a large desalination plant. That will be the first in this country of significant size where you can get some real costings, where some real evidence will be available rather than comparing that which is done, say in the Middle East or in other countries. At the present time all the evidence suggests from water company resource plans, which as you can imagine are done on economic appraisals, that that sits still further down the cost hierarchy. Yes, getting a leakage done up to the economic point is the best bet. Where possible some re-use of waste water can be the best bet, certainly the home-based scheme to which my colleague referred was the best bet. Then you move on to what I would call traditional water resources, the reservoirs and the like and somewhere along there is desalination, membrane technology and new technologies which are being worked through the universities and research centres. To some extent that was what appealed to me about the Foresight approach, which is taking this very long-term view, getting the very best brains collectively to say "Let's look beyond where we normally look". That is exactly one of the ways. Professor Binnie: What we were suggesting was that it would be not a bad idea to do Foresight on water resources up to 2100 or whenever, rather than just the 25-year time horizon which current water resource plans have. Q28 Alan Simpson: In that context you also threw in the weakness about insufficient interconnectivity in our existing water network. How would you see that national grid for water resources coming about? Mr Setterfield: Without reading the particular line, I hope we were not demonstrating a lack of interconnectivity, because actually it is an area where there has been very good investment over the past decade. Most of the water companies and adjoining water companies have carried out a fair degree of interconnectivity to share resources. Our own view is that a grid system is not economically feasible. It just does not make sense. Q29 Alan Simpson: Why? Mr Setterfield: Where a local grid is appropriate, where local use of a canal makes sense, then the water companies in the area will already be looking at that, they will be doing that and so will the Agency. This is definitely an area which is joined; we have not received opposing views on this from anybody. By and large the UK is pretty good at that. There are water companies which use canals, there are water companies which use large diameter mains which transfer large volumes of water long distances, but it is incredibly heavy and it does cost an awful lot of money to pump it when you have a local source which you do not have to pump. Q30 Chairman: Does that present us with a serious show stopper? In your remarks you put particular emphasis on the problems of London and the South East. If you look at where what I call the buffer stocks of water are in the United Kingdom, they are in Scotland, the North East, the North West and Wales. It is not quite easy to see, if you are having this sharing scenario, how water gets from any of those locations as far as the South East. The impression I get is that it is in the "all too difficult and expensive" column. Is that right? Professor Binnie: I would suggest that the plans water companies have ... Thames Water have a reservoir they are planning in the Upper Thames catchment using water from the Thames catchment area. Mr Setterfield: Certainly the Kent solution is to use local water. Let me just stress that it is not too difficult. If we engineers only wanted to build things for the sake of building things, we could build pumping stations all over the country and pipelines all over the country and we could shift water by the bucketful, but it is not economically efficient. It simply would not make sense to do that at the present time, nor in the foreseeable future. Q31 Chairman: One other question, going back to the 10 per cent figure. If you started to use more than the 10 per cent of the available water, is there some sort of cut-off point beyond which you cannot go? If as a result of climate change we are facing a reduced total availability of water and you start using more and more of it for human consumption, some of these scenarios about flows and water courses you were going to mention start to become more difficult. Is there a point at which you say we should not abstract water for human consumption from the available water which you defined a few moments ago? Professor Binnie: I do not know that anyone has looked at demand in the long term, but I do not expect demand to go up by more than say 50 per cent by the end of the century and that is a figure out of the air. We might move 10 to 15 per cent, but I just do not envisage it going significantly higher than that, because there are greater efficiencies of appliance usage and greater efficiencies on loo cisterns. Mr Setterfield: Thames Water use 55 per cent, so in a particular area there is a significantly higher re-use. It does vary, but it also varies seasonally, so it is an average figure, it is not absolute volume of water per se. You have to look at the particular circumstances in the surrounding area to see what the state of the rivers is, how much of that flow in the river results from waste water treatment works and the like and how much is coming in naturally and what you do with the excess flows in the winter. Q32 Chairman: Whichever way you look at it, it is making the best use of what we have got. Mr Setterfield: Yes. Q33 Alan Simpson: In your introduction you said that in a way you can do something about demand management, but that tends to be over a longish period in terms of the replacement of people's water systems and flush cisterns for the toilet. I think I am right in saying that it was the New York water authority which was having to do some of those sorts of calculations in respect of the case for a new reservoir. They concluded that it was cost advantageous for them and everyone else just to give everyone in New York a new plumbing system and that is what they did as their investment: they planned just to put in new cisterns which were much more water efficient. Professor Binnie: Correct. Q34 Alan Simpson: I am assuming that the caveat in what you said was that if we had government policies which required much more interventionist approaches to water, to management of existing resources, that would change your assessment of how effective it might be. Professor Binnie: New York was actually a particular instance where they had loo cisterns which were enormous and they were able to make really massive gains at relatively low cost by doing that cistern replacement technique. We have much smaller cisterns in this country and therefore the relative gains we can get from those cisterns are very much smaller. Chairman: Now I understand why we no longer see loos with Niagara on them. Q35 David Taylor: One brief final point on resource management before moving on to quality. You said earlier on that the performance of water companies in terms of reduced leakage has been mixed, but you suggested that in the South East, where the pressure is at its greatest it was quite a good track record. Overall your evidence suggests about 20 per cent of the water put into mains is eventually leaked out. Is it the point that that leakage is largely occurring in areas where the pressure on supplies is from leaks? Mr Setterfield: No, because every water company across the country in England has a target leakage level set by OFWAT and those target levels have come down and leakage has reduced by 33 per cent across the country over the past seven or eight years. Q36 David Taylor: Are you saying that 20 per cent figure you quote means we are almost at the level where it is not economically possible to drive it down much further. Mr Setterfield: The figure which is set by OFWAT is the economic level of leakage and it is their calculation, shared with the agency and the water companies. The water companies by and large are there or thereabouts; they have either met or are just above or just below those target levels, otherwise they lose points in the OFWAT scoring system. Professor Binnie: The figures are that it was 5,000 megalitres per day in 1994-95 and it was just over 3,000 megalitres in 2000-2001. Q37 David Taylor: May I turn to quality? In the ICE evidence at paragraph 3.3 you talk about the