Future Flood and Water Management Legislation

The Consumer Council for Water (CCWater) is an independent non-departmental public body representing the interests of water and sewerage customers across England and Wales. We have four local committees in England and a committee for Wales.

We have worked with the water industry and its regulators since 2005 to get the best results for consumers. In that time we have :

· been central to achieving the customer focused outcome from the 2009 price review , which around 80 % of customers found acceptable and was around £1billion better for water customers than the 2004 review.

· convinced water companies to return over £13 5 m to consumers through either additional investment or keeping prices lower ;

· dealt with over 7 8 ,000 complaints ;

· returned over £ 10 m to customers in compensation ; and

· cost only 2 3 p on each water bill a year. This will reduce to 21p in 2011-12.

We welcome the opportunity to submit evidence to this Efra inquiry into outstanding legislative measures which may be required to implement effective flood and water management policies in England and Wales.

Our evidence is provided from the perspective of the water consumer, both domestic and business, and addresses the terms of reference accordingly.

1.1 The Consumer Council for Water (CCWater) welcomes this inquiry into outstanding legislative measures. This will help to ensure there is a more comprehensive legislative framework in place to secure a sustainable water and wastewater sector, with affordable and effective flood and water management policies for England and Wales.

Floods and Water Management Act 2010

1.2 From our perspective, the Flood and Water Management Act 2010 (FWMA 2010) provided initial legislation that complemented the water strategies published by Defra and the Welsh Assembly Government. It included measures that promised consumers a more robust water and sewerage infrastructure.

1.3 The FWMA 2010 has provided the framework for addressing water consumers’ priorities on flooding but requires speedy enactment and implementation.

Issues for Future Legislation

1.4 The issues of affordability and competition in the water markets still need to be addressed for water customers. The recent independent reviews by Walker and Cave have helped focus attention, but water customers will continue to suffer from the problems considered by these reviews until legislation – primary and secondary - is put in place to resolve them. Our evidence will consider solutions to the problems.

CCWater’s role is critical to successful implementation

1.5 CCWater is available to work with EFRA and Government to find solutions to address the growing water affordability problem; promote fair charging and progress competition by lowering the eligibility threshold and by improving the opportunities to switch supplier for eligible business customers – issues that were not addressed by the FWMA 2010.

Affordability problems for water customers need to be fixed quickly

1.6 The recommendations of the Walker Review of Charging and Metering for Water and Sewerage Services need to be concluded and implemented to help those who are struggling to pay or facing unfairness in how they are being charged for water.

1.7 To tackle the high bills in the South West, research indicates that customers are likely to prefer adjustments, to bring charges in line with other regions, to be funded by taxation.1 The current financial climate makes this less likely to happen, so social tariffs may be needed to address affordability.

1.8 To help low income customers in the South East, who could see increases of up to £200 as a result of being compulsorily metered, protection is needed through social tariffs.

1.9 To help low incomes households who are struggling to pay their water bill from other water companies, assistance is required.

Government policy guidance is needed for social tariffs

1.10 The FWMA 2010 makes provision for the introduction of social tariffs. CCWater has asked consumers what they think of social tariffs and how much they would be prepared to pay to help other customers.1 This in-depth research can help the development of the policy guidance that will be required, to enable the water companies and regulator to implement the tariffs. All water companies could need suitable tariffs in place to protect low income families. Gaining customer acceptance for tariffs that create additional cross subsidies and increase water bills can be achieved by involving customers and taking their views into account.

Competition for business customers

1.11 CCWater are active in pressing for competition to satisfy the demand for choice by business customers. The eligibility threshold should be dropped and the pricing regime refined to encourage competition for business customers.

New customer focused indicator for Ofwat

1.12 Ofwat should be given a performance indicator based on customers’ satisfaction with value for money and service as a key measure of a successful regulatory regime. Measuring Ofwat would motivate them to reduce the regulatory burden and create the right incentives for water companies to focus on their customers and involve them in key decisions that affect their bills.

Bigger say for customers in the price setting process

1.13 In the future, water bills are likely to increase to pay for the private sewers transfer, flooding and quality obligations. Customers are more likely to accept price increases if they have been involved in the decisions their local water company has made on investments. Motivating Ofwat to create the conditions for this to happen is crucial to the future of the water industry.

1.14 Increases on water customers’ bills need to be perceived as acceptable by customers. The FWMA 2010, and any future supplementary Bill, should not impose unfair additions onto customers’ bills or see water customers paying for improvements that others require or will benefit from - unless they are subject to cost benefit analysis and there is customer input into the decision making to ensure the solutions are seen as legitimate by water customers.

1.15 As the regulations and guidance develops, CCWater will be looking for clarity on what water customers may be asked to pay for, whether those costs are fairly apportioned and what benefits water customers would receive for their money.

