31.Demand reduction is the second part of the “twin track” approach. Demand reduction comprises a range of worthwhile activities, some of which fall outside the remit of our Report (for example, improving the water efficiency of domestic appliances). We have chosen to focus here on how water companies and regulators intend to encourage customers to reduce demand.
32.The first step to reducing demand is to identify current levels of water consumption and then set a target for reduction. Water consumption by domestic customers is commonly measured as Per Capita Consumption (PCC), which is the average litres of water used by each person that lives in a household property per day. Waterwise stated that “targets for personal water consumption have been shown internationally as a successful option in driving forward innovative approaches for water efficiency” and it has advocated that PCC targets be used as the “most appropriate common commitment measure for water efficiency in PR19”. The current PCC for England and Wales is 141 litres per person per day. Water usage has been shown to vary according to whether customers have a water meter (average PCC of 129 litres per person per day) or not (average PCC of 162 litres per person per day). PCC also varies widely by region, with the two extremes being non-metered customers in the South-West region using 198 litres per person per day and metered customers in the Yorkshire region using around 55 per cent of that amount, at 108 litres per person per day.
33.There were different views on what the PCC target should be. The NIC recommended a PCC of 118 litres per person per day. The Environmental Audit Committee recently recommended a PCC of 110 litres per person per day for all new buildings. Building regulations are the responsibility of the Ministry of Housing, Communities and Local Government (MHCLG). Nicci Russell, Managing Director of Waterwise, told us that “we would like to see all the water companies in England and Wales committing to 100 litres per person or less, within that 25-year water resource management plan period”. Ofwat stated that it had “recently commissioned a study of the long term potential for deep reductions in water consumption” which “suggested it is possible to achieve average daily consumption of between 50 and 70 litres per person in 50 years, compared to around 140 litres today, without a reduction in the level of utility or quality of water use”.
34.Rachel Fletcher, CEO of Ofwat, believed that the 2019 draft water resource management plans (WRMPs) published by water companies were “really lacking in ambition” on the demand side, with “quite low ambitions around reducing per capita consumption, even over a large number of years”. She considered that “there are really huge opportunities for the companies to do more” and “in the next price review period [PR19] we will ask every company to make a performance commitment around reducing per capita consumption”. Waterwise identified “a wide variation in PCC ambition” between water companies and suggested that “Ofwat could require a PCC reduction of up to 22% - between 0 and 28 litres per day”.
35.Defra’s 25 Year Environment Plan committed to working with industry to set “an ambitious personal consumption target and agree cost-effective measures to meet it”. Sebastian Catovsky explained that Defra “would like to” publish an ambitious target in the autumn.
37.It is disappointing that the Government has not yet supported a specific PCC target. A cross-Government target for PCC reduction over the next 25 years should be published, alongside plans for how the target could be achieved.
38.Water consumption is measured using water meters. Knowing how much water is used can incentivise customers to use less, and therefore reducing demand for water will partly depend on the use of water metering. As well as reducing water consumption, meters can help water companies and customers identify where leaks are happening.
39.Water meters may be fitted throughout the water supply system, but our Report primarily focuses on meters within domestic premises. The main factors affecting whether properties are metered include customer choice, the age of the property and whether the property is in a designated area of water stress. All homes built after 1990 have water meters and bills reflect the amount of water used, whereas water bills for homes built before 1990 may be based on the rateable value of the property. Domestic customers cannot change the rateable value of their property and can only opt to be metered for their water use instead. Water companies must install a water meter free of charge at a customer’s request. After a meter is fitted, customers can usually choose to revert back to an unmeasured charge within 12 months. Water companies in areas of water stress are allowed to introduce compulsory metering as part of demand management. In 2013, the following water company regions were classified as areas of serious water stress: Affinity Water; Anglian Water; Essex and Suffolk Water; South East Water; Southern Water; Sutton and East Surrey Water; and Thames Water. Meters can also be introduced under other, limited circumstances, such as if the property has an automatically filled pond or swimming pool or when there is a change of occupier.
40.Water metering in England increased from 17 per cent in 1999/2000 to 51 per cent in 2016/17. Current levels of domestic metering vary from 85 per cent in the Southern Water region to 40 per cent in the region covered by United Utilities. Southern Water, the first company to implement a “universal metering programme”, has found that “customers reduced consumption by up to 16.5%” and that “average PCC is 15% lower”. Southern Water now has a target to “reduce average PCC to 100 litres per day by 2040”. Metering has also generated data on consumption, which is being used to “target water efficiency campaigns in areas of above average consumption”. CIWEM explained that most companies in water stressed areas, such as Southern Water, were using their powers but “outside such areas, meter penetration remains relatively low, with the average at around 53%”. However, future projections anticipate metering potentially increasing to 61 per cent by 2020, and 87% per cent by 2045.