higher spring and summer temperatures and we heard earlier that in the next quarter of a century there could be higher average summer temperatures, perhaps up to one or one and a half degrees centigrade and in the quarter century beyond that a figure perhaps up to three degrees centigrade would be middling assumptions. You point out the greater likelihood of algal blooms for instance. How great an effect do you think climate change will have? Mr Setterfield: There are others who are better qualified as scientists. I think it is reasonable to say that this is more scientific than engineering. Our view is that from what we read those effects will be significant in that all of these pressures move in the same direction. So as temperature rises and flows diminish, water quality deteriorates, pressure will be on water companies to improve sewage works effluent, but equally there will be environmental pressure to reduce the amount of water which is available for extraction for public water supply. In our view it looks as though deteriorating water quality will mean less is available and the logic of that is absolute; we are not arguing the logic. It does mean that climate change puts pressure on via that route. Q38 David Taylor: Are there any other engineering options, not the Chairman's concrete pouring, but other options? Professor Binnie: Algal blooms depend on temperature. Q39 David Taylor: Not just algal blooms; that was just an example. Professor Binnie: And nutrients, which are nitrogen and phosphate and you can take those out at the sewage treatment works. It is the diffuse nutrients which are the more difficult ones in order to try to deal with that problem. Mr Setterfield: In terms of any answers, I guess my suggestion, which is sort of counter-intuitive, that those areas where you have waste water treatment which is putting effluents to sea, although it will mean higher energy use in treating them to a higher standard to put them back into the rivers, actually if you put them back in rivers and you can raise the base flow with reasonably quality oxygenated water, then that flow is beneficial. Q40 David Taylor: You were saying much earlier on that the flows in some of them might be 30 per cent less than they are now. Professor Binnie: Yes. Q41 David Taylor: You also say in your evidence that therefore less water would be available to dilute foul flow in the event of sewers overflowing. What then are the measures which we need to plan into new generations of sewage treatment works to take account of that? Mr Setterfield: Again there are others who are better qualified to answer that in terms of the waste water treatment methods, but essentially it will be higher standards, it will be new treatment technologies, it might be greater use of membrane technology, it will be whatever the next advances are, all of which come with a price and that price has to be borne by customers of the water companies. Our view again is that some real long-term planning and long-term thinking about this in research terms would be beneficial and it is research which everybody should sign up to rather than it being done just by the water companies, or just by the agency, or just by Defra. Q42 Chairman: May I follow on that for a bit of information? In paragraph 4.2 you say "Evidence of climate change on the design of sewers is within a recent report prepared by UKWIR". Could you tell me who they are? Mr Setterfield: That is the United Kingdom Water Industry Research body. Q43 Chairman: Is it a public body? Mr Setterfield: No. The people next giving evidence will be able to tell you in great detail, because I happened to see one of the people massively involved in that in the corridor outside. He is going to be giving evidence. Q44 Chairman: I give them notice that perhaps one of the things they might like to explain to us, because there is a wonderfully Delphic short line here where you say "Only a two page summary is in the public domain" as if to say there are deep secrets which are not in the public domain. Mr Setterfield: If I may, it was simply that we, as the Institution of Civil Engineers, in terms of giving evidence did not have access to this to be able to amplify what might be in it. Chairman: It will be a voyage of discovery. Q45 David Taylor: You were keen the report was not leaked. Professor Binnie: We do have some of it, but we cannot talk about it. There is one other thing, if I may, which is that a lot of research has been done by the Met Office on the changes of the mean precipitation and things like that. As far as water resources are concerned, what are much more important are the extremes and we hope very much that the Met Office will be encouraged to do more work on the extremes of rainfall during drought periods in the future. Q46 Joan Ruddock: I am going to deal with the question of sewage flooding, if I may. I have dealt in my constituency with far too many incidents of sewage getting into people's homes, but I expect it is back to Victorian pipes in London. I do not know just what the source of this is, but it is a hugely tricky problem when you get it. We are in the business of getting so much of our sewer system renewed and possibly upgraded or completely replaced. I just wonder whether you can answer the question you posed when you spoke of lack of investment, which was about the degree of climate change we should be prepared for in the structure of sewers. Do you have an answer to the question you posed? Mr Setterfield: If I may go back to the earlier point you were making, our view as the Institution of Civil Engineers - and we have been very public on it - is that there has been significant under-investment in the sewer system. At the present time, if you take the age of sewers and the rate of investment currently being made, in terms of maintenance, replacement and all that goes with it, many of our sewers are going to have to last 1,000 years. Q47 Joan Ruddock: But they are not lasting and we know it. Mr Setterfield: We know they are not and that is a silly figure in some ways; some might last that long. What it really means is that looking ahead for climate change and looking ahead at scenarios it is essential that we allow and are funded for and the water companies are funded for sufficient margin to be able to design in some of the extreme events, not all of them clearly, because it is about risk, but some of those extreme events into present day sewer designs. The UKWIR research which is referred to starts to look at that and you do have the manager of the whole project as one of your witnesses, but I do not want to drive his evidence in a particular direction. In answer to the second part, no, I do not think we are in a position to answer any further than I have. Q48 Joan Ruddock: You are just conscious of the need, but you have not made an assessment yourselves. Mr Setterfield: No. Q49 Joan Ruddock: I think you do all agree that the kind of climate change which is happening will result in a greater increased threat of the sewers being flooded. You have no doubt about that. Mr Setterfield: Yes; absolutely. Professor Binnie: Absolutely; correct. Q50 Joan Ruddock: Given that is the case, to what extent do you think the government regulators and the water companies are addressing that? Given that we agree on the science and the likelihood of these risks increasing, is it being adequately addressed? Mr Setterfield: I would say that in the early periodic reviews post privatisation the whole question of sewerage was not being addressed with sufficient priority because the driving forces were European legislation, other legislation, which effectively alone capped the amount of money available for maintenance and new sewers within the infrastructure. OFWAT have recognised that and much more effort is currently being made to include sufficient for sewerage maintenance and investment. I do feel it is still the poor relation within the water company capital programmes looking ahead to the next five years. Since we have only seen the draft business plans for the water companies and we do not yet know the outcome of the next periodic review until November, perhaps that is the time when we will really see what the evidence is. Q51 Mr Mitchell: What is the problem with sewers? Is it just age, is it lack of capacity, is it that the wrong raw materials have been used, is it the earth