Examination of Witnesses (Questions 660
- 679)
WEDNESDAY 9 JANUARY 2008
MS PAMELA
TAYLOR, MR
PHILL MILLS,
MR BRUCE
HORTON, MR
JIM MARSHALL
AND MR
RICHARD VENTERS
Q660 Mr Drew:
--- Secondly, how you are advising individual water companies
and, thirdly, what you need to do in the future to re-evaluate
the scale of the events of last year and how individual water
companies will be able to respond.
Ms Taylor: Because of the work
that we have been doing at the moment we felt that it was essential
that we should get together as a water industry and learn the
lessons very quickly and share those lessons, which we are doing
and we are continuing to do. We are also updating ministers on
that information. However, water and sewerage undertakers have
to comply with the Security and Emergency Measures Direction (SEMD)
and that is about co-ordinating, planning and so on. It was quite
obvious from the events of last year that although the plans exist
and although those plans are rehearsed with many different bodies
and different organisations that in fact, when it came to an event
that people had not foreseen, then although the plans worked element-by-element,
when you added it up to the whole they could not cope. As far
as we are concerned now, we are looking for these plans to be
shared more rigorously, if that does not sound too silly. In other
words, that people should not just do desk exercises and computer
exercises and so on but should do real old-fashioned exercises,
and these should be co-ordinated through local resilience forums.
We should also be learning the real lessons from what happened
and making sure that we are prepared for the future. Any scenarios
that people had in their minds, we have now got to up those, and
the research that we referred to earlier is helping us to do that.
Mr Mills: Companies are already
looking at their critical infrastructure, the water treatment
works—and a lot of them are near rivers anyway because this
is the source of the water—but they are re-evaluating their
resilience and looking at flood protection or increased flood
protection measures for them or improving the security of supply
so that they will be able to get water supplies from alternative
sources. Companies are obviously doing that now and they will
be putting proposals to the regulator as part of their business
plans because we are now getting into the periodic review cycle
when Ofwat looks at companies' submissions and looks at what the
investment programmes will be and what the price limits will be
from 2009 onwards.
Q661 Mr Drew:
Is Ofwat the final gatekeeper when it comes to the individual
companies' plans in terms of the resilience of those contingency
plans?
Ms Taylor: The financing of it,
yes.
Q662 Mr Drew:
Or is it basically left to the companies themselves to decide
this is an area they need to spend much more attention and money
on?
Mr Mills: Companies get guidance
from Defra and from the security services and they have to work
to that guidance provided, but they will put forward their business
plans because they are the ones that understand the assets that
they own and operate.
Q663 Mr Drew:
That is Ofwat who will do that?
Mr Mills: Ofwat will decide whether
the public are going to fund that particular improvement or that
programme.
Mr Horton: Ofwat have been quite
clear there is no blank cheque for updating infrastructure or
assets and any case needs to be made and well-justified on an
economic basis by companies and judged against the other investment
requirements that companies are expected to make as well.
Q664 Mr Drew:
A final point, if there is unhappiness over a very specific piece
of critical infrastructure, is it possible to say to a water company,
"You have got to move that? That is just too high a risk.
Sorry, it has got to be moved out of the flood plain and we might
be able to give you some help to so do"? Is that a possibility
or is that one of the things, Pamela, that you would allege actually
falls between all these different bits of legislation?
Ms Taylor: Sadly, I think the
answer is both in that when you are analysing risk you cannot
just take the water industry on its own. You have to look at the
impact on other utilities such as electricity. Power cuts are
a worse threat usually than flooding and flooding of course can
be linked to power cuts, so we have to look at it across the piece.
I think that it is fair to say though that water companies err
on the side of asking for what it is they think is right and regulators
will err on the side of saying, "Can you justify that financially?"
I do not think there is any need for anyone to say to a water
operator, "You are not looking at this risk properly; you
are not asking for sufficient funding; you are not looking at
resilience sufficiently," and so on. If you like, the balance
is the other way around, that the water operator would obviously
ask, and then it is a question of whether the economic regulator
would say that that was right and justified or not.
