2 Reducing water abstraction licence fees
6. The Agency recovers the costs of water abstraction
on a regional basis (Figure 2). The variation in licence
fees in each region (from £10.03 per 1,000 cubic metres of
water in Yorkshire to £23.57 in Northumbria) should therefore
reflect the associated costs of regulating water abstraction.
The cost varied according to the geological and hydrological features
in each region which impacted on the number of monitoring sites
and visits required. The unit charges in Southern, Wessex and
South West also reflected the higher workload on water resource
planning and management in those regions. The high unit charge
in Northumbria was primarily attributable to the cost of the Kielder
reservoir. Abstractors in adjacent regions pay substantially different
abstraction charges. For example, abstraction charges in the Thames
region are £11.91 per 1000 cubic metres, some 55% of the
charge of £21.72 in Anglia.[7]
Figure 2: Abstraction charges vary considerably between regions
1 The
North East region is split into two areas; Yorkshire and Northumbria,
for calculating abstraction charges.
2 The South West
region is split into two areas; South West and Wessex, for calculating
abstraction charges.
Source: Environment Agency
7. The Agency's approach to recovering water abstraction
costs from licence holders gives it little incentive to operate
water resource management activities efficiently. The Agency had
justified its licence fee to abstractors by keeping the increase
each year below the rate of inflation, but abstractors have little
information with which to challenge proposed fees or understand
how they are calculated. The National Audit Office found that
the Agency had apportioned incorrectly flood risk management costs
of £650,000 to £1.7 million a year to its water resource
management activities. Unlike water resource management costs,
which are recovered from abstractors, flood management costs are
borne by the taxpayer. If costs are incorrectly allocated they
result in higher licence fees for abstractors and could ultimately
result in water consumers paying more than necessary. Reducing
water resource management costs by the sums identified by the
National Audit Office would reduce the standard unit charge per
1,000 cubic metres of water in 2005-06 by up to 55 pence (Figure
3). The Agency has reallocated £300,000 costs from water
resource management to flood risk management in 2005-06 and expects
to re-allocate a further £1 million in 2006-07.[8]
Figure 3: The price reduction per 1,000 cubic metres of water in 2005-06
when flood management costs are taken out of the cost recovery
Source: Environment Agency
8. Minimising increases in the licence fee partly
depends on an efficient regulatory approach. The Agency has added
1,500 sites to its monitoring network in England in the last three
years (a 12% increase). Further increases might arise as the European
Union Water Framework Directive was likely to require additional
monitoring, and the number of sites had increased as a result
of flood risk management. There is, however, no single individual
or team within the Agency responsible for the network and for
controlling charges to the water resources account. The Agency
considered that it had processes at regional and national levels
to assess the effectiveness of its monitoring network, and it
now intended to make an Area Environment Manager responsible for
the network in each region.[9]
7 Qq 49-54; C&AG's Report, para 2.5 and Figure
10; Ev 10 Back
8
Qq 7, 38, 42-44, 66-67; C&AG's Report, para 2.12; Ev 10 Back
9
Qq 4-5, 36; C&AG's Report, paras 3.6-3.9, 3.11-3.12; Ev 10 Back
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