41.Although there was widespread support among witnesses to our inquiry for increased metering, there were mixed views on whether metering should be compulsory. Mel Karam, Chief Executive Officer of Bristol Water, considered that:
the focus, at least for the next few years, should be on customer education and water efficiency. There is a place for compulsory smart metering later on but unless we have the customers and the public on our side that water is precious, water should stay in the environment and that we should reduce water use, compulsory metering may have a negative impact and backfire.
42.CIWEM stated that “households that have chosen to have a meter tend to […] save money on their water bill, largely because they have lower than average occupancies and/or consumption”. CIWEM also considered that “comprehensive metering coverage in all water company areas […] should be permitted” but added that “this should also be accompanied by robust schemes to deal with financial hardship and to smooth bill increases for segments of society for which the impacts of moving to a metered supply would be particularly significant”. Some support already exists, such as Watersure, which caps bills for metered customers at the average metered bill amount for their area, if the customers meet certain criteria such as receiving benefits or needing to use a large amount of water for medical reasons. The use of such schemes to help customers transition to metering was generally supported by water companies.
43.Southern Water advocated universal metering as “the most cost-effective method of reducing household consumption”. The National Infrastructure Commission (NIC) has recommended that Defra “should enable companies to implement compulsory metering by the 2030s beyond water stressed areas, by amending regulations before the end of 2019 and requiring all companies to consider systematic roll out of smart meters as a first step in a concerted campaign to improve water efficiency”. Rachel Fletcher, Ofwat, stated that Ofwat has “a number of incentives on the companies that might drive them to look again at the case for metering”, including the “performance commitment around reducing per capita consumption” in PR19. Rachel Fletcher added that Ofwat expects companies to be “talking to their customers about metering” and “helping customers understand the benefits that can come from water meters”.
44.We consider that using meters to ensure customers pay for the water they use, rather than basing bills on the outdated system of rateable values, sends a strong message to customers about the value of water. There is strong evidence that metering helps to reduce water use and to detect leaks.
45.Allowing compulsory metering only in water-stressed areas causes regional disparities that are inappropriate given the national need to conserve water. We endorse the recommendation of the National Infrastructure Commission that Defra should amend regulations by the end of 2019 to allow all water companies to implement compulsory metering, using smart meters. Water companies should use these powers to help achieve ambitious PCC reduction targets, while also engaging customers about the value of water and the benefits of using a meter. Support for economically vulnerable customers should be strengthened should metering lead to significant bill increases.
93 Waterwise () para 20; Correspondence from Waterwise to Ofwat, , 30 August 2017
94 Figures for April 2017 to March 2018; Discover Water, , accessed September 2018
95 Discover Water, , accessed September 2018
96 Discover Water, , accessed September 2018
97 National Infrastructure Commission, , April 2018, p 25
98 Environmental Audit Committee, Ninth report of session 2017–19, , HC 826, para 99
99 Ministry of Housing, Communities and Local Government, , accessed September 2018; The Chartered Institution of Water and Environmental Management () para 50
100 Q 59
101 Ofwat () para 27
102 Q 260
103 Q 260; Q 249
104 Waterwise () para 21–22
105 Department for Environment, Food and Rural Affairs, , January 2018, p 70
106 Q 347
107 Investors in Water () para 8
108 Chartered Institution of Water and Environmental Management () para 44
109 Rateable values are an assessment of the annual rental value of a property and were last fully updated in 1973. They are fixed and cannot be changed. Rateable values are used by water companies to calculate unmeasured water and sewerage charges. See: Ofwat, , accessed September 2018
110 Installation at the customer’s request can be denied if the property’s pipe work does not allow it or the installation cost is unreasonable; Consumer Council for Water, , accessed September 2018
111 Ofwat, , 2013, p 10
112 Department for Environment, Food and Rural Affairs, , August 2013
113 House of Commons Library, , February 2016
114 House of Commons Library, , February 2016; Qq 362–369; Dr Thérèse Coffey ()
115 Environment Agency () para 5
116 Investors in Water () para 25
117 Southern Water () para 35
118 Southern Water () para 37
119 Southern Water () para 36
120 Chartered Institution for Water and Environmental Management () para 13
121 Investors in Water () para 8; Environment Agency () para 5
122 Q 142
123 Chartered Institution for Water and Environmental Management () para 10
124 Chartered Institution for Water and Environmental Management () para 43
125 Citizen’s advice, , accessed September 2018
126 For example, Qq 145–146
127 Southern Water () para 38
128 National Infrastructure Commission, , April 2018, p 12
129 Q 249
130 Q 249
Published: 9 October 2018