Mr Horton: In response to that
specific question, it would be one of the options, but moving
a water treatment or waste water treatment works a significant
distance is going to be extremely expensive, and there are other
things that you could do probably that may be cheaper or more
cost-effective such as localised flood defences or improving connectivity
within the region so that you are not isolated and you are not
over-reliant on one works.
Q665 Chairman:
The only thing that bothers me about what you say, Pamela, you
say you are going to improve your business resilience, you are
going to do all this, as if to say this is a new discovery. I
would not imagine that there is one water company that does not
have a backed up IT system because it realises in this day and
age that if it does not its business processes are totally vulnerable,
and yet in the case of this summer it seems to have come as something
of a surprise—and we say this with the benefit of hindsight—that
certain assets were suddenly found to be vulnerable or eventually
overwhelmed.
Ms Taylor: I think it is fair
to say that they were found vulnerable or overwhelmed in ways
that nobody, not just the water operators but everyone else who
is involved in the planning, had foreseen, so, yes, companies
are always looking at resilience. Where the economic regulator
has refused the financing for example, going back to the previous
point, then companies have used their own money, ie shareholder
money, in order to improve the resilience of their infrastructure.
The need is there, the need is recognised and the need had been
being met, but last year was different of course.
Q666 Chairman:
I want to move on to talk about the design of sewers, but obviously
sewer capacity is pretty expensive stuff. If you decide that sewers
are not able to cope, then ripping up streets and building new
sewers is seriously expensive stuff. Just before I get into the
design issue do you believe that the current model of determining
the payment structure for water is a correct model and a correct
basis to take into account the implications of more extreme weather?
I ask this question against the background that when bathing water
standards for example were to be improved, particularly in the
South West, individual users' bills went up very steeply because
there was a big bill and not many people to pay it. It has occurred
to me as to whether in fact the current user-pays-all-expenses
model is correct when there are extreme weather conditions of
an unpredictable nature, not the fault of the water company but
they are now becoming a consequence of climate change. We deal
with that on a national, European and international basis, so
I come back to my central question: in responding to some of the
pressures which may be associated with climate change, is the
current water pricing investment and payment model the right way
to deal with it?
Ms Taylor: The answer is that
we are asking the same question and we do not yet know the answer.
It is certainly something that we are aware of and our regulators
are aware of as well, so it is something that certainly more people
now are beginning to ask, and there is a bigger debate about that.
One of the things about the five-yearly cycle—and as you
know, our prices are set for us by the economic regulator every
five years—and what we are discussing with Defra at the
moment (and we are very pleased that the current ministers are
responding very well to this and, to be fair, the last minister
too) is to look at the strategic direction of the water sector,
to say long term what are the things that we have to take into
account in terms of planning, and then to say, well, long term
how do we need to make sure that we are fit for the future and
therefore can we make sure that price reviews are not just a five-yearly
battle where the environment wins one time or customers the other,
prices go down or prices go up, or whatever else it may be, but
making sure that those five-yearly price reviews are actually
a stepping stone on the way to where it is we think long term
we need to be. Part of that debate now is whether regulation as
we currently have it is fit for the future, and if it is not what
are things that are blocking it that we need to consider.
Mr Horton: Just two points I wanted
to make in relation to climate change. The first is we need to
understand the impacts of climate change on the water industry.
There is an awful lot of work going on to do that. Phill mentioned
earlier some of the UKWIR work that is going on. We have been
doing research on climate change for ten to 15 years already and
our understanding is improving, although it is still not perfect,
so we still need to do more work to understand the impact. Water
companies and the regulator do not want customers to be paying
for investment unnecessarily. The second point is that adaptations
to climate change are not necessarily always going to cost a lot
of money. In some circumstances they will but we should be looking
for the most cost-effective and in the long term most sustainable
solutions. Phill mentioned earlier things like SUDS, permeable
surfaces, restoring natural flood plains and so on, and with things
like the Water Framework Directive we are increasingly being given
the tools to move towards those more low-tech, sustainable solutions
which may be less costly.
Q667 Chairman:
Let us talk about sewer design because as I understand it, you
are supposed to have your sewers designed to deal with a one in
30 year event. Who set that standard?
