Memorandum submitted by Mrs Lucy Borland
(Ofwat 24)
Thank you very much indeed for your very kind
letter of 17 February 2009, in response to my sending you two
reports a month ago.
I am enclosing today some additional information
which I have collated on the costs of domestic metering, which
is being undertaken on the basis that it curtails demand. As you
will see, installing a "free" domestic meter costs significantly
more than installing a water and energy efficient washing machine.
For the appliance, a clear, measurable and permanent
reduction in water use can be demonstrated.
For the domestic meter, whilst it is sadly clear
that very poor families, who already under use water because of
the high costs of heating it, will further reduce their water
usage, there is no evidence of any overall significant or sustained
reduction in demand.
Despite this, between 2003 and 2007, £308
million was spent on installing "free" meters. The figure
does not include the costs of reading meters, replacing faulty
ones or the extra billing costs. Between 2003 and 2007, the annual
total spend nearly doubled—moving from £48 to £89
million.
Looking at a second area where money is wasted,
in the year ending March 2008, well over £300m was spent
by water companies on billing (revenue spend on customer services),
money which could be saved by collecting water bills alongside
council tax. The figure excludes Severn Trent, South Staffordshire
and Southern as I have had no reply from OFWAT to my emailed request
for the whereabouts of these companies regulatory accounts (except
the false one that I would receive a response within 5 days).
I enclose a First Addenda to Consolidate, Liberate,
Innovate!, and separately two tables, showing respectively capital
expenditure on meters and revenue expenditure on customer service.
CAPEX: "FREE METER SELECTIVE AND OPTANTS"
|
| Year to 31 March £millions
|
| 2003
| 2004 | 2005
| 2006 | 2007
| 5 year |
|
| Anglian | 5.3
| 7.2 | 5.5
| 3.7 | 4.2
| 25.9 |
| Bournemouth & West Hampshire | 0.4
| 0.3 | 0.4
| 1.3 | 1.4
| 3.8 |
| Bristol | 0.4
| 0.4 | 0.6
| 1.1 | 1.5
| 4.1 |
| Cambridge | 0.6
| 0.5 | 0.3
| 0.3 | 0.3
| 2.0 |
| Dee Valley | 0.4
| 0.6 | 0.6
| 0.7 | 0.5
| 2.8 |
| Dwr Cymru | 3.8
| 3.9 | 3.5
| 3.1 | 2.1
| 16.4 |
| Folkestone & Dover | 0.2
| 0.2 | 0.2
| 0.5 | 0.9
| 2.1 |
| Northumbrian | 3.2
| 3.8 | 4.5
| 5.4 | 9.0
| 25.9 |
| Portsmouth | 0.2
| 0.4 | 0.3
| 0.5 | 1.1
| 2.6 |
| Severn Trent | 3.8
| 3.9 | 6.3
| 4.7 | 7.3
| 26.1 |
| South Staffordshire | 0.5
| 0.7 | 0.7
| 1.4 | 1.5
| 4.8 |
| South East Water | 0.8
| 0.8 | 0.8
| 1.5 | 3.1
| 7.1 |
| Mid Kent (merges with above) | 1.1
| 1.1 | 0.7
| 1.1 | 1.5
| 5.5 |
| South West Water | 4.7
| 6.1 | 5.2
| 6.2 | 5.7
| 27.8 |
| Southern | 2.9
| 3.1 | 2.9
| 3.7 | 7.4
| 20.0 |
| Sutton & East Surrey | 0.4
| 0.3 | 0.3
| 0.8 | 2.3
| 4.1 |
| Tendring Hundred Water | 0.3
| 0.3 | 0.2
| 0.2 | 0.2
| 1.1 |
| Thames Water | 2.0
| 2.5 | 2.1
| 6.4 | 16.8
| 29.8 |
| Three Valleys Water | 5.3
| 5.4 | 4.5
| 6.9 | 6.5
| 28.6 |
| United Utilities | 9.1
| 10.4 | 9.4
| 7.6 | 8.1
| 44.6 |
| Wessex Water | 0.9
| 1.8 | 1.9
| 2.3 | 3.0
| 9.8 |
| Yorkshire Water | 1.8
| 1.5 | 2.8
| 2.9 | 4.1
| 13.0 |
| Total: | 48.2
| 55.1 | 53.5
| 62.4 | 88.6
| 307.8 |
|
| Source: June returns 2007, table 35, from OFWAT website
|
WATER COMPANIES—KEY
DATA
|
| | Customer service spend Year to March 2008 £m
|
| Ultimate Owner
| Water | Sewerage
| Total |
| Anglian | Osprey Consortium