moves? What is wrong with the Victorian sewers. Mr Setterfield: There is nothing at all wrong with Victorian sewers, but like any infrastructure they have a lifespan. So those which are in good condition will continue to be in a good condition and equally some of those laid in materials such as pitch fibre pipe,or when we moved away from large diameter brick sewers do not last as long as the large diameter Victorian sewers. No, no, they were some superb examples of engineering skills and some of the sewers built subsequently are equally good examples of engineering skills, but you have to invest in the infrastructure, in maintenance and rebuild at some rate and I do not think it has been sufficient. Professor Binnie: Certainly in parts of London trunk sewers were designed in the late Victorian era for much smaller populations, much less impermeable streets. We now have impermeable streets, a lot bigger population, so the sewers are running much closer to their full capacity during normal conditions and with quite small extra rainfall you can get problems building up. Chairman: Gentlemen, you have been a remarkable double act, working beautifully together in close harmony in answering all our questions and we are very grateful to you for starting the formal part of our inquiry into this area. As we always say, you cannot undo on the record that which you have put on, but, if, in addition to the point I was making about the benchmarking for Singapore, there is anything else you want to send to us by way of written evidence, we are always grateful for further thoughts. Thank you both very much indeed.
Memorandum submitted by Water UK Examination of Witnesses Witnesses: Mr Brian Duckworth, Managing Director, Severn Trent Water, Dr Peter Spillett, Environment and Quality Manager, Thames Water and Mr Jacob Tompkins, Policy Adviser, Water UK, examined. Q52 Chairman: Now Water UK. We have a galaxy of stars in front of us who are going to reveal all, including, when we get to sewers, lifting the shroud on the mystery report which has got us so excited. Mr Brian Duckworth is the Managing Director of Severn Trent Water, welcome. Dr Peter Spillett is the Environment and Quality Manager of Thames Water, so thank you for what you do in my household, I am very grateful for it. Mr Jacob Tompkins is the Policy Adviser for Water UK and you are very welcome. Thank you very much for sending in your evidence which was very clear indeed. You say in the introduction to your evidence "If the future impacts of climate change are not factored into water company plans then water and wastewater service provision could become unsustainable". If that is your statement now and we have known about climate change and its implications for some while, what have you all been doing? Mr Duckworth: We have all been trying to work very closely with our economic regulators and our quality regulators. At the end of the day, they are working very closely with government officials too. When we see the amount of investment which we face, we face a huge amount of investment coming out of new European directives, mainly in respect of quality, when we then look at customer expectations in terms of their service, it can quite often mean customer expectations in respect of sewerage - they do not want flooding - expectations about the way they are able to use water in the 21st century, then we align that with their expectations of how much they prefer to pay for a 21st century service and sometimes the two do not match. It is a question of balance. Can we afford to do all the things we ought to be doing in terms of maintaining our assets, preparing for some of the new and quite often quite expensive European legislation, looking after their water resources, because our customers still see us as water companies rather than water and sewerage companies in the main and finally perhaps thinking about those other aspects of customer service which the vast majority of customers take for granted, but some customers, perhaps at the ends of our systems, suffer from? We are faced with quite a lot of competing issues for what have become pretty scarce funds in terms of water bills. Q53 Chairman: Does that have an implication that you feel that Europe perhaps, with things like the water framework directives and directives on water quality, have not themselves factored into the demands which have been implicit in those requirements the impact on the customer. In other words, are we asking customers to bear too many costs in relation to what they want, which is a regular quality water supply but an equally regular departure of waste? Mr Duckworth: I shall defer to others in a second. May I just refer to some market research which was undertaken on behalf of the industry? When I talk about the industry I mean the regulatory bodies and I also include Defra and organisations like English Nature. We conducted some market research ahead of the current price review and top of customers' lists in terms of their expectations were drinking water supplies and quantity and quality basically. Then they understand there is an environmental expectation and then they want some of their local service deliverables. The real issue though is that we are faced with massive amounts of new investment to meet some of the environmental drivers and some of the other issues which perhaps do not have a statutory driver do not get done. Quite often - and we saw it at the last review - some of the issues associated with maintaining our assets were excluded because the new quality drivers coming out of Europe overtook. Q54 Chairman: I picked out a piece in paragraph 29 of your evidence in terms of our previous witnesses and commented that you had said "The current 5-year periodic review of water industry prices and investment does not encourage long-term investment". That says clearly that regulators, the Environment Agency and ministers are thinking too short term. Is that right? Mr Duckworth: In my view, yes. Q55 Chairman: If we looked at the agenda of the things which you ought to be planning for in terms of climate change, you now have a pretty clear idea of what the scenarios are. Just give us a flavour of what the menu is of the things you need. Can you give us any global figures for the UK water industry? What should it be spending? What should it mean to a customer if you were to knock on somebody's door and say "I'm from the water company. I want to talk to you about your bills in the next decade. We're going to have to do X, Y and Z". What kind of message are you going to give to customers? What needs to be done? Dr Spillett: If you just look at the main functions of the water companies, we have to provide safe, wholesome water, take away and treat and dispose of sewage. We have already heard, and I presume you have from your UKCIP witness, that we expect to have less water in the summer, longer drier summers and probably more intense rainfall in the winters. Overall we can see that there are going to be more unpredictable events, maybe longer droughts. The question on our demand forecast over these 25 years is whether we should be planning to a greater extent for great risk and this costs. Because there is more winter run-off, as was mentioned earlier, it would be useful to have more winter storage and hence upland reservoirs to help regulate the rivers. In terms of investment on the kind of assets we are talking about, in order to ensure security of supply, more has to go into that supply and demand area. Equally we have heard about possible water quality problems on already high standard rivers if there is less flow in the summer. Do we have to ratchet up the standards on our sewage works which are really quite tight? We can see all this would lead to increased investment on processed chemicals and energy. Then you have to look at what the impact of all this will be on our current performance, on our assets. Will the sewage works work better or worse at higher temperature? There is going to be dilution in the winter and concentration in the summer. This summer with the long dry autumn we had odour problems and septicity in the sewage network because we are not moving the stuff along. What we are saying, and the inference about long-term planning, is that our assets are in the ground for anything from 80 to several 100 years. You were referring to this famous document of which