Examination of Witnesses (Questions 120
- 122)
MONDAY 1 JUNE 2009
DAME YVE
BUCKLAND AND
MR TONY
SMITH
Q120 Chairman: Can I just interrupt
for a second Roger's train of thought because one of the things
that is interesting is that we talk about the polluter paying
and it becomes one of those sort of bits of shorthand, that everybody
goes, "the polluter pays," but quite often it is focused
on when somebody does something wrong they get fined for polluting,
but then if you become a little more sophisticated and you take
something like the Nitrate Vulnerable Zone situation or the Water
Framework Directive you start saying that polluters should not
seek pipe end solutions, they should deal with the source of the
pollution at the source and it becomes their charge, not the water
company's charge. So within that context and looking forward within
PR 09, what do you think are the issues which currently water
companies are having to bear the cost of that are not, if you
like, being touched by "the polluter pays" principle
and what prospects are there during the next five years for those
problems to be visited upon those who originated them and not
being picked up as a central charge by water users?
Mr Smith: I think you are absolutely
right, that with the polluter pays principle if you actually adopt
that approach you actually get back to the source of the problem
rather than the end point of the problem. You are absolutely right.
I suppose we are encouraged by the approach which many of the
companies are adopting in that regard because they are beginning
to work, in some of the proposals they are putting forward, with
the sources of some of that pollution, farmers and so on in terms
of nitrate problems and all the rest of it. So we are actually
quite encouraged by that because they seem to be moving away from
end of pipe solutions. I suppose what needs to go with that is
that actually, if you like, the incentive on the original polluter
needs to be stronger so that that party is more committed to working
with the water company to resolve the problem rather than actually
seeing it as the water customers' problem.
Q121 Mr Williams: You have also advocated
that environmental improvements should be phased so as not to
have such an effect on consumers' prices. I think you have been
criticised by the Blueprint for Water Coalition for having opposed
environmental investment in favour of "a very narrow focus
fixated on price". Do you think it was your role to reflect
consumers' views on the environment?
Dame Yve Buckland: We would. In
the past sometimes the Price Review has been seen as the opening
of the sweetie shop and everyone dashes in and grabs as much as
they possibly can and then dashes out again. What is argued from
the outset is that there should be a sensible long-term strategic
plan about the investment that is required and the pace at which
that investment should be made. Obviously we need to meet the
European Directive. We do not want to see infringements, et cetera,
but I think we need to take customers with us. Secondly, we need
to understand the cost benefit of environmental investment as
best we can. Thirdly, and more increasingly, we need to understand
the carbon outcome of environmental investment in the sense that
in a number of areas where there has been investment to meet European
Directives—bathing waters would be one, and the protection
of shellfish, which has resulted in things like companies doing
UV treatment of the end of pipe solution all the year round when
there are no bathers in the winter. That has enormous environment
consequences as well as cost consequences. So we would advocate
that there needs to be a long, hard look. However, consumers are
not anti the environment. Those issues do need to be factored
in. Once again, it is about what are the priorities, what are
people being asked to pay for, are there cost benefits to this
and how can we sell those benefits to consumers?
Mr Smith: Just reflecting that,
we are not anti-environment at all either, in fact one of the
benefits of this Price Review process that we have not really
talked about is that Ofwat asked each company to produce a 25
year plan as well as a five year plan and that was very beneficial
because it meant that the companies, consumers and regulators
all took a long-term view and said, "Actually, there is a
number of things that need to be done over the next 25 years and
there is a price that goes with that." What you could see
in many of those companies' plans is that you could actually,
if you paced it correctly, do all those things at a price consumers
were prepared to pay. That is what we are about. We are saying,
"Okay, we accept many of these things need to be done as
long as there is a good cost benefit case for it," but the
important thing is taking consumers with you because the worst
thing that can happen is that if we get very spiky price increases
over the next five years and over the five years after that then
consumers will become much more negative towards the industry,
its regulators and Government, and then there is a question about
the future sustainability of making further environmental improvements
in the future. We must take consumers with us if we are going
to do these things and make these improvements in the future.
Q122 Chairman: What actually are
over the next five years the big environmental issues which are
going to have an influence on water bills that you have discovered?
Dame Yve Buckland: Principally
the Water Framework Directive you mentioned earlier and the size
of that bill I think is still largely unknown and how it will
impact, and the variable impact of that will be huge. Secondly,
of course, as has been mentioned earlier, the impact of climate
change, which is probably going to require investment in the infrastructure
for water as well as a demand for more water supplies. Those are
the big issues, I think, coming up strategically which will need
to be properly paid for.
Chairman: Thank you very much.
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