| 11.8 | 15.9
| 27.7 |
|
| Bournemouth &West Hampshire | Biwater and Cascal, NYSE listing
| 2.3 | |
2.3 |
| Bristol | Suez, French Utility champion
| 2.9 | |
2.9 |
| Cambridge | Hutchinson Whampoa, Hong Kong
| 1.4 | |
1.4 |
| Dee Valley | FTSE listing, AXA 35% stake
| 1.1 | |
1.1 |
| Dwr Cymru | Not for profit co. limited by guarantee
| 13.1 | 13.9
| 27 |
| Folkestone & Dover | Veolia, French Utility champion
| 0.8 | |
0.8 |
| Northumbrian | FTSE listing
| 15.3 | 7.4
| 22.7 |
| Portsmouth | Managers 15%, Employee trust 40%, SMIF, RBS
| 1.8 | |
1.8 |
| Severn Trent | FTSE listing
| | | ???
|
| South Staffordshire | Alind Capital Partners, US
| | | ???
|
| South East Water | Hastings—Australian hedge fund
| | 7.3 |
7.3 |
| South WestWater | Pennon, FTSE quote
| 7.9 | 3.2
| 11.1 |
| Southern | JP Morgan, Challenger (Australian), UBS etc
| | | ???
|
| Sutton & E Surrey | Deutsche Bank and others
| 3.5 | |
3.5 |
| Tendring Hundred Water | Veolia, French Utility champion
| 0.7 | |
0.7 |
| Thames Water | Macquarie—Australian hedge fund
| 29.6 | 35.1
| 64.7 |
| Three ValleysWater | Veolia, French Utility champion
| 15.3 | |
15.3 |
| United Utilities | FTSE listing
| 36.8 | 38.2
| 75 |
| Wessex Water | YTL Power, Malaysian conglomerate
| 6.2 | 3.2
| 9.4 |
| Yorkshire Water | Citigroup, GIC, HSBC, Infracapital
| 11.7 | 10.5
| 22.2 |
| Total | |
| | 296.9
|
|
| Sources: OFWAT and company websites, regulatory accounts (activity costing analysis)
|
FIRST ADDENDA
TO CONSOLIDATE,
LIBERATE, INNOVATE!
1. Domestic water meters These are meters fitted at the
edge of a private property to measure the water supplied for billing
purposes. When domestic rates were replaced by the community charge
in 1989, new properties were metered. When older properties were
converted, for example, into flats, charges were assessed. More
recently, all converted properties have been required to install
meters. Households can choose to switch to metered bills, with
the meter installed "free", people making this choice
are called optants. As with the community charge, meters reverse
the redistributive nature of rateable value charges, and are charges
on occupants, not owners.
2. As empty nesters in valuable properties and second home
owners can receive dramatically lower bills under metering, and
newer properties are more water efficient as a result of building
regulation changes, water usage per household should theoretically
be lower in metered than unmetered properties. However, if poorer
families are disproportionately represented in older properties,
and water usage increases significantly with wealth, then we could
find newer properties use more water.
3. Specialist chemicals company Croda estimates that
spending on personal care, including bubble baths, shampoo, face
creams etc grows at 1.5 x GDP. Unilever has noted recent declines
in spending on bubble bath and household cleaning products relating
to the deteriorating economic situation. (Sources: FT coverage
of company results).
4. What does a domestic meter cost? Looking at Sutton
and East Surrey Water plc's annual report for 2008, they spend
£2.1 million (capital investment) in installing 8,280 meters,
which gives a cost per meter installed of £253.62.
5. Looking at John Lewis' website, for the same amount
of money (£249 plus a £9 disposal fee to remove your
old appliance), a Zanussi ZWF 12370W washing machine "uses
the Jetsystem+ to save you time, energy, water and detergent".