I have a slightly longer version than two pages. It is saying that the design of our sewers is based on 50 to 100 years ago, on return periods of maybe a one in 30-year storm. If we are getting more intense rainfall, more unpredictable rainfall, how much larger should the diameter of the sewers be? How much more storage should we put in? We should be thinking about it now, because these assets we are going to be putting into our infrastructure are going to be there for a long time. In going to the customer, picking up the point about previous investment, we should like not to do the environmental stuff, which is very important; we should just like to see the focus moved more back to our infrastructure. Q56 Chairman: Just help us out. You have painted a wonderful word picture and it is very clear on some of the issues you are thinking about. Given that there is time to do this work and certainly the presentation we had earlier indicates that events are moving, but they are moving at a slower pace and we need to react to them, have you done any of your monetary forecasting? If you then said right, we now have to make the investment to deal with all of the issues you have just so clearly outlined, over what timescale do the water companies in the UK then have to start investing? We have gathered that there are different scenarios in different parts of the country. Try to help us understand, from the point of view of the people we represent, what this means. Does it mean that every year there is going to be X pounds extra which will have to be added to a water bill, to enable the investment to go in? How does that relate to what the regulators are allowing at present? Just give us some feel for what it means. Dr Spillett: At the moment average bills down here in the South East are about £200; they vary. In the South West they are more expensive because of the coastline and so on. At the last price review OFWAT required a price reduction. There is probably going to be a bit of a catch-up here and companies' published draft plans show anything up to 30 or 40 per cent more. A lot of these investment things, if they are major, like reservoirs or whatever, are going to be spread over 20 or 30 years. The question is the balance in the bill. The bill does not have to go up by itself, but if for the next five years the framework directive requires a high increase in investment because of quality issues and at the same time the industry is trying to seek a greater improvement in its infrastructure, then OFWAT is going to be faced with a political problem of a larger bill size. Q57 Chairman: I want to pin you down. Again you are painting a very elegant word picture of the balance as to where investment should be, but in terms of money, we have done an inquiry into the water framework directive and we are aware of the deficiencies at the moment in the forecasting of the number which it may cost to implement, except that you may not be able to be accurate. Try to give us a figure, even within a range of numbers, as to the kind of investment levels that water companies are projecting, over whatever time period it is appropriate, you are going to have to spend to cope with the kind of issues here. Obviously you understand the issues here very clearly, but what kind of numbers are we talking about? Dr Spillett: I can give you an example of a major sewerage project which would in effect cost about £2 billion overall, that we calculated over a 20-year period would put the average bill up by about £30. Q58 Chairman: Is that a UK sewerage project? Dr Spillett: This would be in the Thames area. Q59 Chairman: So it is £2 billion for Thames over 25 years as a ballpark figure. Dr Spillett: It gave us a model price increase of about £30 over that period; just to give you an idea of the scale. Q60 Chairman: That gives us a very good idea, but have you done any discussion about a national bill for this? The point is that we had the regulator in when we did our last inquiry into water prices and we were looking at this five-year period. What you are talking about is a very long timescale. It would just be helpful to get some idea what this global sum is. Mr Tompkins: We do not know, partly because we are not party to the information that we would need in order to be able to calculate that. There is no national planning body for water resources. Q61 Chairman: Hang on a minute. You represent the UK --- Mr Tompkins: We represent Water UK. Q62 Chairman: I cannot believe that water companies in the United Kingdom faced with this challenge have not individually, even on the back of the proverbial envelope, sat down and said it is going to be in the order of X for us to deal with this and added up the Xs. I cannot believe you have not done that. Mr Tompkins: To a certain extent that has been done. The Competition Acts precludes detailed comparison. I would also say that for things like the water framework directive, because we are excluded from the discussions over what good status is going to be, the definition of good status within the water framework directive will set what the cost levels have to be. We are currently doing some research looking at land use changes or what things we would have to do, depending on different levels of good status and there is UKWIR work which is looking at those things as well. We have done estimates of cost, but because it is dependent on government regulation, we are precluded from being involved in that and we do not know. Q63 Chairman: I am not asking for it to be down to the last five pence. Mr Duckworth: Let me hazard a guess. Q64 Chairman: Yes, that is a nice idea; hazard a guess. Mr Duckworth: If we want to talk about reservoirs, though we could talk about the sewerage system but that is much more complex, ten reservoirs perhaps over the next ten years. Possibly around £500 million each one, £5 billion spread over the next hundred years. The amount of increase on water bills will be in terms of pence per week spread over that period and that secures the water resource position for the whole of the UK. Chairman: That is helpful, to get it into some perspective. Q65 Joan Ruddock: May I touch on the sewers question? Dr Spillett said that there was the question of possibly increasing the diameters of sewers to cope with these very heavy, sudden and unexpected storms and also the storage capacity. Is it possible to do that to existing sewers? It clearly is to new sewers, but I imagine not to existing sewers. Dr Spillett: Absolutely; very difficult to do any retrofit. Q66 Joan Ruddock: So if you cannot do it to existing sewers, this is clearly a universal problem we are going to face, so how many new sewers are you going to have to put in place? Dr Spillett: The mysterious report which our colleagues were alluding to is a three-year piece of work looking at the impact of potential future rainfall patterns on our existing sewerage system. The reason they only got two pages is that there are 12 volumes and they have not been published yet. What we wanted to know were answers to the questions you have just asked. Most of our sewers already exist on previous handbook design. What they were trying to look at was the potential impact of climate change rainfall. They have come up with this view that we would have to look at the return period of storms and we would have to design more storage. The next phase is how to do this, what it is going to cost, whether OFWAT are going to be shocked by it and how much the bills are going to go up. Q67 Joan Ruddock: And the disruption in a city like London. Dr Spillett: Exactly. If we are starting with new growth areas like the ODPM areas, then we should be putting in new sewer designs or more environmentally friendly sustainable urban drainage things to help out to start now, because they are going to be there for 100 years. It is really looking forward and saying we ought to be building this into the design of brown field sites and new towns, but we have not yet got the precise cost implications. We suspect it is going to be a bit of a shock to OFWAT because this is fairly new research, quite innovative. We should like to put in more storage, but in somewhere like London there is no capacity. Q68 Chairman: There certainly cannot be much space under London's streets at the moment. Dr Spillett: No, everyone else is going under there. Mr Duckworth: It is not