Examination of Witnesses (Questions 120-139)|
MONDAY 8 MAY
Q120 Mr Williams: Double the previous.
Were the companies aware of this when they took on the four sold-off
Mr Buchanan: Yes.
Mr Gray: Yes, they were aware
of the arrangement.
Q121 Mr Williams: Which were they
aware of? The earlier set of figures or were they aware of the
Mr Gray: They were aware of the
new arrangements. The 1,150 miles a year was the performance before
the 2001 price review. The accelerated replacement was introduced
at that price review with funding to allow the companies to do
Q122 Mr Williams: What estimate of
annual cost is there to replace 2,000 miles a year?
Mr Gray: The mains replacement
programme, which is part of the expenditure the companies undertake,
which is specifically to do with this, runs at about £430
million per annum in the current five-year period. That is one
of the largest bits of expenditure.
Q123 Mr Williams: That is £430
million a year to replace pipes.
Mr Gray: Yes.
Q124 Mr Williams: That is over the
whole network, not just the four.
Mr Gray: That is over all eight
Q125 Mr Williams: So the four who
purchased got approximately half of that to pay.
Mr Gray: Yes.
Q126 Mr Williams: That cost is obviously
going to go to the consumer, is it not?
Mr Gray: Yes.
Q127 Mr Williams: It is quite a considerable
sum. How much of it is in urban areas? If we have 58,000 miles
of pipe at risk, how much is in the urban areas where it is very
Mr Gray: I should guessand
I should be guessing because I do not have the datathat
probably the large majority of it would be in urban areas because
those are the areas where the system is overridingly post-war
cast iron pipes.
Q128 Mr Williams: We have three types
of pipe: there is the original cast iron pipe which was used from
the beginning of the last century and which, understandably, is
subject to corrosion, but there is a degree of predictability
about it. Earth shifting is a different matter. Then, in 1970
you moved to this ductile iron pipe. Were you using that to replace
Mr Gray: You keep saying "you":
it is the industry.
Q129 Mr Williams: You embody the
industry for us today.
Mr Gray: We embody consumers actually.
Q130 Mr Williams: Yes, you are supposed
to be looking after the interests of consumers. It says here that
the safety of consumers is a major consideration. I would have
thought that physical safety must be a predominant consideration.
If we look at footnote 35 we find that the ductile iron pipe was
introduced in 1970, but this now presents a different type of
problem, does it not? According to this, it fails unpredictably.
How much of it is down there and do you have to dig it all up
Mr Buchanan: The best thing is
for us to get that data for you in the breakdown of cast iron/ductile
Q131 Mr Williams: In terms of priorities,
has it meant there is a shift in priority? From the 1970s on you
have been putting in this new type of piping. Do you now have
to say, because it is unpredictable... I assume a lot of it will
be in areas where there are new housing estates, so following
the housing explosionexcuse the rather inappropriate phrase
at the momentsince 1970, a major part of this ductile unpredictably
volatile pipe will be in new housing estates.
Mr Buchanan: Yes.
Q132 Mr Williams: Have you stopped
Mr Buchanan: It is a great question
and the HSE clearly set the parameters, but the important thing
here is that we do represent the consumers we do not represent
Q133 Mr Williams: Have they stopped
Mr Buchanan: We do interface on
this. The companies have a primary responsibility to make sure
that the pipes are protected and that they have the appropriate
assets in place. If we were to set a price review which in their
view was thoroughly irresponsible, they would go to the Competition
Commission; they would have to.
Q134 Mr Williams: Coming back to
the fact that you are looking after consumers' interests, we understand
that, but if you are not asking the questions I am asking, it
seems to me there are some important questions you should have
asked. So it is not unreasonable to ask you which is the greater
priority, replacing the newer ductile unpredictable iron pipes
which are substantially in new urban areas, or replacing the old
cast iron pipes?
Mr Buchanan: It is a very reasonable
question. To give you some kind of comfort, through the price
control discussions we haveso for the price reviews this
year it is largely with National Grid, Scottish Power and Scottish
Hydrowe have regular discussions on the quality of the
assets, we hire engineer consultants to go out and look at the
quality of the assets, we have intense negotiations with the companies
on the quality of the assets.
Q135 Mr Williams: This is waffle.
You are missing the point.
Mr Buchanan: We have their asset
register. We will then negotiate with them, effectively on the
back of the advice of the engineers and the HSE
Q136 Mr Williams: I am sorry, but
you are misunderstanding the question. The question is not what
you are negotiating about. The question is: since consumer safety
is your priority, what attention are you paying to the new and
more dangerous problem of a pipe having been used for new developments
which is actually more volatile and unpredictable than previous
piping? You are not able to tell me what priority there is now
in replacing pipes, whether you are still concentrating on the
post-1900 stuff up to 1970 or whether you have had to switch to
replacing the new and using the third type, the plastic pipe,
to replace it.
Mr Buchanan: Quite clearly our
primary responsibility is as an economic regulator and we look
to the specialists at the HSE with their primary duty, but also,
when we are in a price review, to the specialist engineering consultants.
In answer to the questions you ask, I want to give you some confidence
that we do ask them but the degree of responsibility
Q137 Mr Williams: But you do not
remember the answers.
Mr Buchanan: I can give you an
example right now. We are going through the electricity transmission
price review and we are analysing the underground cables, we are
analysing the quality of the overhead wires and we have engineering
specialists to help us do that. I want to give you some comfort
that it is not just ignored.
Q138 Mr Williams: I should like you
to look at the questions I have asked. I may consider putting
in some written questions to refine them.
Mr Buchanan: We should welcome
that and we shall try to give you some answers.
Q139 Mr Williams: I should like a full
report from you for us to embody in our Report on this issue of
safety, the extent of it, the location particularly, since a lot
of the new stuff will be in urban areas and so on. I shall probably
put together a set of questions and pass them in, but read what
I have said in my questions.
Mr Buchanan: Yes.
Chairman: That concludes our meeting.
Just to sum up, the Report estimates that there are potential
savings for the consumer of £1.2 billion between 2008 and
2023. Some of us will not be here in 2023, so we hope you make
more progress before then. Thank you very much.