It has a timer, and a silent brushless inverter motor and special
insulation—so can be programmed to quietly wash at night
when energy demand is lower. The standard cycle water consumption
is 42 litres.
6. Moving down the price range, at £197 including
delivery, the Indesit WIB111 washing machine uses "soak and
rain" in order to use less water when filling the machine
and has automatic water control. The standard cotton cycle uses
53 litres (full load).
7. So it is possible, if we can obtain the water consumption
figures for older machines, to work out how much water could be
saved each year for a given spend on new appliances.
8. How accurate is a domestic meter? Looking at meter
specifications on company websites, 2-5% error is not uncommon.
Inaccuracy is greatest at lowest usage levels.
9. What are the advantages of a domestic meter? NONE.
It is not actually possible to identify a saving in water usage
driven by spending on metering. According to the French manufacturer,
Actaris, an Itron company, metering promotes responsible usage.
Artesia Consulting's website reports a workshop sponsored by the
Intelligent Metering Initiative held in July 2008. Neal Warren,
of Essex and Suffolk Water "showed the importance of occupancy
on pcc calculation ... questioned whether the impact of metering
could be separated from that of other water saving initiatives,
or indeed whether this mattered and it was the whole picture which
was important".
10. In my opinion it really does matter whether or not
domestic meters reduce demand—as between 2003 and 2007 alone
£308 million pounds was spent installing them. This is before
the costs of reading the meters, altering billing arrangements
etc and of course excludes the costs to society from the under
use of water by cost constrained families.
11. District Area Meters District area meters are used
to measure and monitor water supplies to defined locations, enabling
leaks to be detected, and supply planned to match demand. Possibly
it can reduce bursts by proactively reducing water pressure at
times of low demand. In 2007, South Staffordshire Water spent
£1.893 million on establishing District Metering Areas, compared
to £1.530 million on "free" meters and meters for
sprinkler licences, and £2.8 million replacing customer meters
and installing boundary boxes. (Reporter's commentary on June
Return, Report on Board's Overview).
12. South Staffordshire estimates unmeasured household
per capita consumption (litres per head per day) using District
Meter Areas. The Reporter (civil engineers providing commentary
for OFWAT) has some interesting comments about these calculations,
the results of which could mistakenly be taken as evidence that
metering reduces demand. "We have challenged the Company
as to whether or not it is reasonable to calculate upcc at the
District Metering (DMA) level as opposed to monitoring individual
households or cul-de-sacs. Upcc is sensitive to occupancy and
we note that no...occupancy surveys have been completed in any
of the 82 DMAs...The Company notes its approach is acceptable
practice identified in the 1999 UKWIR report on upcc ..."
13. Innovation: The annual ceremony organised by the
Royal Society to help researchers commercialise their scientific
ideas, saw Professor David Stuckey win the Brian Mercer Aware
for Innovation. Professor Stuckey received the grant of £250,000
to develop a revolutionary new sewage treatment process which
will use bacteria that primarily comes from the human lower intestine
to breakdown effluent.
14. Current sewerage treatment technology, which uses
oxygen to breakdown waste, is power intensive—using 5% of
all energy used in the UK—and produces thousands of tonnes
of sludge which is difficult to dispose of. Professor Stuckey
believes he has developed an environmentally sound system which
actually creates energy and clean water, and reduces sludge by
90%.
15. The new funding will help Professor Stuckey to build
and pilot a new plant, known as a Submerged Anaerobic Membrane
Bioreactor (SAMBR), which will be located alongside the Cambridge
Treatment Plant.
16. His technology employs a revolutionary new technique
which uses membranes to filter wastewater out for potential reuse,
and bacteria that doesn't require oxygen to breakdown waste.
17. Professor Stuckey says his bioreactor could be of
particular benefit in countries where water is scarce. He also
believes it could be used on a miniaturised scale, for example
to treat waste in blocks of flats or small urban communities.
18. "Imaging a day when mini bioreactors, located
under apartment buildings, are able to convert raw sewage from
flats into valuable methane gas for use in household heating,
and treated water recycled back to flush toilets. Funds from my
award will develop the world's first low waste bioreactor which
has the potential to revolutionise the way we deal with effluent,"
said Professor Stuckey.
Mrs Lucy Borland
March 2009
|