just London's streets either, every town and village. Q69 Alan Simpson: I should welcome this discussion which takes us onto the longer term basis. You will recall from our review of the water framework directive that we were just bemused at the water industry's position on short term versus long term. It is important to put on the record that one of the criticisms of the industry post privatisation was that you were very good at initially turning the tap on and paying yourselves and your shareholders, much better at going down that path than addressing these longer-term issues you are coming to us with now. We ought to be just a bit clear with each other about the methods of how we finance and what the industry is there for. I just want to try to address this from a different tack and that is that in some ways we have to produce a change of culture and perception about where water figures in people's lives. In order to get to the long term we are going to have to begin with the short-term water crisis of one form or another. In the evidence you submitted you did suggest that the high frequency of extreme events is likely to stress the water and wastewater infrastructure severely. Where do you feel we are most likely to be confronted with that first? Which are the most vulnerable areas to the sorts of threats you addressed? Dr Spillett: You saw the monsoon conditions yesterday. In the last ten years we have had more atypical events or unprecedented events than in the previous century. We are already quite concerned about the possibility of getting back to back droughts two years in a row, because if the groundwater aquifers are not recharged then the river flows are going to suffer and then we are worried about restrictions and ensuring security of supply for our customers. Equally, if we are going to get very intense rainfall periods which exacerbate flooding, the agency is going to have more fluvial flooding and certainly their worries about coastal flooding and saline intrusion are huge. This last autumn, when it was getting pretty dry, there were problems in Ireland, Scotland, North Wales as well as the South East, but from the water resources point of view, the South East is probably the most prone to water resource problems. Q70 Alan Simpson: In a sense, if you were to take this regionalised picture from the South East and project it on, how as an industry are you attempting to get across to us that more regionalised breakdown of the balance of stress, the stress between water shortage, the problems of areas which are more likely to be hit by monsoon flooding, the problems of areas which are more likely to be affected by higher levels of groundwater contamination? Mr Duckworth: I do not think we can say to you with any evidence that it is going to be area A or area B. Your monsoon conditions in London yesterday happened in Worcester and Pershore the day before and probably at some other time in the course of the next few months, it is going to happen in other parts of the countryside. Similarly, drought conditions can be regionally specific. The fact that we had an autumn drought which applied to the whole of the UK was quite unusual really. In the drought of 1995-96 the East suffered much more than the West. In my particular region, the Midlands, we had plenty of water coming out of Wales into Birmingham, but it was the East Midlands which was at most risk. It is difficult to paint a sub-regional picture. We know that in the course of the next 20 years we are going to have either these severe rainstorm conditions or lack of rain which will exacerbate either floods or water shortages. Dr Spillett: After the companies have produced their 25-year or 30-year water resource plan, the Agency usually then produces a national and a regional view from their own perspective and they themselves quite often differentiate between issues in the Midlands, South West, South East and the North. They tend to focus on what they see as possible regional differences. Q71 Chairman: Coming back to this question of the investment, surely you are going to have to produce some kind of risk analysis for the UK and the quicker you get started on responding to the outcome of that, bearing in mind the asset life and point you were making earlier about spreading it out, from the consumer's point of view it will be "cheaper" to do it starting now, rather than spending a long time. There must come a cut-off point where you say if you do not begin this process of spending in the next five years and you leave it for ten years, then you are going to have to spend at an ever-increasing rate to achieve the objective. When should this process be starting? Mr Duckworth: That process has already started, but you are asking us to paint a picture nationally. What that picture is, is a composition of ten regional water company plans and if we were here just listening to evidence from Severn Trent or Thames today, we could go into a lot of detail about where we see our water resources' headroom being eroded over the next 10 or 15 years because we do have those plans and we could also talk about the hydraulically challenged parts of our sewerage system. It is for those areas where we feel most exposed and most at risk that we are identifying investment solutions for the future. Q72 Chairman: Let me ask for some help during the course of this inquiry. From our standpoint, it would be very interesting if you were able to try to develop the analysis you have put in front of us in a little more detail. The reason I say that is that water users in the South West, as you referred to briefly earlier, have had to pay very high per capita increases in their bills because the environmental directives have impacted on their area disproportionately. There is not at the moment a mechanism of burden sharing but you could argue that climate change is a national problem. However, you have just highlighted the case of the East Midlands as a relatively speaking high risk area in your area. There is an interesting debate to be had here. If you are going to sustain supplies in and out of the East Midlands against the scenario we are talking about, are those people going to have to prepare themselves for disproportionately large bills or, given it is part of Severn Trent, is there an element of burden sharing? I do not want to have the debate now, but it would be very helpful if you could develop that scenario, because people will want to say, if I am living in a high risk area, what do I face as a possible increase in my bills? Mr Duckworth: I think we can develop that for you. The public part of the plans which every water company will be putting on their website next Friday will talk about those particular issues: where the investment is going or what investment is proposed over the next five years, which of these problem areas we are addressing. Q73 Alan Simpson: In preparing that information for us, or something we shall get from the website, can you just make sure we are able to see as well the risk evaluation you do in respect of potential gains which would come from new reservoirs, new sources of water supply as opposed to man management which looks at conservation measures more effectively? Mr Duckworth: That is a different issue. Dr Spillett: You asked the question earlier about the cost hierarchy. When the companies put together their 25-year plans they are based on a methodology agreed with the regulators which takes into account least cost and risk. It is not just the physical cost; it is the social and environmental cost. You would develop your next stage, either a resource or a demand management measure depending on the economics. As you go out to the 10 or 20 years you are using up your resources on the cheaper ones and you are coming into reservoirs, desalination and so on. You have a certain amount of flexibility because you cannot build a reservoir within 20 years. In the case of Thames, we are having to bring desalination forward to plug a gap, but we have to analyse the risk in order to make sure the resource or the demand management is in place against increasing population in the South East and climate change. That is how we judge it. I am not saying that it is brilliant, but it is reasonably sophisticated. Q74 Joan Ruddock: I think you are beginning to touch on some of the questions I was going to ask about the maintenance of