2 Efra Committee Questions/ CCWater evidence

2.1 Which of the key issues covered by the consultation into the draft Flood and Water Management Bill and by the Walker and Cave reviews should be taken forward as legislative priorities?

The key issues for water consumers are:

2.1.1 Cave Review of Competition and Innovation

a) To get competition available and functioning for eligible business customers as quickly as practicable. 84%1 of large business customers and 69%2 of small businesses are supportive of competition in principle.

b) Reduce the threshold for business competition at a pace that will not damage the trust of eligible customers and change the pricing methodology (the costs principle) that constrains competition.

c) A step by step approach to opening up competition, with government and regulators establishing that:

· benefits outweigh costs; and

· ineligible customers are not disadvantaged.

d) A bigger role for consumers in setting water prices to give greater:

· visibility of what customers get for their money;

· choice; and

· legitimacy for the regulatory system.

2.1.2 Walker Review of Charging and Metering

a) To further deal with water affordability through legislation, including tackling high water bills in the South West. Customers are likely to prefer adjustments to bring charges in line with other regions to be funded by taxation.1 As this is unlikely to happen in the current financial climate, social tariffs may need to address affordability. Please see 2.3.1.

b) Expansion of DWP’s ‘Water Direct’, which currently only helps those customers who are in debt. Government could help prevent water debt by allowing people on benefits to pay direct to water companies through this scheme.

c) To get metering implemented without customer backlash. Customers3 say metering is the fairest basis for charging for water services. However compulsory metering will be contentious as research indicates 27% of customers oppose it4 and only 40% support it. There is also a need for protection for the least able to pay and a pace of implementation that customers will support and accept, with sound communication about the process. Relevant water companies should be required to have a structured compulsory meter installation process in their plans so they are clear on their responsibilities.

d) Fair apportionment of environmental costs so that water customers do not subsidise schemes that are primarily aimed at the wider public good.

e) Environmental improvements are paced so that the impact on customers’ bills is seen by them as acceptable, but ensuring that legal obligations are met.

f) Customers should have greater involvement in decisions which will affect their water bills. There should be a new requirement on Government and regulators to consult with customers and their representatives before agreeing water quality directives or legislation which water customers will have to pay for.

g) Transfer of highways drainage costs from water customers to local and other public authorities to incentivise sustainable drainage.

2.1.3 Extend ing Ofwat ’s powers

Legislation to extend Ofwat’s powers:

· for imposing financial penalties on a water company after a contravention to

five years; and

· to acquire information from water companies where it suspects a standards of performance breach.

2.2 What are the further policies required to ensure flood and water management which delivers optimum social, economic and environmental outcomes?

2.2.1 Economic Regulation

Ofwat should be given a key performance indicator based on customers’ satisfaction with service and value for money. Better satisfaction with value for money for the water and sewerage service is crucial if customers are to accept future price increases. This is necessary for a sustainable water industry. This should motivate Ofwat to create the right incentives for water companies to focus on their customers and involve them in key decisions including:

· prices;

· metering;

· social tariffs;

· surface water concessions; and

· other major changes service.

2.2.2 Flooding

The FWMA 2010 was a positive step towards meeting consumers’ needs for protection against flooding. CCWater is playing an active role to ensure consumers’ requirements are built into national strategies and guidance.

The strategies’ consultations need to value the publics’ contribution, so there is acceptance for the cost of flooding measures. Consumers views1 show the strategies should cover measures to:

· make water companies plan in more flooding resilience;

· raise customer awareness;

· plan emergency and response mechanisms as well as investment priorities and funding matters.

Planning guidance and regulation could be strengthened to consider sewer capacity in development control or to ensure developers pay to expand sewer capacity satisfactorily.

2.3 Are there remaining issues related to the Flood and Water Management Act 2010 (including sustainable drainage systems (SUDS) and the transfer of private sewers and lateral drains)?

2.3.1 Guidance on social tariffs

High water bills in the South West, affordability problems elsewhere for some customer groups and compulsory metering in South East England mean measures to protect low income households are urgently needed. In the South East some customers are likely to see their yearly bills increase by up to £200. In the South West, average unmeasured bills will rise by £212 or 29% by 2015, demonstrating the growing disparity between measured and unmeasured bills. Consequently water companies need guidance now to create tariffs for customers struggling to pay. The guidance needs to be clear on who has the responsibility for deciding if a proposed social tariff is acceptable.

2.3.2 New regulations to help water companies tackle outstanding customer debt

Regulations need to clarify:

· occupier information requirements;

· timescale for providing information; and

· procedures for non compliance.

Delayed regulations means debt accrues causing all water bills to increase, which is especially hard for those struggling to pay.

2.3.3 New regulations for managing discretionary use of water during droughts

Regulations are needed to introduce more consistency in the application of bans on non – essential water use. Consumers need to understand their water company’s rationale for imposing restrictions, and what uses of water are banned. The need for clear information is paramount and we have consumer experiences to help identify good practice.