Written evidence submitted by Severn Trent
Water
EXECUTIVE SUMMARY
1. Severn Trent Water is pleased to submit
evidence to this EFRA Committee inquiry.
2. Overall, we believe the Flood and Water
Management Act contains much which will benefit the management
of water resources and flood protection in England and Wales.
3. There are a number of areas, however,
where we feel legislation is still required to ensure we can deliver
the best overall outcomes for our customers and the environment.
These include recommendations about facilitating water trading
to deliver cost-effective water resources and better provision
of services for those customers unable to afford their water bills.
4. We also believe there are a number of
areas where progress towards more affordable outcomes could be
made which would not require legislation, such as ensuring we
invest in environmental and other service improvements only where
it is clearly cost-beneficial to do so.
5. There are also provisions in the Flood
and Water Management Act, where guidance is still awaited from
Ministers before progress can be made, such as guidance on social
tariffs.
6. Severn Trent Water recently published
Changing Course (www.stwater.co.uk/changingcourse), which
sets out six key recommendations for change which would ensure
more sustainable outcomes in the future for customers, the environment
and investors and which we believe are relevant to this inquiry.
These changes are:
(a) Flexible implementation of the Water Framework
and other EU Directives.
(b) Development of competition through water
trading.
(c) A more flexible approach to environmental
consenting.
(d) An improved price-setting process.
(e) Companies driving innovation.
(f) Prioritising national outcomes to deliver
the sector's strategy.
Key issues from the consultation into the draft
Flood and Water Management Bill and the Walker and Cave reviews
which should be taken forward as legislative priorities.
7. As a result of the Walker Review, two
provisions were added to the draft Bill at a late stage, Section
44, which allows companies to introduce social tariffs to help
those unable to afford their bills and Section 45, which introduced
a requirement for landlords to provide information to the water
company to enable identification of the liable person for the
water and sewerage bill. Both of these provisions require further
guidance from Ministers and we would urge that this guidance is
provided at the earliest opportunity to enable companies to better
tackle affordability and bad debt issues.
8. The Flood and Water Management Act gave
the Environment Agency an overview of all flood and coastal erosion
risk management and unitary and county councils the lead in managing
the risk of all local floods. There is a concern that progress
on developing and undertaking these new duties may be affected
by the Government's spending review. We believe it is important
that the Environment Agency and unitary and county councils are
properly resourced and funded to undertake these roles effectively.
The further policies which are required to ensure
flood and water management which delivers optimum social, economic
and environmental outcomes.
9. In April 2010, Severn Trent Water published
Changing Course. This report recognises that regulation
has achieved much success since the water industry was privatised
in 1989, but sets out the new challenges which face the sector
in the twenty first century, including climate change, affordability
and the continuing need to finance significant investment programmes.
We suggest that six key changes are required to ensure companies
can continue to deliver the most sustainable outcomes for customers,
the environment and investors:
(a) Flexible implementation of the Water Framework
and other EU Directives.
(b) Development of competition through water
trading.
(c) A more flexible approach to environmental
consenting.
(d) An improved price-setting process.
(e) Companies driving innovation.
(f) Prioritising national outcomes to deliver
the sector's strategy.
Our modelling shows that, by adopting these
changes:
— Bills would be 11% lower in 2030 than
if we continue with the current course.
— Carbon emissions would decline, rather
than rise, and be some 13% lower than otherwise.
— Financing would become more sustainable
with lower investment and debt levels than the current course.
10. Implementing these six recommendations
would not necessarily require primary legislation, but would require
Government, Regulators and companies to change the way in which
they work and engage with each other on policy issues.
11. On competition, we are supportive of
upstream competition, as we believe it could bring the most benefits
to customers and we believe that the real benefits of upstream
competition (that is, the better allocation of water resources)
could be accessed without the potential disbenefits of vertical
separation (such as the impact on investor confidence). We have
proposed a trading model which is incremental to the current industry
structure and which would require minimal change to implement.
Our model was quoted in the Cave Review's final report and we
have discussed it with Defra and our Regulators.
12. The Cave and Walker reviews, and Changing
Course, advocate a strengthened role for customers in the
price-setting process. We believe that customers should be properly
represented and engaged with regarding investment and service
priorities and the consequences for bills. UK Water Industry Research
(UKWIR) has worked with companies, regulators and consumer bodies
to scope a project on how this might work in practice and this
is now being commissioned.
Any issues related to the Flood and Water Management
Act 2010 (including sustainable drainage systems (SUDS) and the
transfer of private sewers and lateral drains)
13. As set out in Paragraph 7 above, we
are awaiting guidance from Government on social tariffs (Section
44 of the Act) and regulations on measures to combat water debt
(Section 45 of the Act) and we would urge that these be provided
at the earliest opportunity.
14. We are responding to Defra's consultation
on the transfer of private drains and sewers and are working to
ensure we are ready for the transfer date of 1 October 2011. We
support the transfer of private sewers and lateral drains to water
and sewerage companies as we consider that this transfer will
remove the risk of future liability and repair costs to the benefit
of our customers. As well as removing uncertainty for customers,
the transfer will also help promote the integrated management
of the sewerage network and support the development of surface
water management plans—a key recommendation from the Pitt
Review to reduce the risk of flooding in urban areas.
CONCLUSION
15. Severn Trent Water is pleased to have
this opportunity to provide evidence to the Committee. We would
be delighted to provide any further detail required on the issues
set out above and look forward to the Committee's report.
7 October 2010
| 
