3 Information on the performance of
sewer networks
19. For companies to make the right investments at
the right time, there must be consistent and reliable information
on the condition of the sewer network they own. Before privatisation,
there was incomplete and inconsistent information on the performance
and condition of networks. Ofwat described the records maintained
by water authorities before privatisation as patchy.[26]
20. The companies and Ofwat have improved the quality
of information. Since 2000, the industry and its regulators have
worked together to develop a "common framework" allowing
companies to obtain a better understanding of network capital
maintenance needs, founded on risk-based principles.
21. There remain, however, problems of consistency
between and within companies. There can be difficulties in comparing
asset condition over time, in particular with the interpretation
of grades assessing condition. The water industry has produced
five versions of its guidance on grading in their Sewer Rehabilitation
Manuals and companies use different versions.[27]
22. Some companies consider that Ofwat should give
more weighting to trends in the condition of sewers. At present,
companies report on asset condition on a sample basis as part
of a five-yearly asset inventory exercise. There is however no
long-term programme of surveys of the same sample, or cohort,
of sewer - so it is rare for the same sewer to be surveyed from
one assessment to the next.[28]
Companies do not have a cohort of sewers which they continue to
look at every five years in order to detect whether there is a
systematic rate of deterioration.[29]
23. Ofwat uses backward-looking indicators, based
on past performance, to monitor the condition of each company's
sewer network. The indicators do not provide robust information
on the likelihood of asset failure (for example, a sewer collapse)
or the need for investment in the future. Ofwat acknowledged the
weaknesses in the backward-looking approach and confirmed its
determination, alongside the companies, to develop a more forward
looking element in the analysis of the performance and condition
of sewer networks.[30]
24. The investment cycle appears to be driven less
by the information obtained by companies and Ofwat than by the
regulatory cycle. Figure 4 below shows how companies tend
to incur low expenditure immediately after Ofwat has set price
controls, while expenditure tends to increase towards the middle
of the price review period, before falling away at the end.
Figure
4: Profile of investment spending on sewer networks
Source: C&AG's Report, Figure 7
25. Ofwat did not think this was an acceptable profile,
but the investment cycle was more stable than it had been in the
past, when sewer assets had been owned by water authorities subject
to annual public sector expenditure controls. Ofwat have sought
to address the uneven cycle by confirming in advance the investment
programme for the first year of the next price control period.[31]
26. There is only a limited longer-term framework
for planning investment in sewer networks. By contrast, the licences
issued to water companies require them to prepare water resource
plans, which consider the balance of supply and demand over a
25 year period.[32] There
are two issues that may increase the pressure on water companies
as they attempt to run effective networks. Firstly, climate change
may lead to more intense rainstorms, which in turn may lead to
more incidents when the existing sewer capacity is insufficient
for the expected water flow. Ofwat consider that there is already
evidence of climate change in the increasing intensity of rainstorms.[33]
Secondly, expected increases in the number of houses in the South
East may increase the risk that existing sewer networks have insufficient
capacity. Ofwat acknowledged the potential impact on the design
of water and sewerage systems of the pressure of new housing development
in the South East.[34]
26 Q 19 Back
27
C&AG's Report, para 3.16 Back
28
ibid Back
29
Q 20 Back
30
Q 10 Back
31
Q 53 Back
32
C&AG's Report, paras 3.30-3.31 Back
33
Q 12 Back
34
Q 12 Back
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