Ms Taylor: All sewers since 1980
have met the standard of one in 30. That was actually something
that the water industry itself pushed for as a standard.
Q668 Chairman:
Who decided that a one in 30 year event was the right number?
Ms Taylor: Based on information
that we had at the time in terms of the modelling available to
us, information on climate change, demographics, the ways in which
people are using water and so on, it was right and it looked as
if it was right at the time, and it probably was right at the
time.
Q669 Chairman:
So all sewers that we have got now ---?
Ms Taylor: Only those built since
1980 were designed to meet the standard of one in 30.
Q670 Chairman:
Let us go back because an awful lot were built before then
Ms Taylor: An awful lot, yes,
but it is quite likely that many of those built before 1980 meet
that standard too thanks to the Victorians, but it is also quite
likely that a whole load of them do not meet the one in 30.
Q671 Chairman:
You said that the standard was set in 1980, so this is 27 years
ago and the scenario of what you have to cope with because of
development, and now climate change, has changed, but are you
saying that the industry does not have knowledge of the status
of the sewers that were built before 1980, because your response
to my probing on that was of a general nature alluding to the
fact that you hoped that much of the other infrastructure was
up to the one in 30 year but you could not be certain?
Ms Taylor: That is because we
do not control all of the sewer network that we have to take responsibility
for. We do not control the water that comes into it. We do not
control the connections that people have and the automatic right
to connect to it. We do not control the water run-off from highways
and so on. As usual, there are too many things that we do not
control in order for us to be able to—
Q672 Chairman:
You might not control it but coming back to this question of what
we need to do, were it necessary to have a sewer system that can
cope, there is lots you cannot control in terms of the liquid
input, but you have already identified a large number of sources
of water.
Ms Taylor: Yes.
Q673 Chairman:
So I am just a little concerned that nobody has gone out and done
some modelling.
Ms Taylor: We have.
Q674 Chairman:
Right. Let me come to the simple layman's question: you might
not be able to tell me exactly if all of the sewerage system is
at one in 30 years, but let me turn it on its head, how much of
it does not cope with what we have already got in terms of all
this water coming into it, because otherwise, if it all coped
we would not have any flooding?
Mr Mills: You are correct, companies
have done modelling since they took over the sewerage system in
1989 and they have been required to map sewers as well. They have
not mapped all the sewers yet but they have done it on a risk
assessment/risk management approach. They have looked at areas
and sewers where they have problems and they have established
what are their critical sewers, so they have looked at putting
investment in those critical sewers, which could be because of
the flow capacity or could be because of the impact if there was
a collapse of a particular sewer, and the modelling has been geared
towards that. They have also done lots of CCTV surveys to check
the condition of sewers, so they have a good feel since 1990 of
the condition of those sewers. The sewers are classified into
Ofwat's five conditions from good, meeting all the standards,
to those that are perhaps in imminent danger of collapse and need
remedial measures.
Mr Horton: It is important to
remember also that the one in 30 is a standard and it is a theoretical
standard largely. There are many, many rainfall events and floods
that occur that are greater than one in 30 and do not cause any
property damage or flooding. It also only reflects probabilities;
it does not reflect consequences, so companies, I think rightly,
take a risk-based approach.
Q675 Chairman:
The ABI use one in 75 years as their event number as a condition
for providing insurance. In other words, if you are in an area
where the flood risk is greater than one in 75 you are in trouble
in getting cover. The insurers have one in 75; you are working
to a standard of one in 30.
Mr Mills: Is that not for different
flooding?
Chairman: It might be. I am just
exploring with the benefit of your guidance and knowledge why
there is a difference between the two.
Mr Horton: Obviously it is possible
to increase the size of sewers to achieve a higher standard. You
could have a one in 100 standard for all sewers if you wanted
to. It would cost an awful lot of money though, and we would argue
that there are cheaper solutions to address those higher standards.
The framework that we have got at the moment where we have a minimum
of one in 30 for sewers has evolved over time, and that has been
seen to work. On the whole, it has worked extremely well and extremely
effectively.
Q676 Chairman:
I do not want to prolong discussion on this area but I think what
I am getting at is that Pamela said that we have got all this
water coming in, a lot of it we cannot control and she said in
an earlier answer what we have also got to do is slow it down.
