Environment, Food and Rural Affairs CommitteeWritten evidence submitted by Carillion Energy Services

Carillion Energy Services (CES) welcomes the opportunity to respond to the Environment Food and Rural Affairs Committee’s inquiry on the Water White Paper. In order to put our comments into context, it may be helpful to outline briefly our role in the provision of energy services across the UK and Ireland.

Carillion Energy Services was formerly Eaga plc prior to its acquisition by Carillion in April 2011. Carillion is one of the UK’s leading support services companies with a substantial portfolio of Public Private Partnership projects and extensive construction capabilities. The Group has annual revenue of over £5 billion, employs around 46,000 people and operates across the UK, in the Middle East, Canada and the Caribbean.

Carillion Energy Services, a division of the group are a leading independent energy services provider and one of the largest installers of renewable technologies and domestic heating services in the UK. We currently operate within the Private, Domestic, Social and Commercial market sectors offering a wide range of energy efficient renewable technologies and domestic heating services to our customers. CES has the ability to source responsive funding solutions, design & implement a customer centric offering and deliver the installation of required measures with the support of an established supply chain network.

We manage Warm Front on behalf of Department of Energy and Climate Change and we also have experience of working for the Welsh Assembly Government on the Home Energy Efficiency Scheme, the Warm Homes initiative in Northern Ireland and the Central Heating and Warm Deal programme in Scotland. We also worked closely with Utilities and Local Authorities in managing the delivery of energy efficiency programmes.

Carillion Energy Services are committed to helping the environment and combating climate change; as referred to above we have a history of providing energy efficiency and renewable energy solutions to private housing and social housing and we will be increasing our activity in these sectors as well as expanding our commercial energy services offer taking a total energy management approach.

Prior to the Feed-in Tariff scheme we led renewable innovations through the installation of over 10,000 micro-generation systems including solar thermal and air/ground source heat pumps.

Under the Feed-in Tariff scheme we showed how innovative funding programmes could bring renewable measures to the social housing sector. Our Clean Energy Programme works in conjunction with the Government’s Feed-in Tariff to install solar photovoltaic panels on social housing properties, we are working with a number of social landlords to provide free electricity to social tenants.

Within our Carbon Services team, we support the largest number of area-based programmes in the UK, leveraging multiple funding sources to accelerate delivery against policy objectives and drive the Government’s climate change and carbon reduction agendas. Our work with the UK’s major utilities and energy suppliers allowed us to deliver a total carbon saving of 6.2 million tonnes from energy saving measures and products in 2011.

We have experience delivering water efficiency products and services including providing water audits and efficiency measures for South-West Water’s Watercare scheme for vulnerable customers and we install rainwater harvesting systems in partnership with Kingspan.

We are also one of the largest providers of Community Legal Advice in England offering debt, housing, employment and welfare advice on behalf of the Legal Services Commission.

For further information on Carillion Energy Services please visit—http://www.carillionplc.com/

Responses to Individual Questions

Does the White Paper set out the right principles for customers and the water and sewerage industry for taking forward reform of the market for water supply?

1. Carillion Energy Services support the proposals outlined by DEFRA and in particular welcome the recognition that the water industry needs to become more customer focused and that more competition and flexibility needs to be introduced into the market. We welcome the introduction of a catchment based approach to water supply; though we understand this approach will require a range of bespoke management plans from water companies and their partners.

Are the proposals to protect and enhance water resources, for example on abstraction regime reform, likely to be fully effective?

2. We welcome that the abstraction regime modernisation will enable licence holders to trade licences and that the cost of licences needs to reflect the relative scarcity of water as a resource. The Government’s proposals are positive; however, more could be done, for example, by linking the cost of abstraction with greater water efficiency. For example, the amount charged for licences could decrease, or a tiered approach could be considered, if abstractors achieved an agreed level of water efficiency savings appropriate to their operating sector. For agriculture, this could be in the form of efficiency savings made to irrigation processes, installation of private reservoirs, or installing rainwater harvesting technology. For water companies; this could take the form of delivering water efficiency advice to households in addition to interventions earlier in the supply process. Alternatively, abstraction costs could be graduated based upon the volume of water extracted, as has been suggested by Policy Exchange1 —again providing an incentive to consider the most efficient use of water possible.

3. We welcome Government’s plans to introduce greater flexibility of water supply, including incorporating private water supplies, trading abstraction licences, and greater interconnection.

How best can the White Paper’s aims to promote water efficiency and the use of sustainable drainage be implemented?

4. We are pleased that the White Paper has noted a number of synergies between water efficiency and existing energy efficiency programmes such as Green Deal and smart metering implementation.

5. Carillion Energy Services feel that the most effective way to engage domestic customers in water efficiency may be to combine the provision of water and energy advice. Water efficiency is considered to be a low priority among households according to research undertaken by DEFRA2 as unmetered households have no financial incentive to reduce water use. The report highlights that metered customers often feel they have already made a saving by switching to a metered supply therefore it is unnecessary to undertake water efficiency measures. Additionally, metered customers are almost always charged a flat rate for consumption and are not incentivised to conserve water through sculpted tariffs, such as a rising block tariff or seasonal tariff.

6. Policy supported drives to encourage domestic energy efficiency are much more established, however, and the higher proportionate cost of household energy consumption acts as a further driver for households to make efficiencies with uSwitch reporting that 83% of households were worried about their energy bills in November 2011^. 3

7. Combining water and energy saving advice could generate greater customer engagement and water saving advice could be incorporated into a Green Deal assessment, for example, which would provide a “way in” to discussing water efficient behaviours and products that reduce consumption. A holistic approach would enable water efficiency to be pitched in the context of wider money-saving and home improvement advice rather than focusing on the issue in isolation.

8. With regard to sustainable drainage systems we note the potential for these to be retrofitted to public and commercial buildings such as Matchborough First School, cited in the White Paper. In order to assist take-up it may be helpful to promote such technology alongside the non-domestic Green Deal and to offer similar incentives such as cash-back.

Do you support the White Paper’s proposals on affordability of water bills for householders?

9. We support the White Paper’s proposals for the expansion of social tariffs beyond the existing WaterSure programme. However, we question whether water companies have the existing expertise to adequately identify and engage with households most in need of social tariffs, given that water companies have historically not been customer focused and the White Paper acknowledges that 60% of households with affordability problems do not receive means-tested benefits. Water companies are likely to need much more in-depth guidance on the design and implementation of social tariffs with appropriate independent oversight of schemes, particularly if these are to reflect diverse customer demographics.

10. It may be helpful for water companies to work in partnership with independent companies or other voluntary organisations that have experience working with vulnerable households and are able to provide a range of services, such as household audits, benefit checks, customer education and debt advice.

11. Water companies are also under greater pressure to reduce bad debt (and the cost it adds to all customers’ bills) and domestic water efficiency may be a credible measure to tackle this problem particularly as more households move to a metered supply (50% of households by 2015). Combined energy and water audits could help customers make savings on a multiple household bills and other sources of funding, for example, ECO could be leveraged to deliver a range of measures.

Does the White Paper omit any key issues where further policy action is required to ensure sustainable, reliable and cost-effective water supplies?

12. We believe that to fully engage domestic customers in reducing their water consumption, there needs to be a range of innovative products and services available in addition to current low-cost or free of charge water saving products that may appear uninspiring. At this time, though, there is little indication to suggest that householders would be willing to fund water efficiency products and water companies need an attractive cost benefit ratio for them to consider funding products. It may be worthwhile for further consumer research to be undertaken to understand the combination of messages and incentives that most motivate behaviour change.

January 2012