water supplies. You suggest that there may be need for new reservoirs and we have just heard from Dr Spillett the fact that it is not possible to do that in the timeframe required by Thames Water. In terms of your planning I wonder how that has happened and why you are moving to desalination, but can we look at the more general picture and what role reservoirs can have in mitigating the effects of climate change? Dr Spillett: Particularly the way we are being told the scenarios are going to work, the problem is that there will be more winter run-off going into the rivers and out to sea and not being used and there will be less available in the summer which will affect both our customers' security of supply and environmental issues. The idea is that the more you can keep upstream, either in proper reservoirs or in wetlands the better and we do work with RSPB, the agency, English Nature. The idea that we can re-create upland wetlands and storage area is one on which the whole industry agrees. Also, if you have upland storage, you have more chance of regulating the river so that you can prevent flooding and so on and allow releases. The difficulty is that what with planning inquiries and environmental impact assessments it is a long-term thing, let alone local NIMBY effects and displacement of people and all the studies you have to do. Thames has been looking at a reservoir for many years, since 1975, because it was always seen with London's growth that we would eventually need one. In the past we have wanted to put it forward, but have been told to do more on leakage. This time round, with the problems of leakage, even if we forecast that we bring leakage under control, what with the population forecast for the South East, climate change and a reduction of some of our sources for environmental reasons, we can see London possibly running out at about 2020. In our plans we have put forward at least the next five years for a major planning inquiry and the relevant studies. If that gets through, we would then propose to go ahead with a major new resource. Q75 Joan Ruddock: Which is? A reservoir or a desalination plant? Dr Spillett: A reservoir. We have looked at artificial recharge, towing icebergs, seeding clouds, pipelines from the Severn, national grids and done an economic and environmental analysis. All I am saying about desalination is that if we perceive gaps opening up before we get to the reservoir, we cannot bring the reservoir forward, but we can construct a desalination plant on the Thames within two or three years. Because it is brackish water and not full sea water, the energy costs are fortunately much less. We think that is quite a good way forward. To be perfectly honest, from a water resource professional's point of view, we see desalination costs getting cheaper and becoming a more useful technology all round the world, because the water resources problem is not just the UK, it is everywhere. Q76 Joan Ruddock: It is not directly on this inquiry, but may I ask whether there are no means of using renewable energy to do desalination? Dr Spillett: Oh, yes. Especially if you have a cheaper power source, if you run it near a power station or something like that, the costs get even less. Q77 Joan Ruddock: I am concerned about the climate change implications of using carbon technology. Dr Spillett: Spain, for example, can use wind power and solar power and they use these things seasonally because of the tourist trade or high cost vegetables and so on. People here were earlier talking about re-use; re-use uses membrane technology, which is very similar to desalination. I see some of these new technologies coming in over the next few years, which may help solve technically some of the water resource problems which we are collectively facing. Q78 Joan Ruddock: Do you think realistically that is going to happen? You say all these things are possible. If a reservoir being sought since 1975 has come to no conclusion --- Dr Spillett: No, we have done the planning for it and done the studies and believe me they take a long time. This is the first time we have put into our OFWAT and our agency five-year plan with a 25-year water resource plan a firm commitment that we want to go ahead. As was said earlier, the agency are slightly more sympathetic about long-term resources, so with their support and with OFWAT funding over the next 10, 15, 20 years, we will go ahead with that. On desalination we are already starting to talk about planning permission with the local authorities in London. Mr Duckworth: The thing that is happening all the time in all the companies is that we are moving ahead on several fronts all the time. Conservation is a major issue. We do talk to our industrial customers, we do encourage them to recycle water wherever possible. It has an impact on our profitability, but we do that and it is very important that we do it. We talk to our domestic customers too about opportunities for conservation. We are very rigorous about the way we approach leakage from our pipes. The only way we are really going to tackle that is to have a major re-engineering of our pipework system. A lot of our pipework is over 70 or 80 years old and we cannot continue to go along and fix a pipe for it to burst again the next day somewhere else. Those are two tracks. The third track is that we do have to look for different water resources and one of the areas which may just generate some spare resource is metering. It is probably the most expensive of the opportunities we have, because if your upland storage reservoirs are the lowest cost option, metering is probably the highest cost option, because it does cost a lot to meter an individual household in the hope that will cause the pattern of consumption to be changed over time. There are all those things happening and they are happening in every water company to ensure that we have a sustainable water resource position for the future. Q79 Joan Ruddock: Would those things together, dealing with leaks and possibly increasing the proportion of people who have meters, be sufficient to cope with the predictions of climate change without new reservoirs? Mr Duckworth: No, they would not. Q80 Joan Ruddock: That is what I expected you to say. Dr Spillett: It is a twin track; you need both resource development and demand management. Q81 Joan Ruddock: I think we are all aware of the barriers which probably exist to the building of new reservoirs and Thames obviously has evidence of that. Dr Spillett: Absolutely. Q82 Joan Ruddock: In your view where should new reservoirs be built? Mr Duckworth: Upland areas are the best place because you get the benefit of the water flowing downhill to your centres of population. Q83 Joan Ruddock: Which uplands are we talking about? Whose uplands? Where? Dr Spillett: In any system. Mr Duckworth: Wales has always been a good source of upland areas. The Victorians had a great opportunity to build reservoirs and Liverpool has water from Wales, Birmingham has water from Wales and the real benefit is that it all flows downhill 70 or 80 miles under gravity and the benefits that modern 21st century water companies are still getting from Victorian over-engineering cannot be understated. The over-engineering of our reservoir systems and the over-engineering of our sewerage systems are something which we are still living on, which is great for us in a way, but it re-emphasises yet again that we have to do much more maintenance to those very old systems. Q84 Joan Ruddock: I am Welsh and I can tell you that in my youth taking water from Wales and letting it run into England was a great political issue. Dr Spillett: It still is. Mr Duckworth: If you look at modern reservoir systems and Professor Binnie mentioned earlier Carsington in Derbyshire, which was only opened in 1992 and is the most modern reservoir in this country, I think you can transform an area. It is not a blight on the landscape, it does bring opportunities. Any reservoir built anywhere would be shared by several companies in future We are not just talking a reservoir for Severn Trent, or a reservoir for Thames perhaps, we are talking something which could be developed nationally. One of the things we had many years ago was something called the Water Resources Board, which looked at water resources in a national context. We have the opportunity, through the Environment Agency, to do