If you are dealing with capacity, you may have got enough capacity
if you can slow down the entry of the water into your system.
I find it all quite difficult to imagine the dynamic of what is
happening in the real world with the rain coming down, all this
water hurtling in and me asking a question whether it is adequate.
In the real world, when we had our friends from the GLA in and
we were thinking back to the summer and some of those films of
bits of London under railway bridges submerged, there are people
under those circumstances who are going to say the drains are
not big enough, they were not properly maintained, et cetera,
et cetera, and you come to the real question we do not want this
to happen again; we know there is a problem; how do we deal with
the problem there when that kind of real world event occurs? I
am getting the impression that there are so many variables that
you have put before us that it is quite difficult to make any
kind of prediction as to where you ought to invest to avoid the
problem. The only way you can identify it is when the problem
occurs and you do something about it retrospectively. Is that
right?
Ms Taylor: Nearly in that, yes,
it is very, very difficult and, yes, there are many, many variables,
but it is a menu of things that you need in order to try to deal
with it, first of all, to try to prevent it happening and then,
secondly, going back to the discussion we had right at the beginning,
in terms of responsibilities and so on when it does happen. If
you think about the classic picture in whatever city it may be
of the railway bridge and flooding underneath it on the road and
so on, it is quite likely if you looked back to when the homes
around were first built they would have all had front gardens,
they would not have been paved over, they would not have had cars
parked on the front gardens, and you would not have roads that
are really rivers now because they are acting almost as urban
drains taking the water away. Of course, no drain is designed
for that and no sewerage system is designed for that. We have
to ask do we want to spend customers' money on expanding the size
of the sewers or do we want to look at a menu of options here?
One would be more permeable covering and so on for people's driveways,
et cetera. Another would be slowing the water down in other ways,
SUDS and so on. We think that it is a mixture of things, it is
a menu of things that we need.
Chairman: Paddy, do you want to come
in on that?
Q677 Paddy Tipping:
I think that is right. You do things on the uplands and flood
plains, SUDS and the kinds of things you have been talking about,
but ultimately we are asking a very straightforward question.
I think you told us that the standard was set at one in 30 in
1980. Is it going to increase? As a result of the problems this
year are you going to increase the standards? Should they be increased?
Mr Mills: The current Defra advice
is for an uplift of 20% on that to 2050. It is a complicated issue
to grasp but the one in 30 is obviously based on probability.
However, as you move forward, the intensity of a one in 30 year
return storm is going to increase anyway, so the design standard
or the flow that you would expect to design for is going to increase
anyway and there will be that increase in the standards. There
is research going on at the moment into 21st century sewer design
and what those future standards should be. I cannot emphasise
enough that in future we are going to look at a twin-track approach,
if that is the right word, and try and keep surface water out
of sewer systems through sustainable urban drainage and getting
water to percolate back into the ground rather than into pipe
systems.
Q678 Paddy Tipping:
So you are saying to me that at some point in the future, and
perhaps you would just clarify when that might be, with big new
developments the sewerage infrastructure is going to be of a higher
quality design and higher volume design?
Mr Mills: Big new developments
going forward ideally would have SUDS installations and retention
basins so that that water would not go into the existing sewerage
system because then it will overload it somewhere downstream.
Mr Horton: Ideally in the future
we would like new developments to be drainage neutral as well
as carbon neutral and anything else neutral you want to make them.
Ms Taylor: Exactly.
Q679 Paddy Tipping:
Just explain for us beginners what drainage neutral actually means.
Mr Mills: No additional contribution
to the drainage network.
Ms Taylor: No additional burden
on the drainage network.
Mr Mills: So it would be offset
by SUDS or green roofs or permeable surfaces or localised storage.
Mr Horton: Just one very quick point on the one
in 30 standard. Although we are looking at that and there is a
project now, as Phill says, to look at the design standards of
sewers in the future, the first thing we need to do is to make
sure that the climate change scenarios of the future are built
in. The one in 30 may still be a one in 30 standard but at least
it has got the more intense rainfall events built in there.
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