more of that national water resource planning for the future, so it does not become a particular local issue for Thames or Severn Trent, but has the ability to address where best a resource might be developed for Great Britain UK. Q85 Joan Ruddock: Is there a map somewhere of these planned reservoirs in the next ten years? Mr Duckworth: Maps have been produced by the National Rivers Authority, which was the forerunner of the Environment Agency and it did identify about six or seven different opportunities, including inter-basin transfers. That is something which unfortunately the water framework directive does not commend. There is the opportunity and once the Environment Agency distils all the different plans from the different companies which have gone into the agency over the last few weeks, there may be an opportunity to have another look at that with a national picture in place. It will still have to address the local issues for Thames, for example. I think Jacob has the figures. Dr Spillett: Only a few companies have put them; half a dozen or so. Mr Tompkins: It is worth pointing out that about ten companies are going in for investigations in this current funding round, so they are looking long term, for the next 20 to 25 years. When we are talking about reservoirs, we are not talking about very large reservoirs. One company has put in for a winter storage reservoir, where they take out flood waters or high groundwater and use it over the summer. There is another very small one and a couple of reservoirs which are just being increased in height. Two shared reservoirs had been put forward by the companies. One of the companies is putting forward a proposal to optimise the reservoirs it has by building pipelines between them, so they can pump between the reservoirs. A lot of the work the companies are doing is about optimising their resource as well as building new resource and companies are looking at a whole range of options. I do not want you to get the idea that these are just big reservoirs; there is a mix. Dr Spillett: Are they all in the South and South East? Mr Tompkins: Strangely the majority are in the South and South East, but there is a distribution across other parts of the country in terms of optimising current resources; the majority are in the South East. Q86 Joan Ruddock: That takes me to the winter storage. If you are going to transfer water from winter storage to areas of high demand you need infrastructure. That has environmental impacts. How can they be minimised? Mr Duckworth: Carsington is a great example. It takes water out of the river Derwent in winter time. The only time we have a licence to abstract out of the river Derwent is when the river is at a certain height, so it is almost at flood conditions. We take it out of the river Derwent in winter and if we are short of water supplies anywhere in the East Midlands, we put it back into the river Derwent and it will be transferred back via the river system to one of three or four locations to serve Nottingham, Derby or Leicester. Dr Spillett: You can do it. You take into account the treatment capacity of the available rivers, you try to optimise these in the planning of them. Q87 Chairman: May I just ask one factual question? If everybody were on a water meter in England and Wales would the water companies' revenues go up or down from current levels? Mr Duckworth: We would lose a lot of money. Q88 Chairman: You would. Mr Duckworth: Yes. Firstly, customers are quite conscious of what they use initially, but, secondly, the tariffs are set such that we do not necessarily cover all the costs and it takes a long time to recover the cost of installing a meter, which may be up to £350. Chairman: I was having visions, listening earlier to Dr Spillett discussing desalination, of a little bottle of water with "Desal" on it. A new brand could be born. We know something about things like that. Q89 Mr Mitchell: Just on meters, that means presumably that you cannot really assess the value of meters in reducing consumption, because you have offered them as a loss leader in a sense. Mr Duckworth: We can because we can look at different customer groups, some of whom have had meters installed because they have had new houses; every new house since 1979 has had a meter installed. We can look at some of those groups who have meters and a similar sort of group who do not have meters. The consumption tends to be quite similar, but a lower amount of water is consumed by customers with meters. Q90 Mr Mitchell: Is it substantial? Mr Duckworth: No, not substantial. Q91 Mr Mitchell: Substantial enough to justify the huge investment in meters? Mr Duckworth: No. We did it for a different reason in those days. We needed to understand what was happening to our demands, because we knew, back in the 1970s, that we were going to have to think about the next level of resource. What evidence do we have of customers' consumption? What opportunities were there to encourage customers to use less? When you install meters initially, there is a slight reduction and there is also an opportunity to reduce peak demands. Peak demands on our system are things which most worry us quite frankly with everyone switching their hosepipe on at five o'clock on a warm summer afternoon. What we have seen is that meters can be useful in suppressing peak demands. Q92 Mr Mitchell: I can tell you a little story there, if it does not hold us up. In New Zealand, with a single channel television, the best way of checking audience reactions was the Christchurch Metropolitan Water Board. Unfortunately, when Coronation Street was on water usage was at an absolute minimum, apart from a few dripping taps. When my programme went on ... people rushed out to take baths and flush lavatories. Just to round off the water meters thing, it is going to be difficult to use water meters as a form of rationing or price management, as long as there is only a proportion of usage. The universal metering plan has faltered. Mr Duckworth: It was never going to be an overnight issue because the cost of universal metering was going to be huge. We are moving to 70 or 80 per cent meter penetration over the next 10 to 15 years and that takes us a long way further forward. I do not think it will overcome the problems we anticipate as a result of climate change. Dr Spillett: Ideally, if you had universal metering, you would be able to do what they do abroad with different tariffs and some seasonal pricing. The issue is particularly relevant in London, with a lot of shared service supplies in high-rise buildings and the average cost of £200 or £300 moves up to about £1,000 per individual property, so when you look at those economics it is hardly worth it. Obviously the industry would prefer everything metered so we had direct measurement of everything. It would be sensible, but it is a long-term thing. Also customers are not always keen and there is an incident shift with the disadvantaged in society. If we go away from domestic rate based costs and you have a single parent with a lot of kids, it goes from a low bill to a very high one, whereas people in detached houses whose kids have maybe left are paying a high price on the property but suddenly get very low bills on metering. Q93 Mr Mitchell: Let me move on to quality of water. All these visions of youths like myself wearing straw boaters, punting down the Cam is going to be pretty well ruled out, is it not? You paint a frightening picture of the deterioration in the quality of water and all the causes. What is going to be the worst problem? Dr Spillett: The possibility of long dry summers, meaning that there will be lower base flows in the rivers. You saw this autumn, with an extended dry period, companies and public and the agency all starting to get worried. It is our fear that if we get year on year like that, the system has never really had to face that. The quality issues are because of dilution, or lack of it, plus the fact that we do not know how well our treatment works will bear up under higher temperatures and less flow. It is not meant to be a doomsday thing. The scenarios you heard earlier from UKCIP were showing ranges over 2030, 2050, 2080 but we have just been worried as an industry about the number of unprecedented events, the one in 200 years, which have happened in the last ten years. We can start to see that some of these things are going to happen sooner than we thought and, to answer an earlier question about why we have not been doing more about it, this is the first price review in which the regulators and Defra have asked us to take into account climate change in our long-term plans. We have not had the opportunity to cope with climate change in our investment plans before. To be perfectly honest, without the research we have been carrying out, we have not had as much knowledge as we need in order to plan correctly. Q94 Patrick Hall: I must admit I am surprised to hear what I have just heard. It is not as though no-one had heard of the concept, nor that the concept did not have credibility in the scientific community never mind others until recently. In your evidence you refer in paragraph 25 to the effects of anticipated climate change on the ecology, on the environment and on biodiversity. You say "We will not be able to conserve species or habitats ... We will need to accept that we will lose species and habitats". That is what Water UK are saying. I think that needs to be challenged and questioned or explained a little bit more. Obviously if there were an ice age everywhere here, then we would expect certain things to be different, or if there were a tropical rain forest. Do we need to accept that or is it not too early an indication that the industry is simply preparing to give up on nature conservation? Linked with that of course are comments you make later in paragraph 26, and maybe this is partly the nub of it, that it is going to be too expensive to have good quality nature conservation projects and regulations. Is this about the industry seeking to sidestep its obligations towards biodiversity and environmental quality? Mr Tompkins: No, we have statutory duties to promote the Hab and BAP guidelines within government. We are also one of the major landowners of SSSIs in the UK and we do a lot to ensure that the environment is preserved and enhanced. However, if you look for instance at the chalk streams in the South of England, the biodiversity would then operate within a certain temperature range; likewise salmon in the Thames is another one. Once the water temperature gets too high, it is no longer a suitable habitat for them. For instance is there a process to de-list certain coastal salt marshes, if sea levels rise, inundate those and destroy the site? We are not saying we should abandon nature sites. We are saying that there should be some flexibility to make sure that we are not protecting museum pieces, but that we are adapting our protection with climate change to make sure that we are still protecting as wide a range of species and habitats as possible and that that is appropriate for the new temperature and climatic conditions we are under. Also, we anticipate that there will be a challenge if we enter into a long period of drought and we have to apply for drought orders which may affect specific nature sites and there is then a balance between either supply for the public or damage to a nature site. We are trying to address that by working with the Environment Agency and English Nature to highlight where those sites are and to avoid those sites where possible and to do investigations now rather than having to do them in anger in several years' time. It is because we take our environmental protection role very seriously that we are flagging this up. We are concerned that we cannot carry on as we are at the moment and if we do, that will lead to loss of habitats. What we need to do is to make sure we have as much protection as possible. That means an adaptation of regulation, more flexibility in regulation. Q95 Patrick Hall: Dr Spillett said something earlier and if I have misunderstood, please correct me. I thought he said at one point, which is linked to this point, that there is a need for the industry to move away from some environmental projects and investment in environmental issues in order to put more into re-engineering the infrastructure. Dr Spillett: No, it is a different point. What we are saying is that since the industry was privatised every five years most of the focus has been on environmental and quality investment and money on infrastructure has tended to be deferred because it did not have any mandatory basis with OFWAT. This time round, the fourth price review, the industry has a slightly larger chunk of money put into infrastructure issues. Infrastructure affects the environment as well. Jacob's point here is that most of the companies are extremely proud of their environmental record and we have a large number of SSSIs, sites of scientific special interest, the conservation areas, the special protection areas, within our custodianship. What we are saying is that what will happen over the next 20-odd years, as the climate zones shift, particularly if the chalk streams are not replenished and the temperature changes - we have flagged this up with English Nature, who know the problem - is that we will need to be able to manage change. Do we preserve sites in perpetuity and at increasing cost? Ecologically if they are changing anyway, what is the best way forward? We are just raising the issue. We in no way want to negate our environmental obligations. We would prefer to do more in this area by conservation. The environmental issues we were talking about on the bigger investment scene are drinking water quality, urban waste water, framework directive, a whole string of them. Q96 Patrick Hall: The sentence you use in paragraph 26 of your evidence about the need to develop flexibility and realism and move towards a regulatory framework which is less prescriptive could be open to misinterpretation. It could mean that the industry is seeking to withdraw from its responsibilities in these areas. After all, even if there are these great changes taking place and the movement of climatic zones etcetera, it does not necessarily mean that the degree of biodiversity will fall; in fact it may increase in some areas. Therefore the need to have this environmentally wholesome and sustainable approach will apply anyway, will it not, even if certain habitats are lost for reasons like flooding or whatever? Dr Spillett: You are right. It is really asking whether you can de-designate a site if ecological conditions no longer apply. At the moment it is extremely difficult. Q97 Patrick Hall: Perhaps then re-designate according to a different set of circumstances. Dr Spillett: I have no problem with that. Mr Duckworth: Absolutely. Mr Tompkins: Absolutely. Q98 Patrick Hall: I just wanted to clarify that. Mr Duckworth: I think it is very important. It could be misinterpreted. You should not interpret anything we said today as being anti-environment, because we have to work with the environment 24 hours a day seven days a week. We get our water from the environment and we want to make sure that is okay and we put our waste water back into the environment. As an industry we do have tremendous environmental credentials, but what we have tried to get across today is about balance and the balance of risk as we go forward. Q99 Patrick Hall: Are you developing this argument with regulators? Mr Duckworth: With English Nature and organisations like that who are very sensitive to some of these issues themselves. Dr Spillett: We are suggesting that we should be developing river corridors and avenues for migration for some species, things like invertebrates which cannot easily change. How do we make best use of our existing ecological assets? The point we are just making is that you cannot preserve them in aspic if the environment is changing. Mr Tompkins: We are actually working with the wildlife trusts in something called Water for Wildlife, which is looking at the ecological potential of river corridors for wildlife. We are not just focusing on the SSSIs. One of my concern is that with climate change you could end up with specific protected nature sites as islands within a desert of biodiversity unless you also, as water companies, focus on using the rivers as corridors and look at our wider environmental obligations to the environment as a whole. We want flexibility which enables us to do that as well as the protection of the designated sites. 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". 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? 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. |